<PAGE>
As filed with the Securities and Exchange Commission on March 30, 2000
Registration No. 333-31174
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-1/A
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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Inspire Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in its Charter)
--------------
Delaware 2834 04-3209022
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
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4222 Emperor Boulevard Gregory J. Mossinghoff
Suite 470 4222 Emperor Boulevard
Durham, North Carolina 27703-8466 Suite 470
(919) 941-9777 Durham, North Carolina 27703-8466
(Address, including zip code, and (919) 941-9777
telephone number, including area (Name, address, including zip code,
code, of registrant's principal and telephone number, including area
executive office) code, of agent for service)
--------------
Copies to:
Diane M. Frenier, Esq. Jeffrey E. Cohen, Esq.
Edward P. Bromley III, Esq. Carol B. Stubblefield, Esq.
Smith, Stratton, Wise, Heher & Coudert Brothers
Brennan 1114 Avenue of the Americas
600 College Road East New York, NY 10036-7703
Princeton, NJ 08540 (212) 626-4400
(609) 924-6000
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Approximate date of commencement of proposed sale to the public: As soon as
possible after the effective date of this Registration Statement
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
Title of each Proposed Proposed
Class of Maximum Maximum Amount of
Securites Amount to be Offering Price Aggregate Registration
to be Registered Registered Per Share(1) Offering Price(1) Fee(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.001 per share
(2)........... 6,325,000 shares $15.00 $94,875,000 $25,047
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
(2) Includes 825,000 shares that the underwriters have the option to purchase
to cover over-allotments, if any.
(3) Of which registration fee, an aggregate of $21,120 was previously paid on
or about February 25, 2000.
--------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell these securities and it is not +
+soliciting an offer to buy these securities in any jurisdiction where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH , 2000
PRELIMINARY PROSPECTUS
5,500,000 Shares
[LOGO OF INSPIRE]
Common Stock
--------------
This is an initial public offering of 5,500,000 shares of common stock of
Inspire Pharmaceuticals, Inc. We are selling all of the shares of common stock
offered under this prospectus.
We expect the public offering price for our common stock to be between $13.00
and $15.00 per share. There is currently no public market for our common stock.
We have applied to have our common stock approved for listing on the Nasdaq
National Market under the symbol "ISPH."
See "Risk Factors" beginning on page 6 to read about risks that you should
consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved these securities or passed on the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
--------------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public offering price.............................................. $ $
Underwriting discounts and commissions............................. $ $
Proceeds to Inspire................................................ $ $
</TABLE>
--------------
We have granted the underwriters a 30-day option to purchase up to an
additional 825,000 shares of common stock from us at the initial public
offering price less the underwriting discount.
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares in New York, New York, on
, 2000.
--------------
Bear, Stearns & Co. Inc.
Deutsche Banc Alex. Brown
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000
<PAGE>
Inside Front Cover:
The Inspire logo is followed by two diagrams:
Description of the first diagram: The upper portion of the page contains a
diagram showing Inspire's product opportunities in the respiratory tract, the
eyes and other areas. The diagram is preceded by a caption reading "Our
products are based on our proprietary technology targeted at respiratory, eye
and other diseases."
Description of the second diagram (located under the first diagram): A bar
chart setting forth information regarding the products in development as
follows:
Inspire Product Development Chart
<TABLE>
<CAPTION>
Clinical Trials
--------------------------
Products Preclinical Phase I Phase II Phase III
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INS365 Respiratory for Chronic XXXXXXXXX
Bronchitis XXXXXXX OOO
INS37217 Respiratory for Cystic Fibro- XXXOOOOOO
sis OOO
INS316 Diagnostic Aid for Lung Disease XXXXXXXXX XXXXXXX XXXOO OO
INS365 Ophthalmic for Dry Eye XXXXXXXXX XXXXXXX XXXOO
INS37217 Ophthalmic for Retinal Detach- XXXOOOOOO
ment OOOOOOO OOO
</TABLE>
XXX Current Development as of February 25, 2000
OOO Expected Stage of Development in 2000
The expected stage of development in 2000 is based on our current plans for
development and depends on a variety of factors. None of our products have been
approved for marketing by any regulatory authority. See "Risk Factors."
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and our common stock being sold in this
offering and our financial statements and the notes to our financial statements
appearing elsewhere in this prospectus before making an investment decision.
You should also consider the information discussed in "Risk Factors."
We discover and develop new drugs to treat diseases characterized by
deficiencies in the body's innate defense mechanisms of mucosal hydration and
mucociliary clearance. These mechanisms are the natural way that the body
defends its mucosal surfaces against dust, pollutants, bacteria and viruses.
Mucosal hydration involves the moistening of the body's mucosal surfaces, and
mucociliary clearance involves a blanket-like movement of fluid and particles
from the lungs and sinuses. Our lead products target respiratory and ophthalmic
diseases with inadequate current treatments and which represent large
therapeutic market opportunities. We currently have three product candidates in
advanced clinical development, and we have entered into development and
commercialization alliances with Genentech, Inc., Kissei Pharmaceutical Co.,
Ltd. and Santen Pharmaceutical Co., Ltd. Our products are based on our
proprietary technology relating to P2Y receptors. A receptor is a protein in a
cell membrane that, when stimulated by a compound, leads to a biological
response. We are also exploring other target diseases where we believe P2Y
receptors play important biological roles.
Our Products
INS365 Respiratory for Chronic Bronchitis: We are developing INS365
Respiratory in an inhaled form for the treatment of chronic bronchitis and
expect this product to enter Phase IIa clinical trials later this year. In
Phase I clinical trials, INS365 Respiratory was well tolerated and
significantly enhanced the clearance of retained fluid and mucus in the
airways. Chronic bronchitis, which affects approximately 31 million patients in
the major international pharmaceutical markets, is a serious and potentially
life-threatening lung condition characterized by airway inflammation and
obstruction and a mucus-producing cough. The current drugs for chronic
bronchitis, which generally solely relieve symptoms but do not cure the
disease, generated approximately $1.3 billion of annual sales in 1996, and
sales of these products have been estimated to reach approximately $2 billion
in 2001. Currently, there is no FDA approved pharmaceutical agent that
effectively clears the retained mucous secretions which contribute to lung
infections in patients with chronic bronchitis. We expect that our product will
address this need and may therefore reduce the use of antibiotics, steroids and
bronchodilators, and may reduce the frequency and length of flare-ups of the
illness and related hospitalizations.
In December 1999, we entered into a comprehensive strategic alliance with
Genentech to develop treatments for respiratory disorders, including chronic
bronchitis and cystic fibrosis, worldwide outside of Japan. Upon signing, we
received $15 million comprised of license fees and an equity investment. We may
receive future payments based on the attainment of development milestones,
which could total up to an additional $63 million, as well as royalties on net
sales of licensed products. We have also retained joint development and
commercialization rights for cystic fibrosis in the United States. In September
1998, we entered into an agreement with Kissei for INS365 Respiratory in Japan.
We received an upfront payment of $4.5 million, which included an equity
investment. In addition, if milestones are met, we could receive additional
payments of up to $13 million, as well as royalties on net sales of licensed
products.
INS365 Ophthalmic for Dry Eye Disease: We are developing INS365 Ophthalmic
as an eye drop for dry eye disease, and are currently conducting Phase IIb
clinical trials. In preclinical studies conducted by us and our corporate
partner, Santen, INS365 Ophthalmic was well tolerated and produced a
statistically significant increase in tear secretion. In early clinical
testing, the product was well tolerated in healthy subjects and patients with
dry eye disease. We estimate, based on an extrapolation from United States
data, that moderate to severe cases of dry eye affect approximately nine
million people in the major international pharmaceutical markets. Dry eye
disease is the general term for a condition in which abnormalities in the eye's
tear film--a mixture of salt, water and proteins that coat and protect the
surface of the eye--lead to red, irritated and dry eyes. These abnormalities
are typically characterized by a decrease in tear production, an increase in
tear
1
<PAGE>
evaporation or an improper mixture of the eye's tear film components. If left
untreated, dry eye disease can result in severe corneal damage and visual
impairment. Treatments in these markets consist primarily of artificial tear
replacement therapy, such as eye drops that are made to be similar to natural
tears. There are currently no FDA approved pharmacological treatments for dry
eye disease. We expect that by promoting natural mucosal hydration and proper
lubrication of the eye, our product will be the first drug that works by
stimulating the P2Y\\2\\ receptor to treat the symptoms of dry eye disease,
restore a natural corneal tear film and help prevent long-term corneal damage.
In December 1998, we entered into an agreement with Santen for INS365
Ophthalmic for the treatment of dry eye disease in Japan and Asia, under which
we received an up-front equity investment of $1.5 million and we could receive
development milestone payments of up to $4.75 million, as well as royalties on
net sales of licensed products.
INS316 Diagnostic Adjunct for Lung Disease: We are developing INS316
Diagnostic in an inhaled form to assist in diagnostic tests and we expect this
product to enter Phase III clinical trials in 2000. INS316 Diagnostic is
designed to assist a patient in producing a specimen containing adequate
material from the lower part of the lung. Specimens of such material are
frequently used for diagnosing lung cancer and lung infections. In a trial in
patients at risk of developing lung cancer, INS316 Diagnostic significantly
enhanced the production of an adequate specimen of such material when compared
with placebo. Many patients have difficulty producing adequate specimens
spontaneously, and there are no FDA approved agents to enhance the production
of a specimen. To obtain deep-lung specimens, physicians sometimes use a costly
and invasive bronchoscopy or non-approved inhaled agents that are generally
ineffective and can cause irritation. We expect our product to be the first
approved agent to address the need to enhance the production of an adequate
deep-lung specimen, which may facilitate the diagnosis of lung cancer or lung
infection.
Other Products: In addition to our clinical-stage products, we have several
preclinical products, two of which we expect to enter clinical trials later
this year: INS37217 Respiratory to treat cystic fibrosis, a life-threatening
hereditary respiratory disease, and INS37217 Ophthalmic to treat retinal
detachment, an ophthalmic disorder that can lead to serious visual impairment.
Our Technology
We have focused our discovery efforts on our P2Y receptor technology. The
P2Y receptor family plays an important role in a number of biological processes
and we are currently studying a number of P2Y receptor subtypes for potential
targets that can be used to treat diseases. We have initially focused on a
subtype of the P2Y receptor family, the P2Y\\2\\ receptor, which coordinates
mucosal hydration and mucociliary clearance, the body's natural mechanisms for
cleansing and protecting mucosal surfaces. We believe our P2Y\\2\\ receptor
agonists, which are compounds that stimulate the P2Y\\2\\ receptor, can
regulate these processes and represent a novel pharmacological approach to the
treatment of diseases characterized by deficiencies in these mechanisms.
Importantly, we are developing our lead product candidates in forms applied
directly to the mucosal surfaces, such as inhaled aerosols or eye drops where
they are rapidly metabolized. This minimizes the potential for systemic side
effects.
Our Strategy
Our objective is to become a leading biopharmaceutical company focused on
developing novel treatments primarily for diseases involving impaired mucosal
hydration or inadequate mucociliary clearance. The principal elements of our
strategy include:
. Agressively advance our lead products;
. Establish collaborative relationships with market leaders while
selectively retaining marketing rights;
. Use our proprietary technology platform relating to P2Y receptors to
develop novel products; and
. Protect and enhance our technology leadership position.
Inspire was incorporated in Delaware in October 1993. Our principal office
is located at 4222 Emperor Boulevard, Suite 470, Durham, North Carolina, and
our telephone number is (919) 941-9777.
2
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common stock to be offered by Inspire............... 5,500,000 shares
Common stock to be outstanding after this offering.. 24,314,069 shares
Use of proceeds..................................... We plan to use the net
proceeds from this
offering for clinical
development, product
commercialization,
discovery research,
preclinical activities,
working capital, general
corporate purposes and
possible future
acquisitions
Proposed Nasdaq National Market symbol.............. ISPH
</TABLE>
The share amounts in this table are based on shares outstanding as of March
24, 2000. This table excludes:
. 1,906,241 shares of our common stock that are reserved for the exercise
of options granted to executive officers, employees and consultants
under our stock plan with a weighted average exercise price of $4.18 per
share;
. 265,397 shares of our common stock that are reserved for the exercise of
outstanding warrants with a weighted average exercise price of $7.72 per
share;
. the sale of up to $2,000,000 of our common stock, at a per share price
determined using the 20-day trailing average close price of common stock
as quoted on an established stock exchange, to Genentech upon the
occurrence of certain milestone events, and up to 50,793 shares of
common stock to Genentech upon exercise of warrants to be issued upon
the occurrence of certain milestone events with a weighted average
exercise price of $7.88 per share; and
. 208,170 shares of our preferred stock that are reserved for the exercise
of outstanding warrants for preferred stock that will convert into
warrants to purchase 118,954 shares of our common stock at the time of
the closing of this offering with a weighted average exercise price of
$2.10 per share.
The information in this prospectus is based on the following assumptions:
. 15,469,104 shares of our common stock will be issued upon the automatic
conversion of the outstanding shares of our Series A, B, C, D and E
preferred stock at the time of the closing of this offering;
. a 1-for-1.75 reverse-split in our common stock will take effect just
before the closing of this offering;
. 740,880 shares of common stock will be issued upon the automatic
conversion of the outstanding shares of our Series G preferred stock
owned by Genentech at the time of the closing of this offering, assuming
the accrual of dividends through April 30, 2000, and a conversion ratio
based on an initial public offering price of $14.00 per share; provided,
however, the actual number of shares of common stock issued to Genentech
will be the number obtained by dividing the aggregate Series G preferred
stock purchase price of $10,000,000, plus accrued dividends, by the
initial public offering price of our common stock in this offering;
. the milestone events which trigger the sale to Genentech of up to
$2,000,000 of our common stock and warrants for up to 50,793 shares of
common stock do not occur; and
. the underwriters do not exercise the over-allotment option to purchase
up to 825,000 shares.
3
<PAGE>
SUMMARY FINANCIAL DATA
The following table presents summary financial and operating data for our
company. The data presented in this table are derived from "Selected Financial
Data," and the financial statements and notes elsewhere in this prospectus. You
should read those sections for a further explanation of the financial data
summarized here. You should also read "Management's Discussion and Analysis of
Financial Condition and Results of Operations," on page 22 which describes a
number of factors which have affected our financial results.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(in thousands, except per share
amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue........................... $ -- $ -- $ -- $ 3,600 $ 600
------- ------- ------- ------- -------
Operating Expenses:
Research and development
(excludes $0, $0, $0, $8 and
$59, respectively, of stock
based compensation)............ 1,539 4,207 6,569 5,438 7,179
General and administrative
(excludes $0, $0, $0, $6 and
$31, respectively, of stock
based compensation)............ 1,050 1,531 1,494 1,921 1,887
Stock based compensation........ -- -- -- 14 90
------- ------- ------- ------- -------
Total operating expenses.......... 2,589 5,738 8,063 7,373 9,156
------- ------- ------- ------- -------
Operating loss.................... (2,589) (5,738) (8,063) (3,773) (8,556)
Other income (expense), net....... (115) (44) 116 35 142
------- ------- ------- ------- -------
Loss before provision for income
taxes............................ $(2,704) $(5,782) $(7,947) $(3,738) $(8,414)
Provision for income taxes........ -- -- -- 360 60
------- ------- ------- ------- -------
Net loss.......................... $(2,704) $(5,782) $(7,947) $(4,098) $(8,474)
Preferred stock dividends......... -- -- -- -- (62)
------- ------- ------- ------- -------
Net loss available to common
stockholders..................... $(2,704) $(5,782) $(7,947) $(4,098) $(8,536)
======= ======= ======= ======= =======
Net loss per common share--basic
and diluted...................... $ (1.73) $ (3.22) $ (4.01) $ (1.99) $ (3.53)
======= ======= ======= ======= =======
Weighted average common shares
outstanding--basic and diluted... 1,567 1,798 1,981 2,061 2,401
Pro forma net loss per common
share--basic and diluted......... $ (0.54)
=======
Pro forma weighted average common
shares outstanding
--basic and diluted.............. 15,561
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $22,728 $22,728 $93,138
Total assets...................................... 23,930 23,930 94,340
Convertible preferred stock....................... 45,895 -- --
Common stock...................................... 2 19 24
Total stockholders' equity........................ 17,080 17,120 87,530
</TABLE>
See the financial statements and notes thereto included elsewhere in this
prospectus for a description of the computation of the historical and pro forma
net loss per share and the number of shares used in the historical and pro
forma per share calculations in the statement of operations data above.
4
<PAGE>
The pro forma column of the balance sheet data shows 18,652,068 shares of
our common stock outstanding immediately after the automatic conversion, at the
time of the closing of this offering, of all of our outstanding shares of
preferred stock.
The pro forma as adjusted column of the balance sheet data shows 24,152,068
shares of our common stock outstanding immediately after the automatic
conversion, at the time of the closing of this offering, of all of our
outstanding shares of preferred stock and our receipt of the net proceeds from
the sale of the 5,500,000 shares of our common stock offered in this offering
at an assumed initial public offering price of $14.00 per share. See "Use of
Proceeds" and "Capitalization" for a discussion about how we intend to use the
net proceeds from this offering and about our capitalization.
5
<PAGE>
RISK FACTORS
The shares of common stock offered by this prospectus involve a substantial
risk of loss. Before making an investment in our common stock, you should
carefully read this entire prospectus and should give particular attention to
the following risk factors. You should recognize that other significant risks
may arise in the future, which we cannot foresee at this time. Also, the risks
that we now foresee might affect us to a greater or different degree than
expected. There are a number of important factors that could cause our actual
results to differ materially from those indicated by any forward-looking
statements in this prospectus. These factors include, without limitation, the
risk factors listed below and other factors presented throughout this
prospectus.
If our products fail in clinical studies, we will be unable to obtain FDA
approval and will not be able to sell those products.
To achieve profitable operations, we must, alone or with others,
successfully identify, develop, introduce and market proprietary products. Even
if we identify potential products, we will have to conduct significant
additional development activities and preclinical and clinical tests, and
obtain regulatory approval before our products can be commercialized. Product
candidates that may appear to be promising at early stages of development may
not successfully reach the market for a number of reasons. We have not
submitted any products for marketing approval by the United States Food and
Drug Administration (FDA) or any other regulatory body.
Generally, all of our product candidates are in research or preclinical
development, with only three, INS365 Respiratory, INS365 Ophthalmic and INS316
Diagnostic, currently in clinical trials. The results of preclinical and
initial clinical testing of our products under development may not necessarily
indicate the results that will be obtained from subsequent or more extensive
testing. Companies in the pharmaceutical and biotechnology industries have
suffered significant setbacks in advanced clinical trials, even after obtaining
promising results in earlier trials. Our ongoing clinical studies might be
delayed or halted for various reasons, including:
. the drug is not effective, or physicians think that the drug is not
effective;
. patients experience severe side effects during treatment;
. patients die during the clinical study because their disease is too
advanced or because they experience medical problems that may or may not
relate to the drug being studied;
. patients do not enroll in the studies at the rate we expect;
. drug supplies are not sufficient to treat the patients in the studies;
or
. we decide to modify the drug during testing.
Because our product candidates utilize a new mechanism of action, obtaining
regulatory approval may be difficult, expensive and prolonged, which would
delay any marketing of our products.
We cannot apply for regulatory approval to market a product candidate until
we successfully complete pivotal clinical trials for the product. To complete
successfully clinical trials, the products must meet the endpoints we establish
for the product in the clinical study. Generally, we will establish these
endpoints in consultation with the regulatory authorities, in accordance with
design guidelines on the efficacy, safety and tolerability measures required
for approval of products.
Because our existing product candidates utilize a new approach to the
treatment of respiratory and eye diseases, we may have trouble establishing
endpoints that the regulatory authorities agree sufficiently evaluate the
effectiveness of each product candidate. For this and other reasons, we could
encounter delays and increased expenses in our clinical trials if the
regulatory authorities determine that the endpoints established for a clinical
trial do not predict a clinical benefit, and the authorities will not approve
the product for marketing without further clinical trials. The regulatory
authorities could change their view on clinical trial design and the
6
<PAGE>
establishment of appropriate efficacy and safety and tolerability measures and
require a change in study design, additional data or even further clinical
trials before approval of a product candidate.
After initial regulatory approval, regulatory authorities continue to review
a marketed product and its manufacturer. They may require us to conduct long-
term safety studies after approval. Discovery of previously unknown problems
through adverse event reporting may result in restrictions on the product,
including withdrawal from the market. Additionally, we and our officers and
directors could be subject to civil and criminal penalties.
If physicians and patients do not accept our product candidates, they may not
be commercially successful.
Even if regulatory authorities approve our product candidates, those
products may not be commercially successful. Acceptance of and demand for our
products will depend largely on the following factors:
. acceptance by physicians and patients of our products as safe and
effective therapies;
. reimbursement of drug and treatment costs by third-party payors;
. safety, effectiveness and pricing of alternative products; and
. prevalence and severity of side effects associated with our products.
In addition, to achieve broad market acceptance of our product candidates,
in many cases we will need to develop, alone or with others, convenient methods
for administering product candidates. Our current product candidates for the
treatment or diagnosis of respiratory disorders, INS365 Respiratory and INS316
Diagnostic, have been administered using a jet nebulizer, a device that
generates and delivers a fine mist derived from a liquid, which is inhaled into
the lungs, in their respective clinical studies. Although the use of a jet
nebulizer is an effective and well accepted means for administering products
for inhalation with respect to acute use and, to a lesser degree, chronic use,
we believe more convenient methods of delivery and administration, such as a
hand-held inhalation device, will be necessary in the case of INS365
Respiratory, to more fully address chronic use. Although we have successfully
completed a test of a prototype hand-held inhalation device in 12 healthy
patients, our testing of such devices is at an early stage and we may not be
able to develop or find a convenient hand-held device that works in patients
with chronic bronchitis. Our current product candidate for the treatment of dry
eye disease, INS365 Ophthalmic, has been administered using a single dose
administrator. Patients may prefer a multi-dose formulation. We have not yet
established a plan to develop a multi-dose formulation. Similar challenges
exist in identifying and perfecting convenient methods of administration for
many of our other product candidates.
We intend to rely on third parties to develop, market, distribute and sell our
product candidates and those third parties may not perform.
We do not have the ability to independently conduct clinical studies, obtain
regulatory approvals, market, distribute or sell our products and intend to
rely on experienced third parties to perform, or assist us in the performance
of, all of those functions. We may not identify acceptable partners or enter
into favorable agreements with them. If third parties do not successfully carry
out their contractual duties or meet expected deadlines, we will be unable to
obtain required governmental marketing approvals and will be unable to sell our
products.
Our dependence on collaborative relationships may lead to delays in product
development and disputes over rights to technology.
Our business strategy depends upon the formation of research collaborations,
licensing and/or marketing arrangements. We currently have development
collaborations with three collaborators, Genentech, Kissei and Santen. The
termination of any collaboration may lead to delays in product development and
disputes over technology rights and may reduce our ability to enter into
collaborations with other potential partners.
7
<PAGE>
Genentech has the right, by giving us 150 days prior notice, to terminate our
collaboration. We cannot be sure that we will be able to maintain the
Genentech, Kissei or Santen collaborations or establish additional research and
development collaborations or licensing arrangements necessary to develop and
commercialize therapeutic or diagnostic products using our technology. We
cannot be sure that any future collaborations or licensing arrangements will be
on terms favorable to us or that our current or any future collaborations or
licensing arrangements ultimately will be successful. Under our current
strategy, and for the foreseeable future, we do not expect to develop or market
therapeutic or diagnostic products on our own. As a result, we will continue to
depend on collaborators and contractors for the preclinical study and clinical
development of therapeutic products and for regulatory approval, manufacturing
and marketing of therapeutic and diagnostic products which result from our
technology. The agreements with collaborators typically will allow them some
discretion in electing whether to pursue such activities. If any collaborator
were to breach or terminate its agreement with us or otherwise fail to conduct
collaborative activities in a timely and successful manner, the preclinical or
clinical development or commercialization of product candidates or research
programs would be delayed or terminated. Any delay or termination in clinical
development or commercialization would delay or eliminate potential products
revenues relating to our research programs.
We intend to rely on Genentech, Kissei, Santen and any future collaborators
for significant funding in support of our development efforts. If Genentech,
Kissei or Santen reduces or terminates its funding, we will need to devote
additional internal resources to product development, scale back or terminate
certain research and development programs or seek alternative collaborators.
See "Risk Factors--If we are not able to obtain sufficient additional funding
to meet our expanding capital requirements, we may be forced to reduce or
eliminate research programs and product development" and "Business--Corporate
Collaborations."
Disputes may arise in the future over the ownership of rights to any
technology developed with collaborators. These and other possible disagreements
between us and our collaborators could lead to delays in the collaborative
development or commercialization of therapeutic or diagnostic products. Such
disagreement could also result in litigation or require arbitration to resolve.
If we are unable to contract with third parties for synthesis and manufacturing
of product candidates for preclinical testing and clinical trials and for large
scale manufacturing of any of our drug candidates, we may be unable to develop
or commercialize products.
We have no experience or capabilities in large scale commercial
manufacturing of any of our product candidates or any experience or
capabilities in the manufacturing of pharmaceutical products generally. We do
not generally expect to engage directly in the manufacturing of products, but
instead intend to contract with others for these services. To date, we have
relied upon supply agreements with third parties for the manufacture and supply
of our product candidates for purposes of preclinical testing and clinical
trials. Although we have previously received preclinical and clinical supplies
of our product candidates from several suppliers, we presently depend upon
Yamasa Corporation as the sole supplier for our supply of product candidates.
If we are unable to obtain or retain third party manufacturing on commercially
acceptable terms, we may not be able to commercialize products as planned. Our
manufacturing strategy presents the following risks:
. the manufacturing processes for most of our product candidates have not
been tested in quantities needed for commercial sales;
. delays in scale-up to commercial quantities and any change to a
manufacturer other than Yamasa Corporation could delay clinical studies,
regulatory submissions and commercialization of our products;
. manufacturers of our products are subject to the FDA's good
manufacturing practices regulations and similar foreign standards, and
we do not have control over compliance with these regulations by the
third-party manufacturers;
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. if we need to change to manufacturers other than Yamasa Corporation, FDA
and comparable foreign regulators would require new testing and
compliance inspections and the new manufacturers would have to be
educated in the processes necessary for the production of our product
candidates;
. without satisfactory long-term agreements with manufacturers, we will
not be able to develop or commercialize our product candidates as
planned or at all; and
. we may not have intellectual property rights, or may have to share
intellectual property rights, to any improvements in the manufacturing
processes or new manufacturing processes for our product candidates.
If we are unable to supply Kissei and Santen with sufficient quantities of
materials we may breach our agreements with such parties.
We are currently a party to a development, license and supply agreement with
each of Kissei and Santen, under which we granted each a license to develop and
market INS365 Respiratory and INS365 Ophthalmic, respectively. See "Business--
Corporate Collaborations." Generally, the agreements with Kissei and Santen
will require us to supply such partners with either sufficient quantities of
materials or finished products, as applicable, for the purpose of commercial
distribution. We will need to establish, alone or with third parties, a
manufacturing process in relation to each product. Our dependence upon third
parties for the manufacture of products may adversely affect our ability to
develop and deliver products on a timely and competitive basis.
Our inability to successfully manufacture commercial products could result
in our breach of the terms of our agreements with Kissei and Santen. Any of
these factors could delay our preclinical studies, clinical trials or
commercialization of our product candidates, entail higher costs and result in
our inability to effectively sell our product candidates.
If our patent protection is inadequate, the development and any possible sales
of our product candidates could suffer or competitors could force our products
completely out of the market.
Our business and competitive position depends upon our ability to protect
our products and processes, proprietary methods and technology. Except for one
patent covering novel chemical compounds, most of our patents are use patents
containing claims covering methods of treating disorders and diseases by
administering therapeutic chemical compounds. Use patents, while providing
adequate protection for commercial efforts in the United States, may afford a
lesser degree of protection in European and possibly other countries due to
their particular patent laws. Besides our use patents, we have patents covering
pharmaceutical formulations of these chemical compounds. We also have patent
applications covering processes for large-scale manufacturing of these chemical
compounds. Many of the chemical compounds included in the claims of our use
patents, formulation patents and process applications were known in the
scientific community prior to our formation as a company. Consequently, these
previously known chemical compounds themselves are not covered by any of our
patents, and are in the public domain. As a result, competitors may be able to
commercialize products that use the same chemical compounds used by us for the
treatment of disorders and diseases not covered by our use patents. In such
case, physicians, pharmacies and wholesalers could possibly substitute these
products for our products. Such substitution would reduce any revenues received
from the sale of our products.
We believe that there may be significant litigation in the pharmaceutical
and biotechnology industry regarding patent and other intellectual property
rights. A patent does not provide the patent holder with freedom to operate in
a way that infringes the patent rights of others. While we are not aware of any
patent that we are infringing, nor have we been accused of infringement by any
other party, it is possible that others currently have or will acquire patent
rights which we might be accused of infringing. If we are required to defend a
patent suit, or if we choose to initiate a suit to have a third party patent
declared invalid, there could be a considerable expenditure of money and
management time in litigation. We cannot be sure that we would prevail in a
patent infringement action. A judgement against us could cause us to pay
monetary damages, require us to obtain licenses, or prevent us from
manufacturing or marketing the affected products. In addition,
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we may need to initiate litigation to enforce our proprietary rights against
others, or we may have to participate in interference proceedings in the United
States Patent and Trademark Office (USPTO) to determine the priority of
invention of any of our technologies.
In general, the development of patent rights in pharmaceutical,
biopharmaceutical and biotechnology products to degree sufficient to support
commercial efforts in these areas is typically uncertain and involves complex
legal and factual questions. For instance, while the USPTO has recently issued
guidelines addressing the requirements for demonstrating utility for
biotechnology inventions, USPTO examiners may not follow these guidelines in
examining patent applications. Such applications may have to be appealed to the
USPTO's Appeals Board for a final determination of patentability. Furthermore,
we cannot be certain that we will continue to develop technologies that are
patentable, or even if patents are obtained, that they will adequately support
our commercial efforts.
If we fail to reach milestone or other obligations, The University of North
Carolina at Chapel Hill and other licensors may terminate our agreements with
them.
Our current technologies, discoveries and our original patents are based in
part on two exclusive licenses and one non-exclusive license from The
University of North Carolina at Chapel Hill. See "Business--Patents and
Proprietary Rights." Generally, if we fail to meet milestones under the
respective UNC licenses, UNC may terminate the applicable license. In addition,
it may be necessary in the future for us to obtain additional licenses from UNC
or other third parties to develop future commercial opportunities or to avoid
infringement of third party patents. If such licenses are necessary, we may not
be able to obtain licenses on fair business terms, if at all. Failure to
license or otherwise acquire necessary technologies may reduce or eliminate our
ability to develop product candidates. Even if all necessary licenses are
acquired, if we breach any license provision, either intentionally or
unintentionally, we may not be allowed continued use the licensed technology.
Because we rely upon trade secrets and agreements to protect some of our
intellectual property there is a risk that unauthorized parties may obtain and
use information that we regarding as proprietary.
We rely upon the laws of trade secrets and non-disclosure agreements and
other contractual arrangements to protect our proprietary compounds, methods,
processes, formulations and other information for which we are not seeking
patent protection. We have taken security measures to protect our proprietary
technologies, processes, information systems and data, and we continue to
explore ways to further enhance security. However, despite these efforts to
protect our proprietary rights, unauthorized parties may obtain and use
information that we regard as proprietary. Employees, academic collaborators
and consultants with whom we have entered confidentiality and/or non-disclosure
agreements, may improperly disclose our proprietary information. In addition,
competitors may, through a variety of proper means, independently develop
substantially the equivalent of our proprietary information and technologies,
gain access to our trade secrets, or properly design around any of our patented
technologies.
Because all of our product candidates are designed to use related mechanisms of
action, we may not be able to commercialize our products if the mechanism of
action is not effective.
Any products resulting from our product development efforts are not expected
to be available for sale for a number of years, if at all. Two of our product
candidates, INS365 Respiratory and INS37217 Respiratory, operate in a similar
manner. If the clinical results of one of the compounds is not favorable, the
results of the other compound may not be favorable. Moreover, we have designed
all of our product candidates to utilize related mechanisms of action. If these
mechanisms of action are not effective, we may not be able to commercialize any
of our product candidates. Even if all of our product candidates prove
effective, we may choose not to commercialize all of them. We cannot be sure
that we, alone or with our collaborators, will successfully develop,
commercialize, manufacture or market any products.
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If we continue to incur operating losses for a period longer than anticipated,
or in an amount greater than anticipated, we may be unable to continue our
operations.
We have experienced significant losses since inception. We incurred net
losses of $8.5 million for the year ended December 31, 1999, $4.1 million for
the year ended December 31, 1998 and $7.9 million for the year ended December
31, 1997. As of December 31, 1999, our accumulated deficit was approximately
$29.4 million. We expect to incur significant additional operating losses over
the next several years and expect cumulative losses to increase substantially
in the near term due to expanded research and development efforts, preclinical
studies and clinical trials. We expect that losses will fluctuate from quarter
to quarter and that such fluctuations may be substantial. Such fluctuations
will be affected by the following:
. timing of regulatory approvals and commercial sales of our product
candidates;
. the level of patient demand for our products;
. timing of payments to and from licensors and corporate partners; and
. timing of investments in new technologies.
No regulatory authorities have approved any of our product candidates for
marketing, and therefore we are not generating any revenues from product sales.
To achieve and sustain profitable operations, we must, alone or with others,
develop successfully, obtain regulatory approval for, manufacture, introduce,
market and sell our products. The time frame necessary to achieve market
success is long and uncertain. We do not expect to generate product revenues
for at least the next few years. We cannot be sure that we will ever generate
sufficient product revenues to become profitable or to sustain profitability.
If the time required to achieve profitability is longer than we anticipate, we
may not be able to continue our business.
If we are not able to obtain sufficient additional funding to meet our
expanding capital requirements, we may be forced to reduce or eliminate
research programs and product development.
We have used substantial amounts of cash to fund our research and
development activities. In 1999 our operating expenses exceeded $9,000,000. We
expect our capital and operating expenditures to increase over the next several
years as we expand our research and development activities, address possible
difficulties with clinical studies and prepare for commercial sales. Many
factors will influence our future capital needs. These factors include:
. the progress of our research programs;
. the number and breadth of these programs;
. our ability to attract collaborators for our products;
. achievement of milestones under our existing collaborations with
Genentech, Kissei and Santen;
. our ability to establish and maintain additional collaborations;
. progress by our collaborators: Genentech, Kissei and Santen;
. the level of our activities relating to commercialization rights we
retain in our collaborations;
. competing technological and market developments;
. the costs involved in enforcing patent claims and other intellectual
property rights; and
. the costs and timing of regulatory approvals.
We anticipate that our operating expenses will exceed $20,000,000 over the
next twelve months. We also expect to purchase capital equipment at a cost of
approximately $1,000,000. Following such twelve month period, we expect our
operating expenses to increase as we continue to develop our product
candidates. We intend to rely on Genentech, Kissei, Santen, future
collaborators and the proceeds of this offering for significant funding in
support of our development efforts. In addition, we may seek additional funding
through public or private equity offerings and debt financings. Additional
financing may not be available when needed. If available, such financing may
not be on terms favorable to us or our stockholders. Stockholders' ownership
will
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be diluted if we raise additional capital by issuing equity securities. If we
raise additional funds through collaborations and licensing arrangements, we
may have to relinquish rights to our technologies or product candidates which
are involved in these future collaborations and arrangements or grant licenses
on unfavorable terms. If adequate funds are not available, we would have to
scale back or terminate research programs and product development. As of March
24, 2000, we had cash on hand of approximately $22,000,000.
We may not be able to successfully compete with biotechnology companies and
established pharmaceutical companies.
The biotechnology and pharmaceutical industries are intensely competitive
and subject to rapid and significant technological change. Our competitors in
the United States and elsewhere are numerous and include, among others, major
multinational pharmaceutical and chemical companies, specialized biotechnology
firms and universities and other research institutions. These competitors
include Abbott, Astra Zeneca, Aventis, Boehringer Ingelheim, Glaxo Wellcome,
Pfizer and SmithKline Beecham. Many of these competitors employ greater
financial and other resources, including larger research and development staffs
and more effective marketing and manufacturing organizations, than we or our
collaborative partners. Acquisitions of competing companies and potential
competitors by large pharmaceutical companies or others could enhance
financial, marketing and other resources available to such competitors. As a
result of academic and government institutions becoming increasingly aware of
the commercial value of their research findings, such institutions are more
likely to enter into exclusive licensing agreements with commercial
enterprises, including our competitors, to market commercial products. Our
competitors may not succeed in developing technologies and drugs that are
safer, more effective or less costly than any which we are developing or which
would render our technology and future drugs obsolete and non-competitive. The
products of our competitors marketed to treat chronic bronchitis include anti-
inflammatory products, such as Azmacort(R) and Beclovevent(R), bronchodilators
such as Atrovent and Proventil(R), and antibiotics such as Biaxon(R) and
Zothromax(R). Pulmozyme(R), a Genentech product, and TOBI(R) from PathoGenesis
are examples of products used to treat cystic fibrosis. The current treatments
for dry eye disease consists primarily of artificial tear replacement drops. In
addition, alternative approaches to treating diseases which we have targeted,
such as gene therapy, may make our product candidates obsolete. Our competitors
may also be more successful in production and marketing. See "Business--
Competition" for a discussion of competitors and the advantages of their
products.
In addition, some of our competitors have greater experience than we do in
conducting preclinical and clinical trials and obtaining FDA and other
regulatory approvals. Accordingly, our competitors may succeed in obtaining FDA
or other regulatory approvals for drug candidates more rapidly than we do.
Companies that complete clinical trials, obtain required regulatory approvals
and commence commercial sale of their drugs before we do may achieve a
significant competitive advantage, including patent and FDA marketing
exclusivity rights that would delay our ability to market products. We cannot
be sure that drugs resulting from our research and development efforts, or from
our joint efforts with our collaborative partners, will be able to compete
successfully with competitors' existing products or products under development
or that they will obtain regulatory approval in the United States or elsewhere.
Failure to hire and retain key personnel may hinder our product development
programs and our business development efforts.
We depend on the principal members of our management and scientific staff,
including Christy L. Shaffer, Ph.D., our President, Chief Executive Officer and
director; and Gregory J. Mossinghoff, our Chief Business Officer. If any of
these people leaves us, our ability to conduct our operations may be negatively
affected. We have not entered into agreements with any of the above principal
members of our management and scientific staff that bind any of them to a
specific period of employment. We do not maintain key person life insurance.
Our future success also will depend in part on our ability to attract, hire and
retain additional personnel skilled or experienced in the pharmaceutical
industry. There is intense competition for such qualified personnel. We may not
be able to continue to attract and retain such personnel.
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Our operations involve a risk of injury from hazardous materials, which could
be very expensive to us.
Our research and development activities involve the controlled use of
hazardous materials and chemicals. We cannot completely eliminate the risk of
accidental contamination or injury from these materials. If such an accident
were to occur, we could be held liable for any damages that result and any such
liability could exceed our resources. In addition, we are subject to laws and
regulations governing the use, storage, handling and disposal of these
materials and waste products. The costs of compliance with these laws and
regulations could be substantial.
Use of our products may result in product liability claims for which we may not
have adequate insurance coverage.
Clinical trials or manufacturing, marketing and sale of our potential
products by our collaborative partners may expose us to liability claims from
the use of such pharmaceutical products. Although we carry clinical trial
liability insurance, we currently do not carry product liability insurance. We
or our collaborators may not be able to obtain or maintain sufficient or even
any insurance. If we can, it may not be at a reasonable cost. If we cannot or
are unable otherwise to protect against potential product liability claims, we
may find it difficult or impossible to commercialize pharmaceutical products we
or our collaborators develop. If claims or losses exceed our liability
insurance coverage, we may go out of business.
If third party payors will not provide coverage or reimburse patients for any
products we develop, our ability to derive revenues will suffer.
Our success will depend in part on the extent to which government and health
administration authorities, private health insurers and other third party
payors will pay for our products. Reimbursement for newly approved health care
products is uncertain. In the United States and elsewhere, third party payors,
such as Medicare, are increasingly challenging the prices charged for medical
products and services. Government and other third party payors are increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new therapeutic products. In the United States, a number
of legislative and regulatory proposals aimed at changing the health care
system have been proposed in recent years. In addition, an increasing emphasis
on managed care in the United States has and will continue to increase pressure
on pharmaceutical pricing. While we cannot predict whether legislative or
regulatory proposals will be adopted or what effect those proposals or managed
care efforts, including those relating to Medicare payments, may have on our
business, the announcement and/or adoption of such proposals or efforts could
increase our costs and reduce or eliminate profit margins. We cannot be certain
that any third party insurance coverage will be available to patients for any
products we discover or develop. If government and other third party payors do
not provide adequate coverage and reimbursement levels for our products, the
market acceptance of these products may be reduced. In various foreign markets,
pricing or profitability of medical products is subject to government control.
Because our management will have broad discretion over the use of the proceeds
from this offering, the offering proceeds may be used in ways stockholders do
not deem to be advisable.
The net proceeds of this offering are estimated to be approximately $70.4
million, or about $81.2 million if the underwriters exercise their over-
allotment option in full. This calculation assumes that the initial public
offering price is $14.00 per share and the underwriting discounts and
commissions and our estimated offering expenses are $6.6 million. Our
management will retain broad discretion as to the allocation of the proceeds of
this offering, including the timing and conditions of the use of the proceeds.
Consequently, our management may allocate the proceeds to uses that
stockholders do not deem advisable. If management spends the funds unwisely, we
may not have sufficient working capital to become profitable.
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Our existing directors, executive officers and principal stockholders will
retain a substantial amount of our common stock even after this offering and
may be able to prevent other stockholders from influencing significant
corporate decisions.
After this offering, our directors, executive officers and current 5%
stockholders and their affiliates will beneficially own approximately 51.0% of
the common stock. These stockholders, if they all act together, may be able to
direct the outcome of matters requiring approval of the stockholders, including
the election of our directors and other corporate actions such as our merger
with or into another company, a sale of substantially all of our assets and
amendments to our amended and restated certificate of incorporation. The
decisions of these stockholders may conflict with our interests or those of our
other stockholders.
Anti-takeover provisions in our amended and restated certificate of
incorporation and bylaws, and our right to issue preferred stock, may
discourage a third party from making a take-over offer that could be beneficial
to us and our stockholders.
Our amended and restated certificate of incorporation and bylaws contain
provisions which could delay or prevent a third party from acquiring shares of
our common stock or replacing members of our board of directors. Our amended
and restated certificate of incorporation allows our board of directors to
issue shares of preferred stock. The Board can determine the price, rights,
preferences and privileges of those shares without any further vote or action
by the stockholders. As a result, our board of directors could make it
difficult for a third party to acquire a majority of our outstanding voting
stock.
Effective simultaneously with the closing of this offering, our amended and
restated certificate of incorporation will provide that the members of the
board will be divided into three classes. Each year the terms of approximately
one-third of the directors will expire. Our bylaws will not permit our
stockholders to call a special meeting of stockholders. Under the bylaws, only
our President, Chairman of the Board or a majority of the board of directors
will be able to call special meetings. The bylaws also require that
stockholders give advance notice to our secretary of any nominations for
director or other business to be brought by stockholders at any stockholders'
meeting. These provisions may delay or prevent changes of control or
management.
Further, we are subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law. Under this law, if anyone becomes an
"interested stockholder" in the company, we may not enter a "business
combination" with that person for three years without special approval. These
provisions could delay or prevent a change of control. These provisions could
adversely affect the market price of the common stock.
Our common stock has never been publicly traded and we cannot predict the
extent to which a trading market will develop.
Before this offering, there has been no public market for the common stock.
We cannot predict the extent to which an active public market for the common
stock will develop or be sustained after this offering. We will negotiate the
initial public offering price with the representatives of the underwriters. The
price we determine may not be indicative of future market prices.
Our common stock price is likely to be highly volatile and your investment in
our stock may decline in value.
The market price of our common stock is likely to be highly volatile. In
addition to various risks described elsewhere in this prospectus, the following
factors could also cause volatility and could result in declines in the market
price of our common stock:
. announcements made by us concerning the results of our clinical trials
with INS365 Respiratory, INS365 Ophthalmic, INS316 Diagnostic and any
other product candidates;
. changes in government regulations;
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. regulatory actions as a result of their new therapeutic approach;
. changes in concerns of our collaborators, in particular our
collaborations with Genentech, Santen and Kissei;
. developments concerning proprietary rights including patents by us or
our competitors;
. variations in our operating results; and
. litigation.
Extreme price and volume fluctuations occur in the stock market from time to
time and that can particularly affect the prices of biotechnology companies.
These extreme fluctuations are often unrelated to the actual performance of the
affected companies. These broad market fluctuations may adversely affect the
market price of the common stock.
Future sale by our current stockholders may cause our stock price to decline
and may adversely affect our ability to raise funds in new stock offerings.
Sales of our common stock by our current stockholders in the public market
after this offering could cause the market price of our stock to fall. Sales
may also make it more difficult for us to sell equity securities or equity-
related securities in the future at a time and price that our management deems
acceptable, or at all. Upon the completion of this offering, we will have
24,314,069 shares of common stock outstanding, assuming no exercise of options
or warrants and assuming no exercise of the underwriters' over-allotment
option. Of these outstanding shares of common stock, the 5,500,000 shares sold
in this offering will be freely tradable, without restriction under the
Securities Act of 1933, as amended, unless purchased by our "affiliates." The
remaining 18,814,069 shares of common stock held by existing stockholders are
"restricted securities" and may be resold in the public market only if
registered or pursuant to an exemption from registration, such as Rule 144
under the Securities Act.
Immediately following the completion of this offering, holders of 16,191,949
shares of common stock and options and warrants to purchase 356,748 shares of
common stock will be entitled to registration rights. Upon registration, these
shares may be freely sold in the public market.
All of our officers, directors and holders of at least one percent of our
stock have signed lock-up agreements, in which they agreed that they will not,
directly or indirectly, offer, sell or agree to sell, or otherwise dispose of
any shares of our common stock or other securities in the public market without
the prior written consent of Bear, Stearns & Co. Inc. for a period of 180 days
after the final prospectus relating to this offering. The lock-up agreements do
not apply to any shares acquired in this offering through the directed share
program. The agreement of one of the stockholders excludes 206,963 shares
currently held and all shares acquired in the future. Upon expiration of the
lock-up agreements approximately 16,885,000 shares of common stock covered by
these agreements will be immediately eligible for resale, subject to the
requirements of Rule 144.
We may issue additional shares:
. to employees, directors and consultants;
. in connection with corporate alliances;
. in connection with acquisitions; and
. to raise capital.
As a result of these factors, a substantial number of shares of our common
stock could be sold in the public market at any time.
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Purchasers in this offering will suffer immediate dilution in the net tangible
book value of the common stock that is purchased.
If you purchase common stock in this offering, the value of your shares
based upon the actual book value of the company will immediately be less than
the offering price you paid. This is known as "dilution." Based upon the net
tangible book value of the common stock at December 31, 1999, your shares will
be worth $10.39 less per share than the price you paid in the offering. If
options and warrants we previously granted are exercised, additional dilution
is likely to occur.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "could,"
"will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "intend," "potential," or "continue," the negative of such terms or
other comparable terminology. These statements are only predictions. Actual
events or results may differ materially. In evaluating these statements, you
should specifically consider various factors, including the risks outlined
under "Risk Factors." These factors may cause our actual results to differ
materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of the forward-
looking statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus, to conform such statements to
actual results or to note any changes or exceptions.
SPECIAL NOTE REGARDING MARKET DATA
Statistical market data contained in "Prospectus Summary" and in "Business"
come from or are based on estimates prepared by us using data from various
sources. In certain cases we have made assumptions based on such data and our
knowledge of the specific diseases, which assumptions we believe to be
reasonable. References to prevalence and market size in the major international
pharmaceutical markets refer to the U.S., Canada, Japan, Germany, France,
Italy, Spain and the U.K., except that figures for chronic bronchitis exclude
Canada. With respect to chronic bronchitis, we have relied on data from a
Decision Resources report published in 1998, reporting 1996 prevalence and
market size and estimated 2001 market size. With respect to cystic fibrosis,
prevalence data is based, in the case of the U.S., on a Cystic Fibrosis
Foundation report published in 1999 and, in the case of the major international
pharmaceutical markets, on a 1994 Decision Resources report; market size solely
for the U.S. was estimated from patient usage data from a Cystic Fibrosis
Foundation report published in 1998. With respect to sinusitis, we estimated
prevalence solely in the U.S., based on data contained in a 1998 report from
the Centers for Disease Control and Prevention projected for the U.S.
population as a whole. With respect to dry eye disease, we have estimated
market size based on 1996 data published in a 1997 IMS report and we estimated
prevalence in the major international pharmaceutical markets by extrapolating,
based on population, from U.S. figures set forth in Lacrimal Gland, Tear Film,
and Dry Eye Syndrome (New York, 1998). With respect to retinal detachment, we
have estimated prevalence in the major international pharmaceutical markets by
extrapolating, based on population, from a twenty year study ending in 1995
conducted by the Department of Ophthalmology, Mayo Clinic in a metropolitan
area in the U.S.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of
approximately $70.4 million, or approximately $81.2 million if the underwriters
exercise their over-allotment option in full. For purposes of this calculation,
we have assumed an initial public offering price of $14.00 per share. We have
estimated that the underwriting discounts and commissions and our offering
expenses will be approximately $6.6 million.
We estimate that we will use approximately 50% of the net proceeds of this
offering for the clinical development of our product candidates and product
commercialization. We estimate that we will use approximately 25% of the net
proceeds of this offering for discovery research and preclinical activities. We
estimate that we will use approximately 20% of the net proceeds on working
capital and general corporate purposes. We may also use approximately 5% of the
net proceeds to acquire businesses, technologies, or products complementary to
our business even though we do not currently have any specific plans.
The information above represents our best estimate of our use of the net
proceeds of this offering based upon the current state of our business
operations, our current business plan and strategy, and current economic and
industry conditions. Actual allocation of the net proceeds may differ from the
estimates set forth above. The amount and timing of our expenditures will vary
depending on the following:
. the progress of our clinical and preclinical development projects;
. signing of new corporate partners and the attainment of milestones with
our existing corporate partners;
. the progress of our research and development activities;
. technological changes;
. competitive conditions; and
. general industry and economic conditions.
Pending use of the net proceeds for the purposes described above, we intend
to invest the net proceeds in short-term, interest-bearing, investment-grade
securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. Following
this offering, our board of directors will determine and may change from time
to time our dividend practices with respect to our common stock. Any payment of
dividends will be based upon our earnings, financial condition, capital
requirements and other factors considered important by our board of directors.
Under Delaware law and our amended and restated certificate of incorporation,
our board of directors is not required to declare dividends on our common
stock. We expect to retain all earnings, if any, generated by our operations
for the development and growth of our business and do not anticipate paying any
dividends to our stockholders in the foreseeable future.
Since December 17, 1999, dividends have been accruing on our Series G
preferred stock at prime rate plus 1%. Such accrued dividends will be paid to
the holders of Series G preferred stock in shares of common stock upon the
automatic conversion of the Series G preferred stock into common stock upon the
closing of this offering.
18
<PAGE>
CAPITALIZATION
You should read the following table with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the notes included elsewhere in this prospectus. The table shows
as of December 31, 1999:
. our actual capitalization;
. our pro forma capitalization after giving effect to the automatic
conversion, at the time of the closing of this offering, of our
outstanding shares of preferred stock into 16,186,211 shares of our
common stock and a 1-for-1.75 reverse-split of our common stock that
will take effect before the closing date of this offering; and
. our pro forma as adjusted capitalization, adjusted to show the sale of
5,500,000 shares of common stock sold in this offering at an assumed
initial public offering price of $14.00 per share after deducting
underwriting discounts and commissions and our estimated offering
expenses.
<TABLE>
<CAPTION>
As of December 31, 1999
------------------------------
Pro forma
Actual Pro forma As Adjusted
------- --------- -----------
(in thousands, except share
data)
<S> <C> <C> <C>
Notes payable and capital leases, excluding
current portion................................ $ 357 $ 357 $ 357
Stockholders' equity:
Convertible preferred stock, $0.001 par value;
52,000,000 shares authorized; 28,059,666
shares issued and outstanding (actual); no
shares issued or outstanding (pro forma and
pro forma as adjusted)....................... 45,895 -- --
Common stock, $0.001 par value; 56,000,000
shares authorized;
2,465,857 shares issued and outstanding
(actual); 18,652,068 shares issued and
outstanding (pro forma); 60,000,000 shares
authorized; 24,152,068 shares issued and
outstanding (pro forma as adjusted).......... 2 19 24
Additional paid in capital.................... 908 46,826 117,231
Accumulated deficit........................... (29,396) (29,396) (29,396)
Deferred compensation......................... (329) (329) (329)
------- ------- -------
Total stockholders' equity.................. 17,080 17,120 87,530
------- ------- -------
Total capitalization............................ $17,437 $17,477 $87,887
======= ======= =======
</TABLE>
This table assumes no exercise of stock options or warrants outstanding as
of December 31, 1999. As of December 31, 1999, there were options outstanding
under our stock plan to purchase a total of 1,474,518 shares of common stock,
with a weighted average exercise price of $0.35 per share, 265,397 shares of
common stock issuable upon the exercise of outstanding warrants, with a
weighted average exercise price of $7.72 per share, and 208,170 shares of
preferred stock that are reserved for the exercise of outstanding warrants for
preferred stock that will convert into warrants to purchase 118,954 shares of
our common stock at the time of the closing of this offering with a weighted
average exercise price of $2.10 per share.
19
<PAGE>
DILUTION
Our historical net tangible book value as of December 31, 1999 was
approximately $16.8 million, or $6.82 per share, based on the number of common
shares outstanding as of December 31, 1999. Historical net tangible book value
per share is equal to the amount of our total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding as of
December 31, 1999.
As of December 31, 1999, our pro forma net tangible book value was
approximately $16.9 million or $0.90 per share after taking into account the
delivery of 16,186,211 shares of common stock upon the automatic conversion, at
the time of the closing of this offering, of our outstanding shares of
preferred stock. Without taking into account any other changes in our net
tangible book value after December 31, 1999, other than to give effect to this
offering at an assumed initial offering price of $14.00 per share and our
receipt of the estimated net proceeds from the offering, our net tangible book
value, pro forma as adjusted at December 31, 1999, would have been
approximately $87.3 million or $3.61 per share. This represents an immediate
increase in the net tangible book value of $2.71 per share of our common stock
to present stockholders and an immediate dilution of $10.39 or 74.19% per share
to new investors. The following table shows this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $14.00
Historical net tangible book value per share at December 31,
1999......................................................... $6.82
Decrease per share attributed to the conversion of preferred
stock........................................................ (5.92)
-----
Pro forma net tangible book value per share before this
offering..................................................... 0.90
Increase per share attributable to new investors.............. 2.71
Pro forma as adjusted net tangible book value per share after
this offering.................................................. 3.61
------
Dilution per share to new investors............................. $10.39
======
</TABLE>
If the underwriters exercise their over-allotment in full, there will be an
increase in pro forma as adjusted net tangible book value to $3.02 per share to
existing stockholders and an immediate dilution in pro forma as adjusted net
tangible book value of $10.08 to new stockholders. Our existing stockholders
would own 74.7% and our new public investors would own 25.3% of the total
number of shares of our common stock outstanding after this offering.
The following table summarizes, on a pro forma basis as of December 31,
1999, the differences between existing stockholders and investors in this
offering including the number and percentage of shares of our common stock
purchased from us, the amount and percentage of consideration paid, and the
average price paid per share of our common stock, before deduction of
underwriting discounts and commissions and our estimated offering expenses:
<TABLE>
<CAPTION>
Shares Owned Consideration
--------------------- ----------------------- Average Price
Number Percentage Amount Percentage Per Share
---------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 18,652,068 77.2% $ 47,143,832 38.0% $ 2.53
New investors........... 5,500,000 22.8 77,000,000 62.0 $14.00
---------- ----- ------------ -----
Total................. 24,152,068 100.0% $124,143,832 100.0% $ 5.14
========== ===== ============ =====
</TABLE>
The discussion and tables above assume no exercise of stock options or
warrants outstanding as of December 31, 1999. As of December 31, 1999, there
were options outstanding under our stock plan to purchase a total of 1,474,518
shares of common stock, with a weighted average exercise price of $0.35 per
share, 265,397 shares of common stock reserved for the exercise of outstanding
warrants, with a weighted average exercise price of $7.72 per share and 208,170
shares of preferred stock that are reserved for the exercise of outstanding
warrants for preferred stock, with a weighted average exercise price of $1.20
per share, which will convert into warrants to purchase 118,954 shares of our
common stock at the time of the closing of this offering with a weighted
average exercise price of $2.10 per share. To the extent that any of these
options or warrants are exercised, there will be further dilution to new
investors.
20
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read with our financial
statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus. The statement of operations data for the years ended December 31,
1997, 1998 and 1999, and the balance sheet data at December 31, 1998 and 1999
are derived from financial statements included elsewhere in this prospectus
that have been audited by PricewaterhouseCoopers LLP, independent auditors. The
statement of operations data for the fiscal years ended December 31, 1995 and
1996 and the balance sheet data at December 31, 1995, 1996 and 1997 are derived
from our audited financial statements that are not included in this prospectus.
Historical results do not necessarily show future results.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(in thousands, except per share
amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue........................... $ -- $ -- $ -- $ 3,600 $ 600
------- ------- ------- ------- -------
Operating Expenses:
Research and development
(excludes $0, $0, $0, $8 and
$59, respectively, of stock
based compensation)............ 1,539 4,207 6,569 5,438 7,179
General and administrative
(excludes $0, $0, $0, $6 and
$31, respectively, of stock
based compensation)............ 1,050 1,531 1,494 1,921 1,887
Stock based compensation........ -- -- -- 14 90
------- ------- ------- ------- -------
Total operating expenses.......... 2,589 5,738 8,063 7,373 9,156
------- ------- ------- ------- -------
Operating loss.................... (2,589) (5,738) (8,063) (3,773) (8,556)
Other income (expense), net....... (115) (44) 116 35 142
------- ------- ------- ------- -------
Loss before provision for income
taxes............................ (2,704) (5,782) (7,947) (3,738) (8,414)
Provision for income taxes........ -- -- -- 360 60
------- ------- ------- ------- -------
Net loss.......................... (2,704) (5,782) (7,947) (4,098) (8,474)
Preferred stock dividends......... -- -- -- -- (62)
------- ------- ------- ------- -------
Net loss available to common
stockholders..................... $(2,704) $(5,782) $(7,947) $(4,098) $(8,536)
======= ======= ======= ======= =======
Net loss per common share--basic
and diluted...................... $ (1.73) $ (3.22) $ (4.01) $ (1.99) $ (3.53)
======= ======= ======= ======= =======
Weighted average common shares
outstanding--basic and diluted... 1,567 1,798 1,981 2,061 2,401
Pro forma net loss per common
share--basic and
diluted.......................... $ (0.54)
=======
Pro forma weighted average common
shares outstanding--basic and
diluted.......................... 15,561
<CAPTION>
As of December 31,
-------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......... $ 6,537 $ 843 $ 5,826 $ 4,138 $22,728
Total assets...................... 7,953 2,568 7,229 5,446 23,930
Convertible preferred stock....... 9,100 9,100 22,067 24,467 45,895
Common stock...................... 2 2 2 2 2
Total stockholders' equity
(deficit)........................ 6,277 508 5,546 3,904 17,080
</TABLE>
See the financial statements and notes included elsewhere in this prospectus
for a description of the computation of the historical and pro forma net loss
per share and the number of shares used in the historical and pro forma per
share calculations in the statement of operations data above.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this section with the financial statements and notes
included elsewhere in this prospectus.
Overview
We were founded in October 1993 under the name Innovative Pharmaceuticals,
Inc. We changed our name to Inspire Pharmaceuticals in June 1994. In March
1995, we commenced operations subsequent to our first substantial financing.
Since that time, we have engaged primarily in research and development efforts
related to the P2Y\\2\\ receptor, which coordinates the body's innate defense
mechanisms of mucosal hydration and mucociliary clearance. To date, we have
three product candidates in advanced clinical development. Our collaborators
include Genentech, Kissei and Santen.
To date, we have devoted substantially all of our efforts to research,
clinical development and establishing strategic partnerships for the
development and potential marketing of our product candidates when they are
approved. We have not derived any commercial revenues from product sales and
we do not expect to receive sales revenues for at least the next several
years. We recognized $3.6 million and $600,000 in revenues from a
collaborative research and development agreement with Kissei in 1998 and 1999,
respectively, and expect to recognize revenues in 2000 from our collaborative
research and development agreements with Kissei and Genentech. We have
incurred significant operating losses since our inception in 1993 and, as of
December 31, 1999, we had an accumulated deficit of $29.4 million. We have
primarily funded our losses by raising $45.9 million in private sales of
equity securities. There can be no assurance if or when we will become
profitable. We expect that our losses will fluctuate from quarter to quarter
and that such fluctuations may be substantial. Our achieving profitability
depends upon our ability, alone and with others, to successfully complete the
development of our product candidates, obtain required regulatory clearances
and successfully manufacture and market our products.
We recognize revenue under our collaborative research and development
agreements when we have performed services under such agreements, or when we
or our collaborative partner has met a contractual milestone triggering a
payment to us. Non-refundable fees received at the initiation of collaborative
agreements for which we have an ongoing research and development commitment,
such as Genentech, are deferred and recognized ratably over the period of the
ongoing research and clinical development commitment. License fees received
under collaborative research and development agreements for which we have no
future research or clinical development commitment, such as Kissei, are
recognized when received. We are also entitled to receive milestone payments
under our collaborative research and development agreements based upon
achievement of development milestones by us or our collaborative partners. We
recognize milestone payments at the date the milestone is achieved and
acknowledged by the collaborative partner, which is generally at the date
payment is received from the collaborative partner.
Results of Operations
Year Ended December 31, 1999 and 1998
Revenues
Revenues are primarily derived from collaborative research and development
agreements with strategic partners. We receive milestone payments under these
collaborative research and development agreements based both on achievement by
us and our partners of defined development milestones.
Our revenues decreased $3.0 million to $600,000 in 1999 from $3.6 million
in 1998. Revenue for 1998 included the receipt of a non-refundable license fee
from Kissei for which we have no ongoing research and development commitment.
In December 1999, we received a $5.0 million payment from Genentech in
connection with the signing of our collaborative research agreement. This
amount was deferred and will be recognized ratably as revenue over the period
of our research commitment for our development of INS365 Respiratory, which is
expected to occur in 2000 and 2001. Revenue for 1999 is comprised of a
$600,000
22
<PAGE>
milestone payment received under our collaborative research and development
agreement with Kissei which is related to a development milestone reached by us
on behalf of Kissei.
Research and Development
Research and development expenses are primarily comprised of personnel and
related costs and costs of contract research organizations that are performing
research and development activities, including clinical studies, for us, and
costs of filing and maintaining our patent portfolio.
Research and development expense increased by approximately $1.8 million to
$7.2 million in 1999 from $5.4 million in 1998. This increase was due to an
increase of approximately $400,000 in contract research costs related to
clinical studies, an increase of $175,000 in patent related costs, $185,000 in
increased personnel and related costs as we added personnel to support the
expansion of our clinical study activities and an increase of $1.2 million in
costs related to preclinical activities as we added research personnel to
support our increased discovery activity related to new compounds and potential
new indications for existing compounds.
General and Administrative
General and administrative expenses consist primarily of personnel and
related costs for general corporate functions, including finance, accounting,
legal, human resources, facilities and information systems expenses.
General and administrative expenses increased by approximately $34,000 to
$1.9 million in 1999. The increase in general and administrative expense is
primarily due to increased facilities and equipment costs in 1999 as a result
of the increase in our business activities.
Stock Based Compensation
Stock based compensation expense consists of the amortization of deferred
compensation, related to stock options granted to employees with an exercise
price below the estimated fair market value of our common stock at the date of
the grant. We recorded deferred compensation of approximately $290,000 in 1998
and $144,000 in 1999. Deferred compensation is amortized to operating expense
over the vesting period of the related stock options which is generally four
years. Stock based compensation expense increased to $90,000 in 1999 as
compared to $14,000 in 1998.
Other Income (Expense), Net
Other income (expense), net consists of interest income earned on cash
deposits and short-term investments, reduced by interest expense on notes
payable and capital lease obligations and gains and losses on sales of property
and equipment. Other income (expense), net increased by approximately $107,000
to income of $142,000 in 1999 as compared to income of $35,000 in 1998. The
increase is primarily due to an increase in interest income of $70,000 due to
higher average cash and investment balances in 1999 as compared to 1998 and a
decrease in interest expense of approximately $25,000 resulting from the lower
average notes payable balance in 1999 as compared to 1998.
Income Tax Expense
Provision for income taxes decreased by approximately $300,000 to $60,000 in
1999 from $360,000 in 1998. Income taxes in 1999 and 1998 are comprised of
Japanese withholding taxes on license payments received from Kissei. The
decrease in income tax expense is due to the reduction in license payments
received from Kissei in 1999 as compared to 1998.
Year Ended December 31, 1998 and 1997
Revenues
Our revenues increased to $3.6 million in 1998 from zero in 1997. This
increase was the result of the receipt of a non-refundable license fee from
Kissei in 1998 for which we have no ongoing research and development
commitment.
23
<PAGE>
Research and Development
Research and development expense decreased by approximately $1.2 million to
$5.4 million in 1998 from $6.6 million in 1997. This decrease was due primarily
to the fact that in 1997, we were required to make milestone payments of
$500,000 to entities from which we licensed some of our drug compounds while we
made only $30,000 of such license payments in 1998. In addition, in 1998 we had
a decline of approximately $800,000 in costs related to clinical and
preclinical studies as compared to 1997.
General and Administrative
General and administrative expenses increased by approximately $400,000 to
$1.9 million in 1998 from $1.5 million in 1997. The increase in general and
administrative expense is primarily due to an increase in personnel costs as we
added administrative and finance staff in 1998 to support the growth in our
business.
Stock Based Compensation
Stock based compensation expense increased to $14,000 in 1998 from zero in
1997 because before 1998 all stock option grants had been made with an exercise
price equal to the fair value of our common stock at the date of the grant.
Other Income (Expense), Net
Other income (expense), net decreased by $81,000 to income of $35,000 in
1998 as compared to income of $116,000 in 1997. The decrease is primarily due
to a decrease in interest income of $112,000 due to lower average cash and
investment balances in 1998 as compared to 1997 partially offset by a decrease
in interest expense on capital leases of $49,000.
Income Tax Expense
Provision for income taxes increased to $360,000 in 1998 from zero in 1997.
Income taxes in 1998 are comprised of Japanese withholding taxes on a license
payment received from Kissei. No such license payments were received in 1997.
Liquidity and Capital Resources
We have historically derived a significant portion of our liquidity and
operating capital from the private placements of preferred stock and from
payments received under collaboration or license agreements related to our
technologies. At December 31, 1999, cash and cash equivalents totaled $22.7
million, an increase of $18.6 million as compared to December 31, 1998. The
increase in cash and cash equivalents resulted from our receipt of $21.4
million in net proceeds from the private placement of our Series E and Series G
preferred stock in July, October and December 1999. In addition, we received a
non-refundable license fee of $5.0 million upon the signing of a collaboration
agreement with Genentech on December 17, 1999, which was recorded as deferred
revenue, and a milestone payment of $600,000 from Kissei in 1999. Cash used for
operating expenses was $7.9 million, excluding the license fees received from
Genentech and Kissei for our operating expenses, cash used by investing
activities of $151,000 and payments on capital lease obligations of $457,000.
Cash used by operations of $2.3 million during 1999 represented our net loss
of $8.5 million partially offset by the $5.0 million license fee received upon
the signing of the Genentech agreement in December 1999, non-cash charges to
our net loss of $741,000 and an increase in accounts payable and accrued
liabilities of $472,000. The increase in accounts payable and accrued
liabilities is primarily due to the increase in spending in our clinical and
preclinical activities in 1999 as compared to 1998.
Cash used in investing activities of $151,000 was comprised of purchases of
property and equipment. Cash provided by financing activities of $21.0 million
resulted from the receipt of $11.4 million in net proceeds from the sale of our
Series E preferred stock in July and October 1999 and net proceeds of $10.0
million from the sale of our Series G preferred stock in December 1999
partially offset by payments of $457,000 on our capital lease obligations.
24
<PAGE>
At December 31, 1998, cash and cash equivalents totaled $4.1 million, a
decrease of $1.7 million as compared to December 31, 1997. The decrease in cash
and cash equivalents resulted from cash used in operations of $3.6 million,
which was primarily due to our net loss, and $462,000 in payments on our notes
payable and capital lease obligations partially offset by $2.4 million in
proceeds received from the sale of our Series C and Series D preferred stock in
September and December 1998.
Cash used by operations in 1998 of $3.6 million reflects our net loss of
$4.1 million partially offset by non-cash charges of $607,000 and a decrease in
accounts payable and accrued liabilities of $107,000. The decrease in accounts
payable and accrued liabilities resulted primarily from timing of the receipt
of invoices related to our clinical and preclinical activities.
Cash used by investing activities in 1998 of $43,000 represented the
purchase of property and equipment partially offset by the proceeds from
disposal of property and equipment.
Cash provided by financing activities of $2.0 million resulted from the
receipt of $900,000 in proceeds from the sale of our Series C preferred stock
in September 1998 and the receipt of $1.5 million in proceeds from the sale of
our Series D preferred stock in December 1998 partially offset by $462,000 in
payments on our notes payable and capital lease obligations.
We have experienced a substantial increase in our operating expenses since
our inception in connection with the increase in the number of compounds in
both preclinical and clinical development. Our capital requirements are
expected to continue to increase as we expect to move more compounds into
clinical trials during 2000. The timing and amount of these expenditures will
depend upon numerous factors, including:
. timing of initiation of clinical trials;
. design and duration of clinical trials;
. our ability to negotiate favorable terms with contract research
organizations to perform these clinical trials;
. number of compounds and level of our preclinical activities; and
. timing of achievement by us or our partners of development milestones
and resulting receipt by us of milestone payments under our
collaborative research agreements.
We expect that the proceeds from this offering, combined with our current
cash and cash equivalents, short-term investments and funding from existing
collaborative arrangements will be sufficient to fund our operations for at
least the next two years. This estimate is a forward-looking statement that
involves risks and uncertainties which are described under the caption "Risk
Factors" in this prospectus.
Recently Enacted Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued the Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Standard establishes accounting and
reporting standards for derivatives and hedging activities and supersedes and
amends a number of existing standards. The Standard, as amended by Statement of
Financial Accounting Standard No. 137, is effective for all fiscal quarters in
all fiscal years beginning after June 15, 2000, but earlier application is
encouraged. Upon the Standard's application, all derivatives are required to be
recognized in the statement of financial position as either assets or
liabilities and to be measured at fair value. In addition, all hedging
relationships must be designated, reassessed and documented. The Company does
not currently, nor does it intend in the future, to use derivative instruments
and, as a result, it does not expect that the adoption of SFAS 133 will have
any impact on its financial position or results of operations.
Impact Of Year 2000
Many currently installed computer systems and software products were unable
to distinguish between twentieth century dates and twenty-first century dates.
As a result, many companies had to upgrade or replace their software and
computer systems to comply with year 2000 requirements or risk system failure
or miscalculations causing disruptions of normal business activities.
25
<PAGE>
State of Readiness
The majority of the computer programs and hardware we currently use in our
own internal operations did not require replacement or modification as a result
of the year 2000 issue. We have not, to date, experienced any material year
2000 problem. We believe that our significant vendors and service providers are
year 2000 compliant and we have not, to date, been made aware that any of our
significant vendors or service providers have suffered disruptions in their
systems.
Costs
To date, we have incurred some expenses, which have not been significant,
related to the operating costs associated with time spent by employees in the
evaluation process and year 2000 compliance testing generally. We presently do
not anticipate that future expenditures will be significant.
Risks
We completed internal assessments of our year 2000 readiness prior to
December 31, 1999, with emphasis on our operating and administrative systems
and are not aware of any year 2000 problems that could reasonably be expected
to have a significant negative effect on our business. Our assessment plans
consisted of internal testing of our systems, contacting third party vendors of
hardware, software and services, assessing and implementing repairs or
replacements as required and developing contingency plans if year 2000 problems
still arise. We contacted our major vendors for software, hardware and related
services. These vendors indicated that they are year 2000 compliant. To date,
we have not experienced any significant year 2000 problems. However, we can not
guarantee that we have identified all year 2000 compliance problems in our
infrastructure that may require substantial revisions and repairs. Also,
despite our testing and reviews, we may experience year 2000 problems related
to the third party software, hardware or other systems on which we are reliant,
and any of these problems may be time consuming or expensive to fix.
Contingency Plan
We have been engaged in an ongoing assessment of our readiness and have
developed contingency plans to address year 2000 problems that may arise. The
results of our analyses and the responses received from third party vendors and
service providers were taken into account in developing these plans.
Quantitative and Qualitative Disclosures about Market Risk
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
investment portfolio and on the increase or decrease in the amount of interest
expense we must pay with respect to our various outstanding debt instruments.
Our risk associated with fluctuating interest expense is limited, however, to
our capital lease obligations, the interest rates are closely tied to market
rates, and our investments in interest rate sensitive financial instruments.
Under our current policies, we do not use interest rate derivative instruments
to manage exposure to interest rate changes. We ensure the safety and
preservation of our invested principal funds by limiting default risks, market
risk and reinvestment risk. We reduce default risk by investing in investment
grade securities. A hypothetical 100 basis point drop in interest rates along
the entire interest rate yield curve would not significantly affect the fair
value of our interest sensitive financial instruments at December 31, 1998 or
December 31, 1999. Declines in interest rates over time will, however, reduce
our interest income while increases in interest rates over time will increase
our interest expense.
26
<PAGE>
BUSINESS
Overview
We discover and develop new drugs, or pharmaceutical products, to treat
diseases characterized by deficiencies in the body's innate defense mechanisms
of mucosal hydration and mucociliary clearance. Our products are based on our
proprietary technology relating to P2Y receptors. Studies indicate that a
subtype of this family, the P2Y\\2\\ receptor, coordinates the mechanisms of
mucosal hydration and mucociliary clearance. These complex mechanisms, which
involve movement of salt and water, a protein substance made in specialized
cells that act to lubricate surfaces called mucin, and the movement of cilia,
or hairlike projections on the surface of cells that move together in a
sweeping motion to move liquid and particles forward, can be regulated
therapeutically through the stimulation of this receptor. Our lead products
target respiratory and ophthalmic diseases with inadequate current treatments.
We currently have three product candidates in advanced clinical development:
. INS365 Respiratory for the treatment of chronic bronchitis;
. INS365 Ophthalmic for the treatment of dry eye disease; and
. INS316 Diagnostic to aid in the diagnosis of lung cancer and lung
infection.
In addition, we have two products that are scheduled to enter clinical
trials later this year: INS37217 Respiratory for the treatment of cystic
fibrosis and INS37217 Ophthalmic for the treatment of retinal detachment. We
have entered into development and commercialization alliances with Genentech,
Kissei and Santen. We are also exploring other target diseases where we believe
P2Y receptors play important biological roles.
We commenced operations in March 1995. At that time, we acquired a license
to our initial technology, including patents relating to P2Y receptors and on
method of use for INS316 in the respiratory area, from The University of North
Carolina at Chapel Hill. We initially focused on the clinical development of
INS316 for the treatment of respiratory diseases such as cystic fibrosis and
chronic bronchitis. In early 1996, we initiated a research program to develop
an improved P2Y\\2\\ agonist compound, INS365. A joint patent for this compound
was granted to us and The University of North Carolina at Chapel Hill. We began
preclinical studies of INS365 for respiratory uses in 1997, and clinical
testing of INS365 for respiratory uses in early 1998. We filed an
investigational new drug application (IND) in the United States in the spring
of 1998. We acquired an exclusive license to use INS365 to treat respiratory
disease from The University of North Carolina at Chapel Hill in 1998. During
the development of INS365 for respiratory uses, our scientists began to
recognize the potential for using INS365 to treat eye diseases such as dry eye.
We initiated ophthalmic clinical testing of INS365 in the United Kingdom in
early 1999 and filed an IND in the United States in the fall of 1999. Our
chemistry lab also synthesised INS37217, a new P2Y\\2\\ receptor agonist, in
1998. We began preclinical testing of INS37217 for respiratory uses in 1998,
and for ophthalmic uses in 1999. This preclinical work is ongoing at this time.
Background
Mucosal hydration and mucociliary clearance processes are observed at a
number of human mucosal surfaces including those in the respiratory tract, eyes
and sinuses. Mucosal hydration and mucociliary clearance are natural mechanisms
for cleansing and protecting mucosal surfaces and require a coordinated balance
of salt, water and mucus. Studies indicate that P2Y\\2\\ receptors regulate
these mechanisms on epithelial cells that line mucosal surfaces. Diseases that
are characterized by impairment of mucosal hydration and mucociliary clearance
include chronic bronchitis, sinusitis, cystic fibrosis and dry eye disease.
Respiratory
For lungs to function normally, airway surfaces must be kept properly
hydrated and clear of particles. Airway liquid, including salt and water, is
secreted through channels in the membranes of respiratory epithelial
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cells. Mucus, secreted by goblet cells, traps microorganisms and particulates.
Specialized epithelial cells containing cilia beat synchronously to propel the
overlying "mucociliary blanket" of salt, water and mucus to the mouth and
throat where secretions are swallowed or expelled. This process is the
principal mechanism by which the body keeps airway surfaces free of dust,
pollutants, bacteria and viruses. Genetic and environmental factors can lead to
a breakdown in the normal process of mucosal hydration and mucociliary
clearance that is observed in many debilitating respiratory diseases, including
chronic bronchitis and cystic fibrosis. Studies indicate that stimulating
P2Y\\2\\ receptors with effective agonists can help restore the respiratory
system's innate defense mechanisms.
Chronic Bronchitis
Chronic bronchitis is a serious and potentially life-threatening lung
condition characterized by acute and chronic airway inflammation, chronic
obstruction of airflow and a mucus-producing cough. Patients with chronic
bronchitis experience shortness of breath, labored breathing, excessive and
chronic coughing and production and retention of excessive mucus. Chronic
bronchitis can be caused by smoking, environmental toxins, and viral or
bacterial infections. Chronic bronchitis is defined by the American Thoracic
Society as the presence of a mucus-producing cough most days of the month,
three months of the year, for at least two successive years without obvious
alternative explanation. Patients with chronic bronchitis experience acute
flare-ups of the illness, their medication usage increases and they may require
hospitalization. If left untreated, these patients experience progressive
deterioration in lung function, which can eventually result in respiratory
failure and death.
The American Thoracic Society guidelines for the treatment of chronic
bronchitis recommend three main objectives to pharmaceutical intervention:
dilation of the airways, reduction of airway inflammation, and clearance of
retained respiratory secretions. Current management of chronic bronchitis
treats the symptoms, but does not cure the disease, and is based on the degree
of airflow obstruction and the extent of the patient's disability. Physicians
generally prescribe bronchodilators, which act to open airways in the lungs.
These are usually inhaled medications such as Serevent(R), Ventolin(R),
Atrovent(R), or Combivent(R). Physicians may also prescribe inhaled steroids
such as Beclovent(R) and Azmacort(R) to reduce the inflammation in the airways.
Additionally, physicians often use antibiotics during acute flare-ups of the
illness if they diagnose or suspect bacterial infections. There is currently no
FDA approved pharmaceutical agent that effectively clears retained mucous
secretions in this disease.
Approximately 31 million patients have been diagnosed with chronic
bronchitis in the eight major international prescription pharmaceutical
markets, including 14 million in the United States, making it more prevalent
than asthma. Chronic bronchitis is estimated to account for approximately $14
billion in direct costs annually. In the United States, there are estimated to
be 500,000 hospitalizations per year due to acute flare-ups of the illness of
chronic bronchitis and it is the fourth leading cause of death. In the eight
major international prescription pharmaceutical markets, sales of
ethical/proprietary pharmaceutical products to treat chronic bronchitis were
approximately $1.3 billion in 1996 and have been estimated to reach
approximately $2 billion in 2001.
Cystic Fibrosis
Cystic fibrosis is a life-threatening disease involving a genetic mutation
that disrupts the cystic fibrosis transmembrane regulator protein. In healthy
individuals, this protein acts as an ion-specific channel that modulates salt
and water movement. In cystic fibrosis patients, a defect in this channel leads
to poorly hydrated, thickened mucous secretions in the airways and severely
impaired mucociliary clearance. Impairments in these vital lung defense
mechanisms typically begin in early childhood. Chronic secondary infections
invariably occur, resulting in progressive lung dysfunction and deterioration.
Cystic fibrosis-induced damage to the respiratory tract accounts for more than
95% of the morbidity and mortality associated with this disease. According to
the U.S. Cystic Fibrosis Foundation, the average life expectancy for patients
is 32 years.
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The current therapeutic approaches to address cystic fibrosis mainly treat
the symptoms, but do not cure the disease, and are aimed primarily at reducing
respiratory infections and breaking up thickened mucous secretions that cause
airflow obstruction and harbor bacteria. For example, TOBI(R) is an inhaled
antibiotic that treats the infection, and Pulmozyme(R) is an inhaled protein
that breaks up excessive DNA in cystic fibrosis mucus which reduces the
thickness and tackiness of the respiratory secretions. While both products are
approved for the treatment of cystic fibrosis, neither product is designed to
address the underlying ion-transport defect, which results in dehydrated mucus
and severely impaired mucociliary clearance.
There are approximately 30,000 diagnosed cystic fibrosis patients in the
United States and approximately 75,000 in the eight major international
prescription pharmaceutical markets. The average annual cost of treating a
cystic fibrosis patient in the United States exceeds $45,000, and the annual
cost for patients in the United States is over $1 billion. We estimate that in
the United States sales of ethical/proprietary pharmaceutical products to treat
cystic fibrosis currently are in excess of $200 million annually.
Respiratory Diagnostics
Physicians use microscopic examination of lung cells to diagnose lung cancer
and lung infections, including pneumonia and tuberculosis. Effective diagnosis
requires the collection of an adequate specimen, one which is enriched with
deep-lung material, a mucous specimen obtained from the lower part of the lung.
Bronchoscopy, an invasive medical procedure, is sometimes performed to obtain a
specimen; however it is a procedure that costs over $1,000 and poses some risk
to patients with impaired lung function. The induction of sputum, either
spontaneously or with inhaled solutions, is a less invasive and less costly
alternative for obtaining a deep-lung specimen. Once the specimens are
collected, they are tested for the presence of cancerous cells or pathogens
associated with lung infections. However, many patients have difficulty
producing adequate specimens on their own, which is a key barrier to early and
effective diagnosis and treatment.
There are no FDA approved agents currently available to enhance the
production of an adequate specimen. In an effort to produce a quality specimen,
non-approved agents are frequently used, including inhaled solutions such as
hypertonic saline and propylene glycol, which cause irritation and excessive
coughing. Because these agents have limited utility and are often poorly
tolerated, pulmonologists and respiratory therapists have expressed a strong
interest in a better tolerated and more efficacious adjunctive therapy, which
if effective could reduce the need for bronchoscopies.
Market research conducted by us, including interviews with pulmonologists
and oncologists, indicates that deep-lung specimens are frequently collected
for the diagnosis of lung cancer and lung infections. The testing of specimens
is a recommended component of annual physical examinations in Japan.
Ophthalmic
The eyes and inner eyelids are surrounded by a mucosal surface which serves
as an important innate defense mechanism, keeping the surface of the eye, or
ocular surface, moist, clear and free from infection. Tears produced by the
mucosal hydration process and the lacrimal glands help maintain eye moisture
and in response to physical stimuli can be greatly increased to flush out
irritants. This tear film is a complex mixture of fluid, ions, mucin and
proteins that, when mixed in the proper proportions, coats the cornea with a
protective film. The mucosal hydration process and the lacrimal glands maintain
an optimal balance of salt, water, mucin and proteins in people with a healthy
ocular surface. Studies indicate that stimulating P2Y\\2\\ receptors with
effective compounds can help restore the eye's innate mucosal defense mechanism
on the ocular surface.
Dry Eye Disease
Dry eye, an ocular surface disease, is the general term for a condition in
which abnormalities in the eye's tear film lead to red, irritated and dry eyes.
These abnormalities are typically characterized by a decrease in tear
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production, an increase in tear evaporation or the improper mixture of the
eye's tear film components. If left untreated, dry eye disease can result in
permanent corneal damage and visual impairment.
The current treatments for dry eye disorders in the major markets consist
primarily of artificial tear solutions and lubricant drops. In some cases,
small plugs are inserted by physicians in the corner of the eyes to slow tear
drainage. Artificial tears, which are available as over-the-counter and, in
some countries, as prescription products, provide temporary relief of symptoms,
but also wash out the natural proteins and other components that keep an eye
healthy. There are currently no approved pharmacologically active agents, drugs
that work by affecting a biological process such as stimulation of a receptor,
for dry eye disease.
We estimate, based on an extrapolation from United States data, that
moderate to severe dry eye affects approximately nine million people in the
eight major international prescription pharmaceutical markets and can be caused
by eye stress, aging, environmental factors, autoimmune disorders and various
medications. The market for dry eye treatments consists of both prescription
and over-the-counter products. Because dry eye disease is more prevalent among
the elderly and post-menopausal women, this market is expected to grow as
populations age. We estimate that, in the eight major international
prescription pharmaceutical markets, sales of ethical/proprietary
pharmaceutical products for dry eye treatments exceed $230 million annually.
Inspire's Solution
Mucosal hydration and mucociliary clearance are natural mechanisms for
cleansing and protecting epithelial surfaces and require a coordinated balance
of salt, water and mucus. Studies indicate that P2Y\\2\\ receptors coordinate
these processes that can be regulated therapeutically by the local delivery of
compounds that bind to and stimulate these receptors. We have focused our
efforts on developing P2Y\\2\\ receptor agonists to treat diseases by
activating natural processes of mucosal hydration and mucociliary clearance.
We believe that P2Y\\2\\ agonists represent a novel, pharmacological
approach to the treatment of respiratory and eye diseases. We also believe that
a P2Y\\2\\ agonist may be effective as a drug that enhances the production of
deep-lung sputum samples for diagnostic tests. Importantly, our product
candidates can be applied directly to these mucosal surfaces in a topical form
such as inhaled aerosols and eye drops. These products act and are degraded
locally, resulting in minimizing the potential for systemic side effects. Our
current products are designed to address the medical need for effective new
products for chronic bronchitis, cystic fibrosis, respiratory diagnostics, dry
eye disease and other diseases that involve impairment of mucosal hydration and
mucociliary clearance on epithelial surfaces. Our principal products are:
INS365 Respiratory: We are developing INS365 Respiratory as an inhaled
product for the treatment of chronic bronchitis. We believe our product will be
the first FDA approved product that addresses the need for an effective agent
to clear the build-up of mucus in the airways of bronchitis sufferers. Thus, we
believe our product will reduce the need for antibiotics, steroids and
bronchodilators, and may reduce the frequency and length of flare-ups of the
illnesses and hospitalizations. In many cases, we believe that our product will
be complementary to existing treatments.
INS37217 Respiratory: We are developing INS37217 Respiratory as an inhaled
product for the treatment of cystic fibrosis. We believe our product will be
the first FDA approved product that mitigates the underlying ion-transport
defect in the airways of patients with cystic fibrosis. We believe our product
will improve respiratory symptoms, reduce infections and enhance the health
status of patients with this disease and will be complementary to other
currently approved products.
INS316 Diagnostic: We are developing INS316 Diagnostic as an inhaled
diagnostic drug to aid in the detection of lung cancer and lung infection. We
believe that INS316 Diagnostic will be an effective acute-use product to
enhance the production of adequate deep-lung specimens for diagnostic purposes.
As such, we believe our product will facilitate the diagnosis of lung cancer
and lung infection and potentially reduce the need for costly and invasive
bronchoscopies.
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INS365 Ophthalmic: We are developing INS365 Ophthalmic as an eye drop for
dry eye disease. We believe that, by promoting the eyes' natural defense
mechanism, INS365 Ophthalmic will be one of the first FDA approved
pharmacologically effective agents to treat the symptoms of dry eye, and the
first one with this mechanism of action. We believe our product will help
restore a natural corneal tear film, reduce dry eye symptoms and help prevent
long-term corneal damage in dry eye sufferers.
Business Strategy
Our objective is to become a leading biopharmaceutical company focused on
developing novel treatments primarily for diseases involving impaired mucosal
hydration or inadequate mucociliary clearance. The principal elements of our
strategy include:
Aggressively Advance Our Lead Products. Our focus is on discovering and
developing therapies where current treatments are ineffective and where large
therapeutic market opportunities exist. By the end of 2000, we expect to have
five products in clinical development that target chronic bronchitis, cystic
fibrosis, respiratory diagnostics, dry eye disease and retinal detachment. We
intend to continue to develop and commercialize rapidly these products and to
advance other preclinical product candidates toward clinical development.
Establish Collaborative Relationships with Market Leaders while Selectively
Retaining Marketing Rights. In order to minimize the costs to us of late-stage
clinical trials and in order to more effectively market our products, we will
continue to establish and expand strategic alliances with leading corporations
in our target markets. In general, we seek to advance our compounds into later-
stage clinical trials before partnering such compounds so as to retain maximum
economic benefit to us. Additionally, we may selectively retain partial or full
commercialization rights to our products in some limited indications. An
example is our co-development and co-promotion options under the Genentech
agreement for cystic fibrosis that enable us to retain additional economic
benefit in this opportunity.
Use Our Proprietary Technology Relating to P2Y Receptors to Develop Novel
Products. Our research focus is to discover novel pharmaceutical products based
on our P2Y receptor technology. Studies indicate that a subtype of this family,
the P2Y\\2\\ receptor, has broad applicability as regulators of the body's
innate defense mechanisms of mucosal hydration and mucociliary clearance. One
of our key strengths is our ability to understand the role and importance of
P2Y\\2\\ receptors and, through research, high-throughput screening techniques
and pharmacology models, develop compounds that target a patient's impaired
mucosal hydration and clearance mechanisms. Our discovery group is pursuing
opportunities to expand our base of compounds and therapeutic targets for
P2Y\\2\\ agonists and the biological role of other P2Y receptor subtypes. This
group generates opportunities internally and through collaborative
relationships with academic and governmental organizations and private
enterprises.
Protect and Enhance Our Technology Leadership Position. We have a
substantial intellectual property position related to our technology. We intend
to continue to pursue an aggressive patent strategy to protect our expanding
proprietary discoveries.
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Product Development Programs
The following table provides a summary of our development programs by
indication, development status and corporate partners.
<TABLE>
<CAPTION>
Indication Product Candidate Development Status Corporate Partners
- ---------------------------------------------------------------------------------------
<C> <C> <C> <S>
Respiratory:
Chronic bronchitis INS365 Respiratory Phase IIa planned in Genentech (ex-Japan)
2000 Kissei (Japan)
Cystic fibrosis INS37217 Phase I planned in Genentech (ex-Japan)
Respiratory 2000
Sinusitis Unnamed P2Y\\2\\ Preclinical Genentech
agonist (worldwide)
Diagnostic Adjunct INS316 Diagnostic Phase III planned in Uncommitted
for Lung Disease 2000
- ---------------------------------------------------------------------------------------
Ophthalmic:
Dry eye INS365 Ophthalmic Phase IIb ongoing Santen (Asia)
Uncommitted
outside Asia
Retinal detachment INS37217 Ophthalmic Phase I planned in Uncommitted
2000
</TABLE>
INS365 Respiratory for Chronic Bronchitis
INS365 Respiratory is being developed in an inhaled form for the treatment
of chronic bronchitis. We have conducted three Phase I clinical trials of
INS365 Respiratory, and one is ongoing. These trials have evaluated the safety
and preliminary efficacy of INS365 Respiratory in healthy volunteers, chronic
smokers who are at a high risk for developing chronic bronchitis and cystic
fibrosis patients with airflow obstruction. In total, these studies enrolled
approximately 200 subjects. These studies have indicated that INS365
Respiratory was well tolerated and significantly enhanced mucus clearance when
compared to placebo. One of these studies, conducted in 35 chronic smokers,
indicated that INS365 Respiratory in single inhaled doses significantly
enhanced clearing of mucus from the lungs, which occurred rapidly following
dosing. This effect was dose-related and was significantly greater than mucus
cleared from lungs following inhalation of a saline placebo; the results were
statistically significant. We have conducted a series of good laboratory
practice toxicology studies, including 28-day inhalation studies, which,
together with the Phase I data, will allow us to progress INS365 Respiratory
into a Phase II program.
We are planning, in consultation with our strategic partner, Genentech, to
initiate a Phase IIa clinical study in patients with chronic bronchitis in the
second half of 2000. This trial is being designed to be a multi-center study
and would enroll patients with mild to moderate chronic bronchitis. We intend
to dose patients for up to one month using standard air-jet nebulizers. The
clinical efficacy measures in this study are intended to include respiratory
symptoms, health status, quality of life using a validated respiratory
questionnaire, lung function and adverse events. Kissei, our partner in Japan,
filed a Japanese IND for INS365 Respiratory in December 1999 and initiated a
Phase I clinical trial in smokers and non-smokers.
We have developed a drug delivery strategy for INS365 Respiratory based on
segmenting the chronic bronchitis patient population by severity of disease--
mild, moderate and severe. We anticipate that each segment may have different
drug delivery needs based on convenience, ease of use, and degree of patient
mobility, such as whether the patient is working, homebound or hospitalized. In
recognizing this variety of
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needs, we are exploring various delivery options which will allow for
flexibility in dosing across the various segments of the chronic bronchitis
market. One option will be plastic unit-dose vials that are used with a
standard air-jet nebulizer system. Another approach, a novel, hand-held,
portable delivery system, has been evaluated in a radio-labeled lung deposition
study in 12 healthy volunteers. Results from this study suggest that this novel
system can be used to deliver a small volume of concentrated INS365 Respiratory
in one to two breaths providing rapid delivery in a convenient manner to
patients. We have recently initiated an additional study of this hand-held
delivery system in 12 chronic smokers to evaluate the lung deposition profile
of INS365 Respiratory and its effect on mucociliary clearance. This study is
expected to be completed in the first half of 2000. These studies are being
conducted to assist our strategic partners to demonstrate that this product can
be delivered in a more convenient device.
In September 1998, we entered into a joint development, license and supply
agreement with Kissei through which Kissei received exclusive rights to develop
and market INS365 Respiratory for respiratory therapeutic indications in Japan.
In December 1999, we entered into a development, supply and license agreement
with Genentech to develop P2Y\\2\\ agonists, including INS365 Respiratory, for
respiratory diseases, including chronic bronchitis, throughout the world
outside Japan. See "--Corporate Collaborations."
INS37217 Respiratory for Cystic Fibrosis
INS37217 Respiratory is a second-generation P2Y\\2\\ agonist with an
extended duration of action. This product is highly stable in the mucous
secretions of cystic fibrosis patients making it an attractive product
candidate for this disease. The previous studies we have conducted with INS365
Respiratory provide the scientific rationale for the use of INS37217
Respiratory for cystic fibrosis. We have completed a number of key preclinical
studies and we intend to initiate an inhalation toxicology program in March
2000. Pending the toxicology study results, all of these preclinical studies
will provide support for the filing of an IND and the initiation of clinical
studies. We intend to initiate a Phase I clinical trial for the development of
INS37217 Respiratory for cystic fibrosis in the second half of 2000. We intend
to develop INS37217 Respiratory for cystic fibrosis as a chronic use agent in
an inhaled form using both a standard air-jet nebulizer and a novel, portable
inhaler.
INS37217 Respiratory is designed to enhance the lung's innate mucosal
hydration and mucociliary clearance mechanisms, which in cystic fibrosis
patients are impaired by a genetic defect. By hydrating airways and stimulating
mucociliary clearance through stimulation of the P2Y\\2\\ receptor, we expect
that INS37217 Respiratory will help keep the lungs of cystic fibrosis patients
clear of thickened mucus, reducing infections and the damage that occurs as a
consequence of the retention of thick and tacky infected secretions. We further
believe that these effects may result in reduced frequency and length of
hospitalizations, reduced need for antibiotics and other medications, reduced
deterioration of respiratory function, and improved respiratory symptoms and
quality of life. In addition, this product is expected to be complementary with
the two approved products, Pulmozyme(R) and TOBI(R), neither of which affects
the underlying ion-transport defects in cystic fibrosis airways.
We expect to receive orphan drug status and an accelerated regulatory
approval process for INS37217 Respiratory for the treatment of cystic fibrosis.
In December 1999, we entered into a co-development partnership with Genentech
to develop P2Y\\2\\ agonists for respiratory diseases, including cystic
fibrosis, throughout the world outside Japan. See "--Corporate Collaborations."
P2Y\\2\\ Agonist for Sinusitis
We plan to select, in collaboration with Genentech, an existing P2Y\\2\\
agonist for development to treat sinusitis, an infectious and inflammatory
condition of the nose and sinuses that often results in painful flare-ups of
the illness. We believe that increasing mucociliary clearance in the nose and
sinuses with a P2Y\\2\\ receptor agonist may be beneficial for treating this
condition. Clinical studies with other P2Y\\2\\ agonists such as INS316 have
already shown that these agents open ion channels in the nasal mucosa thus
hydrating this surface. It is expected that P2Y\\2\\ agonists will also
stimulate mucociliary clearance in the sinuses. We estimate that sinusitis
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affects approximately 12% of the U.S. adult population, or approximately 25
million adults. The current market consists of both over-the-counter and
prescription treatments. Our research and development of drug candidates in
this area depends on our collaboration with Genentech. See "--Corporate
Collaborations."
INS316 for Respiratory Diagnostics
INS316 Diagnostic, a P2Y\\2\\ agonist with a short duration of action, is
being developed as an acute-use inhaled solution to stimulate enhanced clearing
of mucus from the lungs and serve as a drug that assists in diagnostic tests
for diagnosing lung diseases and lung infections, called a diagnostic adjunct.
We have conducted four clinical trials to evaluate INS316 Diagnostic's utility
as an acute use agent. These clinical studies have demonstrated that INS316
Diagnostic is well tolerated and appears to enhance the ability of patients to
produce rapidly an adequate deep-lung specimen. These studies were conducted in
healthy volunteers, as well as chronic smokers and patients with chronic
bronchitis who are at a high risk for developing lung cancer and lung
infections.
INS316 Diagnostic has been administered by inhalation to more than 300
patients during such clinical trials, and has been well tolerated in these
trials. INS316 Diagnostic's safety profile is based on studies including non-
smokers, smokers and patients with obstructive lung diseases, and on the
results of good laboratory practice, genotoxicity and 28-day inhalation
toxicology studies. We believe that INS316 Diagnostic is rapidly degraded in
blood and plasma and, so has minimal systemic absorption. Therefore, the
potential for unwanted side effects is minimized.
These studies have also demonstrated that single inhaled doses of INS316
Diagnostic significantly enhance clearing of mucus from the lungs relative to
that following administration of normal saline solution. These effects occurred
within a few minutes following dosing and were dose-related. Specimens obtained
from individuals exposed to INS316 Diagnostic were found to be highly enriched
with cell types characteristic of deep lung secretions, including alveolar
macrophages and ciliated epithelial cells, when compared to samples from
individuals exposed to a placebo. These findings were statistically
significant. In a trial in 25 patients with chronic bronchitis who are at high
risk for lung cancer, 90% of the patients produced an adequate deep-lung
specimen following INS316 Diagnostic inhalation versus only 25% following
inhalation of a placebo. These study results were statistically significant.
Based on these encouraging results, we have discussed our Phase III plans with
the pulmonary division of the FDA. We plan to initiate a Phase III clinical
trial program to evaluate the efficacy of INS316 Diagnostic to improve the
diagnostic outcome in lung cancer in the second half of 2000.
INS365 Ophthalmic for Dry Eye Disease
INS365 Ophthalmic is being developed as a topical eye drop for the treatment
of dry eye disease. A series of good laboratory practice ocular toxicology
studies have been completed to support the ongoing clinical program. In
preclinical testing, topically applied INS365 Ophthalmic produced a consistent,
statistically significant increase in tear secretion, relative to that produced
by normal saline controls. INS365 Ophthalmic has also enhanced mucin secretion
on the ocular surface in several preclinical models. Many of these studies were
conducted by our Asian partner, Santen. The preclinical study results were
statistically significant in multiple relevant dry eye models.
We have completed one Phase I clinical trial in 50 healthy subjects and
demonstrated good ocular safety and tolerability. We have completed the safety
portion of a Phase IIa study in 35 patients with mild to moderate dry eye. This
study also showed the product to be well tolerated. A multi-center Phase IIb
clinical trial was initiated in the United States in January 2000 and will
enroll up to 150 patients with dry eye disease. Patients will be treated with
multiple-daily doses of placebo (saline drops) or INS365 Ophthalmic for up to
four weeks. Clinical efficacy measures include ocular comfort, patient diary
cards, rescue with artificial tears, corneal staining and tear-secretion. We
anticipate that this study will be completed in the second half of 2000.
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<PAGE>
In December 1998, we entered into a joint development, license and supply
agreement with Santen in Asia. Santen is a premier ophthalmic company and
markets the only approved prescription product for dry eye disease in Japan.
Santen intends to file an IND with Japanese regulatory authorities and begin
clinical trials in late 2000. See "--Corporate Collaborations."
INS37217 Ophthalmic for Retinal Detachment
INS37217 Ophthalmic, a second-generation proprietary P2Y\\2\\ receptor
agonist, is being developed as a sterile intravitreal injection for the
treatment of retinal detachment, a separation of the retina from the eye.
Retinal detachment occurs when fluid accumulates between the retina and the
underlying retinal epithelium. We estimate, based on an extrapolation from
United States data, that retinal detachment affects approximately 200,000
people in the eight major international prescription pharmaceutical markets.
This condition leads to loss of vision, and when left untreated, often results
in permanent damage to the retina, a sensory organ at the back of the eye that
is responsible for vision, and irreversible blindness. Previous work conducted
in vitro has shown that the retinal pigment epithelium contains P2Y\\2\\
receptors at the retinal-facing membrane, which can be stimulated by
appropriate agonists to enhance fluid absorption across the retinal pigment
epithelium. Subsequent work conducted in vivo has demonstrated the ability of
INS37217 Ophthalmic to facilitate the reattachment of the retina to the retinal
pigment epithelium in various animal models of retinal detachment. Retinal
detachment in humans may result from several ophthalmic diseases, ocular
trauma, or side-effects from invasive intraocular surgery. There is currently
no pharmaceutical treatment for retinal detachment.
We have completed a series of preclinical studies with INS37217 Ophthalmic
and have initiated intravitreal toxicology to support initiation of clinical
studies in 2000. We intend to file an IND with the FDA and initiate clinical
testing in patients in the second half of 2000.
Corporate Collaborations
Genentech, Inc.
In December 1999, we entered into a collaboration with Genentech to develop
treatments for respiratory disorders, including chronic bronchitis, cystic
fibrosis and sinusitis. Under the terms of the agreement, we granted an
exclusive license to Genentech for the use of INS365 Respiratory and our other
related P2Y\\2\\ agonists existing on the date of the agreement for all human
therapeutic uses for the treatment of respiratory tract disorders throughout
the world, excluding Japan. In addition, Genentech has an exclusive license for
the use of INS365 Respiratory and such existing P2Y\\2\\ agonists for all human
therapeutic uses for the treatment of sinusitis and middle ear infection
worldwide. Finally, Genentech has the right to use related P2Y\\2\\ agonists we
discover and develop during the term of the agreement upon reimbursing us for
discovery costs or funding our discovery efforts leading to those compounds.
However, even if Genentech does not reimburse or fund our discovery efforts, we
have agreed not to develop any such P2Y\\2\\ agonist for use in the therapeutic
respiratory field during the term of our agreement.
We have established joint project teams to oversee and coordinate the joint
development programs and a joint steering committee to establish the strategy
and manage the relationship. Under the terms of the agreement, we provide bulk
active drug substance to Genentech for its requirements, at an agreed-upon
price, through the end of Phase II. After Phase II, Genentech is responsible
for obtaining or manufacturing all of its bulk active drug substance
requirements.
We received an up-front payment of $15 million, comprising a non-refundable
cash license fee, funding for the Phase IIa clinical trials for chronic
bronchitis and the purchase of our Series G preferred stock. In addition,
depending on whether all milestones in each of the chronic bronchitis, cystic
fibrosis and sinusitis
35
<PAGE>
development programs are met, we could receive additional payments of up to
$63 million. Genentech is required to pay us royalties on net sales of products
licensed under the agreement.
In the United States, we will lead the early clinical development of
INS37217 Respiratory for the treatment of cystic fibrosis through the end of
Phase II clinical trials. We then have the option to continue to co-fund the
development of the product in the United States in exchange for a share of
United States operating profits instead of royalties. In addition, we have the
option, any time before Genentech initiates pre-launch activities, to choose to
co-promote the product in the United States at our own expense.
We are responsible for conducting, in collaboration with Genentech, the
Phase IIa clinical trials for INS365 Respiratory for chronic bronchitis. We
will also lead the preclinical program for a P2Y\\2\\ agonist selected by the
joint steering committee for the treatment of sinusitis, and will be
responsible for filing the IND for such compound. We expect our development
obligations under the agreement to be completed by the end of 2001.
Genentech is responsible for all other development conducted under the
agreement, including all development outside the United States, and for all
other regulatory submissions, filings and approvals relating to products.
Genentech is required to use commercially reasonable efforts to conduct
development, seek regulatory approvals and market and sell the products.
The agreement will be in effect until all patents licensed under the
agreement have expired. If we exercise our option to co-fund the development of
INS37217 Respiratory for the treatment of cystic fibrosis, then the agreement
will remain in effect for those products in the United States until the
products are no longer being marketed in the United States. Either Genentech or
we may terminate the agreement if the other materially breaches the agreement.
In addition, Genentech has the right, by giving us 150 days prior notice, to
terminate the agreement at any time. If Genentech breaches the agreement or
terminates the agreement early other than for our breach, Genentech's license
will terminate, Genentech must provide us with all data and information
relating to our products, and Genentech must assign or permit us to cross-
reference all regulatory filings and approvals.
Kissei Pharmaceutical Co., Ltd.
In September 1998, we entered into a Joint Development, License and Supply
Agreement with Kissei for the development of INS365 Respiratory for all
therapeutic respiratory applications, excluding sinusitis and middle ear
infection, in Japan. We granted Kissei an exclusive license to INS365
Respiratory in the field in Japan and a first right to negotiate a license to
particular P2Y\\2\\ agonists that show utility as inhalation products for
respiratory uses in Japan.
We established a joint development committee with Kissei to oversee the
development program, approve development plans, protocols and studies, and
review and approve all regulatory submissions and filings. In consultation with
Kissei, we are responsible for formulation of the compound and the design of
the delivery system to be used. We are also responsible, through the use of
development and manufacturing liaisons, for coordinating and facilitating
communications among our corporate partners for the worldwide development and
manufacture of INS365 Respiratory. Kissei is responsible for all development of
the compound and all regulatory filings.
We received an up-front payment of $4.5 million, which included the purchase
of our Series C preferred stock. In addition, depending on whether all
milestones are met, we could receive additional payments of up to $13 million,
as well as royalties on net sales of licensed products. To date, we have
received $2.1 million in milestone payments. We also are receiving funding for
development and manufacturing liaison staff positions.
We are obligated to supply Kissei with its requirements of INS365
Respiratory in bulk drug substance and in an inhalation formulation for all
preclinical trials conducted by Kissei. In addition, we are obligated to supply
Kissei with its requirements of finished product contained in a vial or nebule
and in a delivery system approved by the joint development committee for all
clinical trials to be conducted by Kissei. Kissei will pay us an agreed-upon
transfer price for all such supplies. We have also agreed to negotiate a
commercial supply arrangement with Kissei at the appropriate time to supply
Kissei's requirements of finished product and the delivery system.
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The agreement will terminate when all patents licensed under the agreement
have expired. Either Kissei or we may terminate the agreement if the other
materially breaches the agreement. In addition, Kissei has the right, by giving
us three months' prior notice, to terminate the agreement at any time if Kissei
determines that continued development or marketing of the product is
scientifically or economically infeasible. If Kissei breaches the agreement or
terminates the agreement early other than for our breach, Kissei's license will
terminate, Kissei will provide us with all data and information relating to our
products, and Kissei will assign or permit us to cross-reference all regulatory
filings and approvals,
Santen Pharmaceutical Co., Ltd.
In December 1998, we entered into a Development, License and Supply
Agreement with Santen for the development of INS365 Ophthalmic for the
therapeutic treatment of ocular surface diseases, such as dry eye disease, in
Asia. Under the agreement, we granted Santen an exclusive license to market
INS365 Ophthalmic for ocular surface diseases in Japan, China, South Korea, the
Philippines, Thailand, Vietnam, Taiwan, Singapore, Malaysia and Indonesia.
We established a coordinating committee to review and evaluate Santen's
progress in the development and commercialization of products and to provide
input and recommendations regarding the development of the products. Santen is
responsible for all development, regulatory submissions, filings and approvals,
and all marketing of products. We are obligated to supply Santen with its
requirements of INS365 Ophthalmic in bulk drug substance form for all
preclinical studies, clinical trials and commercial requirements at agreed-upon
prices.
Under the terms of the agreement, we received an up-front equity investment
of $1.5 million in our Series D preferred stock. In addition, depending on
whether all milestones are met, we could receive additional payments of up to
$4.75 million, as well as royalties on net sales of licensed products.
The agreement will terminate when all patents licensed under the agreement
have expired. Either Santen or we may terminate the agreement if the other
materially breaches the agreement. In addition, we have the right to terminate
the agreement at any time if we determine, subject to the coordinating
committee's review and arbitration, that Santen has not made reasonably
sufficient progress in the development or commercialization of products. If
Santen breaches the agreement, or if we terminate the agreement because Santen
has not made sufficient progress, Santen's license will terminate, and Santen
will provide us with all data and information relating to our products, and
will assign or permit us to cross-reference all regulatory filings and
approvals.
Discovery
Our scientists have specific expertise and proprietary knowledge relating to
the design and synthesis of P2Y receptor agonists, and we have invested heavily
in state-of-the-art equipment and laboratory space for performing synthetic
chemistry, determination of compound structure and molecular modeling. We have
acquired, by licenses and/or material transfer agreements, rights to three of
the five unique human P2Y receptors that have been functionally expressed. We
have cloned and expressed the other two receptors in-house.
Our discovery effort is primarily focused on conducting studies using our
proprietary cell-based MUCOSA(TM) assay system, a cell-based assay that
measures activities caused by stimulation of P2Y receptors, to identify novel
compounds that specifically and selectively bind to members of the P2Y receptor
family. The MUCOSA high-throughput assay enables us to identify agonists and
antagonists that act at specific receptor subtypes and have demonstrated a
level of specificity and activity that merits further investigation. We use
data from the assays to design and synthesize compounds specific to each P2Y
receptor subtype which can be advanced to clinical trials.
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By screening against several P2Y receptor subtypes, we have been able to
identify agonists and/or antagonists that interact preferentially with a
specific receptor subtype. Several proprietary discovery compounds, including
new chemical entities, with promising stability and metabolic profiles, are
being actively explored. We intend to conduct further preclinical development
studies to advance such proprietary compounds to project status, if
appropriate. These compounds will then be targeted to the treatment of new
disease areas, as identified through our strategic planning process.
We obtain access to chemical libraries through our own proprietary
combinatorial chemistry, commercial sources, and corporate agreements. The
chemicals are screened for both agonist and antagonist activity. Our chemistry
department also assists in the development of analytical protocols used by
contract service organizations for analysis of a drug substance, clinical
trials material, and drug stability studies which will be incorporated into IND
and new drug application (NDA) filings.
We use sponsored research agreements to investigate specific biological
processes to augment our technology platform. We are currently sponsoring
research at major universities, including The University of North Carolina at
Chapel Hill, Columbia University, the University of Southern California, Duke
University, Schepens Eye Research Institute and Brigham and Women's Hospital.
Patents and Proprietary Rights
We believe that the proprietary protection of our product candidates,
processes and know-how is important to the success of our business. We
aggressively file and prosecute patents covering our proprietary technology,
and, if warranted, will defend our patents and proprietary technology. As of
December 31, 1999, we owned or licensed patent rights consisting of 17 issued
United States patents, none of which expire before 2011, and thirteen pending
applications in the United States and numerous corresponding patents and patent
applications in foreign jurisdictions. We seek patent protection for our
proprietary technology and products in the United States and Canada and in key
commercial European and Asia/Pacific countries and other major commercial
sectors of the world, as appropriate. We intend to seek protection in the
United States and foreign countries trademarks from time to time. We also rely
upon trade secrets, know-how, continuing technological innovation and licensing
opportunities to develop and maintain our competitive position.
In March 1995 and September 1998, we entered into two agreements with The
University of North Carolina at Chapel Hill granting us exclusive worldwide
licenses to develop, make, use and sell products based on UNC patented
technology relating to the use of P2Y\\2\\ receptor agonists for respiratory
therapeutics, such as INS365 Respiratory, and respiratory diagnostics, such as
INS316 Diagnostic. The United States government may have limited rights in some
of this UNC patented technology. We also entered into a third agreement that
granted us a non-exclusive worldwide license to use other UNC patented
technology as a research tool to identify agonists and antagonists for P2Y
receptors. The agreements require us to pay licensing fees upon the attainment
of development milestones and royalties on net sales or a share of sublicensing
income on products covered by the patents. We are also required to meet due
diligence milestones and UNC may terminate the licenses if we fail to do so. In
connection with the licenses, we issued to UNC an aggregate of 326,286 shares
of our common stock, of which 128,610 shares have been transferred to the
inventors of the licensed UNC patented technology. We have also entered into
consulting agreements with some of the inventors of these technologies, all of
whom are from The University of North Carolina at Chapel Hill, including Dr.
Richard C. Boucher, one of our founders and a member of our Board of Directors,
M. Jackson Stutts, Kendall Harden and Michael Knowles, in which they agreed to
consult with us regarding their respective fields of knowledge.
Additional patent applications have since been filed on discoveries made in
support of such technologies, from research conducted at The University of
North Carolina at Chapel Hill or in our own laboratories. Our sponsored
research agreements, material transfer agreements, and other collaborations
have the potential to result in license agreements with universities,
institutes, and businesses. We believe that our patents and licensed patents
provide a substantial proprietary base that will allow us, and our
collaborative partners, to exclude others from conducting our business as
described in this prospectus and as encompassed by our issued patents and
issued patents licensed to us. We cannot be sure, however, that pending or
future applications will
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issue, that the claims of any patents which do issue will provide any
significant protection of our technology, or that our directed discovery
research will yield compounds and products of therapeutic and commercial value.
Our competitors or potential competitors may have filed for or have received
U.S. and foreign patents and may obtain additional patents and proprietary
rights relating to compounds or processes which may compete with our product
candidates. Accordingly, there can be no assurance that our patent applications
will result in patents being issued or that, if issued, the claims of the
patents will afford protection against competitors with similar technology; nor
can we be sure that others will not obtain patents that we would need to
license or get around.
Manufacturing and Supply
We do not engage in, and do not expect to engage in, the manufacture of bulk
active pharmaceutical ingredient for preclinical, clinical or commercial
purposes. We rely on a contract manufacturing supply agreement with a single
manufacturer for the development stage production of INS316 and INS365. We have
identified an alternative supplier as a backup. We have already obtained
clinical trial grade material of both products from both the lead and backup
supplier. In addition, we expect the same lead manufacturer will supply
commercial quantities of INS316 and INS365 for both respiratory and ophthalmic
applications. We believe this lead manufacturer is capable of producing
sufficient quantities for commercial purposes within current good manufacturing
practices. In addition, we have obtained preclinical supplies of INS37217 for
both respiratory and ophthalmic applications from the same lead manufacturer
and we have discussed entering into an agreement for the clinical supply of
INS37217. See "Risk Factors--If we are unable to contract with third parties
for synthesis and manufacturing of our product candidates for preclinical
testing and clinical trials and for large scale manufacturing of any of our
drug candidates, we may be unable to develop or commercialize products."
We currently obtain all of our bulk active ingredient for INS316, INS365 and
INS37217 from Yamasa Corporation, in Choshi, Japan, but the first two are also
available from other fine chemical manufacturers. In addition to the bulk
active ingredient, our products are made up of sodium chloride, sodium
hydrochloric acid and sterile water, all of which are readily available from
numerous sources. Our products are packaged in unit-dose vials, which we obtain
from Automatic Liquid Packaging of Woodstock, Illinois, but these vials are
also available from other commercial filling and packing companies.
Competition
Many drug companies engage in research and development to commercialize
products to treat chronic bronchitis, cystic fibrosis, dry eye disease and
other diseases that we are researching. We compete with these companies for
funding, access to licenses, personnel, third-party collaborators and product
development. Almost all of these companies have substantially greater
financial, marketing, sales, distribution and technical resources, and more
experience in research and development, clinical trials and regulatory matters,
than we do. We are aware of existing palliative treatments that will compete
with our products.
We believe that several major pharmaceutical companies have initiated
research programs to design P2Y receptor agonists or antagonists; however, we
are not aware of any competing P2Y\\2\\ receptor agonists that have entered
clinical testing. If successfully developed and commercialized, our products
will compete with existing therapeutics and improved versions of these
treatments.
The current therapeutic approaches used in the treatment of chronic
bronchitis are palliative and are aimed primarily at reducing airway
inflammation, respiratory infections and airflow obstruction. These approaches
include corticosteroids and other anti-inflammatory agents, bronchodilators and
antibiotics. We are aware of many anti-inflammatory agents, including
Azmacort(R), Beclovent(R) and antibiotics such as Biaxin(R), and Zithromax(R).
We believe that other anti-inflammatory agents are in development. Numerous
bronchodilators are also on the market, including among others generic
albuterol, Alupent(R), Proventil(R), Ventolin(R), Serevent(R), and
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Theo-Dur(R). Outside of the United States, mucolytics, agents that liquefy or
reduce the viscoelastic consistency of mucus, are widely used even though they
have shown minimal efficacy in well-controlled trials.
Although we believe that none of the therapeutic approaches described above
address the underlying problem of excessive retained mucus and impaired
mucociliary clearance, drugs based on other therapeutic mechanisms may be
efficacious in treating respiratory diseases. The development by others of
treatments that are not related to our mucociliary clearance approach could
render our product candidates non-competitive or obsolete.
There are two products approved in the United States specifically for the
treatment of cystic fibrosis: Pulmozyme(R), an agent designed to break up
thickened airway secretions, and TOBI(R), an inhaled antibiotic. Pulmozyme(R)
is marketed by Genentech, which is one of our collaborative partners.
The current prescription and non-prescription treatments for dry eye disease
include primarily artificial tear replacement therapy or lubricant drops. The
only prescription pharmacological agent in late-stage clinical trials for dry
eye is Restasis(R) from Allergan. We are aware of early clinical trials with
various other potential products as possible alternative modes of therapy.
Governmental Regulation
The research, development, testing, manufacture, promotion, marketing and
distribution of human therapeutic and diagnostic products are extensively
regulated by government authorities in the United States and other countries.
In the United States, the FDA regulates drugs and diagnostic products and
similar regulatory bodies exist in other countries. The steps ordinarily
required before a new drug may be marketed in the United States, which are
similar to steps required in most other countries, include:
. Preclinical laboratory tests, preclinical studies in animals and
formulation studies and the submission to the FDA of an IND for a new
drug;
. Adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug for each indication;
. The submission of an NDA to the FDA; and
. FDA review and approval of the NDA before any commercial sale or
shipment of the drug.
Preclinical tests include laboratory evaluation of product toxicity and
formulation, as well as animal studies. The results of preclinical testing are
submitted to the FDA as part of an IND. A 30-day waiting period after the
filing of each IND is required before the commencement of clinical testing in
humans. At any time during this 30-day period or later, the FDA may halt
proposed or ongoing clinical trials until the FDA authorizes trials under
specified terms. The IND process may be extremely costly and substantially
delay development of our products. Moreover, positive results of preclinical
tests will not necessarily indicate positive results in clinical trials.
Clinical trials to support NDAs are typically conducted in three sequential
phases, but the phases may overlap. During Phase I, the initial introduction of
the drug into healthy human subjects or patients, the drug is tested to assess
metabolism, pharmacokinetics and pharmacological actions and safety, including
side effects associated with increasing doses. Phase II usually involves
studies in a limited patient population to:
. Assess the efficacy of the drug in specific, targeted indications;
. Assess dosage tolerance and optimal dosage; and
. Identify possible adverse effects and safety risks.
If a compound is found to be potentially effective and to have an acceptable
safety profile in Phase II evaluations, Phase III trials, also called pivotal
studies, major studies or advanced clinical trials, are undertaken
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to further demonstrate clinical efficacy and to further test for safety within
an expanded patient population at geographically dispersed clinical study
sites.
After successful completion of the required clinical testing, generally a
NDA is submitted. The FDA may request additional information before accepting a
NDA for filing, in which case the application must be resubmitted with the
additional information. Once the submission has been accepted for filing, the
FDA has 180 days to review the application and respond to the applicant. The
review process is often significantly extended by FDA requests for additional
information or clarification. The FDA may refer the NDA to an appropriate
advisory committee for review, evaluation and recommendation as to whether the
application should be approved, but the FDA is not bound by the recommendation
of an advisory committee.
If FDA evaluations of the NDA and the manufacturing facilities are
favorable, the FDA may give us either an approval letter or an approvable
letter. An approvable letter will usually contain a number of conditions that
must be met in order to secure final approval of the NDA and authorization of
commercial marketing of the drug for particular indications. The FDA may refuse
to approve the NDA or give us a non-approvable letter, outlining the
deficiencies in the submission and often requiring additional testing or
information. If regulatory approval of a product is granted, it will be limited
to particular disease states or conditions.
We and any of our contract manufacturers are also required to comply with
the applicable FDA current good manufacturing practice regulations. Good
manufacturing practice regulations include requirements relating to quality
control and quality assurance as well as the corresponding maintenance of
records and documentation. Manufacturing facilities are subject to inspection
by the FDA. These facilities must be approved before we can use them in
commercial manufacturing of our products. Our contract manufacturers or we may
not be able to comply with the applicable good manufacturing practice
requirements and other FDA regulatory requirements.
Outside the United States, our ability to market our products will also
depend on our receipt of marketing authorizations from the appropriate
regulatory authorities. The requirements governing the conduct of clinical
trials and marketing authorization vary widely from country to country. At
present, foreign marketing authorizations are applied for at a national level,
although within Europe procedures are available to companies wishing to market
a product in more than one European Union member state. If the regulatory
authority is satisfied that adequate evidence of safety, quality and efficacy
has been presented, a marketing authorization will be granted. This foreign
regulatory approval process, including those in Europe and Japan, involves all
of the risks associated with FDA clearance discussed above.
Employees
As of the date of this prospectus, we have 30 full-time employees, 16 of
whom are involved in our drug discovery and preclinical programs, eight of whom
are engaged in development programs, and six of whom are involved in
administrative activities. Thirteen of our employees hold a Ph.D., Pharm.D. or
M.D. degree. In addition, we utilize part-time employees and outside
contractors and consultants as needed. Employees are required to execute a
confidentiality and assignment of trade secrets agreement. Our employees are
not represented by a labor union and we believe that our relations with
employees are good.
Facilities
We lease facilities that comprise approximately 17,500 square feet in
Durham, North Carolina adjacent to the Research Triangle Park, through several
leases. The leases expire in August 2003, May 2003 and December 2003 and are
renewable. We anticipate having sufficient space to allow for all potential
expansionary needs over the next two years.
Legal Proceedings
We are not a party to any material legal proceedings.
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Scientific Advisory Board
We are advised by an international scientific advisory board currently
composed of eight members with expertise in the fields of statistics, molecular
biology, genetic research and medicine. We meet periodically with our
scientific advisory board to review and discuss specific projects with those
members who are experts in the subjects being discussed. In addition, we may
consult individual board members as to matters in their respective areas of
expertise. Our scientific advisory board currently is composed of the following
individuals:
Richard Boucher, M.D. is the Chairman of the Scientific Advisory Board. See
"Management--Executive Officers and Directors."
Dennis Ausiello, M.D. is Chief of Medicine at Massachusetts General
Hospital, and Professor of Medicine at Harvard Medical School. He is an
internationally recognized expert in the cell biology of ATP receptors, sodium
ion channels and water channels.
Carol Basbaum, Ph.D. is Professor of Anatomy at the University of California
at San Francisco and is an expert in lung mucin production. Her interests focus
on both the biology of the mucin secretory cell in the lung and the regulation
of mucin gene expression. A particular interest has been bacterial pathogen-
mucin gene regulatory interactions.
Geoffrey Burnstock, D.Sc. is Director, Autonomic Neuroscience Institute, and
Professor, Department of Anatomy and Developmental Biology, Royal Free Hospital
School of Medicine. He originally conceived the idea of purinergic nerves and
receptors for extracellular adenine nucleotides. He is the leader of the
purinergic receptor field. He is the recipient of many international awards and
is a fellow of the Royal Society.
Jeffrey Drazen, M.D. is Chief of the Pulmonary and Critical Care Division of
the Brigham and Women's Hospital and the Parker B. Francis Professor of
Medicine, Harvard Medical School. He is an expert in the field of lung
diseases, with particular expertise in the pathogenesis/genetics of asthma and
clinical trial design.
Mark Leppert, Ph.D. is Associate Professor, Eccles Institute of Human
Genetics, University of Utah. He is a geneticist/molecular biologist. He is a
central figure in the internationally recognized University of Utah human
genome effort. His particular interest is mapping human diseases to define the
molecular basis of human disease.
Lee Limbird, Ph.D. is Associate Vice Chancellor for Research, Vanderbilt
University Medical Center, Professor of Pharmacology and Chair, Department of
Pharmacology Vanderbilt University. Her research has focused on the structure
and function of G-protein coupled receptors with particular emphasis on
adrenergic receptors. A current interest is delineation of the molecular basis
of membrane targeting of receptors in polarized cells. She was awarded the John
Jacob Abel Award given to the most outstanding young pharmacologist in 1987.
David Westfall, Ph.D. is Vice President, Academic Affairs, University of
Nevada-Reno and Professor of Pharmacology, University of Nevada School of
Medicine. He has been a leader in physiological and pharmacological studies of
purinergic receptors for the last two decades. His research includes a major
interest in purinergic receptors in the nervous system and on smooth muscle of
the urinary tract.
Other Advisory Committees
In addition to our scientific advisory board, we have a chronic bronchitis
advisory board, a cystic fibrosis advisory board and a critical care advisory
board. These committees consist of clinical experts in their respective fields.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors as of the date of this prospectus are
as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Christy L. Shaffer, Ph.D................ 42 President, Chief Executive
Officer and Director
Gregory J. Mossinghoff.................. 39 Chief Business Officer, Secretary
and Treasurer
Donald J. Kellerman, Pharm.D. .......... 45 Vice President, Development
Benjamin R. Yerxa, Ph.D................. 34 Vice President, Discovery
Janet L. Rideout, Ph.D(1)............... 61 Senior Vice President, Discovery
Terrance G. McGuire..................... 44 Chairman of the Board
Richard Boucher, M.D. .................. 55 Director
Andre L. Lamotte, Sc.D. ................ 51 Director
H. Jefferson Leighton, Ph.D. ........... 54 Director
W. Leigh Thompson, M.D., Ph.D., D.Sc. .. 61 Director
Jesse I. Treu, Ph.D. ................... 53 Director
</TABLE>
- --------
(1) Dr. Rideout has informed us that she will retire following this offering.
However, Dr. Rideout has agreed to serve as a consultant for a period of
at least a year.
Following are brief descriptions of our current executive officers and
directors:
Christy L. Shaffer, Ph.D. has served as our President, Chief Executive
Officer and as a director since January 1999. Dr. Shaffer joined us in June
1995 as our first full time employee, Director, Clinical Operations, was
promoted to Senior Director, Development in June 1996 and to Vice President,
Development and Chief Operating Officer in January 1998. Dr. Shaffer has over
ten years of experience in drug development within the pharmaceutical industry.
She previously served in a variety of positions in the clinical research
division of Burroughs Wellcome Co. including Associate Director of pulmonary
research in the department of pulmonary/critical care medicine during the
period from February to June 1995. Dr. Shaffer coordinated several IND
submissions and one NDA submission at Burroughs Wellcome. Dr. Shaffer received
a Ph.D. in pharmacology from the University of Tennessee and completed two
years of postdoctoral training in cardiovascular research in the Biochemistry
Department at the Chicago Medical School before her postdoctoral appointment at
UNC.
Gregory J. Mossinghoff has served as our Chief Business Officer since
December 1999. Mr. Mossinghoff joined us in June 1998 as our Senior Director of
Strategic Planning and Operations and was promoted to Vice President, Corporate
Development in January 1999. Mr. Mossinghoff has also served as our Secretary
since October 1998, and as our Treasurer since March 2000. In his current role
he helps us develop and realize strategic objectives, expand our corporate
partnerships in the United States and abroad, and oversee all business-related
activities including operations and finance. Before joining us, from February
1996 to June 1998, Mr. Mossinghoff was worldwide Director of Business Analysis
at Glaxo Wellcome plc, with specific responsibility for the CNS therapeutic
area. Before joining Glaxo Wellcome, Mr. Mossinghoff held various roles with
increasing responsibility at Hoffmann LaRoche Inc., from June 1988 to February
1996, including Manager, Business Development and Strategic Planning from 1994
to 1996. Mr. Mossinghoff received a BA degree in Economics from the University
of Virginia, Charlottesville, VA and an MBA in Financial Management & Analysis
from George Mason University, Fairfax, VA.
Donald J. Kellerman, Pharm.D. has served as our Vice President, Development
since July 1999. He is responsible for all of our clinical development programs
and regulatory affairs. Before joining us, Dr. Kellerman spent 11 years with
Glaxo Wellcome, from August 1997 to July 1999 and from April 1988 to
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August 1996, where he was Director of various groups, including International
OTC, U.S. Infectious Diseases, and the Inhaled Corticosteroid Group. He was
clinical project leader for Flovent(R) from first U.S. clinical studies in 1989
to approval in 1996. From September 1996 to August 1997, he was Vice President
of Clinical Research at Sepracor, where he was project leader for the
Xopenex(R) NDA team. Before Glaxo Wellcome, Dr. Kellerman worked at E.R. Squibb
and Sons and Ciba-Geigy on several cardiovascular products. Dr. Kellerman holds
a Doctor of Pharmacy and Bachelor of Science degree from the University of
Minnesota.
Benjamin R. Yerxa, Ph.D. has served as our Vice President, Discovery since
February 2000. Dr. Yerxa joined us in August 1995 and previously held several
positions, including Senior Director of Preclinical Programs. He supervises
both the Biology and the Chemistry Discovery teams and all early preclinical
drug development activities. He created a novel strategic opportunity for us by
developing the concept of ophthalmic uses for our core P2Y\\2\\ technology.
Before being promoted to the position of Senior Director of Preclinical
Programs in December 1999, Dr. Yerxa was Director of Preclinical Programs and,
before that, Senior Research Chemist. While in chemistry, he served as the
preclinical project leader for INS365. As a Senior Research Chemist his work
focused on designing and synthesizing novel P2Y receptor agonists. Before
joining us, from October 1993 to August 1995, Dr. Yerxa was a Research
Scientist at Burroughs Wellcome Co. Dr. Yerxa worked at Biophysica, Inc. for
over two years, synthesizing radiocontrast agents. He developed scale-up
procedures for the industrial production of Oxilan, a marketed imaging product.
Dr. Yerxa received his Ph.D. in Organic Chemistry from UC Irvine in 1993.
Janet Rideout, Ph.D. has served as our Senior Vice President, Discovery
since February 2000. Dr. Rideout joined us in 1995 as Director of Chemistry and
was promoted to Senior Director, Discovery, in June 1996 and Vice President,
Discovery in January 1998. Before joining us, Dr. Rideout spent more than 26
years at Burroughs Wellcome Co., ultimately serving as associate division
director of organic chemistry. Dr. Rideout holds more than 40 patents, most
notably as co-inventor for AZT (Retrovir(R)). She is a member of three
divisions of the American Chemical Society, the New York Academy of Sciences,
the American Association for the Advancement of Science, and a Life Fellow and
past member of the board of directors of the American Institute of Chemists.
She received the Distinguished Chemist Award from the North Carolina Institute
of Chemists in 1994. Dr. Rideout received her Ph.D. in organic chemistry from
the State University of New York at Buffalo.
Terrance G. McGuire has served as our Chairman of the Board and a director
since October 1993, and is one of our four founders. He currently serves as
chairman of the compensation and audit committees of the board and as a member
of the nominating committee of the board. He also served as our Treasurer from
October 1993 to March 2000. Since March 1986, he has been a founding general
partner of Polaris Venture Partners L.P. Since 1992, he has served as a general
partner of Alta V Management Partners L.P., which is the general partner of
Alta V Limited Partnership, a fund associated with Burr, Egan, Deleage & Co. He
is a director of Akamai Technologies, Inc., Aspect Medical Systems, Inc.,
Wrenchead.com, Inc., Paradigm Genetics, Inc. and several other private
healthcare and information technology companies. Mr. McGuire received his B.S.
in Physics and Economics from Hobart College, his M.S. in Engineering from
Dartmouth College and his MBA from the Harvard Business School.
Richard Boucher, M.D. has served as a director since March 1995, and is a
member of our nominating committee. One of our four founders, Dr. Boucher is
the William Rand Kenan Professor of Medicine, Chief of Pulmonary Medicine and
Director of the Cystic Fibrosis/Pulmonary Research and Treatment Center at The
University of North Carolina at Chapel Hill School of Medicine. Dr. Boucher
obtained his M.D. degree from Columbia University College of Physicians and
Surgeons. Following residency training, he joined the Faculty of Medicine at
The University of North Carolina at Chapel Hill in 1977. Dr. Boucher has
authored or co-authored more than 200 original research articles and more than
100 additional publications including book chapters. He received the Doris
Tulcin and Paul Di Sant'Agnese CF Research Awards and the Julius Comroe Award
from The American Physiology Society. He is an established principal
investigator with the National Institutes of Health, and is a member of the
American College of Physicians and the Association of American Physicians. In
recent years, Dr. Boucher has pioneered novel approaches for the treatment of
cystic fibrosis.
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Andre L. Lamotte, Sc.D. has served as a director since October 1993 and is
one of our four founders. Dr. Lamotte also currently serves as a member of our
nominating committee. In 1989, Dr. Lamotte founded Medical Science Partners,
which specializes in early stage life sciences investments in affiliation with
Harvard University and has served as the managing general partner since such
time. Before founding Medical Science Partners, Dr. Lamotte served as a general
manager at Pasteur Merieux from April 1983 to April 1988. He also serves as the
managing general partner of Medical Science Partners II, L.P. and Medical
Science II Co-Investment, L.P. Dr. Lamotte is a director of Ascent Pediatrics,
Inc. Dr. Lamotte holds a Ph.D. in chemistry from the Massachusetts Institute of
Technology and an M.B.A. from Harvard University.
H. Jefferson Leighton, Ph.D. has served as a director since October 1993 and
is one of our four founders. He served as our President and Chief Executive
Officer from October 1993 until December 1995. Dr. Leighton also serves as a
member of our audit committee. Dr. Leighton has more than 20 years of
experience in large pharmaceutical companies in various research and
development positions. More recently, he has founded, reorganized, and merged
several small pharmaceutical companies including ICAgen, Exogen, Biodesign,
Sphinx, SemaCo. and AdipoGenix.
W. Leigh Thompson, M.D., Ph.D., D.Sc. has served as a director since April
1996. In December 1994 Dr. Thompson retired from Eli Lilly and Co. where he
served as chief scientific officer and a member of the management committee.
Dr. Thompson has enjoyed a distinguished career in both academic medicine and
the pharmaceutical industry and has published extensively, particularly in the
area of critical care medicine. He is a member of numerous corporate, academic,
and civic boards, and consults in the areas of health informatics, enterprise
strategic planning, and related areas. Since 1995, Dr. Thompson has been the
Chief Executive Officer of Profound Quality Resources, Inc., a worldwide
scientific consulting firm. He is currently a director of Bioanalytical Systems
Inc., DepoMed Inc., Orphan Medical Inc., Guilford Pharmaceuticals, Inc.,
Medarex Inc. and Ophidian Pharmaceuticals Inc.
Jesse I. Treu, Ph.D. has served as a director since March 1995 and is a
member of our compensation and audit committees. He is a managing member of
Domain Associates, L.L.C. and has served in this or similar capacities with the
firm since 1986. He has served as a director of over 20 early-stage companies,
eleven of which have so far become public companies. He is currently a director
of Focal, Inc., Geltex Pharmaceuticals, Inc., Trimeris, Inc., OraPharma, Inc.,
and Simione Central Holdings, Inc. Before the formation of Domain, Dr. Treu had
12 years of health care experience at General Electric and Technicon
Corporation in a number of research, marketing management and corporate staff
positions. Dr. Treu received his B.S. from Rensselaer Polytechnic Institute and
his M.A. and Ph.D. degrees in physics from Princeton University.
Director Compensation
Directors do not receive cash compensation for services on the board of
directors or any board committee. In 1996, we granted Dr. Thompson an option to
purchase 27,428 shares of our common stock at an exercise price of $0.12 per
share. In March 2000, we granted each non-employee director an option to
purchase 5,714 shares of our common stock at an exercise price equal to the
price of our common stock sold in this offering. All such options are subject
to conditions relating to vesting and retention for each recipient's
participation on the board of directors. All directors are reimbursed for
expenses incurred in connection with attendance at board of directors and
committee meetings.
Board Committees
Our board of directors has established an audit committee, a compensation
committee and a nominating committee. Our audit committee, which consists of
Mr. McGuire, as chairperson, Dr. Treu and Dr. Leighton, reviews the results and
scope of our annual audit and the services provided by our independent
auditors. Our compensation committee, which consists of Mr. McGuire, as
chairperson, and Dr. Treu, administers our stock plan and reviews and approves
issues and matters concerning the compensation of employees and consultants and
the objectives and policies instituted by the board of directors. Our
nominating committee, which consists of Mr. McGuire, Dr. Boucher and Dr.
Lamotte, reviews the qualifications of and proposes candidates for
consideration for election to the board of directors or any committee of the
board.
45
<PAGE>
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1999, Mr. McGuire and Dr. Treu
served as members of our compensation committee. We have never employed any
member of the compensation committee of our board of directors. None of our
executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
board of directors or our compensation committee of the board of directors. For
information on recent purchases of our capital stock by the members of our
compensation committee or their respective affiliates, please see the
description under the caption "Certain Transactions" included in this
prospectus.
Executive Compensation
The following table provides information concerning the annual and long-term
compensation for the fiscal year ended December 31, 1999 of (i) our chief
executive officer, and (ii) our other executive officers as of December 31,
1999 whose salary and bonus earned during the fiscal year ended December 31,
1999 exceeded $100,000. Following the rules of the Securities and Exchange
Commission, the compensation described in the table does not include medical,
group life insurance or some other benefits which are available generally to
all of our salaried employees. These individuals are referred to as the named
officers in other parts of this prospectus.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
---------------- ------------
Securities
Name and Principal Underlying
Position Salary Bonus Options
- ------------------ -------- ------- ------------
<S> <C> <C> <C>
Christy L. Shaffer, $192,800 $40,000 0
Ph.D ..................
President, Chief
Executive Officer and
Director
Gregory J. $139,667 $42,600 71,429
Mossinghoff ...........
Chief Business Officer
Janet L. Rideout, $138,417 $42,600 102,857
Ph.D ..................
Senior Vice President,
Discovery
</TABLE>
The following table sets forth information concerning grants of stock
options to the named officers during the fiscal year ended December 31, 1999.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Percentage Realizable Value
of Total at Assumed Rates
Number of Options of Stock Price
Securities Granted to Appreciation for
Underlying Employees Exercise or Option Term
Options in Fiscal Base Price Expiration ----------------
Name Granted 1999 per Share Date 5% 10%
- ---- ---------- ---------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Christy L. Shaffer,
Ph.D................... 0 -- -- -- -- --
Gregory J. Mossinghoff.. 71,429 18.1% $0.84 10/12/09 97,734 155,625
Janet L. Rideout,
Ph.D................... 102,857 26.0% $0.42 04/06/09 70,368 112,050
</TABLE>
The figures above represent options granted under our stock plan. We granted
options to purchase 395,000 shares of our common stock in 1999.
46
<PAGE>
The options granted to our employees typically vest as to 25% on the first
anniversary of the date of grant and as to the remaining 75% in 36 generally
equal monthly installments commencing on the first month following the first
anniversary of the date of grant. Mr. Mossinghoff's 1999 options vest as to
17,857 shares on October 31, 2000, vest as to an additional 1,489 on the last
day of each month for 35 months after that date, and vest as to the remaining
1,471 shares on October 31, 2003. Dr. Rideout's 1999 options vest as to 51,429
shares on April 6, 2000 and as to 51,429 shares on April 6, 2001, except that
the options become fully vested upon the closing of this offering. Options
granted to the named officers expire 10 years from the grant date.
The potential realizable value represents amounts, net of exercise price
before taxes, that may be realized upon exercise of the options immediately
before the expiration of their terms assuming appreciation of 5% and 10% over
the option term. The 5% and 10% values are calculated based on rules
promulgated by the Securities and Exchange Commission and are applied to an
assumed initial public offering price of $14.00 per share and do not reflect
our estimate of future stock price growth. The actual value realized may be
greater or less than the potential realizable value shown in the table.
We have never granted stock appreciation rights.
The following table shows information concerning the value and number of
exercisable and unexercisable stock options held by the named officers as of
December 31, 1999. The value of unexercised in-the-money options at December
31, 1999 represents an amount equal to the difference between the assumed
initial public offering price of $14.00 per share and the option exercise
price, multiplied by the number of unexercised options. An option is in-the-
money if the fair market value of the underlying shares exceeds the option's
exercise price.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options of
Options at Fiscal Year-End Fiscal Year-End
------------------------------ -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Christy L. Shaffer,
Ph.D................... 187,946 212,054 $2,536,240 2,963,760
Gregory J. Mossinghoff.. 25,201 117,656 $ 324,300 1,597,700
Janet L. Rideout,
Ph.D................... 71,188 104,297 $1,417,236 1,798,964
</TABLE>
Stock Plan
We established our stock plan, as amended, for the purposes of attracting
and retaining the best available personnel, to provide additional incentive to
our employees, officers, directors and consultants and to promote our success.
The stock plan provides for the grant of incentive stock options to our
employees and the grant of non-qualified stock options and restricted stock to
our employees, directors and consultants on such terms and conditions as may be
determined by our board of directors or a committee of the board which has
general responsibility for the administration of the plan. The powers of our
board of directors or a committee, as the case may be, include the
determination of which employees and consultants are to receive stock option
grants or grants of restricted shares, the exercise price, number of shares,
the vesting schedule of the grants, payment methods, and other terms and
conditions applicable to such grants. The total number of shares of our common
stock authorized for use by the stock plan is 3,428,571. As of March 24, 2000,
options to purchase 2,748,089 shares of our common stock were granted (and not
subsequently forfeited), of which options to purchase 1,906,241 shares of our
common stock were outstanding and options to purchase 841,848 shares had been
exercised. The exercise prices of the outstanding options range from $0.12 to
$14.00 per share.
The exercise price per share for incentive stock options may not be less
than the fair market value of our common stock on the date of grant as
determined in good faith by the board of directors; provided, however, in the
case of an incentive stock option granted to an individual who owns at least
10% of the total combined
47
<PAGE>
voting power of all classes of our capital stock, the exercise price shall be
no less than 110% of the fair market value per share on the date of grant. The
aggregate fair market value of shares which may be purchased for the first time
during any calendar year through the exercise of an incentive stock option
granted under the stock plan, or any other incentive stock option plan of the
company, may not exceed $100,000, based on such fair market value at the time
of grant. Under the stock plan, stock options may be exercisable for up to 11
years, in the case of non-qualified stock options, and for up to 10 years, in
the case of incentive stock options.
If we consolidate or merge with another corporation, sell or exchange
substantially all of our assets, or are reorganized or liquidated, a holder of
an option under the stock plan, upon exercise of the option by the terms of the
option, will receive the same shares, securities or property that the
optionholder would have received had he or she, immediately before the event
described above, held the number of shares of our stock purchasable under the
option. Alternatively, our board of directors can choose to cancel unexercised
options outstanding under the stock plan by providing optionholders with at
least 20 days' advance written notice. Our board of directors also may in its
discretion accelerate or waive any deferred exercise period under the option.
The board of directors may amend or terminate the stock plan at any time,
subject to any required stockholder approval.
401(k) Profit Sharing Plan
We adopted a 401(k) profit sharing plan for qualified employees, effective
August 1, 1995. Subject to some maximum contribution limitations, participants
may elect a salary reduction of up to an amount equal to 15% of their
respective work compensation. The plan allows us to match participant salary
reductions of up to 8% of a participant's work compensation or make other
discretionary contributions with respect to participants, neither of which has
been done with respect to any period ending on or before December 31, 1999.
Under the 401(k) plan, a participant's interest in our matching or
discretionary contributions, if any are made, will become 20% vested upon the
participant's completion of two years of service, with such vesting increasing
at the rate of 20% for each additional year of service so that 100% vesting is
achieved when the participant has completed six years of service. A participant
at all times is 100% vested in his interest in the plan which are made by to
salary reduction contributions.
Employee Confidentiality, Invention Assignment and Non-Compete Agreements
All of our employees, including each of the named officers, Dr. Kellerman
and Dr. Yerxa, have entered into employee confidentiality, invention assignment
and, with respect to our management-level employees, non-compete agreements
which provide, among other things, that the employee will not disclose any
confidential information or trade secrets in any unauthorized manner. The
agreements also provide that all inventions by the employee relating to our
current or anticipated business which occur during the time of employment will
be our property. Finally, the agreements provide that, with respect to any
management-level employee, the employee will not compete with us during the
time of employment and for one additional year.
48
<PAGE>
CERTAIN TRANSACTIONS
We entered into a Consultation and Scientific Advisory Board Agreement with
Dr. Richard Boucher, a member of our board of directors, in March 1995. The
terms of the agreement provide that Dr. Boucher will serve as the Chairman of
our Scientific Advisory Board for an initial term of three years. The agreement
automatically renews itself thereafter for successive one year terms unless
terminated by either party. Under the agreement, Dr. Boucher also agreed to
consult on the field of airway diseases and the development of low molecular
weight molecules for therapeutic or diagnostic purposes. We are currently
paying Dr. Boucher $4,166.67 a month for his services, and he has received
400,000 shares of our common stock as partial compensation for his service. In
December 1998, in recognition of his contributions, we granted Dr. Boucher an
option to purchase 114,286 shares of our common stock at $0.21 per share. Such
shares vest pro rata and will be fully vested on June 30, 2002.
In March 1995, we entered into a Sponsored Research Agreement with The
University of North Carolina at Chapel Hill. Under the agreement, we fund a
research program relating to uses of the P2Y receptor family. Drs. Richard C.
Boucher, M. Jackson Stutts and C. William Davis currently serve as the
principal investigators with respect to the research. We paid approximately
$141,120 in 1999 for the research program under the agreement.
On July 1, 1999 and October 29, 1999 we sold an aggregate of 6,201,985
shares of Series E preferred stock at a purchase price of $2.00 per share. The
following holders of more than 5% of our voting securities purchased Series E
preferred stock in those transactions in the amounts shown below. See
"Principal Stockholders" for more detail on securities held by these
stockholders.
<TABLE>
<CAPTION>
Common Stock
into which
Series E
Series E Preferred Stock
Purchaser Preferred Stock Will Convert
--------- --------------- ---------------
<S> <C> <C>
Alta V Limited Partnership............... 395,840 226,194
Benefit Capital Management Corporation... 500,000 285,714
Domain Partners III, L.P................. 373,832 213,618
InterWest Partners VII, L.P.............. 2,857,843 1,633,053
NMT New Medical Technologies............. 1,250,000 714,285
</TABLE>
Terrance G. McGuire, a director, is a general partner of Alta V Management
Partners, L.P., which is the general partner of Alta V Limited Partnership.
Jesse I. Treu, Ph.D., a director, is a general partner of One Palmer Square
Associates III, L.P., the general partner of Domain Partners III, L.P.
In connection with our entering into a Development, License and Supply
Agreement with Genentech, Inc., we sold 1,000,000 shares of Series G preferred
stock at $10.00 per share under the terms of a Series G Preferred Stock and
Warrant Purchase Agreement, dated December 17, 1999. The Series G preferred
stock, including accrued dividends, will automatically convert at the time of
the closing of this offering into 717,107 shares of our common stock. At the
time we also issued Genentech a warrant to purchase 253,968 shares of our
common stock, at an exercise price of $7.88 per share. In addition, upon the
occurrence of certain milestone events, we are obligated to sell, and Genentech
is obligated to purchase: (i) up to $2,000,000 of our common stock, at a per
share price determined using the 20-day trailing average close price of common
stock as quoted on an established stock exchange, and (ii) warrants for up to
50,793 shares of common stock at an exercise price of $7.88 per share. See
"Business--Corporate Collaborations" for a description of the terms of our
collaboration with Genentech.
During 1999, we contracted with a contract research organization to perform
research on behalf of Kissei, one of our collaborative partners and the holder
of 375,000 shares of our Series C preferred stock. We were reimbursed by Kissei
for the cost of the study. The total amount reimbursed by Kissei for this study
in 1999 was $813,000.
49
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 24, 2000 on a fully diluted basis,
and as of such date, as adjusted to show the effect of this offering, by (i)
each person who is known to own beneficially more than 5% of our common stock
and (ii) each of the named officers and our current directors, and (iii) all of
the directors and executive officers as a group.
Except as indicated by footnote, beneficial ownership is determined on a
fully diluted basis and includes all options and warrants which are exercisable
within 60 days of March 24, 2000. In addition to assuming the conversion of all
outstanding shares of preferred stock into shares of common stock upon the
closing of this offering, the information in this table assumes the conversion
of all outstanding warrants to purchase shares of preferred stock into warrants
to purchase shares of common stock. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in the
table have sole voting and investment power for to all shares of common stock
shown as beneficially owned by them.
<TABLE>
<CAPTION>
Number of Shares Percentage Percentage
Beneficially Owned Beneficially Owned Beneficially Owned
Name and Address of Before This Before This After This
Beneficial Owner Offering Offering Offering
- ------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Burr, Egan, Deleage
Funds(1)............... 2,879,180 15.3% 11.8%
Burr, Egan, Deleage &
Co.
One Post Office Square
Suite 3800
Boston, MA 02109
Domain Partners
Entities(2)............ 2,594,985 13.8% 10.7%
Domain Associates,
L.L.C.
One Palmer Square,
Suite 515
Princeton, N.J. 08542
InterWest Partners
Entities(3)............ 1,707,142 9.1% 7.0%
InterWest Investors
VII, LP
3000 Sand Hill Road
Bldg. 3, Suite 255
Menlo Park, CA 94025
Medical Science Partners
Entities(4)............ 1,500,935 8.0% 6.2%
c/o Medical Science
Partners
161 Worcester Road,
Suite 301
Framingham, MA 01701
JAFCO Entities(5)....... 1,428,570 7.6% 5.9%
c/o JAFCO Co., Ltd.
Tekko Building, 1-8-2
Monanouchi
Chiyoda-Ku
Tokyo, 100 Japan
Benefit Capital
Management
Corporation(6)......... 1,238,095 6.6% 5.1%
39 Old Ridgebury Road
Danbury, CT 06817
Genentech, Inc.(7)...... 994,848 5.2% 4.0%
1 DNA Way
South San Francisco, CA
94080-4990
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percentage Percentage
Beneficially Owned Beneficially Owned Beneficially Owned
Name and Address of Before This Before This After This
Beneficial Owner Offering Offering Offering
- ------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Christy L. Shaffer,
Ph.D.(8)............... 219,480 1.2% *
Gregory J.
Mossinghoff(9)......... 32,521 * *
Janet L. Rideout,
Ph.D.(10).............. 234,034 1.2% 1.0%
Richard Boucher,
M.D.(11)............... 556,668 3.0% 2.3%
Andre L. Lamotte,
Sc.D.(12).............. 2,460,935 13.1% 10.1%
H. Jefferson Leighton,
Ph.D.(13).............. 400,000 2.1% 1.6%
Terrance G. McGuire(1).. 2,879,180 15.3% 11.8%
W. Leigh Thompson, M.D.,
Ph.D., D.Sc.(14)....... 27,785 * *
Jesse I. Treu,
Ph.D.(2)............... 2,594,985 13.8% 10.7%
All directors and
executive officers as a
group (9 people)(1),
(2), (8), (9), (10),
(11), (12), (13), (14)
....................... 8,442,722 43.9% 34.1%
</TABLE>
- --------
* Less than one percent
(1) Includes 2,849,236 shares held by Alta V Limited Partnership and 29,944
shares held by Customs House Partners. Alta V Management Partners, L.P. is
the general partner of Alta V Limited Partnership. Burr, Egan, Deleage &
Co. directly or indirectly provides investment advisory services to
various venture capital funds, including Alta V Limited Partnership and
Customs House Partners. Mr. McGuire is a general partner of Alta V
Management Partners, L.P. In his capacity as a general partner of the Alta
V Management Partners, L.P., Mr. McGuire may be deemed to share voting and
investment powers with respect to the shares held by Alta V Limited
Partnership. Mr. McGuire disclaims beneficial ownership of all of such
shares held by Alta V Limited Partnership except to the extent of his
proportional pecuniary interest therein. Mr. McGuire also disclaims
beneficial ownership to all of the shares of Customs House Partners. Does
not include 5,714 shares of common stock underlying stock options granted
to Mr. McGuire which will not have vested within sixty days after March
24, 2000.
(2) Includes 2,514,456 shares held by Domain Partners III, L.P. and 80,529
shares held by DP III Associates, L.P. One Palmer Square Associates III,
L.P. is the general partner of Domain Partners III, L.P. and DP III
Associates, L.P. Jesse I. Treu, Ph.D. is a general partner of One Palmer
Square Associates III, L.P. Dr. Treu shares voting and investment power
with respect to these shares and disclaims beneficial ownership of such
shares except to the extent of his proportional interest therein. Does not
include 5,714 shares of common stock underlying stock options granted to
Dr. Treu which will not have vested within sixty days after March 24,
2000.
(3) Includes 1,633,053 shares held by InterWest Partners VII, L.P. and 74,089
shares held by InterWest Investors VII, L.P. InterWest Management Partners
VII, L.L.C. is the general partner of InterWest Partners VII, L.P. and
InterWest Investors VII, L.P. Arnold L. Oronsky, a managing director of
InterWest Management Partners VII, L.L.C., and each of the other managing
directors and members of InterWest Management Partners VII, L.L.C.
disclaim beneficial ownership of the shares except to the extent of their
pro rata interest therein.
(4) Includes 1,339,177 shares held by Medical Science Partners II, L.P. and
161,758 shares held by Medical Science II Co-Investment, L.P. Medical
Science Partners is the general partner of Medical Science Partners II,
L.P. and the co-manager of Medical Science II Co-Investment, L.P. Dr.
Lamotte is a managing general partner of Medical Science Partners.
(5) Includes 285,714 shares held by Jafco Co., Ltd., 117,142 shares held by
JAFCO-JS-3 Investment Enterprise Partnership, 196,000 shares held by
JAFCO-R-3 Investment Enterprise Partnership, 176,000 shares held by JAFCO-
G-6(A) Investment Enterprise Partnership, 176,000 shares held by
51
<PAGE>
JAFCO-G-6(B) Investment Enterprise Partnership, 238,857 shares held by
JAFCO-G-7(A) Investment Enterprise Partnership, and 238,857 shares held by
JAFCO-G-7(B) Investment Enterprise Partnership. Jafco Co., Ltd. is the
Executive Partner of JAFCO-JS-3 Investment Enterprise Partnership, JAFCO-
R-3 Investment Enterprise Partnership, JAFCO-G-6(A) Investment Enterprise
Partnership, JAFCO-G-6(B) Investment Enterprise Partnership, JAFCO-G-7(A)
Investment Enterprise Partnership and JAFCO-G-7(B) Investment Enterprise
Partnership. Mr. Mitsumasa Murase is the President of Jafco Co., Ltd.
(6) Includes 1,238,095 shares held by Benefit Capital Management Corporation
("Benefit") as Investment Manager for The Prudential Insurance Company of
America, Separate Account No. VCA-GA-5298. Benefit has voting power and
investment power as to the shares held by it. Benefit is a wholly owned
subsidiary of Union Carbide Corporation, a New York corporation ("UCC").
Benefit manages the assets of UCC's retirement program plan for employees
of UCC and its participating subsidiaries. In connection with the
purchase of certain annuities by the retirement program plan, Prudential
has established a separate insurance account. Prudential disclaims
beneficial ownership of the shares.
(7) Includes 740,880 shares and a warrant for 253,968 shares of common stock.
The number of shares held by Genentech is based on an assumption that
dividends on Series G preferred stock will accrue through April 30, 2000.
(8) Includes 40,000 shares of common stock and 179,480 shares of common stock
underlying stock options granted to Dr. Shaffer which will have vested
within sixty days after March 24, 2000. Does not include 294,805 shares
of common stock underlying stock options granted to Dr. Shaffer which
will not have vested within sixty days after March 24, 2000.
(9) Includes 32,521 shares of common stock underlying stock options granted
to Mr. Mossinghoff which will have vested within sixty days after March
24, 2000. Does not include 196,050 shares of common stock underlying
stock options granted to Mr. Mossinghoff which will not have vested
within sixty days after March 24, 2000.
(10) Includes 58,800 shares of common stock, and 175,233 shares of common
stock underlying stock options granted to Dr. Rideout which will have
vested within sixty days after March 24, 2000, assuming the accelerated
vesting of 90,000 shares upon the closing of this offering. Does not
include 251 shares of common stock underlying stock options granted to
Dr. Rideout which will not have vested within sixty days after March 24,
2000.
(11) Includes 504,954 shares of common stock and 51,714 shares of common stock
underlying stock options granted to Dr. Boucher which will have vested
within sixty days after March 24, 2000. Does not include 68,285 shares of
common stock underlying stock options granted to Dr. Boucher which will
not have vested within sixty days after March 24, 2000.
(12) Includes 1,339,177 shares held by Medical Science Partners II, L.P.,
161,758 shares held by Medical Science II Co-Investment, L.P. and 960,000
shares held by NMT New Medical Technologies. Medical Science Partners is
the general partner of Medical Science Partners II, L.P. and the co-
manager of Medical Science II Co-Investment, L.P. Dr. Lamotte is a
managing general partner of Medical Science Partners. Dr. Lamotte is a
director of NMT New Medical Technology. Dr. Lamotte disclaims beneficial
ownership of Medical Science II Co-Investment, L.P.'s shares. Dr. Lamotte
disclaims beneficial ownership of NMT New Medical Technology's shares
except to the extent of his proportional pecuniary interest therein. Does
not include 5,714 shares of common stock underlying stock options granted
to Dr. Lamotte which will not have vested within sixty days after March
24, 2000.
(13) Includes 400,000 shares of common stock. Does not include 5,714 shares of
common stock underlying stock options granted to Dr. Leighton which will
not have vested within sixty days after March 24, 2000.
(14) Includes 27,214 shares of common stock and 571 shares of common stock
underlying stock options granted to Dr. Thompson which will have vested
within sixty days after March 24, 2000. Does not include 5,714 shares of
common stock underlying stock options granted to Dr. Thompson which will
not have vested within sixty days after March 24, 2000.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
At the time of the closing of this offering, our authorized capital stock
consists of 62,000,000 shares, of which 60,000,000 shares are common stock,
$0.001 par value, and 2,000,000 shares are preferred stock, which our board of
directors has the power and authority to designate into classes or series.
Immediately following this offering, there will be 24,314,069 shares of common
stock and no shares of preferred stock outstanding. The following is a summary
of various provisions of our common stock and preferred stock.
Common Stock
As of March 24, 2000, there were 1,906,241 shares of our common stock issued
and outstanding and held of record by 43 stockholders. An additional 16,209,984
shares of our common stock will be issued upon the automatic conversion of all
outstanding shares of our preferred stock on the closing of this offering,
assuming an initial public offering price of $14.00. In addition, as of March
24, 2000, 265,397 shares of our common stock were reserved for the exercise of
outstanding warrants, 208,170 shares of our preferred stock were reserved for
the exercise of outstanding warrants and 3,428,571 shares of our common stock
were reserved for the exercise of options under our stock plan, of which
options to purchase 2,748,089 shares of our common stock were granted (and not
subsequently forfeited). Of these, 1,906,241 shares are reserved for the
exercise of outstanding options and 841,848 shares have been purchased pursuant
to the exercise of such options.
The following summarizes the rights of the holders of our common stock:
. each holder of shares of common stock is entitled to one vote per share
on all matters to be voted on by stockholders generally, including the
election of directors;
. there are no cumulative voting rights;
. the holders of our common stock are entitled to dividends and other
distributions as may be declared from time to time by the board of
directors out of funds legally available for that purpose, if any,
provided that no cash dividend may be declared or paid on our common
stock until paid on various series of outstanding preferred stock along
with its terms;
. upon our liquidation, dissolution or winding up, the holders of shares
of common stock will be entitled to share ratably in the distribution of
all of our assets remaining available for distribution after
satisfaction of all our liabilities and the payment of the liquidation
preference of any outstanding preferred stock; and
. under the terms of our amended and restated certificate of
incorporation, the holders of common stock have no preemptive or other
subscription rights to purchase shares of our stock, nor are they
entitled to the benefits of any redemption or sinking fund provisions.
Preferred Stock
Upon the closing of this offering, there will be no shares of preferred
stock outstanding. Our amended and restated certificate of incorporation
authorizes our board of directors to create and issue one or more series of
preferred stock and determine the rights and preferences of each series within
the limits permitted by our amended and restated certificate of incorporation
and applicable law. Among other rights, the board of directors may decide,
without further vote or action by our stockholders:
. the number of shares constituting the series and the distinctive
designation of the series;
. the dividend rate on the shares of the series, whether dividends will be
cumulative, and if so, from which date or dates, and the relative rights
of priority, if any, of payment of dividends on shares of the series;
. whether the series will have voting rights in addition to the voting
rights provided by law, and if so, the terms of the voting rights;
. whether the series will have conversion privileges and, if so, the terms
and conditions of conversion;
53
<PAGE>
. whether or not the shares of the series will be redeemable, and, if so,
the dates, terms and conditions of redemption, as the case may be;
. whether the series will have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of
the sinking fund; and
. the rights of the shares of the series in the event of our voluntary or
involuntary liquidation, dissolution or winding up and the relative
rights or priority, if any, of payment of shares of the series.
Unless our board of directors decides otherwise, the shares of all series of
preferred stock will rank equally regarding the payment of dividends and the
distribution of assets upon liquidation. Although we have no present plans to
issue any shares of preferred stock, any future grant of shares of preferred
stock, or the grant of rights to purchase preferred shares, may have the effect
of delaying, deferring or preventing a change in control in our company or an
unsolicited acquisition proposal. The grant of preferred stock also could
decrease the amount of earnings and assets available for distribution to the
holders of common stock or could negatively affect the rights and powers,
including voting rights, of the holders of the common stock.
Registration Rights
Following the expiration of all applicable lock-up periods, the holders of
at least 50% of the shares of our common stock to be received upon the
automatic conversion of the outstanding shares of Series A preferred stock at
the time of the closing of this offering may request that we file a
registration statement under the Securities Act. At any time after April 8,
2002, the holders of at least 50% of the shares of our common stock to be
received upon the automatic conversion of the outstanding shares of Series A
preferred stock and Series B preferred stock at the time of the closing of this
offering may request that we file a registration statement. At any time after
December 31, 2002, the holders of more than 50% of the shares of our common
stock to be received upon the automatic conversion of the outstanding shares of
any two of the following series of preferred stock may request that we file a
registration statement: Series A preferred stock, Series B preferred stock,
Series E preferred stock or Series G preferred stock. Furthermore, the holders
of at least 50% of the outstanding shares of common stock issued upon the
conversion of any of the Series A preferred stock, Series B preferred stock,
Series E preferred stock and Series G preferred stock may request that we file
a registration statement on Form S-3. Upon such a request and subject to
minimum size conditions, we generally will be required to use our best efforts
to register those shares. In addition, if we propose to register any of our
common stock, either for our own account or for the account of our
stockholders, we are required, with some exceptions, to notify the holders
described above and, with some limitations, to include in that registration all
of the shares of our common stock received upon conversion of the shares of our
Series A preferred stock, Series B preferred stock, Series E preferred stock
and Series G preferred stock requested to be included by stockholders. We are
generally obligated to bear the expenses, other than underwriting discounts and
sales commissions, of these registrations.
Under agreements with the holders of Series C preferred stock and Series D
preferred stock, we have agreed to notify the holders in the event we propose
to register any of our common stock, either for our own account or for the
account of stockholders, and, subject to certain limitations, to include in the
registration all of the shares of common stock issued upon the conversion of
the Series C preferred stock and Series D preferred stock at the time of
closing of this offering, as requested to be included by such holders. We are
generally obligated to bear the expenses, other than underwriting discounts and
sales commissions, of these registrations.
All such registration rights terminate five years after the closing of this
offering.
Any exercise of registration rights may hinder our efforts to arrange future
financings and may have a negative effect on the market price of our common
stock.
54
<PAGE>
Stockholders' Agreement
The holders of our common stock, our Series A, B and E preferred stock and
we are parties to a stockholders agreement in which stockholders have agreed to
vote their shares for the election of directors, as follows: one person
designated by stockholders affiliated with Burr, Egan, Deleage & Co., one
designated by stockholders affiliated with Medical Science Partners, one
designated by stockholders affiliated with Domain Associates, one designated by
NMT New Medical Technologies, the Chief Executive Officer and three non-
employees designated by those four persons. In addition, the holders of our
common stock granted us and our Series A, B and E preferred stockholders a
right of first refusal to purchase their stock. This agreement will terminate
upon the conversion of all shares of Series A, B and E preferred stock into
shares of common stock upon the closing of this offering.
Delaware Law and Certain Charter and By-Law Provisions
We are subject to Section 203 of the Delaware General Corporation Law which
is an anti-takeover provision. In general, the statute prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in
financial benefit to the stockholder. An "interested stockholder" is a person
who, together with affiliates and associates, owns (or within three years
prior, did own) 15% or more of a corporation's voting stock.
Our amended and restated certificate of incorporation authorizes our board
of directors to create and issue one or more series of preferred stock and
determine the rights and preferences of each series within the limits set forth
in our amended and restated certificate of incorporation and applicable law.
Use of our preferred stock could have the effect of delaying, deferring or
preventing a change in control, as removal of our board of directors and
management may be rendered more difficult. Further, use of the preferred stock
may have an negative impact on the ability of our stockholders to participate,
if applicable, in a tender offer or exchange offer for the common stock, which
would diminish the value of the common stock.
Effective simultaneously with the closing of this offering, our amended and
restated certificate of incorporation will provide that the members of the
board will be divided into three classes. The terms of Mr. Lamotte and Dr.
Shaffer will expire in 2001. The term of Dr. Treu and Mr. McGuire will expire
in 2002. The terms of Drs. Thompson, Leighton and Boucher will expire in 2003.
After this initial term, each class of directors will have a three year term.
Our bylaws will not permit our stockholders to call a special meeting of
stockholders. Under the bylaws, only our President, Chairman of the Board, or a
majority of the Board will be able to call a special meeting. The bylaws also
require that stockholders give advance notice to our secretary of any
nominations for director or other business to be brought by stockholders at any
stockholders' meeting. These provisions may delay or prevent changes of control
or management.
The Delaware General Corporation Law authorizes a corporation in its
certificate of incorporation to limit the personal liability of its directors
for violations of their fiduciary duty of care. Our amended and restated
certificate of incorporation states that a director will not be personally
liable to us or to our stockholders for monetary damages resulting from any
fiduciary wrongdoing as a director, except in circumstances involving wrongful
acts, such as the breach of the director's duty of loyalty to us or our
stockholders, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, or a transaction from which the
director derived an improper personal benefit. The Delaware General Corporation
Law also authorizes a corporation to indemnify its directors and officers, and
our amended and restated certificate of incorporation requires that we
indemnify each director and executive officer to the fullest extent allowable
under the Delaware General Corporation Law. We believe that these provisions
will assist us in attracting and retaining individuals to serve as directors.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock will be American
Securities Transfer & Trust, Inc.
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering there has been no public market for our common stock.
Future sales of substantial amounts of our common stock, or even the
possibility of future sales of our common stock sales, could reduce the
prevailing market price. As described below, only a limited number of shares of
common stock currently held by our stockholders will be available for sale
shortly after this offering because of contractual and legal restrictions on
resale. Sales of substantial amounts of common stock in the public market after
the restrictions lapse could negatively affect the prevailing market price and
our ability to raise equity capital in the future.
Upon the closing of this offering, 24,314,069 shares of our common stock
will be outstanding based on the number of shares of our preferred stock and
common stock outstanding as of March 24, 2000, and assuming no exercise of the
underwriters' over-allotment option. Of these shares, the 5,500,000 shares of
common stock being sold in this offering will be freely tradable (unless
purchased by our "affiliate" as such term is defined in the Securities Act)
without restriction or registration under the Securities Act. All remaining
shares of common stock were issued and sold in private transactions and are
"restricted securities" which are eligible for public sale only if registered
under the Securities Act or sold as required by Rule 144 under that Act. In
addition, upon closing of this offering 2,290,592 shares of common stock will
be delivered upon the exercise of warrants and options.
All of our officers, directors and holders of at least one percent of our
stock have signed lock-up agreements, in which they agreed that they will not,
directly or indirectly, offer, sell or agree to sell, or otherwise dispose of
any shares of our common stock or other securities in the public market without
the prior written consent of Bear, Stearns & Co. Inc. for a period of 180 days
after the final prospectus relating to this offering. The lock-up agreements do
not apply to any shares acquired in this offering through the directed share
program. The agreement of one of the stockholders excludes 206,963 shares
currently held and all shares acquired in the future.
Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus a person or persons whose shares are
aggregated, who has beneficially owned restricted securities for at least one
year, including the holding period of any earlier owner except an affiliate,
will be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:
. 1% of the number of shares of our common stock then outstanding, which
will equal approximately 243,141 shares immediately after this offering;
or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks before the filing of a
notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
Inspire.
Rule 144(k). Under Rule 144(k), a person who is not one of our affiliates at
any time during the 90 days before a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any earlier owner except an affiliate, is entitled to sell these shares
without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Registration Rights. As described above, holders of 17,638,528 shares of our
common stock which are restricted securities and 356,824 shares of our common
stock reserved for the exercise of outstanding warrants will be entitled to
demand registration of their shares. Registration of their shares under the
Securities Act would result in these shares becoming freely tradable without
restriction under the Securities Act, except for shares purchased by
affiliates, immediately upon the effectiveness of that registration.
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<PAGE>
Rule 701. In general, under Rule 701 of the Securities Act as currently in
effect, any of our employees, consultants or advisors, other than affiliates,
who purchases or receives shares from us in connection with our stock plan or
other written agreement will be eligible to resell their shares beginning 90
days after the date of this prospectus, subject only to the manner of sale
provisions of Rule 144, and by affiliates under Rule 144 without compliance
with its holding period requirements.
Stock Options. Following this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering the shares of common
stock reserved for issuance under our stock plan. The registration statement on
Form S-8 will become effective upon filing with the Securities and Exchange
Commission. Accordingly, shares registered under that registration statement
will, subject to limitations applicable to affiliates, be available for sale in
the open market after the filing, except those shares subject to lock-up
agreements and unvested shares.
Warrants. We have issued various warrants to purchase shares of our
preferred stock which shall, upon the closing of this offering, convert into
warrants to purchase an aggregate of 118,954 shares of our common stock. Each
of the preferred stock warrants will expire on the fifth anniversary of the
date of this offering. On January 29, 1999 we issued a ten-year warrant to a
consultant for 11,429 shares of our common stock as partial consideration under
a consulting agreement. On December 17, 1999 we issued a five-year warrant to
Genentech to purchase 253,968 shares of our common stock.
57
<PAGE>
UNDERWRITING
Subject to the terms and conditions provided in an agreement among the
underwriters and us, the underwriters named below, through their
representatives Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc. and
U.S. Bancorp Piper Jaffray Inc., have severally agreed to purchase from us the
aggregate number of shares of our common stock indicated opposite their names
below:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Bear, Stearns & Co. Inc.........................................
Deutsche Bank Securities Inc....................................
U.S. Bancorp Piper Jaffray Inc..................................
Total...........................................................
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters are subject to approval of various legal matters by their counsel
and to various other conditions, including delivery of legal opinions by our
counsel, the delivery of a letter by our independent auditors and the accuracy
of the representations and warranties made by us in the underwriting agreement.
Under the underwriting agreement, the underwriters are obliged to purchase and
pay for all the above shares of our common stock if any are purchased.
Public Offering Price
The underwriters propose to offer the shares of our common stock directly to
the public at the offering price set forth on the cover page of this prospectus
and at that price less a concession not in excess of $ per share of
common stock to other dealers who are members of the National Association of
Securities Dealers, Inc. The underwriters may allow, and those dealers may
reallow, concessions not in excess of $ per share of common stock to
other underwriters or to other dealers. After this offering, the offering
price, concessions and other selling terms may be changed by the underwriters.
Our common stock is offered subject to receipt and acceptance by the
underwriters and subject to other conditions, including the right to reject
orders in whole or in part. The underwriters have informed us that the
underwriters do not expect to confirm sales of common stock to any accounts
over which they exercise discretionary authority.
The following table summarizes the per share and total public offering price
of the shares of common stock in the offering, the underwriting compensation to
be paid to the underwriters by us and the proceeds of the offering, before
expenses, to us. The information presented assumes either no exercise or full
exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
Total
-----------------------
Without With
Per Over- Over-
Share Allotment Allotment
------ ----------- -----------
<S> <C> <C> <C>
Public offering price....................... $14.00 $77,000,000 $88,550,000
Underwriting discounts and commissions
payable by us.............................. .98 5,390,000 6,198,500
Proceeds, before expenses, to us............ 13.02 71,610,000 82,351,500
</TABLE>
The underwriting discount and commission per share is equal to the public
offering price per share of our common stock less the amount paid by the
underwriters to us per share of common stock.
We estimate total offering expenses payable by us, other than the
underwriting discounts and commissions referred to above, will be approximately
$1,200,000.
58
<PAGE>
Over-Allotment Option to Purchase Additional Shares
We have granted a 30-day over-allotment option to the underwriters to
purchase up to an aggregate of 825,000 additional shares of our common stock
exercisable at the offering price less the underwriting discounts and
commissions, each as provided on the cover page of this prospectus. If the
underwriters exercise this option in whole or in part, then each of the
underwriters will be obligated to purchase additional shares of common stock in
proportion to their respective purchase commitments as shown in the table
provided above, subject to various conditions.
Indemnification and Contribution
The underwriting agreement provides that we will indemnify the underwriters
against liabilities specified in the underwriting agreement under the
Securities Act, including liabilities arising from material misstatements or
omissions in connection with disclosure, or will contribute to payments that
the underwriters may be required to make regarding those liabilities. The
underwriters have agreed to indemnify us against liabilities specified in the
underwriting agreement under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to the
underwriters, the underwriters have been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
Lock-Up Agreements
All of our officers, directors and holders of at least one percent of our
stock have signed lock-up agreements, in which they agreed that they will not,
directly or indirectly, offer, sell or agree to sell, or otherwise dispose of
any shares of our common stock or other securities in the public market without
the prior written consent of Bear, Stearns & Co. Inc. for a period of 180 days
after the final prospectus relating to this offering. The lock-up agreements do
not apply to any shares acquired in this offering through the directed share
program. The agreement of one of the stockholders excludes 206,963 shares
currently held and all shares acquired in the future.
In addition, we have agreed that for a period of 180 days from the date of
this prospectus, we will not, without the prior written consent of Bear,
Stearns & Co. Inc., directly or indirectly, offer, sell or otherwise dispose of
any shares of common stock, pledge, make any short sale or maintain any short
position, establish or maintain a put position, enter into any swap, derivative
transaction or other arrangement that transfers to another any of the economic
consequences of ownership of common stock, or otherwise dispose of any common
stock or any interest in common stock held by us.
Nasdaq National Market Quotation
Before this offering, there has been no public market for our common stock.
Consequently, the initial public offering price for the common stock will be
determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in determining the initial
public offering price will be estimates of our prospects in the industry in
which we compete, an assessment of our management, the general state of the
securities markets at the time of this offering, and certain financial and
operating information of companies engaged in similar activities. We have
applied for approval for the quotation of our common stock on the Nasdaq
National Market, under the symbol "ISPH." We cannot assure you, however, that
an active or orderly trading market will develop for the common stock or that
the common stock will trade in the public market subsequent to this offering at
or above the initial offering price.
Stabilization, Syndicate Short Position and Penalty Bids
In order to facilitate this offering, certain persons participating in this
offering may engage in transactions that stabilize, maintain or otherwise
affect the price of the common stock during and after this offering.
Specifically, the underwriters may over-allot or otherwise create a short
position in the common stock for their
59
<PAGE>
own account by selling more shares of common stock than we have actually sold
to them. The underwriters may elect to cover any such short position by
purchasing shares of common stock in the open market and may impose penalty
bids, under which selling concessions allowed to syndicate members or other
broker-dealers participating in this offering are reclaimed if shares of common
stock previously distributed in this offering are repurchased in connection
with stabilization transactions or otherwise. The effect of these transactions
may be to stabilize or maintain the market price at a level above that which
might otherwise prevail in the open market. The imposition of a penalty bid may
also affect the price of the common stock to the extent that it discourages
resales of common stock. No representation is made as to the magnitude or
effect of any such stabilization or other transactions. Such transactions may
be effected on the Nasdaq National Market or otherwise and, if commenced, may
be discontinued at any time.
Directed Share Program
At our request, the underwriters have reserved for sale at the initial
public offering price up to 275,000 shares of common stock to be sold in this
offering for sale to our directors, officers, employees, business associates,
vendors and related persons. Purchases of reserved shares are to be made
through an account at Bear, Stearns & Co. Inc. by following Bear, Stearns & Co.
Inc.'s procedures for opening an account and transacting in securities. The
number of shares available for sale to the general public will be reduced to
the extent that any reserved shares are purchased. Any reserved shares not
purchased by our directors, officers, employees, business associates, vendors
and related persons will be offered by the underwriters to the general public
on the same terms as the other shares offered by this prospectus.
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<PAGE>
LEGAL MATTERS
The validity of the common stock offered and some of the legal matters
arising in connection with this offering will be passed upon for us by Smith,
Stratton, Wise, Heher & Brennan, Princeton, New Jersey. Other legal matters in
connection with this offering will be passed upon for the underwriters by
Coudert Brothers, New York, New York.
EXPERTS
The financial statements as of December 31, 1998 and 1999, and for each of
the three years in the period ended December 31, 1999, included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The statements in this prospectus under the captions "Risk Factors--If our
patent protection is inadequate, the development and any possible sales of our
product candidates could suffer or competitors could force our products
completely out of the market," "Risk Factors--If we fail to reach milestone or
other obligations, The University of North Carolina at Chapel Hill and other
licensors may terminate our agreements with them," "Risk Factors--Because we
rely upon trade secrets and agreements to protect some of our intellectual
property there is a risk that unauthorized parties may obtain and use
information that we regard as proprietary," "Business--Business Strategy--
Protect and Enhance our Technology Leadership Position," and "Business--Patents
and Proprietary Rights" have been reviewed and approved by Howrey Simon Arnold
& White, LLP, our patent counsel, as patent experts, and are included in this
prospectus in reliance upon that review and approval.
CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
In November 1999, we dismissed KPMG LLP as our independent accountants. The
former independent accountants' report did not contain an adverse opinion, a
disclaimer of opinion or any qualifications or modifications related to
uncertainty, limitation of audit scope or application of accounting principles.
The former independent accountants' report does not cover any of our financial
statements in this registration statement. There were no disagreements with the
former public accountants on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure regarding our
financial statements up through the time of dismissal that, if not resolved to
the former accountants' satisfaction, would have caused them to make reference
to the subject matter of the disagreement in connection with their report. In
November 1999, we retained PricewaterhouseCoopers LLP as our independent public
accountants. The decision to retain PricewaterhouseCoopers LLP was approved by
resolution of the board of directors. Before retaining PricewaterhouseCoopers
LLP, we had not consulted with PricewaterhouseCoopers LLP regarding accounting
principles.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.,
a registration statement on Form S-1 (together with required schedules and
exhibits) under the Securities Act regarding the shares of common stock
offered. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information provided in the registration
statement, some terms of which are omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. You can find additional
information regarding us and the common stock in the registration statement,
which may be inspected without charge, at the public reference facilities
maintained by the Securities and Exchange Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, 13th
Floor, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of these materials may be obtained from the
public reference section of the Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C., 20549, at prescribed rates. The registration
statement is also publicly available through the Securities and Exchange
Commission's web site located at http://www.sec.gov.
61
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of Independent Accountants...................................... F-2
Balance Sheets at December 31, 1998 and 1999........................... F-3
Statements of Operations for the years ended December 31, 1997, 1998
and 1999 and the period from inception (October 28, 1993) to December
31, 1999.............................................................. F-4
Statements of Stockholders' Equity (Deficit) for the period from
inception (October 28, 1993) to December 31, 1999..................... F-5
Statements of Cash Flows for the years ended December 31, 1997, 1998
and 1999 and the period from inception (October 28, 1993) to December
31, 1999.............................................................. F-6
Notes to Financial Statements.......................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Inspire Pharmaceuticals, Inc.
The 1 for 1.75 reverse split discussed in Note 15 to the financial
statements has not been consummated at March 29, 2000. When it has been
consummated, we will be in a position to furnish the following audit report:
"In our opinion, the accompanying balance sheets and the related
statements of operations, of stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Inspire
Pharmaceuticals, Inc. (a development stage company) at December 31, 1998
and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 and the period from
inception (October 28, 1993) to December 31, 1999 in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion
expressed above."
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
February 21, 2000
F-2
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, Pro Forma
-------------------------- December 31,
1998 1999 1999
------------ ------------ ------------
(unaudited)
(Note 2)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......... $ 4,137,628 $ 22,727,687 $ 22,727,687
Accounts receivable................ 5,726 19,540 19,540
Prepaid expenses................... 123,372 131,891 131,891
------------ ------------ ------------
Total current assets................. 4,266,726 22,879,118 22,879,118
Property and equipment, net.......... 1,046,195 789,028 789,028
Other, net........................... 133,114 261,611 261,611
------------ ------------ ------------
Total assets......................... $ 5,446,035 $ 23,929,757 $ 23,929,757
============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................... $ 290,473 $ 631,497 $ 631,497
Accrued expenses................... 447,835 650,650 611,150
Capital leases, current portion.... 441,645 210,259 210,259
------------ ------------ ------------
Total current liabilities............ 1,179,953 1,492,406 1,452,406
Capital leases, excluding current
portion............................. 341,382 333,383 333,383
Notes payable........................ 20,825 23,714 23,714
Deferred revenue..................... -- 5,000,000 5,000,000
------------ ------------ ------------
Total liabilities................ 1,542,160 6,849,503 6,810,003
Commitments (Note 12)................ -- -- --
Stockholders' equity:
Convertible preferred stock, $0.001
par value; 52,000,000 shares
authorized; 20,857,681 and
28,059,666 shares issued and
outstanding at December 31, 1998
and 1999, respectively; 0 shares
issued and outstanding pro forma.. 24,466,659 45,895,143 --
Common stock, $0.001 par value per
share; 56,000,000 shares
authorized; 2,159,082 and
2,465,857 shares issued and
outstanding at December 31, 1998
and 1999, respectively; 18,652,068
shares issued and outstanding pro
forma............................. 2,159 2,466 19,188
Additional paid-in capital......... 570,887 907,972 46,825,893
Deficit accumulated during the
development stage................. (20,860,276) (29,396,259) (29,396,259)
Deferred compensation.............. (275,554) (329,068) (329,068)
------------ ------------ ------------
Total stockholders' equity........... 3,903,875 17,080,254 17,119,754
------------ ------------ ------------
Total liabilities and stockholders'
equity.............................. $ 5,446,035 $ 23,929,757 $ 23,929,757
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
from
Inception
(October 28,
Year Ended December 31, 1993) to
------------------------------------- December 31,
1997 1998 1999 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Collaborative research
agreements............. $ -- $ 3,600,000 $ 600,000 $ 4,200,000
----------- ----------- ----------- ------------
Operating expenses:
Research and development
(excludes $0, $8,379
and $59,448,
respectively, of stock
based compensation).... 6,568,914 5,438,405 7,178,909 25,250,042
General and
administrative expenses
(excludes $0, $5,687
and $30,938,
respectively, of stock
based compensation).... 1,494,593 1,921,088 1,887,272 7,895,313
Stock based
compensation........... -- 14,066 90,386 104,452
----------- ----------- ----------- ------------
Total operating
expenses............... 8,063,507 7,373,559 9,156,567 33,249,807
----------- ----------- ----------- ------------
Operating loss.......... (8,063,507) (3,773,559) (8,556,567) (29,049,807)
----------- ----------- ----------- ------------
Other income (expense),
net:
Interest income......... 280,402 167,514 237,581 1,108,741
Interest expense........ (164,321) (115,295) (90,175) (644,641)
Loss on disposal of
property and
equipment.............. -- (16,587) (4,790) (328,520)
----------- ----------- ----------- ------------
Other income (expense),
net.................... 116,081 35,632 142,616 135,580
----------- ----------- ----------- ------------
Loss before provision
for income taxes....... (7,947,426) (3,737,927) (8,413,951) (28,914,227)
Provision for income
taxes.................... -- 360,000 60,000 420,000
----------- ----------- ----------- ------------
Net loss................ (7,947,426) (4,097,927) (8,473,951) (29,334,227)
Preferred stock
dividends................ -- -- (62,032) (62,032)
----------- ----------- ----------- ------------
Net loss available to
common stockholders.... $(7,947,426) $(4,097,927) $(8,535,983) $(29,396,259)
=========== =========== =========== ============
Net loss per common
share--basic and
diluted.................. $ (4.01) $ (1.99) $ (3.53)
=========== =========== ===========
Weighted average common
shares outstanding
--basic and diluted...... 1,980,699 2,061,398 2,401,029
=========== =========== ===========
Pro forma net loss per
common share--basic and
diluted.................. $ (0.54)
===========
Pro forma weighted average
common shares
outstanding--basic and
diluted.................. 15,561,462
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Period from Inception (October 28, 1993) to December 31, 1999
<TABLE>
<CAPTION>
Convertible Class A and B Deficit
Preferred Stock Common Stock Common Stock Accumulated
---------------------- ------------------- ------------------- Additional During the
Number Number Number Paid-In Development Deferred
of Shares Amount of Shares Par Value of shares Par Value Capital Stage Compensation
---------- ----------- --------- --------- --------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception
(October 28,
1993)............ -- $ -- -- $ -- -- $ -- $ -- $ -- $ --
---------- ----------- --------- ------ ------- -------- -------- ------------ ----------
Balance at
December 31,
1993............. -- -- -- -- -- -- -- -- --
Issuance of
Class A and B
common stock.... -- -- -- -- 10,000 10,000 -- -- --
Net loss........ -- -- -- -- -- -- -- (329,503) --
---------- ----------- --------- ------ ------- -------- -------- ------------ ----------
Balance at
December 31,
1994............. -- -- -- -- 10,000 10,000 -- (329,503) --
Issuance of
common stock and
cancellation of
Class A and B
common stock.... -- -- 850,286 850 (10,000) (10,000) 9,150 -- --
Stock issued for
consulting
services........ -- -- 585,714 586 -- -- 71,164 -- --
Stock issued in
exchange for
exclusive
license......... -- -- 297,714 298 -- -- 36,172 -- --
Issuance of
Series A
convertible
preferred
stock........... 9,200,000 9,100,403 -- -- -- -- -- -- --
Issuance of
Series A
warrants........ -- -- -- -- -- -- 91,410 -- --
Net loss........ -- -- -- -- -- -- -- (2,703,917) --
---------- ----------- --------- ------ ------- -------- -------- ------------ ----------
Balance at
December 31,
1995............. 9,200,000 9,100,403 1,733,714 1,734 -- -- 207,896 (3,033,420) --
Issuance of
common stock.... -- -- 227,340 227 -- -- 13,134 -- --
Net loss........ -- -- -- -- -- -- -- (5,781,503) --
---------- ----------- --------- ------ ------- -------- -------- ------------ ----------
Balance at
December 31,
1996............. 9,200,000 9,100,403 1,961,054 1,961 -- -- 221,030 (8,814,923) --
Issuance of
Series B
convertible
preferred
stock........... 10,866,014 12,966,256 -- -- -- -- -- -- --
Issuance of
common stock.... -- -- 31,954 32 -- -- 18,370 -- --
Net loss........ -- -- -- -- -- -- -- (7,947,426) --
---------- ----------- --------- ------ ------- -------- -------- ------------ ----------
Balance at
December 31,
1997............. 20,066,014 22,066,659 1,993,008 1,993 -- -- 239,400 (16,762,349) --
Issuance of
common stock.... -- -- 137,502 137 -- -- 16,861 -- --
Stock issued in
exchange for
exclusive
license......... -- -- 28,572 29 -- -- 17,971 -- --
Issuance of
Series C
convertible
preferred
stock........... 375,000 900,000 -- -- -- -- -- -- --
Issuance of
Series D
convertible
preferred
stock........... 416,667 1,500,000 -- -- -- -- -- -- --
Issuance of
Series B
warrants........ -- -- -- -- -- -- 7,035 -- --
Deferred
compensation.... -- -- -- -- -- -- 289,620 -- (289,620)
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- -- 14,066
Net loss........ -- -- -- -- -- -- -- (4,097,927) --
---------- ----------- --------- ------ ------- -------- -------- ------------ ----------
Balance at
December 31,
1998............. 20,857,681 24,466,659 2,159,082 2,159 -- -- 570,887 (20,860,276) (275,554)
Issuance of
common stock.... -- -- 306,775 307 -- -- 37,754 -- --
Issuance of
Series E
convertible
preferred
stock........... 6,201,985 11,405,952 -- -- -- -- -- -- --
Issuance of
Series G
convertible
preferred
stock........... 1,000,000 10,000,000 -- -- -- -- -- -- --
Issuance of
Series F
warrants........ -- -- -- -- -- -- 18,242 -- --
Issuance of
common stock
warrants........ -- -- -- -- -- -- 137,189 -- --
Preferred stock
dividends....... -- 22,532 -- -- -- -- -- (62,032) --
Deferred
compensation.... -- -- -- -- -- -- 143,900 -- (143,900)
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- -- 90,386
Net loss........ -- -- -- -- -- -- -- (8,473,951) --
---------- ----------- --------- ------ ------- -------- -------- ------------ ----------
Balance at
December 31,
1999............. 28,059,666 $45,895,143 2,465,857 $2,466 -- $ -- $907,972 $(29,396,259) $ (329,068)
========== =========== ========= ====== ======= ======== ======== ============ ==========
<CAPTION>
Total
Stockholders'
Equity/(Deficit)
---------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Inception
(October 28,
1993)............ $ --
----------------
Balance at
December 31,
1993............. --
Issuance of
Class A and B
common stock.... 10,000
Net loss........ (329,503)
----------------
Balance at
December 31,
1994............. (319,503)
Issuance of
common stock and
cancellation of
Class A and B
common stock.... --
Stock issued for
consulting
services........ 71,750
Stock issued in
exchange for
exclusive
license......... 36,470
Issuance of
Series A
convertible
preferred
stock........... 9,100,403
Issuance of
Series A
warrants........ 91,410
Net loss........ (2,703,917)
----------------
Balance at
December 31,
1995............. 6,276,613
Issuance of
common stock.... 13,361
Net loss........ (5,781,503)
----------------
Balance at
December 31,
1996............. 508,471
Issuance of
Series B
convertible
preferred
stock........... 12,966,256
Issuance of
common stock.... 18,402
Net loss........ (7,947,426)
----------------
Balance at
December 31,
1997............. 5,545,703
Issuance of
common stock.... 16,998
Stock issued in
exchange for
exclusive
license......... 18,000
Issuance of
Series C
convertible
preferred
stock........... 900,000
Issuance of
Series D
convertible
preferred
stock........... 1,500,000
Issuance of
Series B
warrants........ 7,035
Deferred
compensation.... --
Amortization of
deferred
compensation.... 14,066
Net loss........ (4,097,927)
----------------
Balance at
December 31,
1998............. 3,903,875
Issuance of
common stock.... 38,061
Issuance of
Series E
convertible
preferred
stock........... 11,405,952
Issuance of
Series G
convertible
preferred
stock........... 10,000,000
Issuance of
Series F
warrants........ 18,242
Issuance of
common stock
warrants........ 137,189
Preferred stock
dividends....... (39,500)
Deferred
compensation.... --
Amortization of
deferred
compensation.... 90,386
Net loss........ (8,473,951)
----------------
Balance at
December 31,
1999............. $17,080,254
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from
Inception
(October 28,
Year Ended December 31, 1993) to
-------------------------------------- December 31,
1997 1998 1999 1999
----------- ----------- ------------ ------------ ---
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss.............. $(7,947,426) $(4,097,927) $ (8,473,951) $(29,334,227)
Adjustments to
reconcile net loss to
net cash used by
operating activities:
Depreciation and
amortization........ 496,598 541,704 622,806 2,118,726
Stock issue for
exclusive licenses.. -- 18,000 -- 54,470
Stock issued for
consulting
services............ -- -- -- 71,750
Amortization of
deferred
compensation........ -- 14,066 90,386 104,452
Amortization of debt
issuance costs...... 15,235 16,408 22,959 73,646
Loss on disposal of
property and
equipment........... -- 16,587 4,790 328,520
Deferred revenue..... -- -- 5,000,000 5,000,000
Changes in operating
assets and
liabilities:
Accounts
receivable........ 2,084 (5,404) (13,814) (19,540)
Prepaid expenses... 19,630 18,708 (8,519) (131,891)
Other assets....... (26,000) (24,599) 1,161 (187,790)
Accounts payable... 51,837 (208,380) 341,024 655,261
Accrued expenses... (32,259) 101,160 130,974 601,432
----------- ----------- ------------ ------------
Net cash used in
operating
activities...... (7,420,301) (3,609,677) (2,282,184) (20,665,191)
----------- ----------- ------------ ------------
Cash flows from
investing activities:
Purchase of property
and equipment........ (185,597) (169,911) (150,860) (1,432,892)
Proceeds from sale of
property and
equipment............ -- 127,037 -- 127,037
Sale of certificate of
deposit.............. -- -- -- (78,000)
----------- ----------- ------------ ------------
Net cash used in
investing
activities...... (185,597) (42,874) (150,860) (1,383,855)
----------- ----------- ------------ ------------
Cash flows from
financing activities:
Proceeds from bridge
loans................ -- -- -- 780,000
Proceeds from issuance
of notes payable..... 10,000 9,000 1,000 408,200
Payments on notes
payable.............. (158,183) (142,651) -- (400,000)
Issuance of common
stock, net........... 18,402 16,998 38,061 96,822
Issuance of
convertible preferred
stock, net........... 12,966,256 2,400,000 21,441,127 45,096,435
Payments on capital
lease obligations.... (247,916) (319,273) (457,085) (1,204,724)
----------- ----------- ------------ ------------
Net cash provided
by financing
activities...... 12,588,559 1,964,074 21,023,103 44,776,733
----------- ----------- ------------ ------------
Increase
(decrease) in
cash and cash
equivalents..... 4,982,661 (1,688,477) 18,590,059 22,727,687
Cash and cash
equivalents, beginning
of period............. 843,444 5,826,105 4,137,628 --
----------- ----------- ------------ ------------
Cash and cash
equivalents, end of
period................ $ 5,826,105 $ 4,137,628 $ 22,727,687 $ 22,727,687
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. Organization
Inspire Pharmaceuticals, Inc. (the "Company") was founded on October 28,
1993 to develop and commercialize novel pharmaceutical products that treat
respiratory and ophthalmic diseases which are characterized by deficiencies in
the body's innate defense mechanisms of mucosal hydration and mucociliary
clearance. The Company's technologies are based in part on exclusive license
agreements with The University of North Carolina at Chapel Hill for rights to
certain developments from the founders' laboratories.
The Company is considered a development stage enterprise. Since inception,
the Company has devoted substantially all of its efforts towards establishing
its business and research and development programs.
2. Summary of Significant Accounting Policies
Unaudited Pro Forma Balance Sheet
The Board of Directors has authorized the Company to file a Registration
Statement with the Securities and Exchange Commission permitting the Company to
sell shares of common stock in an initial public offering ("IPO"). If the IPO
is consummated as presently anticipated, all shares of the Series A, Series B,
Series D and Series E preferred stock will automatically convert into shares of
common stock at a 1-for-1.75 conversion ratio. The Series C preferred stock
will automatically convert into shares of common stock at a 1 to 1.75
conversion ratio plus an additional 6,438 shares of common stock to be received
by the Series C preferred stockholders as a result of their antidilution
protection (Note 8). The unaudited pro forma balance sheet reflects the
conversion of the Series A, Series B, Series C, Series D and Series E preferred
shares into 15,469,104 shares of our common stock as if such conversion had
occurred as of December 31, 1999.
The Company's Series G preferred stock will automatically convert into
shares of common stock based on the assumed initial pubic offering price of
$14.00 per share (See Note 10) plus an additional 2,821 shares of common stock
to be received by the Series G preferred stockholders in payment of accrued
dividends of $39,500 at December 31, 1999. The unaudited pro forma balance
sheet reflects the conversion of the Series G preferred shares into 717,107
shares of common stock as if such conversion had occurred on December 31, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
Property and Equipment
Property and equipment is primarily comprised of furniture, laboratory and
computer equipment and leasehold improvements which are recorded at cost and
depreciated using the straight-line method over their estimated useful lives
which range from three to five years. Property and equipment includes certain
equipment under capital leases. These items are depreciated over the shorter of
the lease period or the estimated useful life of the equipment.
F-7
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Other Assets
Other assets include deferred financing costs which were incurred when the
Company entered into capital lease obligations. These costs are amortized using
the effective interest rate method over the life of the related lease.
Stock-Based Compensation
The Company accounts for stock-based compensation based on the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), which states that no compensation expense is recorded
for stock options or other stock-based awards to employees that are granted
with an exercise price equal to or above the estimated fair value per share of
the Company's common stock on the grant date. In the event that stock options
are granted with an exercise price below the estimated fair value of the
Company's common stock, the difference between the estimated fair value of the
Company's common stock and the exercise price of the stock option is recorded
as deferred compensation. The Company recognized deferred compensation of
$289,620 and $143,900 related to stock option grants during the years ended
December 31, 1998 and 1999, respectively. Deferred compensation is amortized
over the vesting period of the related stock option, which is generally four
years. The Company recognized $14,066 and $90,386 of stock based compensation
expense related to amortization of deferred compensation during the years ended
December 31, 1998 and 1999, respectively. The Company has adopted the
disclosure requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" which requires compensation expense
to be disclosed based on the fair value of the options granted at the date of
the grant.
Income Taxes
The Company accounts for income taxes using the liability method which
requires the recognition of deferred tax assets or liabilities for the
temporary differences between financial reporting and tax bases of the
Company's assets and liabilities and for tax carryforwards at enacted statutory
tax rates in effect for the years in which the differences are expected to
reverse. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date. In addition, valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Revenue Recognition
Revenue is recognized under collaborative research agreements when services
are performed or when contractual obligations are met. Nonrefundable fees
received at the initiation of collaboration agreements for which the Company
has an ongoing research and development commitment are deferred and recognized
ratably over the period of the related research and development commitment.
License fees received from research agreements for which the Company has no
future research and development commitments are recognized when received.
Milestone payments under collaboration agreements and research agreements will
be recognized on the date the Company achieves the indicated milestone and such
achievement is acknowledged by the collaborative partner, which generally
coincides with the receipt of the milestone payment.
Research and Development
Research and development costs include all direct costs, including salaries
for Company personnel, outside consultant's costs of clinical trials, sponsored
research and clinical trials insurance, related to the development of drug
compounds. These costs have been charged to operating expense as incurred.
Costs associated with
F-8
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
obtaining and maintaining patents on the Company's drug compounds and license
initiation and continuation fees, including milestone payments by the Company's
to its licensors, are evaluated based on the stage of development of the
related drug compound and whether the underlying drug compound has an
alternative use. Costs of these types incurred for drug compounds not yet
approved by the United States Food and Drug Administration ("FDA") and for
which no alternative use exists are recorded as research and development
expense. In the event the drug compound has been approved by the FDA or an
alternative use exists for the drug compound, patent costs and license costs
are capitalized and amortized over the expected life of the related drug
compound. License milestone payments to the Company's licensors are recognized
when the underlying requirement is met by the Company.
Significant Customers and Credit Risk
All revenues recorded in 1998 and 1999 were from a single collaborative
partner. Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of short-term cash
investments. The Company primarily invests in short-term interest-bearing
investment-grade securities and certificates of deposits. Cash deposits are all
in financial institutions in the United States.
Cash Flows
The Company made cash payments for interest of $149,085, $98,887 and $67,216
for the years ended December 31, 1997, 1998 and 1999, respectively. The Company
made cash payments for foreign withholding taxes of $360,000 and $60,000 during
the years ended December 31, 1998 and 1999, respectively.
The Company acquired property and equipment through the assumption of
capital lease obligations amounting to $418,810 and $218,157 during the years
ended December 31, 1998 and 1999, respectively.
Net Income (Loss) Per Common Share
Historical
Basic net income (loss) per common share ("Basic EPS") is computed by
dividing net income (loss) available to common stockholders by the weighted
average number of common shares outstanding. Diluted net income (loss)
available to common stockholders per common share ("Diluted EPS") is computed
by dividing net income (loss) available to common stockholders by the weighted
average number of common shares and dilutive potential common share equivalents
then outstanding. Potential common shares consist of shares issuable upon the
exercise of stock options and warrants and conversion of convertible preferred
stock. The calculation of net loss per share available to common stockholders
for the years ended December 31, 1997, 1998 and 1999 does not include
8,749,562, 12,143,320 and 14,132,450, respectively, of potential shares of
common stock equivalents, as their impact would be antidilutive.
Pro Forma (Unaudited)
Pro forma net income (loss) per common share is calculated assuming
conversion of all convertible preferred stock, plus accrued dividends on the
Series G preferred stock, which will convert automatically upon the closing of
the Company's initial public offering into 16,186,211 shares of the Company's
common stock (see Note 8), at the beginning of the applicable period or date of
issuance, if later.
Segment Reporting
The Company has determined that it did not have any separately reportable
operating segments as of December 31, 1998 or 1999.
F-9
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Internal Use Software
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AICPA") issued Statement of
Position No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"), which provides guidance regarding when
software developed or obtained for internal use should be capitalized. The
Company adopted SOP 98-1 effective January 1, 1999. The adoption of SOP 98-1
did not have a material impact on the Company's financial position or results
of operations.
Comprehensive Income (Loss)
The Company had no items of other comprehensive income during the years
ended December 31, 1997, 1998 or 1999.
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as "derivatives"), and for hedging
activities. SFAS 133 as amended by SFAS 137, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000, with earlier
application encouraged. The Company does not currently nor does it intend in
the future to use derivative instruments and therefore does not expect that the
adoption of SFAS 133 will have any impact on its financial position or results
of operations.
3. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Equipment under capital leases.................... $ 1,529,759 $ 1,801,347
Leasehold improvements............................ 666,192 671,539
Computers and office equipment.................... 311,346 392,445
----------- -----------
2,507,297 2,865,331
Less--accumulated depreciation and amortization... (1,461,102) (2,076,303)
----------- -----------
Property and equipment, net....................... $ 1,046,195 $ 789,028
=========== ===========
</TABLE>
4. Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts receivable and
accounts payable at December 31, 1998 and 1999 approximated their fair value
due to the short-term nature of these items.
The fair value of the Company's short-term investments, which are included
in cash and cash equivalents at December 31, 1998 and 1999, approximate their
carrying values as these investments were primarily in short-term interest-
bearing investment-grade securities.
The carrying value of the Company's notes payable and capital lease
obligations at December 31, 1998
and 1999 approximate their fair value as the interest rates on these
obligations approximate rates available in the financial market at such dates.
F-10
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Accrued Expenses
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
Research costs............................................. $133,264 $380,807
Accrued payroll and benefits............................... 49,038 31,848
Accrued legal and patent costs............................. 106,956 40,571
Accrued preferred stock dividends.......................... -- 39,500
Other...................................................... 158,577 157,924
-------- --------
$447,835 $650,650
======== ========
</TABLE>
6. Income Taxes
The components of the Company's 1997, 1998 and 1999 income tax expense
consist of the following:
<TABLE>
<CAPTION>
1997 1998 1999
------ -------- -------
<S> <C> <C> <C>
Current expense (benefit):
Federal........................................... $ -- $ -- $ --
Foreign........................................... -- 360,000 60,000
State............................................. -- -- --
------ -------- -------
Current tax expense (benefit)..................... -- 360,000 60,000
Deferred expense (benefit):
Federal........................................... -- -- --
State............................................. -- -- --
Deferred tax expense (benefit).................... -- -- --
------ -------- -------
Net tax expense (benefit)......................... $ -- $360,000 $60,000
====== ======== =======
</TABLE>
There was no current or deferred federal and state income tax expense for
the years ended December 31, 1997, 1998 and 1999 because the Company generated
net operating losses. The foreign tax represents foreign withholding tax paid
on amounts received from a foreign entity.
F-11
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1998 and 1999 consist of the following:
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Deferred tax assets:
Domestic net operating loss carryforwards....... $ 7,544,056 $ 8,597,519
Deferred revenue................................ -- 1,939,250
Research and development credit................. 759,449 910,890
Fixed and intangible assets..................... 298,983 553,265
Compensation related items...................... 60,147 52,864
Stock warrants.................................. 28,477 37,381
Other........................................... 8,862 41,404
----------- ------------
Gross deferred tax assets..................... 8,699,974 12,132,573
Less valuation allowance...................... (8,699,974) (12,132,573)
----------- ------------
Net deferred tax assets....................... $ -- $ --
=========== ============
</TABLE>
For 1998 and 1999, the Company has provided a full valuation allowance
against its net deferred assets since realization of these benefits could not
be reasonably assured. The increase in valuation allowance of $3,432,598
resulted primarily from the generation of net operating loss carryforwards.
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $22,167,000 and $22,165,000, respectively.
The net operating loss carryforwards expire in various amounts starting in 2008
and 2000 for federal and state tax purposes, respectively. The utilization of
the federal net operating loss carryforward may be subject to limitation under
the rules regarding a change in stock ownership as determined by the Internal
Revenue Code. If the Company's utilization of its net operating loss
carryforwards is limited and the Company has taxable income which exceeds the
permissible yearly net operating loss carryforward, the Company would incur a
federal income tax liability even though its net operating loss carryforwards
exceed its taxable income.
Additionally, the Company has net research and development credit
carryforwards of $910,890 which expire beginning in 2010.
Taxes computed at the statutory federal income tax rate of 34% are
reconciled to the provision for income taxes as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------ ----------- -----------
<S> <C> <C> <C>
United States federal tax at
statutory federal income tax
rate............................. $ (2,702,125) $(1,269,365) $(2,860,743)
State taxes (net of federal
benefit)......................... (419,846) (202,328) (404,804)
Change in valuation reserve....... 3,472,665 1,863,576 3,432,598
Research and development credit... (353,445) (274,183) (151,441)
Foreign withholding tax, net of
federal benefit.................. -- 237,600 39,600
Other, net........................ 2,751 4,700 4,790
------------ ----------- -----------
Provision for income taxes........ $ -- $ 360,000 $ 60,000
============ =========== ===========
</TABLE>
F-12
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Notes Payable
On October 13, 1995, the Company entered into an unsecured loan agreement
with a lessor whereby the Company borrowed $400,000 from the lessor. The
promissory note bore interest at a rate of 10.75% and was payable in monthly
installments through October 1998. The note was fully repaid during 1998.
On November 13, 1996, the Company entered into a Collaborative Funding
Agreement ("CFA") with the North Carolina Biotechnology Center ("NCBC") and the
Kenan Institute whereby NCBC agreed to loan the Company a total of $20,000.
Loans made to the Company by NCBC under the CFA are to be used for specific
research activities. All such loans are unsecured and bear interest at 8.25%,
with principal and accrued interest payable on November 7, 2001. The Company
had total borrowings from NCBC under the CFA of $19,000 and $20,000 as of
December 31, 1998 and 1999, respectively. Accrued interest on these loans,
which is included in notes payable, totaled $1,825 and $3,714 at December 31,
1998 and 1999, respectively.
8. Stockholders' Equity
At December 31, 1999, the Company was authorized to issue 56,000,000 shares
of common stock with a par value of $.001 per share and 52,000,000 shares of
preferred stock. Of the 52,000,000 shares of preferred stock: (i) 9,365,000
shares have been designated as Series A Convertible Preferred Stock ("Series A
Preferred") of which 9,200,000 are issued and outstanding at December 31, 1998
and 1999; (ii) 10,881,014 shares have been designated as Series B Convertible
Preferred Stock ("Series B Preferred") of which 10,866,014 are issued and
outstanding at December 31, 1998 and 1999; (iii) 375,000 shares have been
designated as Series C Convertible Preferred Stock ("Series C Preferred") and
are issued and outstanding at December 31, 1998 and 1999; (iv) 416,667 shares
have been designated as Series D Convertible Preferred Stock ("Series D
Preferred") and are issued and outstanding at December 31, 1998 and 1999; (v)
8,000,000 shares have been designated as Series E Convertible Preferred Stock
("Series E Preferred") of which 0 and 6,201,985 shares are issued and
outstanding at December 31, 1998 and 1999, respectively; (vi) 1,200,000 shares
have been designated as Series G Convertible Preferred Stock ("Series G
Preferred") of which 0 and 1,000,000 shares are issued and outstanding at
December 31, 1998 and 1999, respectively; (vii) 9,365,000 shares have been
designated as Series AA Convertible Preferred Stock ("Series AA Preferred")
none of which are issued or outstanding at December 31, 1998 and 1999; (viii)
10,881,014 shares have been designated as Series BB Convertible Preferred Stock
("Series BB Preferred") none of which are issued or outstanding at December 31,
1998 and 1999; and (ix) 28,170 shares have been designated as Series F
Convertible Preferred Stock ("Series F Preferred") none of which are issued or
outstanding at December 31, 1998 and 1999.
Common Stock
Dividends
The holders of common stock shall be entitled to receive dividends from time
to time as may be declared by the Board of Directors. No cash dividend may be
declared or paid to common stockholders until paid on each series of
outstanding preferred stock in accordance with its terms.
Voting
The holders of shares of common stock are entitled to one vote for each
share held with respect to all matters voted on by the shareholders of the
Company.
F-13
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Liquidation
After payment to the preferred stockholders, holders of common stock shall
be entitled, together with holders of preferred stock, to share ratably in all
remaining assets of the Company.
Class A and B Common Stock
During 1994, 10,000 shares of Class A and B common stock were issued to one
of the Company's founders and to the initial group of investors. During 1995,
the outstanding Class A and B common shares were exchanged for the issuance of
850,286 shares of common stock.
Preferred Stock
Outstanding preferred stock at December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1999
---------------------- ----------------------
Number of Number of
Description Shares Amount Shares Amount
----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Series A Preferred............. 9,200,000 $ 9,100,403 9,200,000 $ 9,100,403
Series B Preferred ............ 10,866,014 12,966,256 10,866,014 12,966,256
Series C Preferred............. 375,000 900,000 375,000 922,532
Series D Preferred............. 416,667 1,500,000 416,667 1,500,000
Series E Preferred............. -- -- 6,201,985 11,405,952
Series G Preferred............. -- -- 1,000,000 10,000,000
---------- ----------- ---------- -----------
20,857,681 $24,466,659 28,059,666 $45,895,143
========== =========== ========== ===========
</TABLE>
Dividends
The holders of Series A Preferred, Series B Preferred, Series C Preferred
and Series E Preferred shall be entitled to receive dividends equal to any
dividends paid on common stock. If dividends are declared on any series of
preferred stock other than Series G Preferred, dividends shall be declared pari
passu among the holders of the series on which such dividends are declared and
the holders of the Series A Preferred, Series B Preferred, Series C Preferred
and Series E Preferred. The number of preferred shares on which dividends would
be paid would be based on the number of shares of common shares into which a
share of preferred stock is convertible. The holders of Series G Preferred
shall be entitled to cumulative dividends at the prime rate plus 1% of the
Series G Preferred preference amount calculated on a per share basis. The
dividends shall accrue and be payable upon the liquidation, dissolution or
winding up of the Company or upon conversion to common stock. Accrued dividends
on the Series G Preferred totaled $39,500 for the year ended December 31, 1999.
No dividends have been declared or paid from the date of inception (October 28,
1993) through December 31, 1999.
Liquidation
In the event of liquidation, dissolution, or winding up of the Company,
holders of preferred stock shall be entitled, in the following order, before
any distribution is made to holders of common stock, to be paid an amount equal
to (i) $1.00 per share of Series A Preferred or Series AA Preferred, $1.20 per
share of Series B Preferred or Series BB Preferred, and $2.00 per share of
Series E Preferred; (ii) $2.40 per share of Series C Preferred; (iii) $3.60 per
share of Series D Preferred, $2.40 per share of Series F Preferred and $10.00
per share
F-14
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
of Series G Preferred; plus, in each case, any declared but unpaid dividends.
In the event that assets of the Company are insufficient to permit payment of
the above mentioned amounts, holders shall share ratably in any distribution of
the remaining assets and funds of the Company in proportion to the respective
amounts which would otherwise be payable under these circumstances in the order
of liquidity preference.
Conversion
Each share of preferred stock, other than Series G Preferred, shall be
convertible, at the option of the holder at any time after the date of issuance
and without payment of additional consideration, into shares of common stock at
a 1-to-1.75 conversion rate subject to certain adjustments. Each holder
converting shares of preferred stock shall be entitled to all declared but
unpaid dividends up to the date of conversion. In the event that a sale of any
series of preferred stock is made at price per share lower than the per share
price of either the Series A Preferred, Series B Preferred, Series C Preferred
or Series E Preferred then the conversion price of the respective series of
preferred stock will be adjusted to equal the per share sales price of the most
recent series of preferred stock. As a result of the sale of the Series E
Preferred for $2.00 per share in July and October 1999, the number of common
shares that Series C Preferred converts into was increased by 6,438 shares
which resulted in the Company recognizing a preferred stock dividend of
$22,532. Series G Preferred shall be convertible into shares of the Company's
common stock at the option of the holder at any time after the second
anniversary of the date of issuance provided the conversion would not cause a
single shareholder to exceed a 19.5% ownership interest in the Company. In such
event, the conversion price for the Series G Preferred will be determined based
on the facts and circumstances at the time of such conversion.
The conversion price will be reduced in the event the Company would issue
any shares of its common stock without consideration or for consideration per
share of less than the conversion price of any series of preferred stock in
effect immediately prior to the time of such issuance except when such common
stock is issued upon conversion of preferred stock or is issued to officers,
directors, employees, or consultants of the Company pursuant to actions or
stock compensation plans in existence as of the initial issue date of the
respective series of preferred stock or any other stock purchase or option plan
for employees or directors.
Automatic Conversion
Each share of preferred stock, other than Series G Preferred, shall
automatically be convertible into common stock at the conversion price upon (i)
the completion of an underwritten public offering involving the sale of the
Company's common stock at a price of at least $2.00 per share and resulting in
gross proceeds to the Company of not less than $10,000,000 or (ii) the consent
of 80% or more of the preferred shares then outstanding. Each share of Series G
Preferred shall automatically be converted into shares of common stock upon the
completion of an underwritten public offering provided that such conversion
would not cause the holder of the converted shares to exceed 19.5% ownership
interest in the Company.
In the event of an initial public offering of the Company's common stock,
the Series G Preferred shall automatically be convertible into common stock at
an exchange rate determined by dividing the total proceeds from the sale of
Series G Preferred, plus accrued and unpaid dividends, by the initial offering
price of the Company's common stock.
Mandatory Conversion
In the event that (i) the Company issues additional shares of common stock
or options or rights to purchase common stock at a price per share less than
the then applicable conversion price of Series A Preferred or Series B
Preferred ("Diluted Stock") and (ii) a holder of Diluted Stock fails to
purchase their pro rata share
F-15
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
of such issuance, each such nonparticipating holder's shares of Diluted Stock
shall be automatically converted to an equivalent number of shares of Series AA
Preferred or Series BB Preferred, as the case may be, which shall have all the
rights and preferences of the Diluted Stock except that the initial conversion
price of the Series AA Preferred and Series BB Preferred shall not take into
account any adjustment resulting from the dilutive issuance triggering such
conversion. Thereafter, the conversion price of the Series AA Preferred and
Series BB Preferred shall be subject to adjustment in the same manner as that
of the Diluted Stock. At December 31, 1999, there are no shares of Series AA
Preferred or Series BB Preferred outstanding.
Voting
Each holder of preferred stock, other than Series G Preferred, shall be
entitled to vote upon any matter submitted to a stockholder for a vote, as
though the common stock and preferred stock constituted a single class of
stock, except with respect to those matters on which Delaware General
Corporation Law requires that a vote must be by a separate class or classes or
by separate series, as to which each class or series shall have the right to
vote in accordance with such law. The holder of preferred stock shall have the
number of votes per share equal to the number of shares of common stock into
which the preferred stock is convertible. The holders of Series A Preferred,
Series B Preferred, Series E Preferred and common stock are obligated to vote
to elect the Company's Board of Directors as provided in the Second Amended and
Restated Stockholders' Agreement dated April 8, 1997, as amended, among the
Company and such stockholders. The agreement terminates upon conversion of the
outstanding shares of the Series A Preferred, Series B Preferred and Series E
Preferred.
Restrictions
The Company cannot, without the consent of the holders of a majority of
Series A Preferred, Series B Preferred, Series C Preferred and Series E
Preferred, (i) amend, repeal, or add any provision to the certificate of
incorporation or by-laws if such actions would change the preferences, rights,
privileges, powers of, or restrictions provided for the benefit of, the Series
A Preferred, Series B Preferred, Series C Preferred and Series E Preferred,
(ii) authorize any merger or consolidation of the Company into any other
corporation or entity, or (iii) authorize the sale of all or substantially all
of the assets of the Company.
Sales of Preferred Stock
In March 1995, the Company issued 8,388,679 shares of Series A Preferred to
a group of investors at a price per share of $1.00 which resulted in proceeds
to the Company of $8,289,082, net of offering costs of $99,597. In addition,
bridge loans from the Series A Preferred investors totaling $811,321, including
accrued interest, were converted into 811,321 shares of Series A Preferred,
using a conversion price of $1.00 per share.
In June and September 1997, the Company issued 10,866,014 shares of Series B
Preferred to a group of investors at a price per share of $1.20 which resulted
in proceeds to the Company of $12,966,256, net of offering costs of $72,960.
In September 1998, the Company issued 375,000 shares of Series C Preferred
to a strategic partner, Kissei Pharmaceutical Co. Ltd. ("Kissei"), at a price
per share of $2.40 which resulted in proceeds to the Company of $900,000, in
conjunction with entering into a research agreement with Kissei relating to the
development of INS365 Respiratory (see Note 10).
In December 1998, the Company issued 416,667 shares of Series D Preferred to
Santen Pharmaceutical Company Ltd., at a price per share of $3.60 which
resulted in proceeds to the Company of $1,500,000, in
F-16
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
conjunction with entering into a research agreement relating to the development
of INS365 Ophthalmic (See Note 10).
In July and October 1999, the Company issued 6,201,985 shares of Series E
Preferred to a group of venture capital investors at a price per share of $2.00
which resulted in proceeds to the Company of $11,405,952, net of offering costs
of $998,018.
In December 1999, the Company issued 1,000,000 shares of Series G Preferred
to Genentech, Inc. ("Genentech"), at a price per share of $10.00 which resulted
in proceeds to the Company of $10,000,000 in conjunction with entering into a
collaboration agreement (See Note 10). The shares will automatically convert
into shares of the Company's common stock upon an initial public offering at an
exchange rate determined by dividing the total proceeds plus accrued and unpaid
dividends by the initial offering price of the Company's common stock.
9. Stock Options and Warrants
1995 Stock Incentive Plan
During 1995, the Company adopted the 1995 Stock Plan (the "Plan") which
provided for the grant of up to 1,005,714 options to directors, officers,
employees and consultants. In April 1999, the Plan was amended and restated,
and is now the Amended and Restated 1995 Stock Plan. In September 1999, the
option pool was increased to 2,285,714 shares and in January 2000 the option
pool was further increased to 3,428,571 shares. Under the Plan, both incentive
and non-qualified, as well as restricted stock, can be granted. The Board of
Directors shall determine the term and dates of the exercise of all options at
their grant date, provided that for incentive stock options, such price shall
not be less than the fair market value of the Company's stock on the date of
grant. The maximum exercise terms for an option grant is ten years from the
date of the grant. Options granted under the plan generally vest 25% upon
completion of one full year of employment and on a monthly basis over the
following three years. Vesting begins from the date of hire for new employees
and on the date of grant for existing employees.
The following table summarizes the stock option activity for the Plan:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
--------- --------
<S> <C> <C>
Options outstanding, December 31, 1996.................. 780,482 $ 0.123
Granted............................................... 43,485 0.137
Exercised............................................. (31,954) (0.123)
Forfeited............................................. (239) (0.123)
--------- -------
Options outstanding, December 31, 1997.................. 791,774 0.124
Granted............................................... 927,714 0.250
Exercised............................................. (137,502) (0.124)
Forfeited............................................. (91,884) (0.170)
--------- -------
Options outstanding, December 31, 1998.................. 1,490,102 0.200
Granted............................................... 395,000 0.688
Exercised............................................. (306,775) (0.124)
Forfeited............................................. (103,809) (0.212)
--------- -------
Options outstanding, December 31, 1999.................. 1,474,518 $ 0.345
========= =======
</TABLE>
F-17
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes information concerning options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Weighted Remaining
Average Contractual
Number of Exercise Life
Shares Price (In Years)
--------- -------- -----------
<S> <C> <C> <C>
Options outstanding--price range
$0.123...................................... 247,715 $0.123 5.97
$0.140...................................... 5,481 0.140 6.42
$0.210...................................... 652,036 0.210 8.58
$0.315...................................... 31,429 0.315 8.79
$0.420...................................... 286,428 0.420 9.14
$0.840...................................... 251,429 0.840 9.70
--------- ------ ----
Options outstanding........................... 1,474,518 $0.345 8.44
========= ====== ====
Options exercisable........................... 581,473 $0.187
========= ======
</TABLE>
Subsequent to December 31, 1999, the Company has made the following stock
option grants:
<TABLE>
<CAPTION>
Number of Options Exercise
Date Granted Price
---- ----------------- ---------
<S> <C> <C>
January 2000.............. 32,857 $1.75
February 2000............. 74,286 $12.69
February 2000............. 428,571 IPO price
March 2000................ 34,286 IPO price
</TABLE>
The Company has recorded deferred compensation of approximately $210,000
related to the stock option grants made in January 2000 to reflect the
difference between the estimated fair value of the Company's common stock at
the date of the grants and the exercise price of the related stock options of
$1.75 per share.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123") requires the Company to disclose pro forma
information regarding option grants made and warrants issued to its employees.
SFAS 123 specifies certain valuations techniques that produce estimated
compensation charges that are included in the pro forma results below. These
amounts have not been reflected in the Company's statement of operations,
because the Company has made the election to use the provisions of APB 25 to
account for its stock based compensation.
The fair value of options granted to employees was estimated using the
following assumptions for the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
December 31,
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Expected dividend yield.............................. 0.00% 0.00% 0.00%
Expected stock price volatility...................... 0.00% 0.00% 0.00%
Risk-free interest rate.............................. 6.03% 5.02% 5.39%
Expected life of options............................. 5 years 5 years 5 years
</TABLE>
F-18
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
For purposes of pro forma disclosures, the estimated fair value of equity
instruments is amortized to expense over their respective vesting period. If
the Company had elected to recognize compensation expense based on the fair
value of stock-based instruments at the grant date, as prescribed by SFAS 123,
its pro forma net loss and net loss per common share would have been as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net loss available to common
stockholders--as reported...... $ (7,947,426) $ (4,097,927) $ (8,535,983)
Net loss available to common
stockholders--
SFAS 123 pro forma............. $ (7,955,969) $ (4,111,486) $ (8,552,123)
Net loss per common share--SFAS
123 pro forma.................. $(4.02) $(1.99) $(3.56)
</TABLE>
Warrants
Preferred Stock Warrants
In connection with the capital lease agreement executed on October 13, 1995,
the Company issued warrants which entitle the holder to purchase 165,000 shares
of Series A Preferred with an exercise price of $1.00 per share. These warrants
had an estimated fair value of $91,410 at the date of issuance which was
deferred and is being amortized as an increase to interest expense over the
term of the related lease agreement using the effective interest rate method.
The warrants shall be exercisable prior to the earlier of the tenth anniversary
of the grant date or the fifth anniversary date of the Company's initial public
offering.
In connection with an amendment on June 18, 1998 to increase the amount of
equipment under the capital lease agreement executed on October 13, 1995, the
Company issued warrants which entitle the holder to purchase 15,000 shares of
Series B Preferred with an exercise price of $1.20 per share. These warrants
had an estimated value of $7,035 at the date of issuance which was calculated
using the Black-Scholes method in accordance with SFAS 123. This amount was
deferred and is being amortized as an increase to interest expense over the
term of the related lease agreement using the effective interest rate method.
The warrants shall be exercisable prior to the earlier of the tenth anniversary
of the grant date or the fifth anniversary date of the Company's initial public
offering.
In connection with additional amendments to increase the amount of equipment
under the Company's capital lease agreement which were executed on February 8,
1999 and April 15, 1999, the Company issued warrants which entitle the holder
to purchase 20,000 and 8,170 shares, respectively, of Series F Preferred with
an exercise price of $2.40 per share. These warrants had an estimated fair
value of $18,242 at their respective dates of issuance which was calculated
using the Black-Scholes method in accordance with SFAS 123. These amounts were
deferred and are being amortized as an increase to interest expense over the
term of the related lease agreement using the effective interest rate method.
The warrants shall be exercisable prior to the earlier of the tenth anniversary
of the grant date or the fifth anniversary date of the Company's initial public
offering.
None of the preferred stock warrants have been exercised as of December 31,
1999.
Common Stock Warrants
In connection with a consulting agreement, the Company issued 11,429
warrants on January 15, 1999 to purchase shares of the Company's common stock
with an exercise price of $4.20 per share. The warrants had an estimated value
of $300 at the date of issuance as calculated using the Black-Scholes model in
accordance with SFAS 123. The warrants shall be exercisable prior to the tenth
anniversary of the grant date.
F-19
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
In connection with the sale of the Series G Preferred and the collaboration
agreement entered into with Genentech on December 17, 1999, the Company issued
warrants which entitle the holder to purchase 253,968 shares of common stock
with an exercise price of $7.88 per share. The warrants had an estimated value
of $136,889 at the date of issuance as determined using the Black-Scholes model
which was deferred and will be amortized to research and development expense
over the period of the Company's research and development commitment. The
warrants shall be exercisable prior to the fifth anniversary of the grant date.
None of the common stock warrants have been exercised as of December 31,
1999.
Outstanding warrants to purchase the Company's common and preferred stock at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Number of Exercise
Type of Warrant Warrants Price
--------------- --------- --------
<S> <C> <C>
Series A Preferred..................................... 165,000 $1.00
Series B Preferred..................................... 15,000 $1.20
Series F Preferred..................................... 28,170 $2.40
Common................................................. 11,429 $4.20
Common................................................. 253,968 $7.88
</TABLE>
10. Collaboration Agreements
On September 10, 1998, the Company entered into a Joint Development, License
and Supply Agreement (the "Kissei Agreement") with Kissei related to the
development of INS365 Respiratory for all therapeutic respiratory applications,
excluding sinusitis and middle ear infection, in Japan. INS365 Respiratory for
respiratory therapeutic uses is licensed by the Company from UNC. Under the
terms of the Kissei Agreement, Kissei will develop, commercialize, and market
INS365 Respiratory in Japan. The Company has no ongoing research and
development commitment as it relates to the Kissei Agreement. The Company
maintains the right to manufacture and supply INS365 to Kissei.
The Kissei Agreement provided that Kissei would pay the Company an up front
payment of $4,500,000, which included the purchase of $900,000 in equity in the
form of Series C Preferred. In addition, depending on whether all milestones
are met, the Company could receive milestone payments of up to $13,000,000 over
the term of the Kissei Agreement. The Company is receiving reimbursement for
liaison staff positions which totaled $62,500 and $250,000 during the years
ended December 31, 1998 and 1999. In addition, the Company will receive
royalties on net sales of INS365 Respiratory by Kissei.
Upon the signing of the Kissei Agreement, Kissei purchased 375,000 shares of
the Company's Series C Preferred for $900,000 or $2.40 per share. In addition,
the Company received a nonrefundable up front license fee of $3,600,000 which
was recorded as license revenue when received as the Company has no ongoing
research commitment under the Kissei Agreement. During 1999, the Company
received a milestone payment under the Kissei Agreement of $600,000 based on
achievement of technical milestones by Inspire. Subsequent to December 31,
1999, the Company received a milestone payment of $1,500,000 based on
achievement of a technical milestone by Kissei in its development of INS365
Respiratory.
During 1999, the Company contracted with a contract research organization
("CRO") to perform research and development on behalf of Kissei. The Company is
reimbursed by Kissei for the costs of this study. The total amount paid to the
CRO and reimbursement received from Kissei during 1999 totaled $813,000.
F-20
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
On December 16, 1998, the Company entered into a Development, License and
Supply Agreement (the "Santen Agreement") with Santen Pharmaceutical Company,
Ltd. ("Santen") to complete the development of INS365 Ophthalmic for the
therapeutic treatment of ocular surface diseases. Santen received an exclusive
license to INS365 Ophthalmic in Japan, China, South Korea, the Philippines,
Thailand, Vietnam, Taiwan, Singapore, Malaysia and Indonesia ("the Territory")
in the field. Under the terms of the Santen Agreement, Santen will develop,
commercialize, and market INS365 Ophthalmic in the Territory. The Company
retains the right to manufacture and supply INS365 Ophthalmic in bulk drug
substance to Santen.
The Santen Agreement provided that Santen would make the Company an up front
payment through an equity investment of $1,500,000 in Series D Preferred. In
addition, depending on whether all milestones under the Santen Agreement are
met, the Company could receive milestone payments of up to $4,750,000. No
milestone payments were received under the Santen Agreement during 1998 or
1999. In addition, the Company will receive royalties on net sales on INS365
Ophthalmic by Santen.
Upon the signing of the Santen Agreement, Santen purchased 416,667 shares of
the Company's Series D Preferred for $1,500,000 or $3.60 per share.
On December 17, 1999, the Company entered into a Development, License and
Supply Agreement (the "Genentech Agreement") with Genentech to jointly develop
INS365 Respiratory and other related P2Y\\2\\ agonists existing on the date of
the Genentech Agreement for all human therapeutic uses for (a) the treatment of
respiratory tract disorders, including chronic bronchitis and cystic fibrosis,
throughout the world, excluding Japan and (b) the treatment of sinusitis and
middle ear infection worldwide. The Company will maintain the right to
manufacture and supply such compounds in bulk drug substance form to Genentech
during the research and development period and up to the end of Phase II
clinical trials for each indication. The agreement will be in effect until all
patents licensed under the agreement have expired, except that if the Company
exercises its option to co-fund the development of INS37217 Respiratory for the
treatment of cystic fibrosis, then the agreement will remain in effect until
the product is no longer being marketed in the United States.
The Genentech Agreement provided that Genentech would pay the Company a non-
refundable, non-creditable up-front payment of $5,000,000 upon execution of the
Genentech Agreement, which the Company will record as license revenue over the
term of its research and development commitment, which is estimated to be
completed by December 31, 2001. In addition, the Company could receive
milestone payments of up to an additional $63,000,000 over the term of the
Genentech Agreement. No milestone payments were received under the Genentech
Agreement during 1999. In addition, the Company will receive royalties on net
sales by Genentech of INS365 Respiratory and other indications for INS365
represented in the collaborative research agreement.
Upon the signing of the agreement, Genentech purchased 1,000,000 shares of
Series G Preferred for $10.00 a share or an aggregate purchase price of
$10,000,000 and Genentech was issued 253,968 warrants to purchase shares of the
Company's common stock with an exercise price of $7.88 per share. In addition,
upon the occurrence of certain milestone events, the Company is obligated to
sell, and Genentech is obligated to purchase: (i) up to $2,000,000 of the
Company's common stock, at a per share price determined, using the 20-day
trailing average close price of the Company's common stock as quoted on an
established stock exchange, and (ii) Genentech will be issued warrants for up
to 50,793 shares of the Company's common stock at an exercise price of $7.88
per share. In the event these warrants are issued, the Company will be required
to record a charge equal to the difference between the trading price of the
Company's common stock on the date the warrants are issued and the exercise
price of the warrants.
F-21
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
11. License Agreement
On March 10, 1995, the Company licensed the rights to the patent for a
Method of Treating Lung Disease with Urinide Triphosphates which covers INS316
Diagnostic from the University of North Carolina at Chapel Hill ("UNC"). In
connection with this license agreement, the Company paid $65,000 in license
initiation fees and issued 297,714 shares of common stock with an estimated
value at the date of issuance of $36,470 or $0.12 per share and has agreed to
make milestone payments totaling up to $1,000,000. The Company reached one such
milestone in 1997 and made the milestone payment of $500,000 in the same year.
A $10,000 milestone payment was made during each of 1998 and 1999.
On September 1, 1998, the Company licensed the rights to the patents for a
Method of Treating Cystic Fibrosis with Dinucleotides, a Method of Treating
Bronchitis with Uridine Triphosphates and related compounds, and a Method of
Treating Ciliary Dyskinesia with Uridine Triphosphates and related compounds,
which cover INS365 Respiratory, from UNC. In connection with this license
agreement, the Company paid $15,000 in license initiation fees and issued
28,571 shares of common stock with an estimated value at the date of issuance
of $18,000 or $0.63 per share and has agreed to pay milestone payments totaling
$160,000. The Company reached one such milestone and made milestone payments of
$30,000 in 1999.
In connection with the license agreements with UNC, the Company has agreed
to pay royalties based on net sales of certain Licensed Products (as defined in
the license agreements).
The Company enters into sponsored research and development and clinical
trial agreements with the UNC on an annual basis whereby direct and indirect
costs, as defined, are reimbursed by the Company.
12. Commitments
The Company is obligated under a master capital lease for furniture,
equipment, and computers. Each lease term under the master lease agreement
expires between 30 to 48 months from the date of inception.
The Company also has several non-cancelable operating leases, primarily for
office space and office equipment, that extend through November 2003 and are
subject to certain voluntary renewal options. Rental expense for operating
leases during 1998, 1999 and for the cumulative period from inception
(October 28, 1993) to December 31, 1999 was $163,833 (net of sublease rentals
$24,938), $145,347 (net of sublease rentals of $65,483) and $610,261 (net of
sublease rentals of $96,656), respectively.
Future minimum lease payments under non-cancelable operating leases (net of
related sublease rentals) with remaining lease payments as of December 31, 1999
are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
-------- ---------
<S> <C> <C>
Year ending December 31:
------------------------
2000.................................................. $267,098 $190,429
2001.................................................. 166,829 147,040
2002.................................................. 142,889 144,164
2003.................................................. 36,964 89,576
-------- --------
Total minimum lease payments............................ 613,780 $571,209
========
Less amount representing interest....................... (70,138)
--------
Present value of net minimum capital lease payments..... 543,642
Less current portion capital lease obligations.......... 210,259
--------
Capital lease obligations, excluding current portion.... $333,383
========
</TABLE>
F-22
<PAGE>
INSPIRE PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company has a purchase commitment as of December 31, 1999 with Summit
Pharmaceuticals Corp. for certain drug compounds in an amount of $375,000 which
is expected to be paid as the drug compound is delivered in March and April
2000.
The Company is subject to various legal matters in the ordinary course of
business. In the opinion of management, the ultimate outcome of such matters
will not have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.
The Company has contractual commitments or purchase arrangements with
various clinical research organizations, manufacturers of drug product and
others. Most of these arrangements are for a period of less than 12 months. The
amount of the Company's financial commitments under these arrangements totals
approximately $4,800,000.
13. Employee Benefit Plan
The Company has adopted a 401(k) Profit Sharing Plan ("the Plan") covering
all qualified employees. The effective date of the Plan is August 1, 1995.
Participants in the Plan must be 21 years of age or older. Participants may
elect a salary reduction of 1% to 15% as a contribution to the Plan.
Modifications of salary reductions can be made quarterly.
The Plan permits employer matching of up to 8% of a participant's salary,
but the Company has elected not to match participants' contributions at this
time. If employer matching is implemented, participants will begin vesting in
employer contributions after one year of employment at a rate of 20% per year
until fully vested.
14. Related Party Transaction
In 1995, the Company issued 585,714 shares of common stock to four founding
scientists with an estimated value of $71,750 in recognition of prior
consulting services provided to the Company.
15. Subsequent Event
On March 27, 2000, the Board of Directors of the Company approved a 1-for-
1.75 reverse common stock split to be effective upon the effectiveness of the
Company's initial public offering. All common share and per common share
amounts for all periods presented in the accompanying financial statements have
been restated to reflect the effect of this reverse common stock split.
In addition, the Board of Directors approved an amendment to the certificate
of incorporation to take effect as of the effective date of the registration
statement, increasing the authorized capital stock to 60,000,000 shares of
common stock and 2,000,000 shares of preferred stock each with a par value of
$0.001.
F-23
<PAGE>
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- -------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that con-
tained in this prospectus. We are offering to sell, and seeking offers to buy,
shares of our common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this pro-
spectus or of any sale of the common stock.
Until , 2000, all dealers that effect transactions of these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a pro-
spectus when acting as underwriters and regarding their unsold allotments or
subscriptions.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements ...................... 17
Special Note Regarding Market Data....................................... 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 27
Management............................................................... 43
Certain Transactions..................................................... 49
Principal Stockholders................................................... 50
Description of Capital Stock............................................. 53
Shares Eligible for Future Sale.......................................... 56
Underwriting............................................................. 58
Legal Matters............................................................ 61
Experts.................................................................. 61
Change in Independent Public Accountants................................. 61
Where You Can Find More Information...................................... 61
Index to Financial Statements............................................ F-1
</TABLE>
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF INSPIRE]
5,500,000 Shares
Common Stock
--------------
PROSPECTUS
--------------
Bear, Stearns & Co. Inc.
Deutsche Banc Alex. Brown
U.S. Bancorp Piper Jaffray
, 2000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table lists the costs and expenses, other than underwriting
discounts and commissions, which we expect to incur in connection with the
issuance and distribution of the securities being registered. Except for the
SEC registration fee, the NASD filing fee and the Nasdaq National Market fees,
the amounts listed below are estimates:
<TABLE>
<S> <C>
SEC Registration Fee................................................. $
NASD filing fee......................................................
Nasdaq Listing application fee.......................................
Legal fees and expenses..............................................
Blue Sky fees and expenses...........................................
Accounting fees and expenses.........................................
Printing and engraving expenses......................................
Transfer Agent and Registrar fees....................................
Miscellaneous expenses...............................................
-----
Total.............................................................. $
=====
</TABLE>
All expenses of registration incurred in connection herewith are being borne
by us.
Item 14. Indemnification of Directors and Officers.
Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") enables a
corporation in its certificate of incorporation to limit the personal liability
of its directors for violations of their fiduciary duty of care. Accordingly,
Article Eighth of our amended and restated certificate of incorporation states
that a director will not be personally liable to the company or to our
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that the elimination or limitation of liability is
prohibited under the DGCL as in effect when such liability is determined.
Subsection (b)(7) of Section 102 of the DGCL states that such provision shall
not eliminate or limit the liability of a director: (i) for any breach of the
director's duty of loyalty to us or to our stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the DGCL is amended, then the liability of a director will be eliminated or
limited to the fullest extent permitted by the amended DGCL.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or
II-1
<PAGE>
settlement of that action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. No indemnification will be made, however, in respect to any claim,
issue or matter as to which that person is adjudged to be liable to the
corporation, unless and only to the extent that the Court of Chancery or the
court in which that action or suit was brought will determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, that person is fairly and reasonably entitled to
indemnity for the expenses which the Court of Chancery or such other court
deems proper.
Section 145 further provides that to the extent a present or former director
or officer of a corporation has been successful in the defense of any action,
suit or proceeding referred to in subsections (a) and (b) of Section 145, or in
defense of any claim, issue or matter therein, that person will be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him; that the indemnification provided by Section 145 will not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and that the scope of indemnification extends to directors, officers,
employees, or agents of a constituent corporation absorbed in a consolidation
or merger and persons serving in that capacity at the request of the
constituent corporation for another. The determination of whether
indemnification is proper under the circumstances, unless made by a court, is
determined by: (a) a majority of the disinterested members of the board of
directors or board committee; (b) independent legal counsel (if a quorum of the
disinterested members of the board of directors or board committee is not
available or if the disinterested members of the board of directors or a board
committee so direct); or (c) the stockholders.
Section 145 also empowers us to purchase and maintain insurance on behalf of
our directors or officers against any liability asserted against them or
incurred by them in any such capacity or arising out of their status as our
directors or officers whether or not we would have the power to indemnify them
against the liabilities under Section 145. We currently carry liability
insurance for the benefit of our directors and officers, including Scientific
Advisory Board members, that provides coverage for any compensatory damages
(excluding punitive or exemplary damages, taxes, matters uninsurable pursuant
to any applicable law, fines or penalties), settlements, and reasonable and
necessary legal fees and expenses incurred by any of the officers or directors
resulting from any written demand for civil damages, any civil proceeding, or
any formal administrative or regulatory proceeding initiated during the policy
period against any of the officers or directors in which they shall be
subjected to a binding adjudication of liability for damages or other relief,
including any appeal therefrom, for any actual or alleged error, act, omission,
misstatement, misleading statement, neglect, or breach of duty committed or
attempted by any officer or director in their capacity as a director or officer
of the company (or any subsidiary of the company) or with consent of the
company in the position of director, officer or trustee of any non-profit
entity, or any matter claimed against any director or officer solely by reason
of their serving in such capacity or position. Among other exclusions, our
current policy specifically excludes coverage for any claim: involving an
accounting of profits made in fact from the purchase or sale of the securities
of the company by officers or directors; based upon actual or alleged pollution
or any decision to test for or clean up pollutants or nuclear material; for
violations of the Employee Retirement Income Security Act of 1974; by or on
behalf of the company, other officers or directors or any security holder of
the company (in most instances); brought about by any deliberately dishonest,
fraudulent or malicious act or omission or any willful violation of law
established by an adverse final adjudication; based upon any personal profit,
remuneration or advantage gained by any director or officer to which they were
not legally entitled; based upon or arising out of their services as directors,
officers or employees of any entity other than the company (or a subsidiary of
the company) except for service, with consent of the company, by a director or
officer in the position of director, officer or trustee in any non-profit
entity, if such claim is brought and maintained without the participation of
the non-profit entity; for defamation, bodily injury, sickness, disease, death,
false arrest or imprisonment, assault, battery, outrage, humiliation, mental
anguish, emotional distress, abuse of process, malicious prosecution, violation
or invasion of any right of privacy or private occupancy, trespass, nuisance or
wrongful entry or eviction, or for damage to or destruction of any tangible
property including loss of use thereof; based any claim related to allegations
that computer software or hardware failed to function properly because of a
year 2000 problem; for, based upon, a rising from, or in any way related to any
demand, suit, or other
II-2
<PAGE>
proceeding which was pending on or existed prior to January 23, 1998 with
respect to the first $1,000,000 in coverage, and prior to January 23, 1999,
with respect to the remaining coverage; which, in whole or in part, is brought
or maintained by or on behalf of David Drutz, including his estate, any
beneficiary of his estate, or assignee, trustee or receiver thereof. In
addition, the policy excludes all or part of such claim that is, directly or
indirectly, based on, attributable to, arising out of, resulting from or in any
manner relating to the Initial Public Offering of the Company's securities
and/or any registration statement or prospectus related thereto, however, the
Company intends to procure liability insurance for the benefit of its directors
and officers which includes the coverage relating to the Initial Public
Offering which is excluded from its current policy, provided it can obtain
reasonable quotations.
Article Ninth of our amended and restated certificate of incorporation
requires that we indemnify, to the fullest extent permitted by the DGCL, each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was, or has agreed to become, a director or officer of Inspire, or is or was
serving, or has agreed to serve, at our request, as a director, officer or
trustee of, or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action,
suit or proceeding and any appeal therefrom.
Any amendment or repeal of Article Ninth of our amended and restated
certificate of incorporation shall not adversely affect any right or protection
of a director or officer with respect to any act or omission of such director
or officer occurring prior to such amendment or repeal.
Further, the Underwriting Agreement, a proposed form of which is filed as
Exhibit 1.1 hereto, contains provisions for indemnification by our underwriters
and their officers, directors and other specified persons, against specified
civil liabilities, including particular liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this registration statement, we
sold the following securities that were not registered under the Securities
Act.
(1) During the period of April 10, 1995 to March 24, 2000, we granted stock
options to employees, directors and consultants under our stock plan covering
an aggregate of 2,978,454 shares of our common stock. Of these, approximately
264,651 shares have been cancelled without being exercised, approximately
841,848 shares have been exercised and 1,906,241 are currently outstanding. The
weighted average exercise price of the stock options outstanding as of March
24, 2000 was $4.18 per share. During the period of April 10, 1995 to March 24,
2000, we sold 841,848 shares of our common stock to employees, directors and
consultants upon the exercise of outstanding stock options for exercise prices
ranging from $0.12 to $14.00 per share.
(2) On June 19, 1997, June 30, 1997 and September 10, 1997, we sold an
aggregate of 10,866,014 shares of our Series B convertible preferred stock to
several accredited investors for an aggregate purchase price of $13,039,217.
(3) On June 18, 1998, we issued Comdisco, Inc. a 10-year warrant to purchase
15,000 shares of our Series B convertible preferred stock at $1.20 per share.
(4) On September 1, 1998, we issued 28,571 shares of our common stock to The
University of North Carolina at Chapel Hill as partial consideration for
technology licensed pursuant to an Exclusive License Agreement dated September
1, 1998.
(5) On September 10, 1998, we sold 375,000 shares of our Series C
convertible preferred stock to Kissei Pharmaceutical Co., Ltd. for an aggregate
purchase price of $900,000.
II-3
<PAGE>
(6) On December 16, 1998, we sold 416,667 shares of our Series D convertible
preferred stock to Santen Pharmaceuticals Co., Ltd. for an aggregate purchase
price of $1,500,000.
(7) On January 29, 1999, we issued PharmaLogic Development, Inc. a 10-year
warrant to purchase 11,429 shares of our common stock at $4.20 per share;
(8) On February 8, 1999, we issued Comdisco, Inc. a 10-year warrant to
purchase 20,000 shares of our Series F convertible preferred stock at $2.40 per
share;
(9) On April 15, 1999, we issued Comdisco, Inc. a 10-year warrant to
purchase 8,170 shares of our Series F convertible preferred stock at $2.40 per
share;
(10) On July 1, 1999 and October 29, 1999, we sold an aggregate of 6,201,985
shares of our Series E convertible preferred stock to several accredited
investors for an aggregate purchase price of $12,403,970. In connection with
these sales, we paid Pacific Growth Equities placement fees of $744,238.
(11) On December 17, 1999, we sold 1,000,000 shares of Series G convertible
preferred stock to Genentech, Inc. for an aggregate purchase price of
$10,000,000 and a five-year warrant to purchase 253,968 shares of common stock
at $7.88 per share.
The sale and issuances of securities in the transactions described in
paragraph (1) above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 (promulgated thereunder in that they were
offered and sold either pursuant to a written compensatory benefit plan or
pursuant to a written contract relating to compensation, as evidenced by Rule
701, or were deemed to be exempt from registration under the Securities Act by
virtue of Section 4(2) as transactions not involving any public offering.
The sale and issuance of securities in the transactions described in
paragraphs (2) through (11) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Regulation D as
transactions not involving any public offering, or Regulation S as offers and
sales that occurred outside the United States. Where appropriate, the
purchasers represented their intention to acquire the securities for investment
only and not with a view to the distribution thereof, or that they were non-
U.S. persons. Appropriate legends are affixed to the stock certificates issued
in those transactions. All recipients either received adequate information
about us or had access, through employment or other relationships, to adequate
information.
Item 16. Exhibits and Financial Statement Schedules.
Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation
3.2 Amended and Restated Bylaws
4.1 Specimen Common Stock Certificate
5.1* Opinion of Smith, Stratton, Wise, Heher & Brennan
10.1+ Amended and Restated 1995 Stock Plan, as amended
10.2+ Form of Incentive Stock Option
10.3* Form of Non-statutory Stock Option
10.4+ Consultation and Scientific Advisory Board Agreement between Inspire
Pharmaceuticals, Inc. and Dr. Richard Boucher, dated March 10, 1995
10.5+** Sponsored Research Agreement between Inspire Pharmaceuticals, Inc. and
The University of North Carolina at Chapel Hill, effective March 10,
1995, as amended
10.6+** Clinical Trial Agreement between Inspire Pharmaceuticals, Inc. and The
University of North Carolina at Chapel Hill, effective March 10, 1995,
as amended
10.7** Exclusive License Agreement between Inspire Pharmaceuticals, Inc. and
The University of North Carolina at Chapel Hill, dated as of March 10,
1995
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.8 Lease between Inspire Pharmaceuticals, Inc. and Imperial Center,
Limited Partnership regarding Royal Center I, Durham, North Carolina,
dated as of May 17, 1995, as amended
10.9 Master Lease Agreement between Inspire Pharmaceuticals, Inc. and
Comdisco, Inc., dated October 13, 1995
10.10 Lease Agreement between Inspire Pharmaceuticals, Inc. and Petula
Associates Ltd. regarding Royal Center II, Durham, North Carolina,
dated as of December 30, 1997
10.11 Sublease Agreement between ICAgen, Inc. and Inspire Pharmaceuticals,
Inc. regarding premises located at 4222 Emperor Boulevard, Suite 500,
Durham, North Carolina, dated September 22, 1997 and extension of
Sublease Agreement dated February 14, 2000
10.12** Exclusive License Agreement between Inspire Pharmaceuticals, Inc. and
The University of North Carolina at Chapel Hill, dated September 1,
1998
10.13** Joint Development, License and Supply Agreement between Inspire
Pharmaceuticals, Inc. and Kissei Pharmaceutical Co., Ltd., dated as of
September 10, 1998
10.14 Registration Rights Agreement between Inspire Pharmaceuticals, Inc.
and Kissei Pharmaceutical Co., Ltd., dated as of September 10, 1998
10.15** Development, License and Supply Agreement between Inspire
Pharmaceuticals, Inc. and Santen Pharmaceutical Co., Ltd., dated as of
December 16, 1998
10.16 Registration Rights Agreement between Inspire Pharmaceuticals, Inc.
and Santen Pharmaceutical Co., Ltd., dated as of December 16, 1998
10.17** Clinical Research Agreement between Inspire Pharmaceuticals Inc. and
Simbec Research Limited, dated August 30, 1999
10.18** Services Agreement between Inspire Pharmaceuticals, Inc. and
Pharmaceutical Development Associates, Inc. (ClinSites/PDA) dated
November 1, 1999
10.19** Quotation between Inspire Pharmaceuticals, Inc. and Simbec Research
Limited regarding research study, dated December 17, 1999
10.20** Development, License and Supply Agreement between Inspire
Pharmaceuticals, Inc. and Genentech, Inc., dated as of December 17,
1999
10.21** Series G Preferred Stock and Warrant Purchase Agreement between
Inspire Pharmaceuticals, Inc. and Genentech, Inc., dated as of
December 17, 1999
10.22 Warrant Agreement between Inspire Pharmaceuticals, Inc. and Genentech,
Inc., dated as of December 17, 1999
10.23 Amended and Restated Investors' Rights Agreement among Inspire
Pharmaceuticals, Inc. and the holders of Series A, B, E and G
Preferred Stock of the Company dated as of December 17, 1999
10.24 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Donald J.
Kellerman dated February 3, 2000
10.25 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Gregory J.
Mossinghoff dated February 4, 2000
10.26 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Benjamin R. Yerxa
dated February 4, 2000
10.27 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Janet L. Rideout
dated February 4, 2000
10.28 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Christy L. Shaffer
dated February 10, 2000
16.1 Letter of KPMG LLP dated February 25, 2000
23.1 Consent of PricewaterhouseCoopers, L.L.P., independent public
accountants
23.2* Consent of Smith, Stratton, Wise, Heher & Brennan (contained in
Exhibit 5.1)
24.1+ Power of Attorney
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
** Confidential treatment has been requested with respect to a portion of this
Exhibit.
+ Previously filed.
II-5
<PAGE>
Financial Statement Schedules
No schedules are required because the information is either not applicable
or is presented elsewhere herein.
Item 17. Undertakings.
We hereby undertake to provide to the underwriter at the closing specified
in the underwriting agreements, certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Inspire
pursuant to the foregoing provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of Inspire in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
We hereby undertake that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act will be deemed to be part of this registration statement
as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus will
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of
Durham, State of North Carolina on March 28, 2000.
Inspire Pharmaceuticals, Inc.
/s/ Christy L. Shaffer
By: _________________________________
Christy L. Shaffer,
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Christy L. Shaffer President, Chief Executive March 28, 2000
______________________________________ Officer (principal
Christy L. Shaffer executive officer) and
Director
/s/ Gregory J. Mossinghoff Chief Business Officer March 28, 2000
______________________________________ (principal financial
Gregory J. Mossinghoff officer and principal
accounting officer)
* Chairman of the Board March 28, 2000
______________________________________
Terrance G. McGuire
* Director March 28, 2000
______________________________________
Richard Boucher, M.D.
* Director March 28, 2000
______________________________________
Andre L. Lamotte, Sc.D.
* Director March 28, 2000
______________________________________
H. Jefferson Leighton
* Director March 28, 2000
______________________________________
W. Leigh Thompson
* Director March 28, 2000
______________________________________
Jesse I. Treu
</TABLE>
- --------
* By her signature set forth below, the undersigned, pursuant to duly
authorized powers of attorney filed with the Securities and Exchange
Commission, has signed this Amendment No. 1 to the registration statement on
behalf of the persons indicated.
/s/ Christy L. Shaffer
By: ____________________________
Christy L. Shaffer,
Attorney-In-Fact
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation
3.2 Amended and Restated Bylaws
4.1 Specimen Common Stock Certificate
5.1* Opinion of Smith, Stratton, Wise, Heher & Brennan
10.1+ Amended and Restated 1995 Stock Plan, as amended
10.2+ Form of Incentive Stock Option
10.3* Form of Non-statutory Stock Option
10.4+ Consultation and Scientific Advisory Board Agreement between Inspire
Pharmaceuticals, Inc. and Dr. Richard Boucher, dated March 10, 1995
10.5+** Sponsored Research Agreement between Inspire Pharmaceuticals, Inc. and
The University of North Carolina at Chapel Hill, effective March 10,
1995, as amended
10.6+** Clinical Trial Agreement between Inspire Pharmaceuticals, Inc. and The
University of North Carolina at Chapel Hill, effective March 10, 1995,
as amended
10.7** Exclusive License Agreement between Inspire Pharmaceuticals, Inc. and
The University of North Carolina at Chapel Hill, dated as of March 10,
1995
10.8 Lease between Inspire Pharmaceuticals, Inc. and Imperial Center,
Limited Partnership regarding Royal Center I, Durham, North Carolina,
dated as of May 17, 1995, as amended
10.9 Master Lease Agreement between Inspire Pharmaceuticals, Inc. and
Comdisco, Inc., dated October 13, 1995, as amended
10.10 Lease Agreement between Inspire Pharmaceuticals, Inc. and Petula
Associates Ltd. regarding Royal Center II, Durham, North Carolina,
dated as of December 30, 1997
10.11 Sublease Agreement between ICAgen, Inc. and Inspire Pharmaceuticals,
Inc. regarding premises located at 4222 Emperor Boulevard, Suite 500,
Durham, North Carolina, dated September 22, 1997 and extension of
Sublease Agreement dated February 14, 2000
10.12** Exclusive License Agreement between Inspire Pharmaceuticals, Inc. and
The University of North Carolina at Chapel Hill, dated September 1,
1998
10.13** Joint Development, License and Supply Agreement between Inspire
Pharmaceuticals, Inc. and Kissei Pharmaceutical Co., Ltd., dated as of
September 10, 1998
10.14 Registration Rights Agreement between Inspire Pharmaceuticals, Inc.
and Kissei Pharmaceutical Co., Ltd., dated as of September 10, 1998
10.15** Development, License and Supply Agreement between Inspire
Pharmaceuticals, Inc. and Santen Pharmaceutical Co., Ltd., dated as of
December 16, 1998
10.16 Registration Rights Agreement between Inspire Pharmaceuticals, Inc.
and Santen Pharmaceutical Co., Ltd., dated as of December 16, 1998
10.17** Clinical Research Agreement between Inspire Pharmaceuticals Inc. and
Simbec Research Limited, dated August 30, 1999
10.18** Services Agreement between Inspire Pharmaceuticals, Inc. and
Pharmaceutical Development Associates, Inc. (ClinSites/PDA) dated
November 1, 1999
10.19** Quotation between Inspire Pharmaceuticals, Inc. and Simbec Research
Limited regarding research study, dated December 17, 1999
10.20** Development, License and Supply Agreement between Inspire
Pharmaceuticals, Inc. and Genentech, Inc., dated as of December 17,
1999
10.21** Series G Preferred Stock and Warrant Purchase Agreement between
Inspire Pharmaceuticals, Inc. and Genentech, Inc., dated as of
December 17, 1999
10.22 Warrant Agreement between Inspire Pharmaceuticals, Inc. and Genentech,
Inc., dated as of December 17, 1999
10.23 Amended and Restated Investors' Rights Agreement among Inspire
Pharmaceuticals, Inc. and the holders of Series A, B, E and G
Preferred Stock of the Company dated as of December 17, 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.24 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Donald J.
Kellerman dated February 3, 2000
10.25 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Gregory J.
Mossinghoff dated February 4, 2000
10.26 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Benjamin R. Yerxa
dated February 4, 2000
10.27 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Janet L. Rideout
dated February 4, 2000
10.28 Employee Confidentiality, Invention Assignment and Non-Compete
Agreement between Inspire Pharmaceuticals, Inc. and Christy L. Shaffer
dated February 10, 2000
16.1 Letter of KPMG LLP dated February 25, 2000
23.1 Consent of PricewaterhouseCoopers, L.L.P., independent public
accountants
23.2* Consent of Smith, Stratton, Wise, Heher & Brennan (contained in
Exhibit 5.1)
24.1+ Power of Attorney
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
** Confidential treatment has been requested with respect to a portion of this
Exhibit.
+ Previously filed.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INSPIRE PHARMACEUTICALS, INC.
Christy L. Shaffer, Ph.D. hereby certifies that:
1. The original name of this corporation is Innovative Pharmaceuticals,
Inc. (the "Corporation"), and the date of filing of the original Certificate of
Incorporation of this corporation with the Secretary of State of the State of
Delaware is October 28, 1993.
2. She is the duly elected President and Chief Executive Officer of the
Corporation.
3. The Certificate of Incorporation of the Corporation, as previously
amended and restated and thereafter further amended, is hereby amended and
restated to read in its entirety as follows:
"FIRST. The name of the Corporation is Inspire Pharmaceuticals, Inc.
SECOND. The address of the registered office of the Corporation in the
State of Delaware is:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
County of New Castle
The name of the Corporation's registered agent at said address is The
Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware (as may be in effect from time to time, the "Delaware
Corporation Law").
FOURTH.
Section 1. CAPITAL STOCK
Section 1.1. Capital Stock Prior to Reverse Split. The total number of
------------------------------------
shares of all classes of stock which the Corporation shall have authority to
issue is One Hundred Eight Million (108,000,000), consisting of Fifty Six
Million (56,000,000) shares of common stock, par value $0.001 per share (the
"Common Stock"), and Fifty Two Million (52,000,000) shares of preferred stock,
par value $0.001 per share.
-1-
<PAGE>
Section 1.2. Reverse Stock Split. Immediately prior to the conversion of
-------------------
all outstanding shares of the Preferred Stock (as hereinafter defined) pursuant
to Sections 3.4(b)(i)(1) and 3.4(b)(ii), every one and three quarters (1.75)
shares of Common Stock issued and outstanding or held in the treasury of the
Corporation will be reclassified and changed into one fully paid and
nonassessable share of Common Stock, and each holder of record of a certificate
for shares of Common Stock at such time shall be entitled to receive, as soon as
practicable upon their surrender of such certificate(s), a new certificate
representing one share of Common Stock for each 1.75 shares of Common Stock
represented by the surrendered certificate(s) of such holder. No fractional
shares of Common Stock shall be issued as a result of the reclassification of
the Common Stock pursuant to this Section 1.2. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the initial public offering price of the
Common Stock. The determination as to whether or not any fractional shares are
issuable upon reclassification of the Common Stock pursuant to this Section 1.2
shall be based upon the total number of shares of Common Stock evidenced by the
stock certificate(s) surrendered by the holder at any given time, and not upon
each share of Common Stock evidenced by such stock certificate(s).
Section 1.3. Capital Stock Following Reverse Split. After giving effect to
-------------------------------------
the reverse-stock split set forth in Section 1.2 above and the conversion of all
outstanding shares of the Preferred Stock pursuant to Sections 3.4(b)(i)(1) and
3.4(b)(ii), the total number of shares of all classes of stock which the
Corporation shall have authority to issue will be Sixty Two Million
(62,000,000), consisting of Sixty Million (60,000,000) shares of Common Stock,
and Two Million (2,000,000) shares of preferred stock, par value $0.001 per
share.
Section 2. COMMON STOCK
Section 2.1. Voting Rights. The holders of shares of Common Stock shall be
-------------
entitled to one vote for each share so held with respect to all matters voted on
by the stockholders of the Corporation, subject in all cases to Sections 3.5 and
3.7 of this Article Fourth.
Section 2.2. Liquidation Rights. Subject to the prior and superior right
------------------
of the Corporation's preferred stock, upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of Common Stock shall be entitled to receive that portion of the
remaining funds to be distributed to holders of Common Stock, subject to and as
provided in Section 3.3 of this Article Fourth.
Section 2.3. Dividends. Dividends may be paid on the Common Stock as and
---------
when declared by the Board of Directors; provided, however, that no cash
dividends may be declared or paid on the Common Stock unless dividends shall
first have been declared and paid with respect to the Corporation's preferred
stock, as provided in Section 3.6 of this Article Fourth.
-2-
<PAGE>
Section 3. PREFERRED STOCK
Section 3.1. Designation of Preferred Stock Generally. Subject to
----------------------------------------
Sections 3.5 and 3.7, the preferred stock of the Corporation may be issued from
time to time in one or more series. The Board of Directors is hereby
authorized, within the limitations and restrictions stated in this Amended and
Restated Certificate of Incorporation (as may be amended from time to time, the
"Certificate of Incorporation"), to fix, or alter the existing dividend rights,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price or prices, and/or liquidation
preferences of any wholly unissued series of preferred stock, and the number of
shares constituting any such series and the designation thereof, or any of the
foregoing; and to increase or decrease the number of shares of any series of
preferred stock subsequent to the issuance of shares of that series, but not
below the number of shares of such series then outstanding. In case the number
of shares of any series of preferred stock shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
Section 3.2. Current Designation of Preferred Stock. Of the 52,000,000
--------------------------------------
shares of preferred stock which the Corporation has authority to issue: (i)
9,365,000 shall be designated and known as "Series A Convertible Preferred
Stock" ("Series A Preferred"); (ii) 9,365,000 shall be designated and known as
"Series AA Convertible Preferred Stock" ("Series AA Preferred"); (iii)
10,881,014 shares shall be designated and known as "Series B Convertible
Preferred Stock" ("Series B Preferred"); (iv) 10,881,014 shares shall be
designated and known as "Series BB Convertible Preferred Stock" ("Series BB
Preferred"); (v) 375,000 shall be designated and known as "Series C Convertible
Preferred Stock" ("Series C Preferred"); (vi) 416,667 shall be designated and
known as "Series D Convertible Preferred Stock" ("Series D Preferred"); (vii)
8,000,000 shall be designated and known as "Series E Convertible Preferred
Stock" ("Series E Preferred"); (vii) 28,170 shall be designated and known as
"Series F Convertible Preferred Stock" ("Series F Preferred"); and (viii)
1,200,000 shall be designated and known as "Series G Convertible Non Voting
Preferred Stock" ("Series G Preferred") (the Series A Preferred, Series AA
Preferred, Series B Preferred, Series BB Preferred, Series C Preferred, Series D
Preferred, Series E Preferred, Series F Preferred and Series G Preferred are
hereinafter collectively referred to as the "Preferred Stock"), and each such
series shall have the respective rights, preferences and privileges set forth
below.
Section 3.3. Liquidation Rights.
------------------
(a) Preference as to Payment. In the event of any voluntary or
------------------------
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation:
(i) the holders of shares of Series A Preferred, Series AA
Preferred, Series B Preferred, Series BB Preferred and Series E Preferred then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, after and subject to the payment
in full of all amounts required to be
-3-
<PAGE>
distributed to the holders of any other class or series of stock of the
Corporation ranking on liquidation prior and in preference to the Series A
Preferred, Series AA Preferred, Series B Preferred, Series BB Preferred and
Series E Preferred (such senior Preferred Stock is referred to as "Senior
Preferred"), but before any payment shall be made to the holders of the Series C
Preferred, Series D Preferred, Series F Preferred, Series G Preferred and Common
Stock or any other class or series of stock ranking on liquidation junior to the
Senior Preferred, Series A Preferred, Series AA Preferred, Series B Preferred,
Series BB Preferred and Series E Preferred (such Common Stock and other classes
or series of stock being collectively referred to as "Junior Stock"), by reason
of their ownership thereof, an amount equal to (A) $1.00 per share with respect
to each share of Series A Preferred or Series AA Preferred, (B) $1.20 per share
with respect to each share of Series B Preferred or Series BB Preferred, and (C)
$2.00 per share with respect to each share of Series E Preferred, plus, in each
case, an amount equal to any declared but unpaid dividends to and including the
date full payment shall be tendered to the holders of the Series A Preferred,
Series AA Preferred, Series B Preferred, Series BB Preferred and Series E
Preferred with respect to such liquidation, dissolution or winding up (subject
to appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares);
(ii) the holders of shares of Series C Preferred then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, after and subject to the payment in full of
all amounts required to be distributed to the holders of the Senior Preferred,
Series A Preferred, Series AA Preferred, Series B Preferred, Series BB
Preferred, Series E Preferred and any other class or series of stock of the
Corporation ranking on liquidation prior and in preference to the Series C
Preferred, but before any payment shall be made to the holders of the Series D
Preferred, Series F Preferred, Series G Preferred and Common Stock or any other
class or series of stock ranking on liquidation junior to the Series C
Preferred, by reason of their ownership thereof, an amount equal to $2.40 per
share of Series C Preferred, plus an amount equal to any declared but unpaid
dividends to and including the date full payment shall be tendered to the
holders of the Series C Preferred with respect to such liquidation, dissolution
or winding up (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares); and
(iii) the holders of shares of Series D Preferred, Series F
Preferred and Series G Preferred then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders, after and subject to the payment in full of all amounts required
to be distributed to the holders of the Senior Preferred, Series A Preferred,
Series AA Preferred, Series B Preferred, Series BB Preferred, Series C
Preferred, Series E Preferred and any other class or series of stock of the
Corporation ranking on liquidation prior and in preference to the Series D
Preferred, Series F Preferred and Series G Preferred, but before any payment
shall be made to the holders of Common Stock or any other class or series of
stock ranking on liquidation junior to the Series D Preferred, Series F
Preferred and Series G Preferred, by reason of their ownership thereof, an
amount equal to (A) $3.60 per share of Series D Preferred, (B) $2.40 per share
of Series F Preferred, and (C) $10.00 per share of Series G Preferred, plus an
amount equal to any declared but unpaid
-4-
<PAGE>
dividends to and including the date full payment shall be tendered to the
holders of the Series D Preferred, Series F Preferred and Series G Preferred
with respect to such liquidation, dissolution or winding up (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares). In
addition to the amount equal to $10.00 per share plus the declared but unpaid
dividends as provided above for Series G Preferred, the holders of Series G
Preferred shall be entitled to the dividends accrued pursuant to Section 3.6(c)
(which dividends shall be deemed accrued on a per diem basis through the date of
such event and thereafter). The amount equal to $10.00 per share, plus the
dividends accrued pursuant to Section 3.6(c) or otherwise declared and unpaid
shall collectively be referred to herein as the "Series G Preference Amount".
(b) Payment. Upon the dissolution, liquidation or winding up of the
-------
Corporation, all preferential amounts required to be paid by the Corporation
shall be paid first to the holders of Senior Preferred Stock and any other class
or series of stock of the Corporation ranking on liquidation on a parity with
the Senior Preferred Stock; second, to the holders of Series A Preferred, Series
AA Preferred, Series B Preferred, Series BB Preferred, and Series E Preferred
Stock and any other class or series of stock of the Corporation ranking on
liquidation on a parity with the holders of Series A Preferred, Series AA
Preferred, Series B Preferred, Series BB Preferred, Series E Preferred; third,
to the holders of Series C Preferred and any other class or series of stock of
the Corporation ranking on liquidation on a parity with the Series C Preferred;
and fourth, to the holders of Series D Preferred, Series F Preferred, and Series
G Preferred and any other class or series of stock of the Corporation ranking on
liquidation on a parity with the Series D Preferred, Series F Preferred and
Series G Preferred. After the payments set forth in the preceding sentence, the
remaining assets and funds of the Corporation available for distribution to its
stockholders shall be distributed among the holders of shares of Series A
Preferred, Series AA Preferred, Series B Preferred, Series BB Preferred, Series
E Preferred, Series C Preferred, Series D Preferred, Series F Preferred, Series
G Preferred and Common Stock and any other class or series of stock entitled to
participate in liquidation distributions with the holders of Common Stock, pro
rata based on the number of shares of Common Stock held by each (assuming
conversion into Common Stock of all such shares).
(c) Allocation Among Series A, AA, B, BB and E Preferred if Funds
-------------------------------------------------------------
Insufficient. If the assets or surplus funds to be distributed to the holders of
- ------------
the Series A Preferred, Series AA Preferred, Series B Preferred, Series BB
Preferred and Series E Preferred are insufficient to permit the payment to such
holders of their full preferential amount, the assets and surplus funds legally
available for distribution shall be distributed ratably among the holders of the
Series A Preferred, Series AA Preferred, Series B Preferred, Series BB and
Series E Preferred in proportion to the full preferential amount each such
holder is otherwise entitled to receive.
(d) Allocation With Respect to Series C Preferred if Funds
------------------------------------------------------
Insufficient. If, after the payment to the holders of the Series A Preferred,
- ------------
Series AA Preferred, Series B Preferred Series BB Preferred and Series E
Preferred of their full preferential amounts, the
-5-
<PAGE>
assets or surplus funds to be distributed to the holders of the Series C
Preferred are insufficient to permit the payment to such holders of their full
preferential amount, the assets and surplus funds legally available for
distribution shall be distributed ratably among the holders of the Series C
Preferred in proportion to the full preferential amount each such holder is
otherwise entitled to receive.
(e) Allocation Among Series D, F and G Preferred if Funds
-----------------------------------------------------
Insufficient. If, after the payment to the holders of the Series A Preferred,
Series AA Preferred, Series B Preferred, Series BB Preferred, Series E Preferred
and Series C Preferred of their full preferential amounts, the assets or surplus
funds to be distributed to the holders of the Series D Preferred, Series F
Preferred and Series G Preferred are insufficient to permit the payment to such
holders of their full preferential amount, the assets and surplus funds legally
available for distribution shall be distributed ratably among the holders of the
Series D Preferred, Series F Preferred and Series G Preferred in proportion to
the full preferential amount each such holder is otherwise entitled to receive.
(f) Certain Events Deemed Liquidation; Exception. A sale of all or
--------------------------------------------
substantially all of the assets of the Corporation or the consolidation or
merger of the Corporation, or sale of more than fifty percent (50%) of the
capital stock of the Corporation in a transaction or series of related
transactions shall be regarded as a liquidation, dissolution or winding up of
the affairs of the Corporation within the meaning of this Section 3.3, but only
if the holders of the outstanding stock of the Corporation immediately prior to
the closing of such sale, merger or consolidation hold, immediately after such
closing, less than a majority in interest of the issued and outstanding shares
of voting securities (as measured by voting power) of the entity purchasing all
or substantially all of the Corporation's assets or of the entity (including
without limitation the Corporation) surviving or resulting from such merger or
consolidation, as the case may be; provided, however, that such transaction
shall not be regarded as a liquidation, dissolution or winding up of the affairs
of the Corporation and, to the extent applicable, all outstanding shares of a
given series of Preferred Stock shall be treated under the provisions of Section
3.4(d)(vii) in lieu of this Section 3.3 in connection with such sale, merger or
consolidation in the event that the holders of a majority of the outstanding
shares of such series of Preferred Stock so elect, by notice to the Corporation
no later than fifteen (15) days before the effective date of such event.
(g) Non-cash Consideration. In any transaction subject to Section
----------------------
3.3(f), if the consideration payable to the Corporation and allocable to the
holders of the shares of any series of Preferred Stock or directly payable to
the holders of the shares of such series of Preferred Stock in connection with
any such sale, merger or consolidation (the "Transaction Consideration") does
not consist entirely of cash, the Corporation may satisfy its obligations under
Section 3.3(b) by paying to the holders of the shares of the applicable series
of Preferred Stock a portion of the Transaction Consideration with a fair market
value equal to the amount required to be distributed pursuant to this Section
3.3. The fair market value of the Transaction Consideration shall be determined
by mutual agreement of the Corporation and the holders of a majority of the
outstanding shares of the applicable series of Preferred Stock. If the
Transaction Consideration consists of more than one type of
-6-
<PAGE>
consideration, then each type of consideration shall be distributed to each
holder of shares of such series of Preferred Stock in the same proportions as
such type of consideration represents of the total Transaction Consideration.
Section 3.4. Conversion. The holders of Preferred Stock and the
----------
Corporation shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert.
----------------
(i) Each share of Preferred Stock other than the Series G
Preferred shall be convertible at the option of the holder thereof at any time
after the date of issuance and without the payment of any additional
consideration therefor into that number of fully paid and nonassessable shares
of Common Stock as is determined by dividing (i) $1.00 with respect to the
Series A Preferred; (ii) $1.00 with respect to the Series AA Preferred; (iii)
$1.20 with respect to the Series B Preferred; (iv) $1.20 with respect to the
Series BB Preferred; (v) $2.40 with respect to the Series C Preferred; (vi)
$3.60 with respect to the Series D Preferred; (vii) $2.00 with respect to the
Series E Preferred; and (viii) $2.40 with respect to the Series F Preferred, by
the applicable Conversion Price (as defined below) in effect at the time of
conversion. The initial Conversion Price of (s) Series A Preferred shall be
$1.00; (t) Series AA Preferred shall be $1.00; (u) Series B Preferred shall be
$1.20; (v) Series BB Preferred shall be $1.20; (w) Series C Preferred shall be
$2.40; (x) Series D Preferred shall be $3.60; (y) Series E Preferred shall be
$2.00; and (z) Series F Preferred shall be $2.40. Subject to Section 3.4(e), the
Conversion Price of each series of Preferred Stock shall be subject to
adjustment (in order to adjust the number of shares of Common Stock into which a
share of each series of the Preferred Stock is convertible) in accordance with
this Section 3.4. Each person so converting shares of Preferred Stock shall be
entitled to all declared but unpaid dividends up to the time of the conversion.
Such dividends shall be paid to each such person within thirty (30) days of the
date of conversion.
(ii) Each share of Series G Preferred shall be convertible, at
the option of any holder thereof or at the option of the Corporation, at any
time after the date of the second anniversary of the date of issuance of the
first share of Series G Preferred issued by the Corporation; provided that no
such conversion shall be made with respect to any single holder to the extent
that such conversion would cause such single holder of such converted shares to
exceed a 19.5% ownership interest in the Corporation. Any such conversion shall
be made, without the payment of any additional consideration therefor, into that
number of fully paid and non-assessable shares of Common Stock as is determined
as follows: (1) in the event that either a Qualified Financing or a Public
Offering (as such terms are defined in Section 3.4(h)) has occurred prior to the
date of such conversion under this Section 3.4(a)(ii), by dividing the Series G
Preference Amount by the Series G Conversion Price established under Section
3.4(h); or (2) if neither a Qualified Financing nor a Public Offering (as such
terms are defined in Section 3.4(h)) has occurred prior to the date of such
conversion under this Section 3.4(a)(ii), then by dividing the Series G
Preference Amount by the Appraisal Price (as hereinafter defined). As used
herein, the "Appraisal Price" shall mean the greater of $2.00 or the quotient
obtained by dividing the Appraised Value (as
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<PAGE>
hereinafter defined) by the number of shares of Common Stock outstanding or
issuable before the conversion of Convertible Securities (as defined in Section
3.4(d)(i)(3) hereof) or the exercise of Options (as defined in Section
3.4(d)(i)(1) hereof) on the date the shares of Series G Preferred are
surrendered pursuant to Section 3.4(c)(ii) hereof. Appraised Value shall mean
the value of the Corporation as determined pursuant to Section 3.4(a)(iii).
(iii) Within thirty (30) days of receiving notice from a holder
of Series G Preferred that it wishes to convert shares of its Series G Preferred
pursuant to this Section 3.4(a) or within thirty (30) days after providing
notice to a holder of Series G Preferred that the Corporation wishes to convert
shares of the Series G Preferred pursuant to Section 3.4(a) (in either case, the
holder of Series G Preferred shall be referred to as the "Redeeming Holder"),
the Corporation shall cause an internal valuation of the Corporation to be
prepared (the "Corporation's Valuation") and sent to the Redeeming Holder and
all other holders of Series G Preferred. Upon receipt of such notice, any holder
of Series G Preferred may become a Redeeming Holder hereunder by returning the
Response Notice described below. Within 15 days after receipt of the
Corporation's Valuation (the "Response Period"), a Redeeming Holder shall have
the right to deliver to the Corporation a written notice (a "Response Notice")
indicating such Redeeming Holder's disapproval of the Corporation's Valuation.
In the event that a Redeeming Holder does not approve of the Corporation's
Valuation, such Redeeming Holder shall, within 15 days after delivery of the
Response Notice to the Corporation, cause an internal valuation of the
Corporation to be prepared (the "Redeeming Holder's Valuation") and delivered to
the Corporation. The Corporation and such Redeeming Holder shall then have a
period of 15 days to agree upon the Appraised Value; provided that if the
Corporation and such Redeeming Holder are unable to agree on such amount, they
shall select an arbitrator (which arbitrator must be a disinterested third party
with reasonable qualifications in the valuation of businesses in the
pharmaceutical industry), who will be instructed to make a decision within
thirty (30) days thereafter on the basis of "baseball arbitration" principles
(such that the arbitrator must select one of the two valuations presented to the
arbitrator by the Corporation and the Redeeming Holder). The Corporation and
such Redeeming Holder shall share equally all expenses of any arbitrator. Within
five (5) days after the determination of the Appraised Value, the Corporation
shall give notice of the Appraised Value and the date on which such conversion
may take place, which shall be not less than ten (10) days after such notice is
given to the Redeeming Holder.
(b) Automatic Conversion.
--------------------
(i) Each share of Preferred Stock, other than Series G Preferred,
shall automatically be converted into shares of Common Stock, according to the
ratio set forth in Section 3.4(a), upon:
(1) the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Corporation to the public at a public offering price of at least
$3.00 per share (with such amount to be
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<PAGE>
appropriately adjusted in the event of any stock dividend, stock distribution,
subdivision combination or consolidation, as provided in Section 3.4(d)(vi)) and
having an aggregate offering price to the public resulting in gross proceeds to
the Corporation of not less than $10,000,000; or
(2) the written consent of holders in interest of
eighty percent (80%) or more of the Preferred Stock, excluding the Series G
Preferred, outstanding at that time.
(ii) Each share of Series G Preferred shall automatically be
converted into shares of Common Stock at the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation to the public; provided that no
such conversion shall be made with respect to any single holder to the extent
that such conversion would cause such single holder of such converted shares to
exceed a 19.5% ownership interest in the Corporation. Any such conversion shall
be made, without the payment of any additional consideration therefor, into that
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing the Series G Preference Amount by the Series G Conversion Price
determined pursuant to Section 3.4 (h)(i) or 3.4(h)(ii). In the event that there
are shares of Series G Preferred that are not converted under this provision due
to the foregoing limitation, then: (1) any such affected holders and the
Corporation shall promptly enter into good faith discussions to determine a
mutually acceptable mechanism to cause such outstanding shares of Series G
Preferred to convert to Common Stock as soon as reasonably practical following
the closing of such public offering; and (2) such outstanding shares of Series G
Preferred shall continue to automatically convert to Common Stock as and when
such conversion may be made in conformance with the foregoing limitation.
(iii) The person(s) entitled to receive Common Stock issuable
upon a conversion of Preferred Stock hereunder shall not be deemed to have
converted the Preferred Stock until immediately prior to the closing of such
offering or the receipt by the Corporation of such consent if applicable, at
which time such conversion shall be deemed to have been effective. Upon the
effectiveness of such conversion, the Preferred Stock shall no longer be
outstanding on the books of the Corporation, and thereafter the holders of the
Preferred Stock shall be treated for all purposes as the record holders of the
Common Stock issued upon the conversion thereof. Each person who holds of record
Preferred Stock immediately prior to an automatic conversion shall be entitled
to all declared but unpaid dividends up to the time of the automatic conversion.
Such dividends shall be paid to all such holders within thirty (30) days of the
automatic conversion.
(iv) In furtherance of Section 3.8 hereof, upon the conversion of
all outstanding shares of the Preferred Stock pursuant to Sections 3.4(b)(i)(1)
and 3.4(b)(ii), all authorized shares of Preferred Stock will be cancelled and
will not be reissued, sold or transferred, whether or not such authorized shares
were outstanding on the date of conversion.
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<PAGE>
(c) Mechanics of Conversion.
-----------------------
(i) No fractional shares of Common Stock shall be issued upon
conversion of Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the then effective applicable Conversion Price. The
determination as to whether or not any fractional shares are issuable upon
conversion of Preferred Stock shall be based upon the total number of shares of
Preferred Stock being converted at any one time by any holder thereof, and not
upon each share of Preferred Stock being converted by such holder.
(ii) Before any holder of Preferred Stock shall be entitled to
convert the same into full shares of Common Stock pursuant to Section 3.4(a),
such holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Preferred Stock, and shall give written notice to the Corporation at such office
that such holder elects to convert the same and shall state therein his name or
the name or names of his nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued, together with the
applicable federal taxpayer identification number(s). The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holders
of Preferred Stock or to his nominee or nominees, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(iii) In connection with any automatic or mandatory conversion
of Preferred Stock pursuant to Section 3.4(b) or 3.4(e), the Corporation, at its
discretion, may require that the holders of such Preferred Stock surrender the
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holders a
certificate or certificates for the number of shares of Common Stock or
preferred stock to which such holders, respectively, shall be entitled, together
with cash in lieu of any fraction of a share of Common Stock.
(d) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Section 3.4(d), the
-------------------
following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
------
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
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<PAGE>
(2) "Original Issue Date" shall mean, as to a series of
-------------------
Preferred Stock, the date on which the first share of such series was issued.
(3) "Convertible Securities" shall mean any evidences
----------------------
of indebtedness, shares (other than Common Stock or other stock issued on
conversion of the Preferred Stock or any other series of preferred stock) or
other securities directly or indirectly convertible into or exchangeable for
Common Stock.
(4) "Additional Shares of Common Stock" shall mean,
---------------------------------
with respect to the Series A Preferred, Series B Preferred, Series C Preferred
and Series E Preferred, all shares of Common Stock issued (or, pursuant to
Section 3.4(d)(iii)(1), deemed to be issued) by the Corporation after the
Original Issue Date, other than shares of Common Stock issued or issuable:
(A) upon conversion of shares of Preferred Stock
or by way of dividend or distribution on shares of Preferred Stock;
(B) in connection with strategic alliances, joint
ventures or partnerships, or in connection with the licensing or acquisition by
the Corporation of technology or intellectual property, each as approved by the
Board of Directors of the Corporation; and
(C) to officers, directors or employees of, or
consultants to, the Corporation pursuant to action by the Board of Directors
prior to the Original Issue Date, pursuant to the Corporation's Stock Option
Plan in existence as of the Original Issue Date or pursuant to any other stock
purchase or option plan or other employee or director stock incentive or
compensation program (collectively, the "Plans") approved by a majority of the
members of the Board of Directors designated by the holders of Preferred Stock.
(ii) No Adjustment of Conversion Price. No adjustment in the number of
---------------------------------
shares of Common Stock into which a share of any series of Preferred Stock is
convertible shall be made by adjustment in the Conversion Price of such series
of Preferred Stock, in respect of the issuance of Additional Shares of Common
Stock or otherwise, (a) unless, with respect to adjustment in the Conversion
Price under Section 3.4(d)(iv), the consideration per share for such Additional
Shares of Common Stock issued or deemed to be issued by the Corporation is less
than the Conversion Price of such series of Preferred Stock in effect on the
date of, and immediately prior to, the issue of such Additional Shares of Common
Stock, or (b) if prior to such issuance, the Corporation receives written notice
from the holders of at least fifty-and-one-tenth percent (50.1%) of the then
outstanding shares of such series of affected Preferred Stock agreeing that no
such adjustment shall be made as the result of the issuance of Additional Shares
of Common Stock or such other that otherwise would cause an adjustment in the
Conversion Price under this Section 3.4(d).
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<PAGE>
(iii) Issue of Certain Securities Deemed Issue, Not Issue of
------------------------------------------------------
Additional Shares of Common Stock.
- ---------------------------------
(1) Options and Convertible Securities. In the event the
----------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument(s) relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon (x) the exercise of such Options or (y) in the case of Convertible
Securities, the conversion or exchange of such Convertible Securities, or (z) in
the case of Options for Convertible Securities, the conversion or exchange of
the Convertible Securities issuable upon the exercise of such Options, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date; provided, however, that such Additional Shares of
Common Stock shall not be deemed to have been issued if (i) such shares of
Common Stock are excluded from the definition of Additional Shares of Common
Stock set forth in Section 3.4(d)(i)(4), or (ii) with respect to any of the
Series A Preferred, Series B Preferred, Series C Preferred or Series E
Preferred, as the case may be, the consideration per share (determined pursuant
to Section 3.4(d)(v)) of such Additional Shares of Common Stock is not less than
the Conversion Price of such series of Preferred Stock in effect on the date of
and immediately prior to such issue, or such record date, as the case may be;
and provided, further, that in any such case in which Additional Shares of
Common Stock are deemed to be issued under this Section 3.4(d)(iii)(1):
(A) no further adjustment in the Conversion Price of
any of the Series A Preferred, Series B Preferred, Series C Preferred or Series
E Preferred, as the case may be, shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options, conversion or exchange of such Convertible Securities, or conversion or
exchange of the Convertible Securities issued upon the exercise of Options for
Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price of any the Series A Preferred, Series B Preferred, Series C
Preferred or Series E Preferred, as the case may be, computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have
-12-
<PAGE>
been exercised, the Conversion Price of any of the Series A Preferred, Series B
Preferred, Series C Preferred or Series E Preferred, as the case may be,
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon shall,
upon such expiration, be recomputed as if:
(I) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the additional consideration, if any, actually received by the Corporation upon
such exercise, or for the issue of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such conversion or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise of such Options were issued at the time of issue of such Options, and
the consideration received therefor was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Section 3.4(d)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised; provided,
however, that upon the subsequent expiration of any rights of conversion or
exchange under the Convertible Securities actually issued upon the exercise of
such Options, a recomputation of the Conversion Price of any of the Series A
Preferred, Series B Preferred, Series C Preferred or Series E Preferred, as the
case may be, as originally recomputed under this Section 3.4(d)(iii)(1)(C)(II)
and any subsequent adjustments based thereon, shall be made pursuant to Section
3.4(d)(iii)(1)(C)(I).
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price of any of the Series A
Preferred, Series B Preferred, Series C Preferred or Series E Preferred, as the
case may be, to an amount which exceeds the lower of (i) the Conversion Price of
such series of Preferred Stock on the original adjustment date, or (ii) the
Conversion Price of such series of Preferred Stock that would have resulted from
any other issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price of any series of the Series A Preferred,
Series B Preferred, Series C Preferred or Series E Preferred shall be made until
the expiration and/or exercise of all such Options, whereupon such adjustment
shall be made in the same manner provided in Section 3.4(d)(iii)(1)(C); and
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<PAGE>
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price of any of the Series A
Preferred, Series B Preferred, Series C Preferred or Series E Preferred, as the
case may be, which became effective on such record date shall be cancelled as of
the close of business on such record date, and thereafter the Conversion Price
of such series of Preferred Stock shall be adjusted pursuant to this Section
3.4(d)(iii) as of the actual date of issuance of such Options or Convertible
Securities.
(2) Stock Dividends, Distributions and Subdivisions. In the
-----------------------------------------------
event the Corporation at any time or from time to time after the Original Issue
Date of Series A Preferred, Series B Preferred, Series C Preferred or Series E
Preferred shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then and in any such event, Additional
Shares of Common Stock shall not be deemed to have been issued, but the
Conversion Price of each series of Series A Preferred, Series B Preferred,
Series C Preferred or Series E Preferred shall be adjusted in accordance with
Section 3.4(d)(vi)(1).
(3) Stock Combinations and Consolidations. In the event the
-------------------------------------
Corporation at any time or from time to time after the Original Issue Date of
any series of Preferred Stock shall combine or consolidate the outstanding
shares of Common Stock, by reclassification or otherwise, into a lesser number
of shares of Common Stock, then and in any such event, Additional Shares of
Common Stock shall not be deemed to have been issued, but the Conversion Price
of each series of Preferred Stock shall be adjusted in accordance with Section
3.4(d)(vi).
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock.
- ----------------------
(1) Adjustment Generally. Subject to the provisions of
--------------------
Sections 3.4(d)(ii), 3.4(d)(iii)(2)-(3) and 3.4(e), in the event the Corporation
shall issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 3.4(d)(iii)(1)) without
consideration or for consideration per share less than the Conversion Price of
any of the Series A Preferred, Series B Preferred, Series C Preferred or Series
E Preferred, as the case may be, in effect on the date of, and immediately prior
to, such issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, in order to increase the number of shares of
Common Stock into which a share of such series of Preferred Stock is
convertible, to a price (calculated to the nearest cent) determined by dividing
(A) (i) the Conversion Price of such series of Preferred Stock multiplied by the
number of shares of Common Stock outstanding immediately prior to such issue
(excluding the shares of Common Stock issuable upon conversion of the series of
Preferred Stock for which such adjustment is being made, but including shares of
Common Stock issuable upon conversion of any outstanding Options,
-14-
<PAGE>
Convertible Securities and shares of all other series of Preferred Stock), plus
(ii) the aggregate consideration received by the Corporation for the total
number of Additional Shares of Common Stock so issued, by (B) (i) the number of
shares of Common Stock outstanding immediately prior to such issue (excluding
the shares of Common Stock issuable upon conversion of the series of Preferred
Stock for which such adjustment is being made but including shares of Common
Stock issuable upon conversion of any outstanding Options, Convertible
Securities and shares of all other series of Preferred Stock), plus (ii) the
total number of such Additional Shares of Common Stock so issued, provided that
the Conversion Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $0.01, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.01 or more.
(2) Adjustments Applicable to Series AA and BB Preferred.
----------------------------------------------------
Until shares of Series AA Preferred are issued and outstanding, the Conversion
Price of Series AA Preferred shall be adjusted as and when the Conversion Price
of the Series A Preferred is adjusted, regardless of the Original Issue Date of
the Series AA Preferred. Until shares of Series BB Preferred are issued and
outstanding, the Conversion Price of Series BB Preferred shall be adjusted as
and when the Conversion Price of the Series B Preferred is adjusted, regardless
of the Original Issue Date of the Series BB Preferred.
(v) Determination of Consideration. For purposes of this Section
------------------------------
3.4(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property. Such consideration shall:
-----------------
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in Sections 3.4(d)(v)(1)(A) and
(B), as determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The aggregate
----------------------------------
consideration received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 3.4(d)(iii)(1), relating to
Options and Convertible Securities, shall be determined by computing the total
amount, if any, received or receivable by the Corporation as consideration for
the issue of such Options or Convertible
-15-
<PAGE>
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instrument(s) relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration until such
subsequent adjustment occurs) payable to the Corporation upon (i) the exercise
in full of such Options, (ii) in the case of Convertible Securities, the
conversion or exchange in full of such Convertible Securities, or (iii) in the
case of Options for Convertible Securities, the exercise in full of such Options
for Convertible Securities and the conversion or exchange in full of such
Convertible Securities. The total number of Additional Shares of Common Stock so
issued shall be determined by calculating the maximum number of shares of Common
Stock (as set forth in the instrument(s) relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number until
such subsequent adjustment occurs) issuable upon (x) the exercise in full of
such Options, (y) in the case of Convertible Securities, the conversion or
exchange in full of such Convertible Securities, or (z) in the case of Options
for Convertible Securities, the exercise in full of such Options for Convertible
Securities and the conversion or exchange in full of such Convertible
Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidation of Common Stock.
- ---------------------------------------------
(1) Stock Dividends, Distributions or Subdivisions. In the
----------------------------------------------
event the Corporation at any time or from time to time shall declare or pay any
dividend or make any other distribution on the Common Stock payable in Common
Stock, or effect a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock),
the Conversion Price of each series of Preferred Stock in effect immediately
prior to such stock dividend, stock distribution or subdivision shall,
concurrently with the effectiveness of such stock dividend, stock distribution
or subdivision, be proportionately decreased.
(2) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price of each series of Preferred Stock in effect immediately
prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(vii) Adjustment for Merger or Reorganization. Subject to the
---------------------------------------
last sentence of this Section 3.4(d)(vii), in case of any consolidation or
merger of the Corporation with or into another corporation or the conveyance of
all or substantially all of the assets of the Corporation or the sale of more
than fifty percent (50%) of the capital stock of the Company in a transaction or
series of related transactions to another corporation in which the holders of
Common Stock will be entitled to receive shares of stock, other securities or
property, each share of Preferred Stock shall thereafter be convertible into the
number of shares of stock or other securities or the property to which a holder
of the number of shares
-16-
<PAGE>
of Common Stock of the Corporation deliverable upon conversion of such Preferred
Stock would have been entitled upon such consolidation, merger or conveyance. In
any such case, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interest thereafter of the holders of the
Preferred Stock, to the end that such provisions (including provisions with
respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Preferred Stock. In the event that such merger or consolidation of the
Corporation or the sale of all or substantially all its assets or the sale of
more than fifty percent (50%) of the capital stock of the Company in a
transaction or series of related transactions shall also be subject to the
provisions of Section 3.3, the Corporation shall give notice to all of the
holders of Preferred Stock at least thirty (30) days before the effective date
of such event. The holders of a majority of each series of outstanding Preferred
Stock may elect to obtain treatment of all outstanding shares of such series of
Preferred Stock under this Section 3.4(d)(vii) in lieu of that described in
Section 3.3, notice of which election shall be submitted in writing to the
Corporation no later than fifteen (15) days before the effective date of such
event.
(e) Mandatory Conversion of Preferred Stock to New Series of Preferred
------------------------------------------------------------------
Stock.
- -----
(i) Special Definitions. For purposes of this Section 3.4(e), the
-------------------
following definitions shall apply:
(1) "Series Preferred Stock" shall mean the Series A
----------------------
Preferred and Series B Preferred, collectively.
(2) "Pro Rata Share" shall mean that portion of a Dilutive
--------------
Issuance which equals the lesser of:
(A) the product of (a) times (b), where (a) equals the
ratio of (x) the number of shares of Common Stock issued or issuable upon
conversion of the Series Preferred Stock or other preferred stock issued on
conversion of Series Preferred Stock that is then held by a holder of Series
Preferred Stock or such other preferred stock, to (y) the total number of shares
of Common Stock then outstanding plus the number of shares of Common Stock
issuable upon conversion of then outstanding Series Preferred Stock, preferred
stock, or other convertible securities or on exercise of options, rights, or
warrants, and (b) equals the gross consideration received by the Corporation in
connection with a Dilutive Issuance; or
(B) the product of (a) times (b), where (a) equals the
ratio of (x) the number of shares of Common Stock issued or issuable upon
conversion of the Series Preferred Stock or other preferred stock issued on
conversion of the Series Preferred Stock that is then held by a holder of Series
Preferred Stock or such other preferred stock issued on conversion of Series
Preferred Stock, to (y) the number of shares of Common
-17-
<PAGE>
Stock issued or issuable upon conversion of the Series Preferred Stock or other
preferred stock issued on conversion of the Series Preferred Stock held by all
holders of Series Preferred Stock or other preferred stock issued on conversion
of Series Preferred Stock, and (b) equals the dollar amount determined by a
majority of members of the Board of Directors to be the aggregate amount of the
Dilutive Issuance for purchase by the holders of Series Preferred Stock,
provided that such amount shall be deemed to be 100% of Dilutive Issuance in the
absence of a determination of the Board of Directors to the contrary.
(3) "Dilutive Issuance" shall mean an issuance of New
-----------------
Securities (as defined in the Investors' Rights Agreement) which results in
Diluted Stock.
(4) "Diluted Stock" shall mean shares of Series Preferred
-------------
Stock (or preferred stock issued on conversion of Series Preferred Stock
pursuant to this Section 3.4(e)) that have a Conversion Price per share greater
than the consideration per share to be received in a Dilutive Issuance.
(5) "Investors' Rights Agreement" shall mean the Investors'
---------------------------
Rights Agreement among the Corporation and certain stockholders, dated as of
April 8, 1997, as amended from time to time.
(6) "Participating Investor" shall mean any holder of
----------------------
Diluted Stock who, together with the Affiliates of such holder (regardless of
whether such holder itself actually purchases): (i) agrees to purchase, in
accordance with Section 1 of the Investors' Rights Agreement, such holder's Pro
Rata Share of a Dilutive Issuance on or before the last day of the twenty-day
period specified in Section 1.3 of the Investors' Rights Agreement applicable to
the Dilutive Issuance, and (ii) purchases such holder's Pro Rata Share of the
Dilutive Issuance in accordance with Section 1 of the Investors' Rights
Agreement.
(7) "Affiliate" shall mean any person that directly, or
---------
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, a holder of Diluted Stock.
(ii) Converted Shares. Subject to Section 3.4(e)(vii), each share of
----------------
Diluted Stock held by a person other than a Participating Investor (such shares,
"Converted Shares") that belongs to a single series of preferred stock shall
automatically be converted simultaneously with the closing of the Dilutive
Issuance into one share of a new series of preferred stock pursuant to the terms
hereof. The Conversion Price of each such new series of preferred stock
immediately after the date of the Dilutive Issuance shall equal the Conversion
Price of the corresponding series of preferred stock from which the Converted
Shares were converted, as in effect immediately prior to the closing of the
Dilutive Issuance, but without giving effect to any adjustments under this
Section 3.4 in connection with such Dilutive Issuance. Other than as set forth
in the foregoing sentence, each such new series of preferred stock shall have
the same rights and preferences as the corresponding series of preferred stock
from which the Converted Shares were converted,
-18-
<PAGE>
including the provisions for future adjustment in the Conversion Price in
accordance with Section 3.4(d) above and for further automatic conversion under
this Section 3.4(e) if not held by a Participating Investor in a future Dilutive
Issuance. In the event that Series A Preferred is Diluted Stock and no shares of
Series A Preferred have previously been converted under this Section 3.4(e)(ii),
then each such Converted Share of Series A Preferred shall automatically be
converted into one share of Series AA Preferred, which Series AA Preferred shall
conform to the two foregoing sentences. In the event that Series B Preferred is
Diluted Stock and no shares of Series B Preferred have previously been converted
under this Section 3.4(e)(ii), then each such Converted Share of Series B
Preferred shall be automatically converted into one share of Series BB
Preferred, which Series BB Preferred shall conform to the foregoing provisions
of this Section 3.4(e)(ii). After such initial conversion, Converted Shares
(whether shares of Series Preferred Stock, Series AA Preferred, Series BB
Preferred or any new series of preferred stock authorized hereafter to effect
further conversion under this Section 3.4) belonging to a single series of
Preferred Stock shall be converted into shares of new series of preferred stock
to be authorized in accordance with this Section 3.4(e).
(iii) Necessary Actions. The Corporation, the Board of Directors and
-----------------
the holders of the outstanding Preferred Stock and Common Stock shall take all
necessary actions to designate new series of preferred stock to the extent
necessary to accomplish the conversions described in this Section 3.4(e),
including any amendment to this Certificate of Incorporation.
(iv) Shares Underlying Warrants, etc. Any shares of Series Preferred
--------------------------------
Stock which are issuable pursuant to any outstanding right, option, warrant or
other convertible security shall remain shares of Series Preferred Stock without
regard to whether the holder of such right, option, warrant or other convertible
security is a Participating Investor, provided that such shares of Series
Preferred Stock shall become subject to this Section 3.4(e) after issuance
thereof.
(v) Effectiveness of Conversion. Upon the conversion of Converted
---------------------------
Shares as set forth in this Section 3.4(e), such Converted Shares shall no
longer be outstanding on the books of the Corporation and the holder of such
Converted Shares shall be treated for all purposes as the record holder on the
date of closing of the Dilutive Issuance of the shares of Series AA Preferred,
Series BB Preferred, or such other new series of preferred stock authorized in
accordance with this Section 3.4(e), as the case may be, issued upon conversion
of such Converted Shares.
(vi) Reservation of Series AA Preferred and Series BB Preferred. Until
----------------------------------------------------------
the first Dilutive Issuance in which there are Converted Shares, the Corporation
shall reserve and keep available out of its authorized but unissued Series AA
Preferred and Series BB Preferred such number of shares of Series AA Preferred
and Series BB Preferred as shall from time to time be sufficient to effect
conversion of all outstanding shares of Series Preferred Stock. The Corporation
shall not in any event issue any shares of Series AA Preferred or Series BB
Preferred except as provided in this Section 3.4(e).
-19-
<PAGE>
(vii) Exclusions. The provisions of this Section 3.4(e) shall not
----------
apply in the event that (A) the holders of Diluted Stock are not entitled to
purchase their respective Pro Rata Shares of the Dilutive Issuance under the
provisions of Section 1 of the Investors' Rights Agreement, or terms
substantially similar to such provisions, or (B) the Corporation shall fail to
comply with its obligation to offer and sell the New Securities the issuance of
which would constitute a Dilutive Issuance in accordance with such provisions or
terms.
(f) No Impairment. The Corporation will not, by amendment of this
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 3.4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(g) Certificate as to Adjustments, etc. Upon the occurrence of any one
-----------------------------------
or more: (i) adjustments or readjustments of any Conversion Price pursuant to
this Section 3.4; or (ii) conversions of shares of Preferred Stock under Section
3.4(b) or 3.4(e), the Corporation at its expense shall promptly compute such
adjustment, readjustment or conversion in accordance with the terms of this
Section 3.4 and furnish to each holder of shares of Preferred Stock affected by
such adjustment, readjustment or conversion a certificate setting forth each
such adjustment, readjustment or conversion and showing in detail the facts upon
which such adjustment, readjustment or conversion is based; provided, however,
that the failure to promptly provide such notice shall not affect the
effectiveness of such adjustment, readjustment or conversion. The Corporation
shall, upon the written request at any time of any holder of Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth: (x) such adjustments and readjustments, (y) the Conversion Price of any
series of Preferred Stock at that time in effect, and (z) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
that time would be received upon the conversion of a share of any series of
Preferred Stock.
(h) Series G Conversion Price. The Conversion Price for the Series G
-------------------------
Preferred shall be determined as follows:
(i) upon the closing of an offer and sale by the Corporation of any
Preferred Stock (other than in connection with a Strategic Transaction (as
hereinafter defined), or to employees of the Corporation or in connection with
any equipment financing, leasing or banking arrangements) issued and sold in the
Corporation's next equity financing with gross proceeds to the Corporation from
outside investors of at least $2,500,000 (a "Qualified Financing"), and provided
that such Qualified Financing occurs prior to a Public Offering (as defined in
Section 3.4(h)(ii)), then the Conversion Price shall be the conversion price at
which the securities sold in the Qualified Financing may be converted into
Common
-20-
<PAGE>
Stock. As used herein, Strategic Transaction shall mean a transaction described
in Section 3.4(d)(i)(4)(B) hereof.
(ii) upon the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Corporation to the public (a "Public Offering"), and provided
that such Public Offering occurs prior to a Qualified Financing (as defined in
Section 3.4(h)(i), then the Conversion Price shall be the price per share at
which the Common Stock is offered and sold to the public in the Public Offering.
(i) Notices of Record Date. In the event of (i) any taking by the
----------------------
Corporation of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or (ii) any capital reorganization of
the Corporation, any reclassification or recapitalization of the capital stock
of the Corporation, any merger or consolidation of the Corporation, and any
transfer of all or substantially all of the assets of the Corporation to any
other corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, then the
Corporation shall mail to each holder of Preferred Stock a notice specifying, to
the extent applicable, (A) the date on which any such record is to be taken for
the purpose of such dividend or distribution and a description of such dividend
or distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (C) the time, if any, that is to
be fixed, as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up. Any such notice shall be mailed at least thirty (30) days in
advance of the date specified in clause (A), (B) or (C) above, as applicable.
(j) Common Stock Reserved. The Corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Preferred Stock that shall be outstanding from time to time.
Section 3.5. Voting Rights.
-------------
(a) Preferred Stock Generally. The holders of shares of outstanding
-------------------------
Preferred Stock other than the Series G Preferred shall be entitled to notice of
any stockholders' meeting and to vote upon any matter submitted to the
stockholders for a vote, as though the Common Stock and the Preferred Stock
(other than the Series G Preferred) constituted a single class of stock, except
with respect to those matters on which the Delaware Corporation Law requires
that a vote must be by a separate class or classes or by separate series, as to
which each such class or series shall have the right to vote in accordance
-21-
<PAGE>
with such law, and except as provided in Sections 3.5(b) and 3.7, on the
following basis: A holder of Preferred Stock shall have that number of votes per
share as is equal to the number of shares of Common Stock into which each share
of Preferred Stock held by such holder is then convertible. The holders of
Series G Preferred shall have no voting rights, except as specifically provided
by the Delaware Corporation Law.
(b) Election of Directors.
---------------------
(i) The management of the business and the conduct of the affairs
of the Company shall be vested in its Board of Directors. The Board of Directors
shall consist of one or more members, the number thereof to be determined in the
manner provided in the By-Laws.
(ii) The directors of the Company need not be elected by written
ballot unless the By-Laws so provide.
(iii) (1) Until the conversion of all of the Company's
outstanding Preferred Stock, other than Series G Preferred, to Common Stock
pursuant to Section3.4(b)(i)(1), the holders of Series A Preferred, Series B
Preferred, Series E Preferred and Common Stock shall vote upon the election of
directors in accordance with the Second Amended and Restated Stockholders
Agreement among the Corporation and the other parties thereto, dated as of April
8, 1997, as amended from time to time.
(2) Upon the conversion of all of the Company's
outstanding Preferred Stock, other than Series G Preferred, to Common Stock
pursuant to Section3.4(b)(i)(1), the Board of Directors shall be divided into
three classes, which are hereby designated as Class A, Class B and Class C
respectively, as nearly equal in number as the then total number of directors
constituting the whole Board permits. At the next annual meeting of the
stockholders following the creation of classes of directors, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected to
hold office for a term expiring at the second succeeding annual meeting, and
directors of the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. At each annual meeting of stockholders
following such initial classification and election, directors in numbers equal
to the number of the class whose terms expire at the time of such meeting shall
be elected to hold office until the third succeeding annual meeting of
stockholders. Each director shall hold office until his successor is elected and
qualified, or until his earlier resignation or removal.
Section 3.6. Dividend Rights.
---------------
(a) Dividends on Common Stock. The holders of outstanding Series A
-------------------------
Preferred, Series B Preferred, Series C Preferred and Series E Preferred shall
be entitled to receive, and shall receive, a dividend (determined on the basis
of the number of shares of Common Stock into which each share of each such
series of Preferred Stock is then
-22-
<PAGE>
convertible) equal to any dividend paid on Common Stock.
(b) Dividends on Preferred Stock other than Series G Preferred. In the
----------------------------------------------------------
event that the Board of Directors declares and/or pays a dividend that is
payable on any series of Preferred Stock other than Series G Preferred
(including, without limitation, Series D Preferred and Series F Preferred) (the
"Dividend Series"), the Board shall do so on a pari passu basis among: (i) all
holders of the Dividend Series, and (ii) all holders of any of Series A
Preferred, Series B Preferred, Series C Preferred and/or Series E Preferred
(determined on the basis of the number of shares of Common Stock into which each
share of each such series of Preferred Stock is then convertible), to the extent
that each such series is not the Dividend Series.
(c) Dividends on Series G Preferred. The holders of the Series G
-------------------------------
Preferred shall be entitled to receive, out of any assets legally available
therefor, cumulative dividends at the per share rate of the prime rate (as
published in The Wall Street Journal on the date of the calculation of such
dividend) plus 1% of the Series G Preference Amount (as defined in Section
3.3(a)(iii)), which Series G Preference Amount shall be adjusted annually as of
January 1st, of a given year for each share of Series G Preferred held by such
holder in preference and priority to any payment of any dividend on the Common
Stock or any other class or series of Preferred Stock of the Corporation. Such
dividends shall accrue on any given share from the date of the original issuance
of such share, and such dividends shall accrue from day to day whether or not
declared, based on the actual number of days elapsed and shall be payable only:
(i) upon the liquidation, dissolution or winding up of the
Company pursuant to the formula in Section 3.3; and
(ii) upon conversion of the Series G Preferred pursuant to
Section 3.4.
(d) Payment. Any declared and unpaid dividend, other than the dividend
-------
set forth in Section 3.6(c) above, shall be payable on liquidation and
conversion in accordance with Sections 3.3 and 3.4.
Section 3.7. Covenants, Consent of Series A, B, C and E Preferred
----------------------------------------------------
Required.
(a) Vote of All Preferred as a Class. In addition to Section 3.5
--------------------------------
and any vote which any series of Preferred Stock may have under Delaware law, so
long as any shares of Series A, B, C or E Preferred or shares of any series of
preferred stock issued as a result of the conversion of Series A, B, C or E
Preferred in accordance with Section 3.4(e)(ii) shall be outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of more than fifty percent (50%) of the outstanding
Series A, B, C and E Preferred, voting together as a single class:
-23-
<PAGE>
(i) amend or repeal any provision of, or add any provision to,
the Certificate of Incorporation or the by-laws of the Corporation (as may be
amended from time to time, the "By-Laws") if such action would change the
preferences, rights, privileges or powers of, or the restrictions provided for
the benefit of, the Series A, B, C or E Preferred generally, including the
reclassification of any Common Stock into shares having any preference or
priority as to dividends, voting, anti-dilution or assets superior to or on a
parity with any such preference or priority of the Series A, B, C or E
Preferred, or the creation or issuance of any other class or classes of stock or
series of preferred stock (other than pursuant to Section 3.4(e)) having any
preference or priority as to dividends, voting, anti-dilution or assets superior
to or on a parity with any such preference or priority of the outstanding Series
A, B, C or E Preferred; or
(ii) authorize (x) any merger or consolidation of the Corporation
with or into any other corporation or entity (except into or with a wholly owned
subsidiary with the requisite stockholder approval), or (y) the sale of all or
substantially all of the assets of the Corporation.
(b) Separate Vote of Individual Series of Preferred Stock. So long
-----------------------------------------------------
as any shares of Preferred Stock are outstanding, the Corporation shall not
alter or change the rights, preferences, privileges or restrictions of a series
of Preferred Stock so as to adversely affect such shares in a manner different
than the other series of Preferred Stock without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of the series of Preferred Stock so
affected.
Section 3.8. Converted or Otherwise Acquired Shares. Any share of
--------------------------------------
Preferred Stock that is converted under Section 3.4 or otherwise acquired by the
Corporation will be canceled and will not be reissued, sold or transferred.
Section 3.9. No Preemptive Rights. Stockholders shall have no preemptive
--------------------
rights except as granted by the Corporation pursuant to written agreements,
whether prior or subsequent to the date hereof.
Section 3.10. Notice. Any notice required under the provisions of this
------
Section 3 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient, or if not,
then on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) business day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt.
All notices shall be addressed, in the case of a stockholder, to such holder of
record at the address of such holder appearing on the books of the Corporation
and, in the case of the Corporation, to the principal office of the Corporation.
-24-
<PAGE>
Section 3.11. Residual Rights. All rights accruing to the outstanding
---------------
shares of the Corporation not expressly provided for to the contrary in this
Section 3 shall be vested in the Common Stock.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. Election of directors need not be by written ballot unless the By-
Laws shall so provide.
SEVENTH. The Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the By-Laws.
EIGHTH. A director shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that the elimination or limitation of liability
is prohibited under the Delaware Corporation Law as in effect when such
liability is determined. No amendment or repeal of this provision shall deprive
a director of the benefits hereof with respect to any act or omission occurring
prior to such amendment or repeal.
NINTH. The Corporation shall, to the fullest extent permitted by the
Delaware Corporation Law, indemnify each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom.
Indemnification may include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of any undertaking by the person indemnified
to repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article, which undertaking may be
accepted without reference to the financial ability of such person to make such
repayments.
The Corporation shall not indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
The indemnification rights provided in this Article (i) shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any law, agreement or vote of stockholders or disinterested directors or
otherwise, and (ii) shall inure to the benefit of the heirs, executors and
administrators of such persons. The Corporation may, to the
-25-
<PAGE>
extent authorized from time to time by its Board of Directors, grant
indemnification rights to other employees or agents of the Corporation or other
persons serving the Corporation and such rights may be equivalent to, or greater
or less than, those set forth in this Article.
Any person seeking indemnification under this Article shall be deemed to
have met the standard of conduct required for such indemnification unless the
contrary shall be established.
Any amendment or repeal of this Article shall not adversely affect any
right or protection of a director or officer of this Corporation with respect to
any act or omission of such director or officer occurring prior to such
amendment or repeal.
TENTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under (S)
291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
(S) 279 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement, and to any reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganizations shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
ELEVENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation."
4. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Sections 228, 242 and 245 of the
Delaware Corporation Law by the Board of Directors and the stockholders of the
Corporation. The total number of outstanding shares entitled to vote thereon was
31,616,900 shares of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred, Series E Preferred and Common Stock voting together as a
class. Holders of 56%, in the aggregate, of such outstanding shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E
Preferred and Common Stock approved such amendment by written consent in
accordance with Section 228 of the Delaware Corporation Law, and written notice
of such was given by this Corporation in accordance with said Section 228.
-26-
<PAGE>
IN WITNESS WHEREOF, Inspire Pharmaceuticals, Inc. has caused this Amended
and Restated Certificate of Incorporation to be signed by its President and
Chief Executive Officer this 28th day of March, 2000.
INSPIRE PHARMACEUTICALS, INC.
By: /s/ Christy L. Shaffer
--------------------------------
Name: Christy L. Shaffer, Ph.D.
Title: President and Chief Executive Officer
-27-
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
INSPIRE PHARMACEUTICALS, INC.
(A DELAWARE CORPORATION)
(As adopted March 27, 2000)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I STOCKHOLDERS......................................... 1
SECTION 1. Place of Meeting............................ 1
----------------
SECTION 2. Annual Meeting.............................. 1
--------------
SECTION 3. Special Meetings............................ 4
----------------
SECTION 4. Notice of Meetings.......................... 4
------------------
SECTION 5. Voting List................................. 5
-----------
SECTION 6. Quorum of Stockholders...................... 6
----------------------
SECTION 7. Proxies and Voting.......................... 6
------------------
SECTION 8. Conduct of Meeting.......................... 6
------------------
SECTION 9. Action Without Meeting...................... 7
----------------------
ARTICLE II DIRECTORS........................................... 7
SECTION 1. General Powers.............................. 7
--------------
SECTION 2. Number; Election, Tenure and Qualification.. 7
------------------------------------------
SECTION 3. Enlargement of the Board.................... 8
------------------------
SECTION 4. Vacancies................................... 8
---------
SECTION 5. Resignation................................. 8
-----------
SECTION 6. Removal..................................... 9
-------
SECTION 7. Committees.................................. 9
----------
SECTION 8. Meetings of the Board of Directors.......... 10
----------------------------------
SECTION 9. Quorum and Voting........................... 11
-----------------
SECTION 10 Compensation................................ 11
------------
SECTION 11. Action without Meeting...................... 11
----------------------
ARTICLE III OFFICERS........................................... 12
SECTION 1. Titles...................................... 12
------
SECTION 2. Election and Term of Office................. 12
---------------------------
SECTION 3. Qualification............................... 12
-------------
SECTION 4. Removal..................................... 12
-------
SECTION 5. Resignation................................. 12
-----------
SECTION 6. Vacancies................................... 12
---------
SECTION 7. Powers and Duties........................... 13
-----------------
SECTION 8. President and Vice-Presidents............... 13
-----------------------------
SECTION 9. Secretary and Assistant Secretaries......... 13
-----------------------------------
SECTION 10. Treasurer and Assistant Treasurers.......... 14
----------------------------------
SECTION 11. Bonded Officers............................. 15
---------------
SECTION 12. Salaries.................................... 15
--------
</TABLE>
<PAGE>
TABLE OF CONTENTS (continued)
------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV STOCK........................................................ 15
SECTION 1. Certificates of Stock................................ 15
---------------------
SECTION 2. Transfers of Shares of Stock......................... 16
----------------------------
SECTION 3. Lost Certificates.................................... 16
-----------------
SECTION 4. Record Date.......................................... 17
-----------
SECTION 5. Fractional Share Interests........................... 17
--------------------------
SECTION 6. Dividends............................................ 18
---------
ARTICLE V INDEMNIFICATION AND INSURANCE................................. 18
SECTION 1. Indemnification...................................... 18
---------------
SECTION 2. Insurance............................................ 19
---------
ARTICLE VI GENERAL PROVISIONS........................................... 19
SECTION 1. Fiscal Year.......................................... 19
------------
SECTION 2. Corporate Seal....................................... 19
--------------
SECTION 3. Certificate of Incorporation......................... 19
----------------------------
SECTION 4. Execution of Instruments............................. 19
------------------------
SECTION 5. Voting of Securities................................. 20
--------------------
SECTION 6. Evidence of Authority................................ 20
---------------------
SECTION 7. Transactions with Interested Parties................. 20
------------------------------------
SECTION 8. Books and Records.................................... 21
-----------------
ARTICLE VII NOTICES..................................................... 21
SECTION 1. Notice to Stockholders............................... 21
----------------------
SECTION 2. Notice to Directors.................................. 21
-------------------
SECTION 3. Address Unknown...................................... 22
---------------
SECTION 4. Affidavit of Mailing................................. 22
--------------------
SECTION 5. Time Notices Deemed Given............................ 22
-------------------------
SECTION 6. Methods of Notice.................................... 22
-----------------
SECTION 7. Failure to Receive Notice............................ 22
-------------------------
SECTION 8. Notice to Person with Whom Communication is Unlawful. 23
----------------------------------------------------
SECTION 9. Notice to Person with Undeliverable Address.......... 23
-------------------------------------------
ARTICLE VIII AMENDMENTS................................................. 24
SECTION 1. By the Board of Directors............................ 24
-------------------------
SECTION 2. By the Stockholders.................................. 24
-------------------
</TABLE>
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
INSPIRE PHARMACEUTICALS, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. Place of Meetings. All meetings of stockholders shall be
-----------------
held at the principal office of the corporation or at such other place as may be
named in the notice.
SECTION 2. Annual Meeting. The annual meeting of stockholders for
--------------
the election of directors and the transaction of such other business as may
properly come before the meeting shall be held on such date and at such hour and
place as the directors or an officer designated by the directors may determine.
If the annual meeting is not held on the date designated therefor, the directors
shall cause the meeting to be held as soon thereafter as convenient.
At an annual meeting of stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received
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<PAGE>
at the principal executive offices of the corporation not less than one hundred
twenty (120) calendar days in advance of the date of the corporation's proxy
statement released to stockholders in connection with the previous year's annual
meeting of the stockholders; provided, however, that in the event that no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time of
the previous year's proxy statement, notice by the stockholder to be timely must
be so received a reasonable time before the solicitation is made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include in
formation with respect to a stockholder proposal in the proxy statement and form
of proxy for a stockholder's meeting, stockholders must provide notice as
required by the regulations promulgated under the Securities and Exchange Act of
1934, as amended. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph. The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph, and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
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<PAGE>
Only persons who are nominated in accordance with the procedures set
forth in this paragraph shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of Directors at the meeting who complies with the notice set forth in
this paragraph. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the corporation in accordance with the provisions of the second
paragraph of this Section 2. Such stockholder's notice shall set forth (i) as
to each person, if any, whom the stockholder proposes to nominate for election
or re-election as a Director: (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a Director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to the second paragraph of this Section 2. At the request of the Board of
Directors, any person nominated by a stockholder for election as a Director
shall furnish to the Secretary of the corporation that information required to
be set forth in the stockholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a Director of the
corporation unless
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nominated in accordance with the procedures set forth in this paragraph. The
chairman of the meeting shall, if the facts warrant, determine and declare at
the meeting that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if he should so determine, he shall so declare
at the meeting and the defective nomination shall be disregarded.
SECTION 3. Special Meetings. Special meetings of the stockholders
----------------
may be called at any time by the President, the Chairman of the Board, if any,
or the Board of Directors, or by the Secretary or any other officer upon the
written request of one or more stockholders holding of record at least a
majority of the outstanding shares of stock of the corporation entitled to vote
at such meeting; provided, however, that following registration of any of the
classes of equity securities of the corporation pursuant to the provisions of
the Securities Exchange Act of 1934, as amended, special meetings of the
stockholders may only be called by the President, the Chairman of the Board, if
any, or the Board of Directors pursuant to a resolution adopted by a majority of
the total number of authorized Directors. Such written request shall state the
purpose or purposes of the proposed meeting. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or
purposes stated in the notice of meeting.
SECTION 4. Notice of Meetings. Except where some other notice is
------------------
required by law, written notice of each meeting of stockholders, stating the
place, date and hour thereof and the purposes for which the meeting is called,
shall be given by or under the direction of the Secretary, not less than ten nor
more than sixty days before the date fixed for such meeting, to each stockholder
entitled to vote at such meeting of record at the close of business on the day
fixed by the Board of Directors as a record date for the determination of the
stockholders entitled to vote at such meeting or, if no such date has been
fixed, of record at the close of business on the day before the day on which
notice is given. Notice shall be given personally to each stockholder or left
at his or her residence or usual place of business or mailed postage prepaid
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and addressed to the stockholder at his or her address as it appears upon the
records of the corporation. In case of the death, absence, incapacity or refusal
of the Secretary, such notice may be given by a person designated either by the
Secretary or by the person or persons calling the meeting or by the Board of
Directors. A waiver of such notice in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent to such notice. Attendance of a person at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice. Except as required by statute, notice
of any adjourned meeting of the stockholders shall not be required.
SECTION 5. Voting List. The officer who has charge of the stock
-----------
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by this section or the books of the
corporation, or to vote at any meeting of stockholders.
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<PAGE>
SECTION 6. Quorum of Stockholders. At any meeting of the
----------------------
stockholders, the holders of a majority in interest of all stock issued and
outstanding and entitled to vote upon a question to be considered at the
meeting, present in person or represented by proxy, shall constitute a quorum
for the consideration of such question, but a smaller group may adjourn any
meeting from time to time. When a quorum is present at any meeting, a majority
of the stock represented thereat and entitled to vote shall, except where a
larger vote is required by law, by the certificate of incorporation, or by these
by-laws, decide any question brought before such meeting. Any election by
stockholders shall be determined by a plurality of the vote cast by the
stockholders entitled to vote at the election.
SECTION 7. Proxies and Voting. Unless otherwise provided in the
------------------
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock held of record by such stockholder, but no proxy shall be voted or
acted upon after three years from its date, unless said proxy provides for a
longer period. Persons holding stock in a fiduciary capacity shall be entitled
to vote the shares so held, and persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the corporation
the pledgee shall have been expressly empowered to vote thereon, in which case
only the pledgee or the pledgee's proxy may represent said stock and vote
thereon. Shares of the capital stock of the corporation belonging to the
corporation or to another corporation, a majority of whose shares entitled to
vote in the election of directors is owned by the corporation, shall neither be
entitled to vote nor be counted for quorum purposes.
SECTION 8. Conduct of Meeting. Meetings of the stockholders shall be
------------------
presided over by one of the following officers in the order of seniority and if
present and acting: the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, a Vice-President, or, if none of the foregoing is
in office and present and acting, a chairman to be chosen
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by the stockholders. The Secretary of the corporation, if present, or an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present the chairman of the meeting
shall appoint a secretary of the meeting.
SECTION 9. Action Without Meeting. Any action required or permitted
----------------------
to be taken at any annual or special meeting of stockholders of the corporation
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, is signed by the holders
or by proxy for the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at meeting at which all shares entitled to vote on such action were present and
voted. Prompt notice of the taking of corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE II
DIRECTORS
SECTION 1. General Powers. The business and affairs of the
--------------
corporation shall be managed by or under the direction of a Board of Directors,
who may exercise all of the powers of the corporation which are not by law
required to be exercised by the stockholders. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
SECTION 2. Number; Election; Tenure and Qualification. The initial
-------------------------------------------
Board of Directors shall consist of three (3) persons and shall be elected by
the incorporator. Thereafter, the number of directors which shall constitute
the whole Board shall be fixed by resolution of the Board of Directors, but in
no event shall be less than one. Each director shall be elected by the
stockholders at the annual meeting and all directors shall hold office until the
next annual
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<PAGE>
meeting and until their successors are elected and qualified, or until their
earlier death, resignation or removal. The number of directors may be increased
or decreased by action of the Board of Directors. Directors need not be
stockholders of the corporation.
SECTION 3. Enlargement of the Board. The number of the Board of
------------------------
Directors may be increased at any time, such increase to be effective
immediately, by vote of a majority of the directors then in office.
SECTION 4. Vacancies. Unless and until filled by the stockholders,
---------
any vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board an unfilled vacancy resulting from
the removal of any director for cause or without cause, may be filled by vote of
a majority of the directors then in office although less than a quorum, or by
the sole remaining director. A director elected to fill a vacancy shall hold
office until the next annual meeting of stockholders and until his or her
successor is elected and qualified or until his or her earlier death,
resignation, or removal. When one or more directors shall resign from the
Board, effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have the power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective. If at any time there are no directors in
office, then an election of directors may be held in accordance with the General
Corporation Law of the State of Delaware.
SECTION 5. Resignation. Any director may resign at any time upon
-----------
written notice to the corporation. Such resignation shall take effect at the
time specified therein, or if no time is specified, at the time of its receipt
by the President or Secretary.
SECTION 6. Removal. Except as may otherwise be provided by the
-------
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, at an annual meeting or at a special meeting
called for that purpose, by the holders of a
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<PAGE>
majority of the shares then entitled to vote at an election of directors. The
vacancy or vacancies thus created may be filled by the stockholders at the
meeting held for the purpose of removal or, if not so filled, by the directors
in the manner provided in Section 4 of this Article II.
SECTION 7. Committees. The Board of Directors may, by resolution or
----------
resolutions passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more directors of the
corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
any member of such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of such absent or
disqualified member.
A majority of all the members of any such committee may fix its rules
or procedure, determine its action and fix the time and place, whether within or
without the State of Delaware, of its meetings and specify what notice thereof,
if any, shall be given, unless the Board of Directors shall otherwise by
resolution provide. The Board of Directors shall have the power to change the
members of any such committee at any time, to fill vacancies therein and to
discharge any such committee, either with or without cause, at any time.
Any such committee, unless otherwise provided in the resolution of the
Board of Directors, or in these by-laws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority denied it by Section 141 of the General Corporation Law
of the State of Delaware.
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<PAGE>
Each committee shall keep regular minutes of its meetings and make
such reports as the Board of Directors may from time to time request.
SECTION 8. Meetings of the Board of Directors. Regular meetings of
----------------------------------
the Board of Directors may be held without call or formal notice at such places
either within or without the State of Delaware and at such times as the Board
may by vote from time to time determine. A regular meeting of the Board of
Directors may be held without call or formal notice immediately after and at the
same place as the annual meeting of the stockholders, or any special meeting of
the stockholders at which a Board of Directors is elected.
Special meetings of the Board of Directors may be held at any place
either within or without the State of Delaware at any time when called by the
Chairman of the Board of Directors, the President, Treasurer, Secretary, or two
or more directors. Reasonable notice of the time and place of a special meeting
shall be given to each director unless such notice is waived by attendance or by
written waiver in the manner provided in these by-laws for waiver of notice by
stockholders. Notice may be given by, or by a person designated by, the
Secretary, the person or persons calling the meeting, or the Board of Directors.
No notice of any adjourned meeting of the Board of Directors shall be required.
In any case it shall deemed sufficient notice to a director to send notice by
mail at least seventy-two hours, or by facsimile, telegram, telex, or electronic
means at least forty-eight hours before the meeting, addressed to such director
at his or her usual or last known business or home address.
Directors or members of any committee designated by the directors may
participate in a meeting of the Board of Directors or such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting.
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<PAGE>
SECTION 9. Quorum and Voting. A majority of the total number of
-----------------
directors shall constitute a quorum, except that when a vacancy or vacancies
exist in the Board, a majority of the directors then in office (but not less
than one-third of the total number of the directors) shall constitute a quorum.
A majority of the directors present, whether or not a quorum is present, may
adjourn any meeting from time to time. The vote of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors, except where a different vote is required or permitted by
law, by the certificate of incorporation, or by these by-laws.
SECTION 10. Compensation. The Board of Directors may fix fees for
------------
their services and for their membership on committees, and expenses of
attendance may be allowed for attendance at each meeting. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent or otherwise, and
receiving compensation therefor.
SECTION 11. Action without Meeting. Any action required or permitted
----------------------
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting, and without notice, if a written
consent thereto is signed by all members of the Board of Directors, or of such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or such committee.
ARTICLE III
OFFICERS
SECTION 1. Titles. The officers of the corporation shall consist of
------
a President, a Secretary, a Treasurer, and such other officers with such other
titles as the Board of Directors
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<PAGE>
shall determine, including without limitation a Chairman of the Board, a
Vice-Chairman of the Board, and one or more Vice- Presidents, Assistant
Treasurers, or Assistant Secretaries.
SECTION 2. Election and Term of Office. The officers of the
---------------------------
corporation shall be elected annually by the Board of Directors at its first
meeting following the annual meeting of the stockholders. Each officer shall
hold office until his or her successor is elected and qualified, unless a
different term is specified in the vote electing such officer, or until his or
her earlier death, resignation or removal.
SECTION 3. Qualification. Unless otherwise provided by resolution of
-------------
the Board of Directors, no officer, other than the Chairman or Vice-Chairman of
the Board, need be a director. No officer need be a stockholder. Any number of
offices may be held by the same person, as the directors shall determine.
SECTION 4. Removal. Any officer may be removed, with or without
-------
cause, at any time, by resolution adopted by the Board of Directors.
SECTION 5. Resignation. Any officer may resign by delivering a
-----------
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt or at
such later time as may be specified therein.
SECTION 6. Vacancies. The Board of Directors may at any time fill
---------
any vacancy occurring in any office for the unexpired portion of the term and
may leave unfilled for such period as it may determine any office other than
those of President, Treasurer and Secretary.
SECTION 7. Powers and Duties. The officers of the corporation shall
-----------------
have such powers and perform such duties as are specified herein and as may be
conferred upon or assigned to them by the Board of Directors, and shall have
such additional powers and duties as are
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<PAGE>
incident to their office except to the extent that resolutions of the Board of
Directors are inconsistent therewith.
SECTION 8. President and Vice-Presidents. The President shall be the
-----------------------------
chief executive officer of the corporation, shall preside at all meetings of the
stockholders and the Board of Directors unless a Chairman or Vice-Chairman of
the Board is elected by the Board, empowered to preside, and present at such
meeting, shall have general and active management of the business of the
corporation and general supervision of its officers, agents and employees, and
shall see that all orders and resolutions of the Board of Directors are carried
into effect.
In the absence of the President or in the event of his or her
inability or refusal to act, the Vice-President if any (or in the event there be
more than one Vice-President, the Vice-Presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Board of Directors may assign to any Vice-President the title of
Executive Vice-President, Senior Vice-President or any other title selected by
the Board of Directors.
SECTION 9. Secretary and Assistant Secretaries. The Secretary
-----------------------------------
shall attend all meetings of the Board of Directors and of the stockholders and
record all the proceedings of such meetings in a book to be kept for that
purpose, shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, shall maintain a
stock ledger and prepare lists of stockholders and their addresses as required
and shall have custody of the corporate seal which the Secretary or any
Assistant Secretary shall have authority to affix to any instrument requiring it
and attest by any of their signatures. The Board of Directors may give general
authority to any other officer to affix and attest the seal of the corporation.
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<PAGE>
The Assistant Secretary if any (or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors of if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of the Secretary's inability or
refusal to act, perform the duties and exercise the powers of the Secretary.
SECTION 10. Treasurer and Assistant Treasurers. The Treasurer shall
----------------------------------
have the custody of the corporate funds and securities, shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the Board of Directors. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board of Directors or the President, taking
proper vouchers for such disbursements, and shall render to the President and
the Board of Directors, at its regular meetings, or whenever they may require
it, an account of all transactions and of the financial condition of the
corporation.
The Assistant Treasurer if any (or if there be more than one, the
Assistant Treasurers in the order determined by the Board of Directors or if
there be no such determination, then in the order of their election) shall, in
the absence of the Treasurer or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Treasurer.
SECTION 11. Bonded Officers. The Board of Directors may require any
---------------
officer to give the corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors upon such terms and
conditions as the Board of Directors may specify, including without limitation a
bond for the faithful performance of the duties of
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<PAGE>
such officer and for the restoration to the corporation of all property in his
or her possession or control belonging to the corporation.
SECTION 12. Salaries. Officers of the corporation shall be entitled
--------
to such salaries, compensation or reimbursement as shall be fixed or allowed
from time to time by the Board of Directors.
ARTICLE IV
STOCK
SECTION 1. Certificates of Stock. One or more certificates of stock,
---------------------
signed by the Chairman or Vice-Chairman of the Board of Directors or by the
President or Vice-President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, shall be issued to each stockholder
certifying, in the aggregate, the number of shares owned by the stockholder in
the corporation. Any or all signatures on any such certificate may be
facsimiles. In case any officer, transfer agent or registrar who shall have
signed or whose facsimile signature shall have been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the certificate of incorporation, the by-
laws, applicable securities laws, or any agreement among any number of
shareholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
SECTION 2. Transfers of Shares of Stock. Subject to the
----------------------------
restrictions, if any, stated or noted on the stock certificates, shares of stock
may be transferred on the books of the
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<PAGE>
corporation by the surrender to the corporation or its transfer agent of the
certificate representing such shares properly endorsed or accompanied by a
written assignment or power of attorney properly executed, and with such proof
of authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. The corporation shall be entitled to treat the
record holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to that stock, regardless of any transfer, pledge or other disposition of that
stock, until the shares have been transferred on the books of the corporation in
accordance with the requirements of these by-laws.
SECTION 3. Lost Certificates. A new certificate of stock may be
-----------------
issued in the place of any certificate theretofore issued by the corporation and
alleged to have been lost, stolen, destroyed, or mutilated, upon such terms
inconformity with law as the Board of Directors shall prescribe. The directors
may, in their discretion, require the owner of the lost, stolen, destroyed or
mutilated certificate, or the owner's legal representatives, to give the
corporation a bond, in such sum as they may direct, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss,
theft, destruction or mutilation of any such certificate, or the issuance of any
such new certificate.
SECTION 4. Record Date. The Board of Directors may fix in advance a
-----------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action. Such record date shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action to which such record date relates.
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If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. Unless otherwise fixed by the Board of
Directors, the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed. The record date for determining stockholders for
any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 5. Fractional Share Interests. The corporation may, but shall not
--------------------------
be required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are
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<PAGE>
exchangeable may be sold by the corporation and the proceeds thereof distributed
to the holders of scrip or warrants, or subject to any other conditions which
the Board of Directors may impose.
SECTION 6. Dividends. Subject to the provisions of the certificate of
---------
incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meeting, declare dividends upon the common
stock of the corporation as and when they deem expedient.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification. The corporation shall, to the extent
---------------
permitted by the certificate of incorporation, as amended from time to time,
indemnify each person whom it may indemnify pursuant thereto.
SECTION 2. Insurance. The corporation shall have power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under the
provisions of the General Corporation Law of the State of Delaware.
-18-
<PAGE>
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. Fiscal Year. Except as otherwise designated from time to time
-----------
by the Board of Directors, the fiscal year of the corporation shall begin on the
first day of January and end on the last day of December.
SECTION 2. Corporate Seal. The corporate seal shall be in such form as
--------------
shall be approved by the Board of Directors. The Secretary shall be the
custodian of the seal. The Board of Directors may authorize a duplicate seal to
be kept and used by any other officer.
SECTION 3. Certificate of Incorporation. All references in these by-laws
----------------------------
to the certificate of incorporation shall be deemed to refer to the certificate
of incorporation of the corporation, as in effect from time to time.
SECTION 4. Execution of Instruments. The Chairman and Vice-Chairman of
------------------------
the Board of Directors, if any, the President, any Vice-President, and the
Treasurer shall have power to execute and deliver on behalf and in the name of
the corporation any instrument requiring the signature of an officer of the
corporation, including deeds, contracts, mortgages, bonds, notes, debentures,
checks, drafts, and other orders for the payment of money. In addition, the
Board of Directors may expressly delegate such powers to any other officer or
agent of the corporation.
SECTION 5. Voting of Securities. Except as the directors may otherwise
--------------------
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at any meeting of
stockholders or shareholders of any other corporation or organization the
securities of which may be held by this corporation.
SECTION 6. Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary secretary, as to any action taken by the
stockholders,
-19-
<PAGE>
directors, a committee or any officer or representative of the corporation
shall, as to all persons who rely on the certificate in good faith, be
conclusive evidence of that action.
SECTION 7. Transactions with Interested Parties. No contract or
------------------------------------
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are director or officers, or have a financial interest, shall be void
or voidable solely for that reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the contract or transaction
or solely because the vote of any such director is counted for such purpose, if:
(1) The material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(2) The material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
-20-
<PAGE>
SECTION 8. Books and Records. The books and records of the corporation
-----------------
shall be kept at such places within or without the State of Delaware as the
Board of Directors may from time to time determine.
ARTICLE VII
NOTICES
SECTION 1. Notice to Stockholders. Whenever, under any provisions of
----------------------
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
SECTION 2. Notice to Directors. Any notice required to be given to
-------------------
any Director may be given by the method stated in Section 1, or by facsimile,
telex, telegram or electronic means, except that such notice other than one
which is delivered personally shall be sent to such address as such Director
shall have filed in writing with the Secretary, or, in the absence of such
filing, to the last known post office address of such Director.
SECTION 3. Address Unknown. If no address of a stockholder or
---------------
Director be known, notice may be sent to the office of the corporation required
to be maintained pursuant to Section 2 hereof.
SECTION 4. Affidavit of Mailing. An affidavit of mailing, executed
--------------------
by a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
-21-
<PAGE>
SECTION 5. Time Notices Deemed Given. All notices given by mail, as
-------------------------
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by facsimile, telex, telegram or electronic means shall be
deemed to have been given as of the sending time recorded at time of
transmission.
SECTION 6. Methods of Notice. It shall not be necessary that the
------------------
same method of giving notice be employed in respect to all Directors, but one
permissible method may be employed in respect to any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
SECTION 7. Failure to Receive Notice. The period or limitation of
-------------------------
time within which any stockholder may exercise any option or rights, or enjoy
any privilege or benefit, or be required to act, or within which any Director
may exercise any power or right, or enjoy any privilege, pursuant to any notice
sent him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.
SECTION 8. Notice to Person with Whom Communication Is Unlawful.
----------------------------------------------------
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by
the corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law,
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<PAGE>
the certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.
SECTION 9. Notice to Person with Undeliverable Address. Whenever
-------------------------------------------
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person all not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE VIII
AMENDMENTS
SECTION 1. By the Board of Directors. These by-laws may be altered, amended or
-------------------------
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
-23-
<PAGE>
SECTION 2. By the Stockholders. These by-laws may be altered, amended or
-------------------
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
-24-
<PAGE>
Exhibit 4.1
NUMBER INSPIRE [LOGO] SHARES
PHARMACEUTICALS, INC.
IP Incorporated Under the Laws of the State of Delaware
COMMON STOCK CUSIP 457733 10 3
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.001 PER
SHARE, OF
INSPIRE PHARMACEUTICALS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to the laws of the State of Delaware and the provisions of
the Certificate of Incorporation and the By-Laws of the Corporation, as amended
from time to time, to which the holder by acceptance hereof assents. This
certificate is not valid unless countersigned and registered by the transfer
agent and registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
/s/ Christy L. Shaffer Dated:
President and Chief Executive Officer
[SEAL]
Countersigned and Registered:
American Securities Transfer & Trust, Inc.
(DENVER, CO)
BY Transfer Agent
/s/ Gregory J. Mossinghoff and Registrar
Chief Business Officer and Secretary
Authorized Signature
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ NOTICE: The signature to this assignment must correspond with the name as +
+ written upon the face of the Certificate, in every particular, without +
+ alteration or enlargement, or any change whatever. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
INSPIRE PHARMACEUTICALS
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF OF THE CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS
OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUESTS MAY BE MADE TO THE CORPORATION
AT ITS PRINCIPAL OFFICE OR TO ITS TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-as tenants in common UNIF GIFT MIN ACT-_______Custodian________
(Cust) (Minor)
TEN ENT-as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN-as joint tenants with right _________________________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________________
________________________________________________________________________________
Attorney to transfer the said Stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated:_______________________________
X__________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM) PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 10.7
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
EXCLUSIVE
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and entered into this 10/th/ day of March,
1995 between THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL having an address
at 300 Bynum Hall, Chapel Hill, N.C. (hereinafter referred to as University) and
Inspire Pharmaceuticals, Inc., a corporation organized and existing under the
laws of Delaware and having an address at c/o Burr, Egan, Deleage & Co., One
Post Office Square, Boston, Massachusetts (hereinafter referred to as Licensee).
W I T N E S S E T H
WHEREAS, University owns and controls the inventions described in U.S.
Patent No. 5,292,498 entitled "Method of Treating Lung Disease with Uridine
Triphosphates," certain inventions relating to the therapeutic use of phenamil
and benzamil for lung disease, and certain inventions relating to the diagnosis
of AIDS-related Pneumocysitis carinii pneumonia ("PCP"), lung cancer, and
tuberculosis (collectively, the "Inventions"); and
WHEREAS, the Inventions were developed by Drs. Richard C. Boucher and M.
Jackson Stutts (collectively, the "Inventors"), of the University; and
WHEREAS, Licensee is desirous of producing, using and selling products
which include the use of the Inventions and is willing to expend best efforts to
do so if it can obtain a license to use the Inventions under the terms and
conditions set forth herein; and
WHEREAS, University desires to facilitate a timely transfer of its
information and technology concerning the Inventions for the ultimate benefit of
the public and this transfer is best accomplished by the grant of this license;
and
WHEREAS, in the opinion of the University, this transfer can best be
accomplished consistent with its mission by affiliation with Licensee;
NOW, THEREFORE, for and in consideration of the covenants, conditions, and
undertakings hereinafter set forth, it is agreed by and between the parties as
follows:
1. Definitions
-----------
1.1. "University Technology" means any unpublished research and
development information, unpatented inventions, know-how, clinical data, and
technical data in the possession of the University prior to the effective date
of this Agreement or which comes into the possession of University during the
term of this Agreement which relates to and is necessary for the practice of the
Inventions or any Licensed Improvements and which University has the right to
provide to Licensee.
<PAGE>
1.2. "Licensed Products" means any method, procedure, product, or
component part thereof whose manufacture, sale, or use includes any use of
University Technology or is covered by any Valid Claim included in the Patent
Rights.
1.3. "Patent Rights" means any unexpired U.S. patents and/or pending
patent applications covering the Inventions or any Licensed Improvements owned
or controlled by University prior to or during the term of this Agreement and
which University has the right to provide to Licensee, as well as any
continuations, continuations in part, divisions, or reissues thereof, and any
foreign counterpart of any of the foregoing.
1.4. "Net Sales Price" means the invoiced sales price, less (i) trade,
quantity and cash discounts or rebates actually allowed, (ii) credits or
allowances actually given for rejections or returns, (iii) sales, use and value
added taxes, and (iv) freight, shipping or other costs of transportation charged
to a customer
In the event any Licensed Product is sold as a component of a combination
of functional elements, Net Sales Price for purposes of determining royalty
payments on such combination shall be calculated by subtracting from the net
sales price of the combination the gross selling price of the inhaler device
component (if any) and then multiplying this adjusted net sales price by the
fraction A over A+B, in which "A" is the gross selling price of the Licensed
Product portion of the combination and "B" is the gross selling price of the
other active elements of the combination, including the inhaler device
component. For the purposes of this Section 1.4, the term "gross selling price"
shall mean the price at which the relevant component was sold separately during
the accounting period in which the sale of the combination was made. In the
event that there is no separate sale of such above designated Licensed Product,
inhaler device, or other active element of the combination during the accounting
period in which the sale of the combination was made, Net Sales Price shall be
calculated by subtracting from the net sales price of the combination the gross
selling price, if available, or the fully allocated cost, if not, of the inhaler
device component (if any) and then multiplying this adjusted net sales price by
the fraction C over C+D, in which "C" is the fully allocated cost of the
Licensed Product portion of such combination and "D" is the fully allocated cost
of the other active elements of the combination, including the inhaler device
component. The fully allocated cost of a component shall be determined in
accordance with conventional cost accounting principles. [CONFIDENTIAL
TREATMENT REQUESTED].
1.5. "Net Sales" means the total Net Sales Price of Licensed Products.
Licensed Products will be considered sold when billed out, or when delivered or
paid for before delivery, whichever first occurs.
1.6. "Licensed Territory" means the entire world.
1.7. "Licensed Improvements" shall have the meaning set forth in the
Sponsored Research Agreement.
-2-
<PAGE>
1.8. "Valid Claim" means a claim of an issued patent which has not
lapsed or become abandoned or been declared invalid or unenforceable by a court
of competent jurisdiction or an administrative agency for which there is no
right of appeal or for which the right of appeal is waived.
1.9. "Sponsored Research Agreement" means the Sponsored Research
Agreement attached as Exhibit A.
---------
2. Grant of License and Term
-------------------------
2.1. University grants to Licensee to the extent of the Licensed
Territory, an exclusive license (with the right to grant sublicenses) under the
Patent Rights and University Technology to make, have made, use and sell
Licensed Products, upon the terms and conditions set forth herein.
2.2. Any license granted herein is exclusive for a term beginning on the
date of execution of this Agreement and, unless terminated sooner as herein
provided, ending at the expiration of the last to expire patent included in the
Patent Rights.
2.3. Licensee shall not disclose any unpublished University Technology
furnished by University pursuant to Paragraph 2.1 above to third parties during
the term of this Agreement or any time thereafter, provided, however, that
disclosure may be made of any such University Technology at any time: (1) with
the prior written consent of University, (2) after the same shall have become
public through no fault of Licensee, (3) as demonstrated by documentary
evidence, if the same was independently developed or discovered by Licensee
prior to the time of its disclosure, (4) the same is or was disclosed to
Licensee at any time, whether prior to or after the time of its disclosure under
this Agreement, by a third party having no fiduciary relationship with
University and having no obligation of confidentiality with respect to such
University Technology or (5) the same is required to be disclosed to comply with
applicable laws or governmental regulations, provided the University receives
prior written notice of such disclosure and that Licensee takes all reasonable
and lawful actions to minimize the extent of such disclosure and, if possible,
to avoid such disclosure.
2.4. Notwithstanding the foregoing, any and all licenses granted
hereunder are subject to the rights of the United States Government which arise
out of its sponsorship of the research which led to the Inventions or any
Licensed Improvements.
3. License Fee, Milestone Payments, and Royalties
----------------------------------------------
3.1. (a) Licensee shall pay to University the following license issue
fees:
Amount of Fee Description of Technology Licensed
------------- ----------------------------------
. [CONFIDENTIAL . U.S. Patent No. 5,292,498 entitled "Method of
TREATMENT Treating Lung Disease with Uridine
REQUESTED] Triphosphates."
-3-
<PAGE>
. [CONFIDENTIAL . Certain inventions relating to the
TREATMENT therapeuticuse of phenamil and benzamil for
lung disease.
. REQUESTED] . Certain inventions relating to the
diagnosis of AIDS-related Pneumocysitis
carinii pneumonia, lung cancer, and
tuberculosis.
(b) Licensee will also reimburse the University for properly documented
costs (including attorney's fees) arising out of the patenting of the Inventions
pursuant to Article 10 of this Agreement.
(c) Licensee shall pay to University the following milestone payments
within thirty (30) days after each milestone is achieved:
Payment Milestone
------- ---------
[CONFIDENTIAL TREATMENT REQUESTED]
(d) In partial consideration of the license granted under Section 2.1 of
this Agreement, Licensee shall issue to the University a total of Five Hundred
Twenty One Thousand shares of Common Stock of the Company, $.001 par value per
share.
(e) Both the license issue fee and the reimbursement of patenting costs
shall be non-refundable and shall not be a credit against any other amounts due
hereunder except as may be provided for elsewhere in this Agreement.
3.2. Beginning on the effective date of this Agreement and continuing for
the life of this Agreement, Licensee will pay University a running royalty of
[CONFIDENTIAL TREATMENT REQUESTED] of all Net Sales of the Licensed Product(s)
that are sold by Licensee.
3.3. After the first commercial sale of a Licensed Product, Licensee agrees
to make quarterly written reports to University within 30 days after the first
days of each January,
-4-
<PAGE>
April, July, and October during the life of this Agreement and as of such dates,
stating in each such report the number, description, and aggregate Net Selling
Prices of Licensed Products sold or otherwise disposed of during the preceding
three calendar months and upon which royalty is payable as provided in Article
3.2 hereof. The first such reports shall include all such Licensed Products so
sold or otherwise disposed of prior to the date of such report.
3.4. Concurrently with the making of each such report, Licensee shall
pay to the University royalties at the rate specified in Article 3.2 of this
Agreement on the Licensed Products included therein.
3.5. (a) If in any calendar year during the term of this Agreement,
[CONFIDENTIAL TREATMENT REQUESTED]
(b) [CONFIDENTIAL TREATMENT REQUESTED]
3.6. University may, by written notice to Licensee, terminate this
Agreement during any April subsequent to the second anniversary of the first
commercial sale of a Licensed Product if Licensee, together with its
sublicensees, have not practiced the Invention during each calendar year which
precedes each such April to the extent of generating earned payments to
University under Section 3.2 and 5.3 of this Agreement in an amount no less than
[CONFIDENTIAL TREATMENT REQUESTED].
3.7. Should this Agreement become effective or terminate or expire
during a calendar year, the minimum royalty under paragraph 3.5 for such portion
of a year shall be determined by multiplying the minimum royalty set forth in
said paragraph for the year in which this Agreement becomes effective,
terminates or expire, by a fraction, the numerator of which shall be the number
of days during such calendar year for which this Agreement shall be in effect
and the denominator of which shall be 365.
3.8. In the event of default in payment of any payment owing to
University under the terms of this Agreement, and if it becomes necessary for
University to undertake legal action to collect said payment, Licensee shall pay
all legal fees and costs incurred by University in connection therewith.
3.9. In the event that licensee is legally required to pay license fees
or royalties to one or more third parties under patents other than the Patent
Rights in order to make, use or sell a Licensed Product, then Licensee shall be
entitled to a credit against royalties due University on sales of that Licensed
Product in an amount equal to [CONFIDENTIAL TREATMENT REQUESTED] of the
royalties paid to such third parties, provided than in no event shall the
royalties otherwise due University be reduced by more than [CONFIDENTIAL
TREATMENT REQUESTED]. In the event that such third party license fee or royalty
payments exceed [CONFIDENTIAL TREATMENT REQUESTED] of the royalties payable to
University on sales of that Licensed Product for the quarterly payment period in
which such third party license fees or royalties are incurred, the excess shall
be carried forward and
-5-
<PAGE>
offset against royalties due to University in successive payment periods. This
Section 3.9 shall apply only to the Licensed Product portion of any combination
product, as described in Section 1.4 above.
4. Diligence Requirements
----------------------
4.1. Licensee shall use its best efforts to proceed diligently with the
manufacture and sale of Licensed Products and shall earnestly and diligently
offer and continue to offer for sale such Licensed Products, both under
reasonable conditions, during the term of this Agreement.
4.2. In particular, Licensee shall meet the performance milestones set
forth in Exhibit B, which is attached hereto.
---------
5. Sub-licenses
------------
5.1. Subject to this Article, Licensee may grant sub-licenses under its
rights under Section 2.1 above provided that each sublicense contains a
provision that such sub-license and the rights thereby granted are personal to
the sub-licensee thereunder and such sub-license cannot be further sub-licensed.
5.2. Any sub-license granted pursuant to this Article shall be in
accordance with the terms and conditions of this Agreement.
5.3. Licensee shall promptly pay University [CONFIDENTIAL TREATMENT
REQUESTED] of any royalty income received from any sublicensee in consideration
of the grant of sublicense rights pursuant to this Article 5. If non-monetary
consideration is so received, then a commercially reasonable monetary value will
be assigned for purposes of calculating University's share of sublicense royalty
income. Licensee shall retain the entirety of all other payments received from
such sublicensees, including without limitation license fees, milestone
payments, research and development payments, and payments for the issuance of
equity or debt securities of Licensee.
6. Cancellation
------------
6.1. It is expressly agreed that, notwithstanding the provisions
of any other paragraph of this contract, if Licensee should fail to deliver to
University any royalty at the time or times that the same should be due to
University or if either party should in any material respect violate or fail to
keep or perform any covenant, conditions, or undertaking of this Agreement on
its part to be kept or perform hereunder, then and in such event the affected
party shall have the right to cancel and terminate this Agreement, and the
license herein provided for, by written notice to the other party if such party
has failed to cure any such breach within 30 days of receipt of written notice
from the affected party describing such breach. The right to cure a breach with
apply only to the first two breaches properly noticed under terms of this
Agreement, regardless of the nature of those breaches. Any subsequent breach by
that party will entitle the affected party to terminate this Agreement upon
proper notice.
-6-
<PAGE>
6.2. If Licensee should fail to meet performance milestones number 1, 3,
4 or 5 as set forth on Exhibit B, University may terminate this Agreement upon
---------
thirty (30) days written notice to Licensee. If Licensee fails to meet
performance milestone number 2 as set forth on Exhibit B, then University may
---------
revoke the license granted under Section 2.1 with respect to such amiloride
analogs upon 30 days prior written notice to Licensee; provided, however, that
all other provisions of this Agreement shall remain in full force and effect,
including without limitation the licenses to the Patent Rights and University
Technology associated with technologies other than such sodium uptake
inhibitors.
6.3. If Licensee should be adjudged bankrupt or enter into a composition
with or assignment to its creditors, then in such event University shall have
the right to cancel and terminate this Agreement, and the license herein
provided for, by written notice to Licensee.
6.4. Any termination or cancellation under any provision of this
Agreement shall not relieve Licensee of its obligation to pay any royalty or
other fees (including attorney's fees pursuant to Article 3.1 hereof) due or
owing at the time of such cancellation or termination.
7. Disposition of Licensed Products On Hand Upon Cancellation or Termination
-------------------------------------------------------------------------
7.1. Upon cancellation of this Agreement or upon termination in whole or
in part, Licensee shall provide University with a written inventory of all
License Products in process of manufacture, in use or in stock. Except with
respect to termination by University for nonpayment of royalties pursuant to
Paragraph 6.1, Licensee shall have the privilege of disposing of the inventory
of such Licensed Products within a period of one hundred and eighty (180) days
of such termination upon conditions most favorable to University that Licensee
can reasonably obtain. Licensee will also have the right to complete performance
of all contracts executed by Licensee prior to cancellation or termination by
University and requiring use of the University Technology, Patent Rights (except
in the case of termination by University for nonpayment of royalties pursuant to
Paragraph 6.1) or Licensed Products within and beyond said 180-day period
provided that the remaining terms of any such contract does not exceed one year.
8. Use of University's Name
------------------------
8.1. The use of the name of University, or any contraction thereof, in
any manner in connection with the exercise of this license is expressly
prohibited except with prior written consent of University. The foregoing
notwithstanding, Licensee shall have the right to identify the University and to
disclose the terms of this Agreement in any prospectus, offering memorandum, or
other document or filing required by applicable securities laws or other
applicable law or regulation, provided that Licensee shall have given University
at least five (5) days prior written notice of the proposed text of any such
identification or disclosure for the purpose of giving University the
opportunity to comment on such proposed text.
-7-
<PAGE>
9. University Use
--------------
9.1. It is expressly agreed that, notwithstanding any provisions herein,
University is free to make noncommercial use of university Technology, Patent
Rights and Licensed Products for its own research, public service, clinical,
teaching and educational purposes without payment of royalties. Furthermore,
except as provided in the Sponsored Research Agreement, University shall be free
to publish University Technology, as it sees fit.
10. Patents and Infringements
-------------------------
10.1. Licensee shall reimburse University for up to [CONFIDENTIAL
TREATMENT REQUESTED] of any properly documented costs incurred to date in
relation to patenting the Inventions. As of the effective date of this
Agreement, Licensee shall bear the cost of filing and prosecuting U.S. Patent
applications and maintenance of issued patents included within the Patent
Rights. Such filings and prosecution shall be by counsel of University's
choosing but shall be reasonably acceptable to Licensee. University shall keep
Licensee advised as to the prosecution of such applications by forwarding to
Licensee copies of all official correspondence, (including, but not limited to,
Applications, Office Actions, responses, etc.) relating thereto. Licensee shall
have the right to advise University as to such prosecution, and further, shall
have the right to make reasonable requests as to the conduct of such
prosecution.
10.2. As regards filing of foreign patent applications and maintenance of
issued patents corresponding to the U.S. applications described in paragraph
10.2 above, Licensee shall designate that country or those countries, if any, in
which Licensee desires such corresponding patent application(s) to be filed.
Licensee shall pay all costs and legal fees associated with the preparation and
filings of such designated foreign patent applications and maintenance of issued
patents, and such applications shall be in the University's name and by counsel
of the University's choosing and reasonably acceptable to Licensee. University
may elect to file corresponding patent applications in countries other than
those designated by Licensee, but in that event University shall be responsible
for all costs associated with such non-designated filings. In such event,
Licensee shall forfeit its rights under this license in the country or countries
where University exercises its option to file such corresponding patent
applications.
10.3. If the production, sale or use of Licensed Products under this
Agreement by Licensee results in any claim for patent infringement against
Licensee, Licensee shall promptly notify the University thereof in writing,
setting forth the facts of such claim in reasonable detail. As between the
parties to this Agreement, Licensee shall have the first and primary right and
responsibility at its own expense to defend and control the defense of any such
claim against Licensee, by counsel of its own choice. It is understood that any
settlement of such actions must be approved by University. Such approval shall
not be unreasonably withheld. University agrees to cooperate with Licensee in
any reasonable manner deemed by Licensee to be necessary in defending any such
action. Licensee shall reimburse University for any out of pocket expenses
incurred in providing such assistance.
10.4. If an action is brought against Licensee as described in Section
10.3, Licensee may offset the royalty paid to University in each quarterly
royalty period by
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<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED] of the amount of expenses incurred in that
royalty period as a result of such action, said expenses to include costs,
attorney's fees, judgments, and all other expenses incident to the infringement
action, to a maximum of [CONFIDENTIAL TREATMENT REQUESTED] of the amount
otherwise payable to University in that royalty period. Expenses in excess of
the amounts due in any royalty period may be carried over into subsequent
royalty periods.
10.5. In the event that any Patent Rights licensed to Licensee are
infringed by a third party, Licensee shall have the primary rights, but not the
obligation, to institute, prosecute and control any action or proceeding with
respect to such infringement, by counsel of its choice, including any
declaratory judgment action arising from such infringement. University agrees
to cooperation with Licensee in any reasonable manner deemed by Licensee to be
necessary in defending any such action, including joining such action if the
University is an indispensable party, provided that Licensee shall reimburse
University for its out-of-pocket expenses incurred in providing such assistance.
[CONFIDENTIAL TREATMENT REQUESTED].
10.6. Notwithstanding the foregoing, and in University's sole discretion,
University shall be entitled to participate through counsel of its own choosing
in any legal action involving the Inventions. Nothing in the foregoing sections
shall be construed in any way which would limit the authority of the Attorney
General of North Carolina.
11. Waiver
------
11.1. It is agreed that no waiver by either party hereto of any breach or
default of any of the covenants or agreements herein set forth shall be deemed a
waiver as to any subsequent and/or similar breach or default.
12. License Restrictions
--------------------
12.1. It is agreed that the rights and privileges granted to Licensee are
each and all expressly conditioned upon the faithful performance on the part of
the Licensee of every requirements herein contained, and that each of such
conditions and requirements may be and the same are specific license
restrictions.
13. Assignments
-----------
13.1. This Agreement is binding upon and shall inure to the benefit of
the University, its successors and assigns. This Agreement shall not be
assignable or otherwise transferable by either party without the prior written
consent of the other, which consent shall not be unreasonably withheld, except
that Licensee may assign or otherwise transfer its rights under this Agreement
to the following parties without obtaining consent: (1) a successor to
Licensee's business, or a successor to that portion of Licensee's business that
pertains to the subject matter of the Patent Rights or any University
Technology, and (2) any entities controlled by, controlling, or under common
control with Licensee.
-9-
<PAGE>
14. Indemnity
---------
14.1. Licensee agrees to indemnify, hold harmless and defend University,
its officers, employees, and agents, against any and all claims, suits, losses,
damage, costs, fees, and expenses asserted by third parties, both government and
private, resulting from or arising out of the exercise of this license.
15. Insurance
---------
15.1. Licensee is required to maintain in force at its sole cost and
expense, with reputable insurance companies, general liability insurance and
products liability insurance coverage in an amount reasonably sufficient to
protect against liability under Section 14, above. The University shall have
the right to ascertain from time to time that such coverage exists, such right
to be exercised in a reasonable manner.
16. Independent Contractor Status.
-----------------------------
16.1. Neither party hereto is an agent of the other for any purpose.
17. Representations and Warranties
------------------------------
17.1. University represents that as of the Effective Date the entire
right, title, and interest in the patent applications or patents comprising the
Patent Rights have been assigned to it and that University has the authority to
issue licenses under said Patent Rights. University also represents that it has
received no notification that the Patent Rights are invalid nor that the
exercise by Licensee of the rights granted hereunder will infringe on any patent
or other proprietary right of any third party. University makes no warranties
that any patent will issue on University Technology or Inventions. University
further makes no warranties, express or implied as to any matter whatsoever,
including, without limitation, the condition of any invention(s) or product(s),
that are subject of this Agreement; or the merchantability or fitness for a
particular purpose of any such invention or product. University shall not be
liability for any direct, consequential, or other damages suffered by Licensee
or any others resulting from the use of the Inventions of License Products.
17.2. Paragraph 3.1(d) of this Agreement is made with the University in
reliance upon the University's representation to the Company, which the
University hereby confirms by execution of this Agreement, that the Common Stock
to be received by the University (the "Securities") will be acquired for
investment for University's own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and that the
University has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, the University
further represents that it does not have any contract, undertaking, agreement,
or arrangement with any person to sell, transfer, or grant participation to such
person or to any third person, with respect to any of the Securities.
17.3. The University has received all the information that it considers
necessary or appropriate for deciding whether to purchase the Securities. The
University further
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<PAGE>
represents that it has had sufficient opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Securities.
17.4. The University acknowledges that it is able to fend for itself, can
bear the economic risk of its investment, and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities.
17.5. Purchaser understands that the Securities are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this regard, the University
represents that it is familiar with SEC Rule 144, as currently in effect, and
understands the resale limitations imposed thereby and by the Act.
18. Accounting and Records
----------------------
18.1. Licensee will keep complete, true and accurate books of account and
records for the purpose of showing the derivation of all amounts payable to
University under this Agreement. Such books and records will be kept at
Licensee's principal place of business for at least three (3) years following
the end of the calendar quarter to which they pertain, and will be open at all
reasonable times for inspection by a representative of University for the
purpose of verifying licensee's royalty statements, or Licensee's compliance in
other respects with this Agreement. The representative and the University will
be obliged to treat as confidential all relevant matters except information
relating to the accuracy of such reports and payments or except as required by
law.
18.2. Such inspections shall be at the expense of University, unless a
variation or error in excess of 2% is discovered in the course of any such
inspection, whereupon all costs relating thereto paid by Licensee.
18.3. Licensee will pay to University within thirty (30) days of
receiving notice from University the full amount of any under payment, together
with interest thereon at the maximum rate of interest allowed by law.
19. Compliance with Laws
--------------------
19.1. In exercising its rights under this license, Licensee shall fully
comply with the requirements of any and all applicable laws, regulations, rules
and orders of any governmental body having jurisdiction over the exercise of
rights under this license. Licensee further agrees to indemnify and hold
University harmless from and against any costs, expenses, attorney's fees,
citation, fine, penalty and liability of every kind and nature which might be
imposed by reason of any asserted or established violation of any such laws,
order, rules and/or regulations.
-11-
<PAGE>
20. U.S. Manufacture
----------------
20.1. It is agreed that any Licensed Products sold in the United States
shall be substantially manufactured in the United States.
21. Notices
-------
21.1. Any notice required or permitted to be given to the parties hereto
shall be deemed to have been properly given when received by means of confirmed
facsimile transmission, recognized national overnight courier, or first-class
certified mail to the other party at the appropriate address or facsimile number
as set forth below or to such other addresses or facsimile numbers as may be
designated in writing by the parties from time to time during the terms of this
Agreement.
UNIVERSITY LICENSEE
Dr. Robert P. Lowman H. Jeff Leighton, Ph.D.
Office of Research Services President and Chief Executive
CB #4100, 300 Bynum Hall Officer
University of North Carolina at Chapel Hill Inspire Pharmaceuticals, Inc.
Chapel Hill, NC 27599-4100 c/o Burr, Egan, Deleage & Co.
Ph: (919) 966-5625 One Post Office Square
Fax: (919) 962-0646 Boston, MA 02110
Ph: (617) 482-8020
Fax: (617) 566-0848
With a copy to:
Michael Lytton, Esq.
Palmer & Dodge
One Beacon Street
Boston, MA 02108
Fax: (617) 227-4420
22. Governing Laws
--------------
22.1. This Agreement shall be interpreted and construed in accordance
with the laws of the State of North Carolina.
3. Complete Agreement
------------------
23.1. Except for the Sponsored Research Agreement, it is understood and
agreed between University and Licensee that this Agreement and the Exhibits
attached hereto constitute the entire Agreement, both written and oral, between
the parties, and that all prior agreements respecting the subject matter hereof,
either written or oral, expressed or implied, shall be abrogated, cancelled, and
are null and void and of no effect.
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<PAGE>
24. Force Majeure.
-------------
24.1. Neither party will be responsible for delays resulting from acts
beyond the control of such party, provided that the nonperforming party uses
reasonable commercial efforts to avoid or remove such causes of nonperformance
and continues performance hereunder with reasonable dispatch whenever such
causes are removed. This Article 24 does not apply to the diligence
requirements set forth on Exhibit B.
---------
25. Survival of Terms
-----------------
25.1. The provisions of Articles 7, 8, 14, 15, 18, 19 and 22 shall
survive the expiration or termination of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, both University and Licensee have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, the day and year first above written. The Inventors have likewise
indicated their acceptance of the terms hereof by signing below.
THE UNIVERSITY OF NORTH CAROLINA INSPIRE PHARMACEUTICALS, INC.
AT CHAPEL HILL
By: /s/ Wayne R. Jones By: /s/ H. Jeff Leighton
------------------------- --------------------------------
Wayne R. Jones H. Jeff Leighton, Ph.D.
Vice Chancellor, President & Chief Executive
Business and Finance Officer
INVENTORS:
/s/ Richard C. Boucher
- -------------------------------
Richard C. Boucher
/s/ M. Jackson Stutts
- -------------------------------
M. Jackson Stutts
-14-
<PAGE>
EXHIBIT A
SPONSORED RESEARCH AGREEMENT
<PAGE>
EXHIBIT B
DILIGENCE REQUIREMENTS
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
EXHIBIT 10.8
LEASE
FOR
ROYAL CENTER I
LANDLORD: IMPERIAL CENTER LIMITED PARTNERSHIP,
A NORTH CAROLINA LIMITED PARTNERSHIP
TENANT: INSPIRE PHARMACEUTICALS, INC.
<PAGE>
STATE OF NORTH CAROLINA: LEASE
-----
COUNTY OF Durham:
THIS LEASE, made as of this 17 day of May 1995, by and between Imperial
Center, Limited Partnership, a North Carolina limited partnership hereinafter
"Landlord" and Inspire Pharmaceuticals, Inc. hereinafter (whether one or more)
"Tenant".
WITNESSETH:
Upon the terms and conditions hereinafter set forth, the Landlord leases to
Tenant and tenant leases from Landlord property hereinafter defined and referred
to as the Premises, all as follows:
1. PREMISES. The property hereby leased to Tenant is:
That area shown on Exhibit A-1 (Space Plan) consisting
of approximately 6,495 rentable square feet and
located in Royal Center I (the "Building") with an
address at 4222 Emperor Boulevard, Morrisville, North
Carolina 27560, the above-described leased property
being herein referred to as the Premises which
together with common areas both for the Building and
the Imperial Center Business Park is also shown
on Exhibit A-4 (Business Park Site Plan).
2. TERM. The term of this Lease shall be for a period of five (5) years
commencing the first day of June, 1995, and ending on the last day of May, 2000.
If for any reason whatsoever, Landlord cannot deliver possession of the Premises
as of the foregoing commencement date, this Lease shall not be void or voidable;
no obligation of Tenant shall be affected thereby; and neither Landlord nor
Landlord's agent shall be liable to Tenant for any loss or damage resulting
therefrom; provided, however, that in such event, the commencement and
expiration dates of this Lease and all other dates affected thereby may be
revised by written notice from Landlord to Tenant within ninety (90) days of the
commencement date specified above to conform all affected dates under this Lease
to the date of Landlord's delivery of possession to the Tenant. If with
Landlord's prior written approval, Tenant occupies the Premises prior to the
commencement date specified above, such occupancy by Tenant shall be subject to
all terms and conditions of this Lease, shall not advance the expiration date,
and Tenant shall pay pro-rated rent for such period of occupancy at the initial
monthly rate set forth below.
3. RENT. All rent payable by Tenant shall be without previous demand
therefor by Landlord, and without setoff or deduction. The minimum rent
("Minimum Rent") for the term shall be the sum of three hundred twenty-four
thousand six hundred fifty-two and 34/100 Dollars ($324,652.34), which rent
shall be payable in advance in equal monthly installments as follows:
<TABLE>
<CAPTION>
MONTHLY ANNUAL
MONTHS RATE PER RENTABLE S.F. RENT RENT
------ ------------------------- ------------- -----------
<S> <C> <C> <C>
1-2* $10.26 $1,282.50
(Commencing 6/1/95)
3-12 $10.26 $5,553.23 $ 58,097.30
13-60 $10.26 $5,553.23 $ 66,638.76
Total Minimum Rent: $324,652.34
</TABLE>
*Rental for months 1-2 shall be on the existing office area only, an area
of approximately 1,500 rentable square feet. Tenant to occupy the
remainder of space of approximately 4,995 rentable square feet, which
comprises the total rentable area of 6,495 square feet on August 1, 1995.
Each monthly installment of rent shall be payable on or before the first day of
each calendar month during the term of this Lease, unless the term commences
other than on the first day of the month, in which event rent at the above rate
pro-rated until the end of that month shall be due and payable on the
commencement date. In addition to such remedies as may be provided under the
default provisions of this Lease, Landlord shall be entitled to a late
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<PAGE>
charge of five percent (5%) of the amount of the monthly rent if not received
when due, and a charge of Twenty Dollars ($20.00) or the maximum amount allowed
by law, whichever is less, for any check given by Tenant not paid when first
presented by Landlord.
4. ADDITIONAL RENT. In addition to rent, Tenant shall pay to Landlord,
at the same time as monthly installment payments to rent are made, a sum which
represents Tenant's proportionate share of insurance costs, taxes and operating
expense charges owed by Tenant pursuant to the terms of Sections 18, 19 and 20
of this Lease, respectively. The actual amount of additional rent due from
Tenant shall be adjusted on an annual basis as and when the actual amount of
Tenant's proportionate share of insurance costs, taxes and operating expenses
charges are determined, and if Tenant has under paid, it shall, within thirty
(30) days of notice from Landlord pay the shortfall as a lump sum payment, and
if Tenant has overpaid, Landlord shall pay in a lump sum payment, such overage
within thirty (30) days. Tenant shall have the right of reasonable access to
Landlord's books and records relative to such operating expense and shall have
the right to audit the same. In the event that such an audit reveals a
discrepancy of greater than ten percent (10%), which has resulted in an
overpayment by Tenant in the amount which should have been charged by Landlord,
then Landlord shall pay all costs associated with such audit.
4. LANDLORD'S LIEN. Intentionally deleted.
5. USE. The premises may be used for office, warehouse, storage, and
light assembly uses as is necessary for Tenant's business and for research,
development and medical purposes consistent with the pharmaceutical industry and
for no other purpose without Landlord's written consent first had and obtained.
The Tenant shall not use or occupy nor permit the Premises to be used or
occupied, nor do or permit anything to be done in or on the Premises, in a
manner which may (a) make void or voidable any insurance in force with respect
thereto; (b) result in any increase in the premiums charged for warehouse
insurance or cause Landlord to be unable to obtain at regular rates fire or
other insurance required to be maintained; (c) cause structural damage to the
building, the Premises or any part thereof; or (d) constitute a public or
private nuisance; or (e) otherwise violate any present or future law, ordinance,
rule or requirement of any public authority, including, without limitation, any
law, ordinance, rule or requirement concerning or relating to Tenant's use,
occupancy or alteration of the Premises. If as a result of any act or neglect of
Tenant, its employees, agents, representatives, clients or visitors, or change
in the manner in which Tenant's business or operations are conducted at the
Premises, any insurance rate shall be increased over the existing rate and
assessed against Landlord, then and in that event, Tenant shall pay to Landlord
on demand the amount of such increase as additional rent.
7. PARKING AND COMMON AREAS. For as long as Tenant affirmatively
complies with the terms of this Lease, Landlord grants to Tenant, its employees
and invitees, a non exclusive right to use during the term of this Lease, but
subject to such rules and regulations as Landlord may enact in accordance with
the terms hereof, the common areas shown on Exhibit A-2 (Site Plan) and which
areas are or shall be designated by Landlord and are acknowledged to be for use
of such persons along with others similarly entitled, for parking, and for
ingress and egress between the Premises and other portions of the common areas
as shown on Exhibit A-2, which may include adjoining streets, sidewalks, and
highways. Landlord represents that the parking facilities at the Building are at
a ratio of 2.8 parking spaces per 1,000 square feet of space (127 spaces). Not
less than 35 spaces shall be made available for Tenant's use. Such spaces
include striping spaces directly behind the building unless prohibited by
applicable laws or traffic patterns. The 35 spaces mentioned above are available
only if tenant occupies 9,775 rentable square feet. If Tenant finds that parking
serving its reasonable needs are insufficient, Landlord will use its best
efforts to provide additional space adjacent to the building. Tenant's employees
shall park only in areas designated from time to time by Landlord, and not in
any other parking area. If Landlord wishes to move Tenant's employees' parking
areas, such new areas shall be reasonably satisfactory to Tenant.
Three(3)"visitor" spaces will be provided adjacent to Inspire Pharmaceutical,
Inc.'s main entrance. In no event shall the Landlord be responsible for
patrolling the use of the "visitor" spaces provided. Common areas include,
without limitation, parking areas and entrances and exits thereto, driveways and
truck serviceways, sidewalks, landscaped areas, business park entrance areas and
other areas and facilities provided for the common or joint use and benefit of
occupants of the Building and others, their respective employees, agents,
representatives, customers and invitees. Landlord reserves the right, from time
to time, to reasonably alter the common areas, to exercise control and
management of the common areas and to establish, modify, change and enforce such
reasonable rules and regulations as Landlord in its discretion may deem
desirable for the management of the Building, the business park, the common
areas or any part thereof. In using any part of the common areas, Tenant shall
not permit anything which may impede the free flow of traffic through
2
<PAGE>
such common areas, endanger persons or property or encroach on the loading or
unloading, service and parking areas of any other tenant. Rules and Regulations
which apply in part to Tenant's use of the common areas are set forth in Exhibit
C.
8. UTILITIES. Tenant shall procure for its own account and shall pay all
charges for water, telephone, electricity, gas, sewage, and other utilities used
by Tenant at or in the Premises, and Landlord agrees at all times to provide
Tenant with access to such utilities for the purpose of Tenant maintenance,
repair or replacement of such facilities or systems. Tenant shall be
responsible for separate meters for all utilities used at or in the Premises.
To the extent that any service or utility used by Tenant at or in the Premises
is not separately metered, Tenant agrees to pay as additional rent and as a
monthly charge its "pro rata share" of the charges due for such service or
utility, unless otherwise agreed in writing by Landlord, Tenant and any other
affected tenant. Tenant's "pro-rata share" shall be determined in accordance
with the terms of Section 18 for calculating the same, except that the
denominator for the computation shall be the square footage of all premises
affected or served by the particular meter.
9. TENANT REPAIRS. Tenant shall keep the non-structural components of
the Premises, together with all systems, fixtures or equipment therein or
appurtenant thereto, including, without limitation, interior surfaces, flooring,
wiring, plumbing, heating and air conditioning equipment, trade fixtures,
loading area components (including, without limitation, overhead doors, bumpers,
seals and levelers) and other facilities, systems or equipment, whether or not
originally installed by Landlord or Tenant in good condition and repair. Tenant
shall be responsibility for maintenance and replacement of all broken plate
glass and windows (unless breakage or damage results from settling of the
building or faulty initial construction undertaken by Landlord) and of all
lights and ballasts. Tenant shall maintain all lighting serving the Premises in
good working order at all times during the term of this Lease. In connection
with the day-to-day maintenance and repair of the heating and air conditioning
systems and equipment at the Premises, Tenant agrees to enter into and maintain
(for the term of this Lease) a maintenance contract with a reputable company
offering maintenance and repair services acceptable to Landlord, this contract
to be subject to the specifications set forth in Exhibit "D". Tenant shall
provide Landlord with satisfactory evidence that it has entered into and
maintained the aforesaid maintenance contract upon Landlord's request therefor.
If, after written notice from Landlord, Tenant fails to repair or maintain any
component, system, fixture or facility at the Premises which Tenant is obligated
to repair or maintain, then Landlord may, at Landlord's option, repair or
maintain the same, and Tenant shall, upon demand by Landlord, reimburse Landlord
forthwith for the total costs of such repairs.
10. LANDLORD REPAIRS. The Landlord shall be responsible for maintenance
of the roof, downspouts, gutters, foundation and utility lines located outside
the Building and structural walls of the Premises. As used herein, the term
"wall" shall not include doors, windows or other components of the Premises
which are not load bearing. There shall be no allowance to Tenant for a
diminution of rentals value and no liability on the part of Landlord for
inconvenience, annoyance or injury to business arising from Landlord or others
making any construction or repair to the Premises, the Building, the common
areas or an adjoining premises, and no liability on the part of Landlord for
failure of the Landlord or others, to make any repairs, alterations, additions
or improvements in or to any portion of the Premises, the Building or common
areas except to the extent caused by Landlord's negligence. Landlord shall not
be liable to Tenant for any damage caused to Tenant and its property due to the
Premises or the Building, or any part or appurtenance thereof, being improperly
constructed or being or becoming out of repair, or arising from the leaking of a
pipe, facility or system for gas, water, sewage, steam, electricity or other
utility. Tenant shall immediately report to Landlord any defective condition in
or about the Premises known to Tenant, and if such defect is not so reported and
such failure results in other damage, Tenant shall be liable for the same.
Regardless of any obligation otherwise imposed upon Landlord, Tenant shall pay
the cost of any repairs or damage resulting from the negligence or the unlawful
or willful acts of its employees, representatives or visitors. If, after a 60-
day period of time after written notice from Tenant, Landlord fails to make any
repair or maintain any facility at the Premises which Landlord is obligated to
repair or maintain, then Tenant may, at Tenant's option, repair or maintain the
same, and Tenant shall be entitled to deduct the cost of such repair or
maintenance from the rental obligations hereunder.
11. SIGNS AND ADVERTISING; USE OF NAME. Without first obtaining the prior
approval of Landlord, not to be unreasonably withheld, (and after submitting
such design specifications as Landlord may require), Tenant shall not permit the
installation, painting and display of any sign, plaque, lettering or advertising
material of any kind on or near the exterior of the Premises, or in the interior
thereof that will be visible from the exterior. Any such installation of a sign
or other advertising by Tenant shall be
3
<PAGE>
installed in compliance with applicable law, shall be maintained by Tenant at
its sole cost and expense and shall be removed by Tenant at the expiration or
sooner termination of this Lease, whereupon Tenant shall repair any damage
caused to the Premises or Building by such removal. Tenant shall keep all
approved signage and other material in good working order clearly illuminated
during business hours. Tenant shall not have any property right or interest in
any name or distinctive designation which may become associated with the
Building or the common areas of which the Building may be a part. Landlord
shall retain all property rights in, and the exclusive right of use of, such
name or designation.
12. IMPROVEMENTS. Tenant agrees to accept the Premises in the condition
existing as of the date of this Lease. Landlord represents to the best of its
knowledge, that (i) it has no knowledge of any material defect at or to the
Premises, (ii) that the heating, ventilation and air-conditioning system is
operating properly as of the date hereof, and (iii) that the Premises are in
compliance with all applicable codes as of the date of the Commencement of the
Term of this Lease and that the space is habitable for the purposes intended for
Tenant, (iv) that the exterior of the Premises (including the parking area and
sidewalks are in compliance with the Americans With Disabilities Act. If there
are any initial changes to be made by Landlord or Tenant (with Landlord's prior
written approval), such changes, together with the estimated and allocated costs
for such changes, shall be set forth in Exhibit B, Up-fit Improvements, to be
initialed by both Landlord and Tenant. Unless expressly stated in Exhibit B to
the contrary, Tenant shall be responsible for the cost of the Up-fit
improvements and agrees to pay Landlord or its designee a charge of ten thousand
and No/100 Dollars ($10,000.00) for construction consulting services, including,
without limitation, the reviewing of plans and specifications, and the
inspecting and coordinating of construction. This charge is payable not later
than thirty (30) days after completion of the Up-fit Improvements. Landlord or
Landlord's agents have made no representations or promises with respect to the
Premises or the Building except as expressly set forth herein. The taking of
possession of the Premises by Tenant shall be conclusive evidence as against
Tenant, that Tenant accepts the same "as is" and "where is" and that the
Premises and Building were in good condition at the time when possession was
taken by Tenant. Landlord may at any time construct additional buildings or
improvements in any part of the common areas, so long as the same does not
materially interfere with Tenant's use and operation at the Premises, and may
remodel or remove the Building or any existing building in any part of the
common areas. Any sidewall of the Premises may be used by Landlord as a "party
wall" for other buildings or improvements. However, in connection with
Landlord's construction of any additional buildings or improvements, Landlord
shall not unreasonably interfere with Tenant's use and occupancy of the Premises
or impair Tenant's rights under this Lease. For any improvements or alterations
made at the Premises, Tenant shall have the right to select and hire its own
contractor, provided that Landlord reasonably approve said contractor and all
plans and specifications for such improvements and alterations. For minor
future improvements, there will be no construction management fee; for
significant improvements made by Tenant, the construction management fee will be
negotiated.
13. FIXTURES AND INTERIOR ALTERATIONS. The Tenant, with Landlord's prior
written consent, not to be unreasonably withheld, but at Tenant's own expense,
may from time to time during the term of this Lease make interior alterations in
and to the Premises which it may deem necessary or desirable providing that in
no case may it affect the structural integrity of the Premises or the Building.
Any such work shall be done in a good workmanlike manner and in accordance with
applicable law and shall not result in any claim or lien against Landlord or its
property. All permanent improvements or alterations shall belong to the
Landlord and become a part of the Premises upon the expiration or sooner
termination of this Lease, unless Landlordrequests the Tenant to remove such
improvements or alterations at Tenant's sole expense, whereupon Tenant shall
also cause to be repaired any damage to the Premises resulting from the removal.
Tenant may construct or install in the Premises, all racks, counters, shelves,
mirrors, chairs, and other trade fixtures and equipment in accordance with
applicable law as may be necessary or convenient for Tenant's business, which
racks, counters, shelves, mirrors, chairs, and other trade fixtures and
equipment shall at all times be and remain the property of the Tenant, and if
not then in default hereunder, the Tenant shall have the right to remove all or
any part of the same from said Premises at any time prior to the expiration or
sooner termination of this Lease, provided nevertheless that Tenant shall repair
any damage to the Premises resulting from installation or removal. The parties
agree that Tenant shall be compensated for the residual value of personal
property and fixtures of Tenant remaining in the Premises after the expiration
of the term (only if Landlord, at its sole discretion elects to have personal
property or fixtures remain in the space), to the extent that Landlord benefits
from the value of such personal property and fixtures in the future leasing of
the Premises. Tenant and Landlord shall, during the Notice period, negotiate in
good faith.
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14. LIENS. Tenant shall keep the Premises and the Building free from any
liens arising out of any work performed, materials furnished or obligations
incurred by or on behalf of Tenant, and Tenant hereby agrees to indemnify and
hold Landlord, its agents, employees, contractors, officers, directors, partners
and shareholders harmless from any and all liability, cost or expense for such
liens. Tenant shall cause any such lien imposed to be released of record by
payment or bonding upon terms acceptable to Landlord within thirty (30) days
after the earlier of the imposition of the lien or a written request by Landlord
therefor. If Tenant fails to remove any lien within the prescribed thirty (30)
day period, then Landlord may do so at Tenant's expense, including costs and
attorneys' fees, which expense shall be due as additional rent hereunder.
15. INDEMNIFICATION. Tenant shall indemnify and hold harmless Landlord,
its agents, representatives, successors or assigns, from and against any and all
losses, damages, liabilities, claims, penalties, costs or expenses (including
attorney's fees), whether caused by Tenant or by its agents, servants,
employees, independent contractors or licensees, occasioned by, arising or
resulting from or growing out of (a) Tenant's use or occupancy of the Premises,
or from the conduct of Tenant's business, or from any activity, work or things
done, permitted or suffered by Tenant in or about the Premises; (b) the breach
or default in the performance of any obligation on Tenant's part to be performed
under the terms of this Lease or arising from any act or omission of the Tenant;
or (c) any alleged or actual violation of any Environmental Law (as defined
below), any unsafe or improper use or storage of any Hazardous Substance (as
defined below) or any condition created by or arising therefrom including any
actual or threatened pollution or contamination at or about the Premises or the
Building, whether or not due to negligence, an omission or a willful act.
The indemnification provisions contained herein shall not be deemed to be
limited by the limits of any insurance policies required under this Lease and
shall survive the expiration or sooner termination of this Lease. Tenant shall
defend any suit, action or proceeding commenced or brought against Landlord in
connection with any indemnity or obligation of Tenant contained in this Section
regardless of any alleged fault or cause and Tenant shall employ legal counsel
reasonably satisfactory to Landlord to defend such suits, actions or
proceedings. Tenant shall deliver to Landlord copies of the documents served in
any such suit, action or proceeding and, whenever requested by Landlord, shall
advise as to the status of such suit, action or proceeding. If Tenant fails to
defend diligently any such suit, action or proceeding, or if Landlord elects to
defend by written notice to Tenant at any time, Landlord shall have the right
(but not the obligation) to defend the same at Tenant's expense. Tenant shall
not settle any such suit, action or proceeding without Landlord's prior written
consent. Tenant shall give timely notice of such suit, action or proceeding and
the claims thereof to Landlord and each insurer issuing an insurance policy
required under this Lease.
16. TENANT'S COMPLIANCE; INSURANCE REQUIREMENTS; WAIVER OF SUBROGATION.
Tenant shall comply with all applicable laws, ordinances and regulations
affecting the Premises, including the Rules and Regulations set forth in Exhibit
C and any other rules for tenants as may be developed from time to time by
Landlord and delivered to Tenant or posted on the Premises. Tenant shall
maintain and care for its personal property and trade fixtures located in the
Premises, insure such personal property and fixtures in all respects, and shall
neither have nor make any claim against Landlord for any loss or damage to the
same, unless caused by negligence of the Landlord. Throughout the term of this
Lease, Tenant, at its sole cost and expense, shall keep or cause to be kept for
the mutual benefit of Landlord and Tenant the following insurance: (a)
commercial general liability insurance naming the Landlord as an additional
insured against any and all claims for bodily injury and property damage
occurring in or about the Premises arising out of Tenant's use and occupancy of
the Premises, such insurance to have a combined single limit coverage of not
less than $1,000,000 per occurrence with a $2,000,000 aggregate limit and excess
umbrella liability insurance in the amount of $2,000,000 (If the Tenant has
other locations that it owns or leases, the policy shall include an aggregate
limit per location endorsement) and such insurance to be primary and non-
contributing to any insurance available to Landlord and Landlord's insurance
shall be in excess thereto, and in no event shall the limits of such insurance
be considered as limiting the liability of Tenant under this Lease; (b) personal
property insurance insuring all equipment, trade fixtures, inventory, fixtures
and personal property located on or in the Premises for perils covered by the
causes of loss--special form (all risk), together with coverage for flood,
earthquake and boiler and machinery (if applicable), such insurance to be
written on a replacement cost basis in an amount equal to one hundred percent
(100%) of the full replacement value of the aggregate of the forgoing property;
(c) workers' compensation insurance in accordance with statutory law and
employers' liability insurance with a limit of not less than $100,000 per
employee and $500,000 per occurrence; and (d) such other insurance as Landlord
deems necessary and prudent or required by Landlord's beneficiaries or
mortgagees of any deed of
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trust or mortgage encumbering the Premises. The policies required to be
maintained by Tenant shall be with companies rated AX or better in the most
current issue of Best's Insurance Reports. Insurers shall be licensed to do
business in the State of North Carolina and domiciled in the United States of
America. Any deductible amounts under any insurance policies required hereunder
shall not exceed $1,000. Certificates of insurance (or certified copies of the
policies if required by Landlord) shall be delivered to Landlord prior to the
commencement date and thereafter at least thirty (30) days prior to the
expiration date of the old policy. Tenant shall have the right to provide
insurance coverage which it is obligated to carry pursuant to the terms hereof
in a blanket policy, provided such blanket policy expressly affords coverage to
the Premises and to Landlord directly as required by this Lease. Each policy of
insurance shall provide notification to Landlord at least thirty (30) days prior
to any cancellation or modification resulting in a reduction of insurance
coverage. Neither Tenant, nor any person claiming through Tenant on Tenant's
behalf, shall have any claim, right of action of right or subrogation against
Landlord for any loss or damage caused by casualty at or concerning the
Premises, or to Tenant's contents, furniture, furnishings, equipment, fixture or
other property at or in the Premises, whether such casualty arose from any act,
fault or negligence of Landlord, its agents, representatives, employees, or
otherwise. All policies of insurance carried or maintained by Tenant pursuant
to this Lease shall contain a provision whereby the insurer waives all rights of
subrogation against the Landlord.
17. CASUALTY DAMAGE. If the Premises, or any part thereof, shall be
damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Landlord. In case the Premises shall be so damaged by fire or other
casualty that substantial alteration or reconstruction of the Premises shall, in
Landlord's sole opinion, be required (whether or not the Premises shall have
been damaged by such fire or other casualty), Landlord may, at its option,
terminate this Lease and the term and estate hereby granted, by notifying Tenant
in writing of such termination within sixty (60) days after the date of damage,
in which event the rent shall be abated as of the date of damage. If Landlord
does not elect to terminate this Lease, Landlord shall within ninety (90) days
after the date of such damage commence to repair and restore the Premises and
shall proceed to restore the Premises (except that Landlord shall not be
responsible for delays beyond its control) to substantially the same condition
in which it was immediately prior to the happening of the casualty, except that
Landlord shall not be required to rebuild, repair, or replace any part of
Tenant's furniture, furnishings, fixtures or equipment removable by Tenant, and
such work shall not in any event exceed the scope of the work done by Landlord
in originally constructing the Premises nor shall Landlord in any event be
required to spend for such work an amount in excess of the insurance proceeds
actually received by Landlord as a result of the fire or other casualty. For the
period of restoration, rent shall abate as of the date of damage, unless Tenant
is able to continue its occupancy of the Premises during restoration whereupon
rent shall be adjusted and prorated in the proportion which the area of unusable
lease space bears to the total Premises. In any event, Landlord shall not be
liable for any inconvenience or annoyance to Tenant, injury to the business of
the Tenant, loss of use of any part of the Premises by the Tenant or loss of
Tenant's personal property resulting in any way from such damage or the repair
thereof. If the Premises or any other portion of the Building are damaged by
fire or other casualty resulting from the omission, fault or negligence of
Tenant or any of Tenant's agents, employees, or invitees, rent due hereunder
shall not be abated or diminished during the repair of such damage and Tenant
shall be liable to Landlord without prejudice to subrogation rights of
Landlord's insurer for the cost and expense of the repair and restoration of the
Premises and Building caused thereby to the extent such costs and expense is not
covered by insurance proceeds.
18. PASS THROUGH--PRORATED INSURANCE COSTS. For the term of this Lease,
Landlord intends to keep the Building containing the Premises insured against
loss or damage by fire with extended coverage endorsement in an amount
sufficient to prevent the Landlord from becoming a co-insurer under the terms of
applicable policies, but, in any event, in an amount not less than ninety (90%)
percent of the full insurable value of the Building as determined from time to
time. Tenant agrees to pay Landlord in advance monthly as additional rent its
"pro rata share" (as defined below) of the estimated premiums and costs of such
Landlord insurance throughout the term of this Lease, and any renewals or
extensions hereof. Tenant's "pro rata share" of such insurance costs shall mean
that percentage found by dividing the agreed to rentable square footage of the
Premises by the agreed to rentable square footage of the Building(s) (in which
the Premises is located) subject of the insurance. In this instance, the "pro
rata share" computation is as follows: 6,495 rentable square feet of the
Premises divided by 41,094 rentable square feet of the Building equals 15.8%
This computed monthly charge estimated by Landlord shall be paid by Tenant until
such time when the charge shall be adjusted to
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reflect actual insurance costs for the year. If the reconciliation of the
charges shows a deficiency, such deficiency shall be paid by Tenant to Landlord
upon demand; if it shows a credit, the credit shall be refunded by Landlord to
Tenant within thirty (30) days.
19. PASS THROUGH--PRORATED TAXES. Tenant shall pay Landlord in advance
monthly as additional rent its "pro rata share" (as determined in accordance
with the terms of Section 18 hereof) of any use and/or occupancy tax imposed on
rents collected by Landlord (other than City, State or Federal Income Tax) or
any tax on rents in lieu of ad valorem taxes, notwithstanding that any such tax
may be levied or assessed against the Landlord. Tenant further agrees to pay
Landlord its "pro rata share" (as determined in accordance with the terms of
Section 18) of ad valorem or any other property tax imposed upon the Building(s)
(of which the Premises is a part) subject to the tax, regardless of the taxing
authority or authorities levying the same. Furthermore, Tenant shall make timely
payments of all ad valorem taxes and assessments made against Tenant's stock of
merchandise, furniture, furnishings, trade fixtures, equipment, supplies and
other property located on or used in connection with the Premises and of all
privilege and business licenses, taxes and similar charges for which Tenant may
be responsible. If the assessed value of the Building in which the Premises are
located is increased by a taxing authority because of alterations or
modifications to the Building made at Tenant's request or made by Tenant, then
the additional taxes attributable to such increase in valuation shall be the
sole responsibility of Tenant, and shall be included monthly as additional rent
to be paid by Tenant.
20. PASS THROUGH--OPERATING EXPENSE CHARGES. Landlord will operate and
maintain the common areas of the Building and business park, in excellent
condition consistent with a first class business park operations and related
areas and facilities referred to in Section 7 above, all as shown in Exhibit A-2
(Site Plan). For the term of this Lease or any extension hereof, Tenant shall
pay Landlord as additional rent a minimum sum as a common areas operating
expense charge equal to seventy-four cents ($.74) per square foot for each
rentable square foot of the Premises, per annum, namely the sum of four thousand
eight hundred six and 30/100 Dollars ($4,806.30) which shall be due and payable
in monthly installments of four hundred and 52/100 Dollars ($400.52) each, in
advance as rent is due. In the event that the actual operating expenses for the
common areas as prorated shall exceed the minimum sum shown above, Tenant shall
pay its "pro rata share" (as determined in accordance with the terms of Section
18 or if with respect to an operating expense concerning the business park
common areas, then a "business park amenities pro rata share" determined from a
percentage found by dividing the agreed to rentable square footage of the
Premises by the rentable square footage of all benefiting buildings within the
business park) of any such increase, as a monthly charge in advance as rent is
due. As used herein, the term "operating expense" shall mean and include all
operating costs concerning the operation or maintenance of the common areas as
determined by standard accounting practices and shall include by way of
illustration, but not limited to: property management fees, ad valorem real and
personal property taxes, legal fees and other costs incurred in connection with
protesting tax assessment, hazard and liability insurance premiums, common area
utilities, common area maintenance services, common area facilities, business
park amenities, landscaping, snow removal, asphalt and pavement repair, labor,
materials, supplies, equipment and tools, permits, licenses and inspection fees.
The term "operating expense" shall not include depreciation on the Building in
which the Premises are located or equipment therein (except for the reasonable
amortization of the costs for capital investment items which are purchased and
installed for the purpose of reducing "operating expenses" or complying with a
governmental requirement), interest, executive salaries or real estate broker
commissions. The annual statement of said operating expenses shall be made
available to Tenant upon Tenant's request. There will be an annual cap of five
percent (5%) on all "controllable expenses." As used herein, the term
"controllable direct expense" means and refers to any direct expense the amount
of which is directly subject to control by Landlord, including, for example,
property management services costs, but exclusive of taxes, insurance premiums,
utility costs, the cost of services by a public authority. Parties agree that
$2.01 is the current basis for pass-through charges paid by Tenant to Landlord
for insurance, taxes, utilities, the cost of services and other operating
expenses. The provisions of this Section only apply to the extent that such
costs exceed $2.01.
21. ACCOUNTING FOR PASS THROUGH CHARGES. Landlord shall send to Tenant,
in writing, a statement of the amount of any additional rent determined due
pursuant to Sections 18, 19, and 20 after the end of the year with respect to
which such additional rent is due. The amount of such additional rent required
to be paid pursuant to the provisions for this Lease, as well as any other sums
of money or charges required to be paid by Tenant under this Lease, whether or
not the same shall be designated "additional rent" shall nevertheless, if not
paid when due, be collectible as additional rent with the next installment of
rent thereafter falling due. Nothing herein contained shall be deemed to suspend
or delay the payment of any amount of
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money or charge at the time the same becomes due and payable hereunder or
otherwise limit any remedy of Landlord to collect the same. Tenant shall pay to
Landlord monthly in advance, one-twelfth (1/12) of the estimated annualized
amounts shown as Tenant's "pro rata share" of any additional rent to be paid in
anticipation of such rent due to provide for increases in operating expenses and
other expenses as specified in Sections 18, 19 or 20 hereof for the then current
calendar year, and all such additional monthly payments shall be credited to
Tenant's rent next due to the extent that the amount paid by Tenant exceeds the
amount actually due. Any deficiency shall be paid by Tenant to Landlord, within
thirty (30) days of notice from Landlord, which notice and any overage shall be
refunded by Landlord to Tenant within thirty (30) days.
22. LANDLORD LIABILITY. Tenant agrees that Landlord shall not be liable
for injury to Tenant's business or any loss of income therefrom or for any
damage to any goods, wares, merchandise, or other property of Tenant, or
Tenant's contractors, agents, employees, invitees, customers or any other person
in or about the Premises, unless such damage or loss is solely caused by
Landlord, its agents, employees or representatives, nor shall Landlord be liable
for injury to the person of the Tenant or to the Tenant's contractors, agents,
employees, invitees, or customers whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures or from any other cause, whether
said damage or injury results from conditions arising upon the Premises or upon
other portions of the Building of which the Premises are a part, or from other
sources or places, regardless of whether the cause of such damage or injury or
means of repairing the same is inaccessible to Tenant. Landlord shall not be
liable for any loss or damages arising from any act or neglect of any other
tenant. The term "Landlord" as used in this Lease so far as covenants or
obligations on the part of Landlord are concerned shall be limited to mean and
include only the owner or owners of the Premises and Building at the time in
question, and in the event of any transfers or conveyances, the then grantor
shall be automatically freed and released from and after the date of such
transfer or conveyance of all liability unless such liability and obligations
------
are expressly not assumed by the successor as respects the performance of any
---
covenant or obligation on the part of Landlord contained in this Lease on the
part of Landlord shall be binding on the Landlord, its successors and assigns
only during and in respect to their respective successive periods of ownership.
Notwithstanding any other provision contained herein to the contrary, in the
event of a breach hereof by Landlord or the failure of Landlord to perform any
of its obligations hereunder, Landlord shall have no personal liability
therefor, but Tenant shall look solely to Landlord's interest in the Building
for satisfaction of any claim or loss.
23. CARE OF PREMISES. Tenant shall at all time keep the Premises and
adjoining areas and appurtenances (subject to its reasonable control) in a clean
and neat condition. Tenant covenants and agrees that Tenant, for itself, its
employees, representatives and visitors, shall:
(a) Prohibit anything which shall endanger or cause injury to any person
or property.
(b) Prohibit any excessive loads within the Premises or any part of the
common areas, including parking areas.
(c) Prohibit any disturbing or offensive odors, fumes, gases, smoke, dust,
steam vapors, noise or vibrations in violation of applicable law.
(d) Keep the entryways, sidewalk and delivery and service areas clean and
free from rubbish, dirt, snow and ice.
(e) Keep the interior building free of vermin except to the extent used in
Tenant's business operations.
(f) Prohibit the use of sinks, toilets or urinals for any purpose except
that for which they are designated and installed.
(g) Store all trash and garbage inside the Premises and provide for its
prompt and regular removal for disposal outside the Building and common areas.
(h) Comply otherwise with all rules and regulations of Landlord, including
those Rules and Regulations set forth in Exhibit C.
24. QUIET ENJOYMENT. Upon Tenant's paying the rent and other sums herein
reserved and its performing the covenants and agreements hereof, Tenant shall
peaceably and quietly have, hold and enjoy the Premises, and all rights,
privileges, easements and appurtenances in any way appertaining thereto, during
the term of this Lease.
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25. SURRENDER; HOLDING OVER. Tenant will vacate and deliver up the
Premises and all improvements, additions and alterations thereto, except and
only to the extent Landlord requests removal of such improvements, additions and
alterations pursuant to Section 13 (except Tenant signs, equipment and trade
fixtures installed by Tenant at its expense which may be removed by Tenant), at
the expiration or termination of this Lease, in a good, clean and tenantable
condition as the same were at the beginning of Tenant's occupancy, excepting
reasonable wear, damage by fire and other casualty or appropriation by eminent
domain. Tenant expressly agrees to perform and complete any and all of its
repair or maintenance obligations specified under Section 9 prior to its
vacating the Premises. Tenant may remove its trade fixtures and equipment within
ten (10) days after the expiration or sooner termination of this Lease, provided
(a) removal of the Tenant item can be accomplished without major damage to the
Premises; and (b) Tenant immediately repairs (or reimburses Landlord for the
cost of repairing any resulting damage or defacements)." (c) Tenant is not in
default hereunder (otherwise, all such items shall become Landlord's property.
Upon its surrender of the Premises, Tenant agrees to provide that all entrance
and exit doors are repaired and in good order, all lighting and ballast are
repaired and in good working order and all lights are replaced, as necessary and
burning, in addition to any other Tenant obligation in connection with the
condition of the Premises upon surrender.
During any such holdover period, Tenant shall be a tenant from month-to-
month only, and shall be subject to and bound by all terms and conditions
hereunder, except those as to term hereof and except that during such holdover
tenancy, Tenant shall pay to Landlord (a) rent at the rate equal to one hundred
thirty percent (130%) at the rate of rent then existing at the end of the Lease,
and (b) any and all operating expenses and all other additional rent payable
hereunder.
26. ASSIGNMENT AND SUBLEASING. Tenant may not assign, transfer, mortgage
or encumber this lease, or sublease the Premises, in whole or in part, without
first obtaining the prior written consent of the Landlord, which Landlord shall
not unreasonably withhold. Any assignment or sublease to which Landlord may
consent (one consent not being any basis to contend that Landlord should consent
to a further change) shall not relieve Tenant of any of its obligations
hereunder. The withdrawal or change, whether voluntary, involuntary or by
operation of law, of persons or entities owning a controlling interest in
Tenant, or the sale of Tenant's business, shall not be deemed a voluntary
assignment of this Lease and subject to the provisions of this Section 26, it
being expressly understood that no further Landlord approvals shall be required
from Landlord in order for Tenant to change the ownership structure or control
of Tenant's business. Acceptance of rent by Landlord after any non-permitted
transfer or assignment shall not constitute approval thereof by Landlord. It is
expressly understood that Tenant's right to sublease or assign is subject to any
right of first offer of ICAgen, Inc. and then any right of first offer of any
other tenant at the Building to Tenant's Premises.
In no event shall this Lease be assignable by operation of any law, and
Tenant's rights hereunder may not become, and shall not be listed by Tenant as
an asset under any bankruptcy, insolvency or reorganization proceedings. Tenant
is not, may not become, and shall never represent itself to be an agent of
Landlord, and Tenant expressly recognizes that Landlord's title is paramount,
and that it can do nothing to affect or impair Landlord's title. If this Lease
shall be assigned or the Premises or any portion thereof sublet by Tenant at a
rental that exceeds the rental to be paid to Landlord hereunder attributable to
the Premises or that portion thereof so assigned or sublet, as the case may be,
then and in such an event, any such excess rent shall be divided evenly between
Landlord and Tenant after netting out the reasonable cost associated with such
assignment or subletting.
27. SUBORDINATION; ATTORNMENT. Tenant agrees that this Lease will either
be subordinate or superior to any mortgage or other security instrument
heretofore or hereafter executed by the Landlord covering the Premises,
depending on the requirements of such mortgagee. Within fifteen (15) days,
Tenant will execute such reasonable agreements making this Lease superior or
subordinate as Landlord's mortgagee may request, and will agree to attorn to
said mortgagee providing the mortgagee agrees not to disturb Tenant's possession
hereunder so long as Tenant is in compliance with this Lease. Landlord consents
to Tenant's execution of Landlord's mortgagee's subordination, attornment and
non-disturbance agreement, and to be bound by the provisions thereof. Further
Tenant agrees to execute within fifteen (15) days of request therefor, and as
often as requested, estoppel certificates setting forth the facts with respect
to date of occupancy, termination date of this Lease, the amount of rent due and
date to which rent is paid, whether or not it has any defenses or offsets to the
enforcement of the Lease or knowledge of any known default or breach by
Landlord, and that this Lease is in full force and effect except as to any
modifications or amendments, copies of which Tenant shall attach to such
estoppel certificate. Tenant agrees to
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attorn to any successor of Landlord.
28. DEFAULT. If Tenant: (a) fails to pay all rent as provided in this
Lease within ten (10) days of written notice from Landlord of such deficiency;
(b) breaches any other agreement or obligation herein set forth and such failure
continues for thirty (30) days following written notice from Landlord of such
failure; (c) files (or has filed against it) any petition or action for relief
under any creditor's law (including bankruptcy, reorganizations, or similar
actions), either in state or federal court; or (d) becomes insolvent, makes any
transfer in fraud of creditors, has a receiver appointed for its assets, or
makes an assignment for benefit of creditors, then in addition to any other
lawful right or remedy which it may have, Landlord may do the following: (A)
declare the rent for the balance of the term immediately due and payable, and
collect the same by distress or otherwise; (B) seize and hold any personal
property of Tenant located in the Premises and assert against the same a lien
for monies due Landlord; (C) without obtaining any court authorization, lock up
the Premises and deny Tenant access thereto; (D) terminate this Lease; or (E)
repossess the Premises, and with or without terminating, relet the same at such
amount as Landlord deems reasonable, and if the amount is less than Tenant's
rent, Tenant shall immediately pay the difference on demand to Landlord, but if
in excess of Tenant's rent, the entire amount shall belong to Landlord free of
any claim of Tenant therto. All expenses of Landlord in repairing, restoring or
altering the Premises or reletting, together with leasing fees, all other
expenses in seeking and obtaining a new tenant, the unamortized portion of
Landlord's upfit costs incurred in connection with this Lease and other damages
and costs, shall be charged to and a liability of Tenant. Landlord's reasonably
attorneys fees in pursuing any of the foregoing remedies, or in collecting any
rents due by Tenant hereunder, shall be paid by Tenant, which fees as to rents
collected shall be the greater of fifteen (15%) percent of the amount of such
rents or the actual amount of such fees and expenses as may be allowed by law.
All rights and remedies of Landlord are cumulative, and the exercise of any one
shall not be an election excluding Landlord at any other time from exercising a
different or inconsistent remedy. No waiver by Landlord or any covenant or
condition shall be deemed to imply or constitute a further waiver of the same at
a later time, and acceptance of rent by Landlord even with knowledge of a
default by Tenant shall not constitute a waiver of such default.
29. ATTORNEY'S FEES. Tenant and Landlord hereby each agree to pay all
reasonable attorney's fees and expenses which the asserting party may incur in
enforcing any obligations under this Lease, or in any litigation commenced to
enforce a provision of this Lease.
30. INSPECTION. Tenant agrees that the Landlord, its agents and other
representatives, shall have the right to enter into, and upon, the Premises, or
any part thereof, at all reasonable times mutually agreeable between the parties
and upon one (1) day prior notice (although no such notice shall be required in
the event of an emergency) for the purposes of inspecting or showing the same.
Tenant further agrees that Landlord may enter the Premises at all reasonable
times mutually agreeable between the parties and upon one (1) day prior notice
to post "For Rent" signs, after notice is given, during the last five (5) months
prior to the expiration of the Lease term, which signs may not removed by
Tenant.
31. CONDEMNATION. If the Premises are totally taken by condemnation, this
Lease shall terminate on the date of taking. If only a portion of the Premises
is taken by condemnation and Tenant can continue use of the remainder, then the
Lease will not terminate, but rent shall abate in a just and proportionate
amount to the loss of use occasioned by the taking. Tenant shall have no right
or claim to any part of any award made to or received by the Landlord for any
taking and no right or claim for any alleged value of the unexpired portion of
this Lease; provided, however, that Tenant shall not be prevented from making a
claim against the condemning party (but not against Landlord) for any moving
expenses, loss of profits, or taking of Tenant's personal property (other than
its leasehold interest) to which Tenant my be entitled.
32. RIGHT TO RELOCATE. Intentionally deleted.
33. SECURITY DEPOSIT. Landlord acknowledges receipt from Tenant of the
sum of five thousand and No/100 Dollars ($5,000.00) which sum Landlord shall
retain as security for the performance by Tenant of each of its obligations
hereunder. If Tenant fails at any time to perform its obligations, Landlord may
at its option apply said deposit, or so much thereof as is required, to cure
Tenant's default. This deposit shall not bear interest, and unless Landlord uses
the same to cure a default of Tenant, or to restore the Premises to the
condition that tenant is required to leave them at the conclusion of the term,
Landlord shall within thirty (30) days after twelfth (12/th/) month of the Lease
refund to Tenant so much of the deposit as remains.
10
<PAGE>
34. NOTICES. Any notices which Landlord or Tenant is required or desires
to give the other shall be deemed sufficiently given or rendered if, in writing,
is delivered personally or sent by regular mail, or if an event of default is
claimed, then either delivered personally or sent by certified or registered
mail, postage prepaid, to the address listed after the signature of the party to
be given notice, at the end of this Lease document. Any notice given herein
shall be deemed delivered when the return receipt therefore is signed, or
refusal to accept the mailing by the addressee is noted thereon by the postal
authorities.
35. HAZARDOUS MATERIALS; ENVIRONMENTAL COMPLIANCE.
A. Tenant's Responsibility. Tenant shall not (either with or without
------------------------
negligence) cause or permit the escape, disposal or release of any biologically
active or other hazardous substances, or materials. Tenant shall not allow the
storage or use of said substances or materials in any manner not sanctioned by
law or by the standards prevailing in the industry for the storage and use of
such substances or materials, nor allow to be brought into the Building or the
business park as generally shown in Exhibit A-2 any such materials or substances
except to use in the ordinary course of Tenant's business, and then only after
written notice is given to Landlord of the identity of such substances or
materials. Tenant covenants and agrees that the Premises will, at all times
during its use or occupancy thereof, be kept and maintained so as to comply with
all now existing or hereafter enacted or issued statutes, laws, rules,
ordinances, orders, permits, and regulations of all state, federal, local, and
other governmental and regulatory authorities, agencies, and bodies applicable
to the Premises, pertaining to environmental matters, or regulating, prohibiting
or otherwise having to do with asbestos and all other toxic, radioactive, or
hazardous wastes or materials including, but not limited to, the Federal Clean
Air Act, the Federal Water Pollution Control Act, and the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as from time to
time amended (all hereinbefore and hereinafter collectively called the
"Environmental Laws" or "Laws")
B. Tenant's Liability. In addition to the indemnifications contained in
------------------
Section 15 hereof, Tenant shall hold Landlord, its agents, representatives,
successors or assigns, free, harmless, and indemnified from any penalty, fine,
claim, demand, liability, costs, or charge whatsoever which Landlord or others
as aforesaid shall incur, or would otherwise incur, by reason of Tenant's
failure to comply with this Section 35; including, but not limited to: (i) the
cost of bringing the Premises into compliance with all Laws; (ii) the reasonable
cost of all appropriate tests and examinations of the Premises to confirm that
the Premises have been brought into compliance with all Laws; and (iii) the
reasonable fees and expenses of Landlord's attorneys, engineers, and consultants
incurred by Landlord in enforcing and confirming compliance with Section 35.
C. Property. For the purposes of this Section 35, the Premises shall
--------
include the Premises identified in Section 1 above, together with the real
estate covered within the Site Plan, Exhibit A-2, and all structures and
improvements thereon; all personal property used in connection with the Premises
(including that owned by Tenant); and the soil, ground water, and surface water
of the Premises, as this term is defined in this Subsection 3(C).
D. Inspections by Landlord. Landlord and its engineers, technicians, and
------------------------
consultants (collectively the "Auditors") may, from time to time as Landlord
deems appropriate upon prior notice and in no event in any way that will
materially interfere with Tenant's business operations conduct periodic tests
and examinations ("Audits") of the Premises to confirm and monitor Tenant's
compliance with this Section 35. Such Audits shall be conducted in such manner
as to minimize the interference with Tenant's permitted activities on the
Premises; however, in all cases, the Audits shall be of such nature and scope as
shall be reasonably required by then existing technology to confirm Tenant's
compliance with this Section 35. Tenant shall fully cooperate with Landlord and
its Auditors in the conduct of such Audits. The cost of such Audits shall be
paid by Landlord unless an Audit shall disclose a material failure of Tenant to
comply with this Section 35, in which case the cost of such Audit, and the cost
of all subsequent Audits made during the Lease term and within thirty (30) days
thereafter (not to exceed two (2) such Audits per calendar year) shall be paid
for on demand by Tenant.
E. Landlord's Liability. Provided, however, the foregoing covenants and
--------------------
undertakings of Tenant contained in this Section 35 shall not apply to condition
or matter constituting a violation of any Law: (i) which existed prior to the
commencement of Tenant's use or occupancy of the Premises and was not caused, in
whole or in part, by Tenant or Tenant's agents, employees, officers, partners,
contractors, representatives or invitees; or (ii) to the extent such violation
is solely caused by the acts or neglects of Landlord or Landlord's contractors,
agents, employees, representatives or invitees.
11
<PAGE>
Landlord represents that to the best of its knowledge, without independent
investigation or verification, the premises shall be in full compliance with all
environmental laws as of the date of the commencement of the Lease.
F. Tenant's Liability After Termination of Lease. The covenants
----------------------------------------------
contained in this Section 35 shall survive the expiration or termination of this
Lease, and shall continue for so long as Landlord and its successors and assigns
may be subject to any expense, liability, charge, penalty, or obligation against
which Tenant has agreed to indemnify Landlord under this Section 35.
36. BROKER'S COMMISSIONS. Tenant represents and warrants that it has not
had dealings with any real estate broker, finder, or other person, with respect
to this Lease in any manner, except Tri-Properties, Inc. whose address is Post
Office Box 13163, Raleigh, North Carolina and Douglas Baker, Corporate Realty
Advisors, whose address is 4000 Westchase Boulevard, Suite 390, Raleigh, NC
27607. Landlord shall pay any commissions or fees that are payable to the
above-named broker or finder with respect to this Lease. Tenant shall indemnify
and hold Landlord harmless from any and all damages resulting from any claims
that may be asserted against Landlord by any other broker, finder or other
person, with whom Tenant has or purportedly has dealt. The provisions of this
Section 36 shall survive the termination or expiration of this Lease.
37. MISCELLANEOUS. Headings of sections are for convenience only and
shall not be considered in construing the meaning of the contents of such
sections. The invalidity of any portion of this Lease shall not have any effect
on the balance hereof. Should Landlord or Tenant institute any legal proceeding
against the other for a breach or non-performance of any provision herein
contained, the prevailing party shall be entitled to receive all costs and
attorney fees from the other party." Should Landlord institute any legal
proceedings against Tenant for breach of any provision herein contained, and
prevail in such action, Tenant shall in addition be liable for the costs and
expenses of the Landlord, including its reasonable attorney's fees. This Lease
shall be binding upon the respective parties hereto and upon their heirs,
executors, successors and assigns. This Lease supersedes and cancels all prior
negotiations between the parties, and changes shall be in writing signed by the
party affected by such change. Landlord reserves the right to make and change
from time to time rules it deems appropriate for the common use and benefit of
all tenants, with which rules Tenant shall comply. Any agreed to measurement of
space shall be done in accordance with Building Owners and Managers Association
("BOMA") standards used to determine "rentable" square feet for warehouse/flex
space. Landlord may sell the Premises without affecting the obligations of
Tenant hereunder. This Lease may not be recorded without Landlord's prior
written consent. The singular shall include the plural, and the masculine,
feminine or neuter includes the other. Each of the Landlord and Tenant
respectively represent that each has the lawful authority to enter into this
Lease and by signing it in their name as set forth below, to be legally bound in
accordance with its terms and conditions. No failure by Landlord to insist upon
the strict performance or observance of any term or condition of this Lease, or
to seek redress or to exercise any right or remedy after any such failure or
breach hereof, shall constitute a waiver of any such term, condition,
obligation, right or remedy, or any such failure or breach then or thereafter
occurring. No term, condition or obligation of this Lease to be performed or
observed by Tenant shall be waived, altered or modified except by a writing
executed by Landlord. No waiver of any failure, breach or default hereof shall
affect or alter this Lease, but each and every term, condition and obligation of
this Lease shall continue in full force and effect with respect to any other
failure, breach or default. This Lease, and the rights and obligations of each
of the Landlord and Tenant hereunder shall be governed by and construed in
accordance with the laws of the State of North Carolina. Whenever this Lease
references square footage of the Premises, portions thereof, or any additional
space to which Tenant may have an option or other prospective leasehold
interest, Tenant may verify the square footage of such space pursuant to BOMA
standards. In the event in a discrepancy in the square footage stated in the
Lease and the actual square footage, all of the charges due hereunder, including
Rent, shall be modified accordingly.
12
<PAGE>
38. SPECIAL CONDITIONS, EXHIBITS AND ADDENDA. The following special
conditions, if any, shall apply, and where in conflict with earlier provisions
in this Lease shall control. If any Lease Exhibits or Addenda are noted below,
such exhibits and addenda are incorporated herein and made a part of this Lease.
If there are no special conditions, exhibits or addenda, the word NONE shall be
written in the blank below.
Exhibit A-1: Floor Plan
Exhibit A-2: Building Site Plan
Exhibit A-3: Legal Description of Real Property
Exhibit A-4: Business Park Site Plan
Exhibit B: Space Plan
Exhibit C: Rules and Regulations
Exhibit D: Contract Standards for HVAC,
Inspection, Maintenance & Repair
Exhibit E: Right of First Refusal
Exhibit F: Right of Cancellation
Exhibit G: Memorandum of Lease
Exhibit H: Renewal Option
13
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease by hand
and under seal affixed hereto in duplicate originals, all as of the day and year
first above written,
LANDLORD:
IMPERIAL CENTER, LIMITED PARTNERSHIP
a North Carolina Limited Partnership
(Seal)
By: PETULA ASSOCIATES, LTD., AN IOWA
CORPORATION, GENERAL PARTNER
[CORPORATE SEAL]
ATTEST:
/s/ Kurt D. Schaeffer By: /s/ Michael S. Duffy
- --------------------- --------------------
Vice President & Secretary Vice President
By: __________________________________
______President
Address: P.O. Box 13163
Raleigh, NC 27709
TENANT:
INSPIRE PHARMACEUTICALS, INC.
[CORPORATE SEAL]
ATTEST:
/s/ Tim R. Gupton By: /s/ H. Jefferson Leighton
- ----------------- -------------------------
Assistant Secretary ______President
Address: 4222 Emperor Boulevard, #470
Morrisville, NC 27560
14
<PAGE>
(Landlord Acknowledgment(s))
STATE OF _______________________________ (Partnership Acknowledgment)
COUNTY OF ______________________________
I, _______________________________, a Notary Public in and for said County
and State, do certify that _________________________, _________________________
of before me this day, executed the foregoing instrument in behalf of said
partnership and acknowledged to me that he/she executed the same for the
purposes therein stated.
WITNESS my hand and notarial seal this _________________ day of
____________________, 199__.
_______________________________
Notary Public
My Commission Expires:
_______________________
(NOTARIAL SEAL OR STAMP)
STATE OF NORTH CAROLINA (Corporate Acknowledgment)
------------------------
COUNTY OF Durham
---------
I, W.E. Walker , a Notary Public in and for said County and State, do
--------------
certify that Tim R. Gupton personally came before me this day and
-------------------
acknowledged that he/she is assistant Secretary of Inspire Pharmaceuticals, a
-- --------- --------------------------
Corporation, and that by authority duly given and as the act of the corporation,
the foregoing instrument was signed in this name by its _____ President, sealed
with its corporate seal, and attested by him/herself as its assistant
----------
Secretary.
WITNESS my hand and notarial seal this 17/th/ day of May , 199 5 .
------- -------- ----
/s/ W.E. Walker
- -------------------------------------
Notary Public
My Commission Expires:
6/28/97
- ----------------
(NOTARIAL SEAL OR STAMP)
___________________________
15
<PAGE>
Landlord
(Acknowledgment)
STATE OF IOWA (CORPORATE ACKNOWLEGEMENT)
-------
COUNTY OF POLK
--------
I, Lynn Blass, a Notary Public in and for said County and State, do certify
-----------
that Kurt D. Schaeffer personally came before me this day and acknowledged that
-----------------
he/she is Vice President & Secretary of Petula Associates, Ltd., a Corporation,
-------------- ------------------------
and that by authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its Vice President, sealed with
----
its corporate seal, and attested by him/herself as its Vice President and
--------------
Secretary.
WITNESS my hand and notarial seal this 1/st/ day of June, 199 5 .
----- ----- ----
/s/ Lynn Blass
---------------------------------------
Notary Public
My Commission Expires: [stamp]
11/2/95
- ------------------
(NOTARIAL SEAL OR STAMP)
16
<PAGE>
EXHIBIT A-1
FLOOR PLAN
Royal Center I
4222 Emperor Boulevard
Imperial Center
[ F L O O R P L A N ]
17
<PAGE>
EXHIBIT A-2
BUILDING SITE PLAN
[ BUILDING SITE PLAN ]
18
<PAGE>
EXHIBIT A-3
LEGAL DESCRIPTION OF REAL PROPERTY
Being all of lot S20 of Imperial Center located in Triangle Township, Durham
County, North Carolina, containing 15.367 acres, as shown on that plat entitled
"Lot S20 - Imperial Center" dated May 4, 1988, prepared by Kenneth Close, Inc.,
and recorded in Plat Book 117, Page 166, Durham County Registry.
19
<PAGE>
EXHIBIT A-4
-----------
PARK SITE PLAN
Imperial Center Business Park
[Imperial Center Business Park]
The Imperial Center
Master Plan
20
<PAGE>
EXHIBIT B
SPACE PLAN
TENANT IMPROVEMENTS, PLANS AND SPECIFICATIONS
Tenant to occupy space in an "as is" condition (see existing space plan below).
The Landlord shall provide an improvement allowance to Inspire Pharmaceuticals,
Inc. of $22,500.00. An additional improvement allowance of seventy-five
thousand and No/100 Dollars ($75,000.00) shall be amortized over the original
lease term at an interest rate of eleven percent (11%) per annum. Amortization
of the amount indicated above adds $3.01 per square foot to a base rental rate
of $7.25 per square foot, resulting in a rentable rate of $10.26 per square foot
for the leased premises. All Additional improvements shall be at Tenant's sole
expense.
The Landlord will provide an architectural allowance of $3,200.00. Tenant shall
be responsible for paying any additional architectural/engineering fees above
the allowance provided directly to the architectural/engineering firm retained.
[SPACE PLAN]
21
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
The following rules and regulations have been adopted by the Landlord for
the care, protection and benefit of the building and the park and for the
general comfort and welfare of the tenants.
1. The sidewalks, entrances, halls, passage, elevators, and stairways
shall not be obstructed by the Tenant or used by him for any other purpose than
for ingress and egress.
2. Toilet rooms and other water apparatus shall not be used for any
purpose other than those for which they are constructed.
3. The Tenant shall not do anything in the Premises, or bring or keep
anything therein, which shall in any way conflict with any law, ordinance, rule
or regulation affecting the occupancy and use of the Premises, which are or may
hereafter be enacted or promulgated by any public authority or by the Board of
Fire Underwriters.
4. In order to insure proper use and care of the Premises, neither the
Tenant nor agent nor employee of the Tenant shall:
(a) Allow any furniture, packages or articles of any kind to
remain in corridors except for short periods incidental to
moving same in or out of building or to cleaning or
rearranging occupancy of leased space.
(b) Maintain or utilize bicycles or other vehicles in the
building.
(c) Mark or defile elevators, toilet rooms, walls, windows doors
or any part of the building.
(d) Keep animals or birds on the Premises except to the extent
used in Tenant's business operations.
(e) Deposit waste paper, dirt or other substances in corridors,
stairways, elevators, toilets, restrooms, or any other part
of the building not leased to him.
(f) Fasten any article, drill holes, drive nails or screws into
walls, floors, doors, or partitions, or otherwise mar or
deface any of them by paint, papers or otherwise, unless
written consent is first obtained from the Landlord.
(g) Operate any machinery within the building except customary
office equipment, such as dictaphones, calculators, electric
typewriters, and the like. Special equipment or machinery
used in the trade or profession of the Tenant may be
operated only with the prior written consent of the
Landlord.
(h) Tamper or interfere in any way with windows, doors, locks,
air conditioning controls, heating, lighting, electric or
plumbing fixtures.
(i) Premises unoccupied without locking all doors, extinguishing
lights and turning off all water outlets.
(j) Install or operate vending machines of any kind in the
Premises without written consent of Landlord.
5. The Landlord shall have the right to prohibit any advertising by the
Tenant which, in their opinion, tends to damage the reputation of the building
or its desirability, and upon written notice from Landlord, the Tenant shall
discontinue any such advertising.
6. The Landlord reserves the right to designate the time when and method
whereby freight, furniture, safes, goods, merchandise and other articles may be
brought into, moved or taken from the building and the Premises leased by the
Tenant; and workmen employed, designated or approved by the Landlord must be
employed by Tenants for repairs, painting, material moving and other similar
work that may be done on the Premises.
7. The Tenant will reimburse the Landlord for the cost of repairing any
damage to the Premises or other parts of the building caused by the Tenant or
the agents or employees of the Tenant, including replacing any glass broken.
22
<PAGE>
8. The Landlord shall furnish a reasonable number of door keys for the
needs of the Tenant, which shall be surrendered on termination of the lease, and
reserves the right to require a deposit to insure their return at termination of
the Lease. The Tenant shall obtain keys only from the Landlord, shall not
obtain duplicate keys from any outside source, and shall not alter the locks or
effect any substitution.
9. The Tenant shall not install in the Premises any metal safes or permit
any concentration of excessive weight in any portion thereof without first
having obtained the written permission of Landlord.
10. The Landlord reserves the right at all times to exclude newsboys,
loiterers, vendors, solicitors and peddlers, from the building and to require
registration, satisfactory identification and credentials from all persons
seeking access to any part of the building outside of ordinary business hours.
Ordinary business hours shall mean Monday through Friday, 8:00 a.m. to 6:00
p.m., except on legal holidays. The Landlord will exercise its best judgment in
the execution of such control but shall not be held liable for the granting or
refusal of such access. The Landlord reserves the right to exclude the general
public from the building after ordinary business hours and on weekends and
holidays.
11. The attaching of wires to the outside of the building is absolutely
prohibited, and no wires shall be run or installed in and part of the building
without the Landlord's permission and direction.
12. Request for services of janitors or other building employees must be
made to the Landlord. Agents or employees of Landlord shall not perform any
work or do anything outside of their regular duties unless under special
instructions from Landlord.
13. Signs or any other Tenant identification shall be in accordance with
building standard signage. No signs of any nature shall be placed in the
windows so as to be visible from the exterior of the building. All signs not
approved in writing by the Landlord shall be subject to removal without notice.
14. Any improvements or alterations to the Premises by Tenant shall be
approved in advance by the Landlord and all such work, if approved, shall be
done at the Tenant's sole expense under the supervision of the Landlord.
15. Tenant shall have a non-exclusive right to use of all driveways and
parking areas adjoining said premises. Landlord shall have the authority to
assign parking areas for Tenant and Tenant's employees, if deemed necessary by
Landlord.
16. If additional drapes or window decorations are desired by Tenant, they
shall be approved by Landlord and installed at the Tenant's expense under the
direction of the Landlord.
17. The Tenant shall, at its sole cost and expense and on at least a
quarterly basis, employ professional exterminators to treat and control pests
within the Premises and supply Landlord with a copy of the contract therefor and
evidence of treatment.
The Landlord shall have the right to make such other and further reasonable
rules and regulations as, in the judgement of the Landlord, may from time to
time be necessary for the safety, care and cleanliness of the Premises, the
building or the park, and for the preservation of good order therein, effective
five (5) days after all tenants have been given written notice thereof.
23
<PAGE>
EXHIBIT D
Contract Standards for HVAC
Inspection, Maintenance and Repair
Pursuant to Section 8 of the Lease, Tenant is obligated to enter into and
maintain a maintenance contract for heating and air conditioning systems and
equipment at the Premises, for the term of the Lease, and any renewal or
extension hereof. The following sets forth minimum standards in connection with
the services contract so as to accomplish a preventive maintenance inspection
and service program for the HVAC systems and equipment at the Premises. At
minimum, contract services shall include four (4) scheduled inspections and
routine preventative maintenance service calls per year. The contract shall
further provide that emergency call service shall be available on a twenty-four
(24) hour a day on call basis. The services contract shall include, without
limitation, the following types of services:
(1) Regular preventative maintenance to heating, ventilation and air
conditioning equipment as follows:
A. Compressors
1. Check suction and head pressures
2. Electrical amperes
3. All electrical connections
B. Condenser Coil
1. Clean coil (if needed) and check fan condition
2. Check oil level and condition
3. Check for refrigerant leaks
C. Air Handling Side
1. Volts and amperes of motor
2. Electrical connections
3. Adjust belts and pulleys
4. Check and lube bearings and motors
5. Clean coil (if needed) and check fan condition
6. Change filters
7. Check for condensate leaks
D. Boiler (if applicable)
1. Check fire
2. Pressures
3. Oil and check pumps
4. Burners
5. Water temperature
6. Safety controls
E. Check out heating side of units as well as cooling side.
F. Check to make sure thermostats are operating properly.
(2) Emergency call service as needed (beyond routine preventative service)
due to mechanical failure of HVAC equipment.
24
<PAGE>
EXHIBIT E
RIGHT OF FIRST OFFER
Tenant shall have a right of first offer throughout the initial Term of this
Lease and any renewal Term hereof, for the space currently occupied by ICAgen,
Inc. Prior to entering into negotiations with any other prospective Tenant for
any such space, the Landlord will provide Tenant with a written notice
specifying the amount of space that will be available, the date of availability,
and the then prevailing terms. Tenant must respond in writing within ten (10)
days of Landlord's notice if it wishes to Lease said space. For the twelve (12)
months of either the initial Term of this Lease or any extension term,
Landlord's obligation to extend Tenant any right of first offer is contingent
upon either (i) Tenant having previously elected to extend this Lease or enter
into a new Lease for the Premises, or (ii) Tenant electing, upon receiving
notice of the availability of said space, to extend the Lease or enter into a
new Lease for the Premises. Landlord represents to Tenant that to the best of
Landlord's knowledge no other party has a right of first offer or right of first
refusal on said ICAgen, Inc. space. In addition to the right of first offer
Tenant shall lease from Landlord the space presently occupied by Kelly Green
'Scapes at the Building, consisting of 3,280 useable square feet, which space
may be available to Tenant on or before November 1, 1995 subject to the
conditions of the following sentence. This right of Tenant to said space is
subject to Landlord receiving from ICAgen, Inc. a waiver of its right of first
offer on the Kelley Green 'Scapes' space, and is further subject to Landlord's
ability to relocate Kelley Green 'Scapes' within the Business Park. Landlord
further represents that it shall use all reasonable efforts to relocate Kelly
Green 'Scapes on or before November 1, 1995. Upon occupancy of the Kelly Green
'Scapes space by Tenant, Tenant shall pay rent for such space in the amount of
five and 50/100 Dollars ($5.50) per square foot and all of the terms and
conditions of this Lease shall apply to Tenant's use and occupancy of said
space. Landlord represents to the best of its knowledge that no other party
other than ICAgen, Inc. has right of first offer or first refusal on the Kelly
Green 'Scapes' space.
25
<PAGE>
EXHIBIT F
RIGHT OF CANCELLATION
Tenant shall have the right to cancel this lease following thirty-six (36)
months occupancy and with six (6) months prior written notice. The cancellation
penalty, paid at the time cancellation notice is given, shall be the unamortized
portion of the interior improvement allowance, architectural fees and brokerage
fees (which is being amortized at eleven percent (11%) per annum) previously
paid by the Landlord. The parties agree that such charge shall be only the
unamortized portion of the principle and shall not include any future interest
------
charges. [past the thirty-six month occupancy period]
------------------------------------------
26
<PAGE>
EXHIBIT G
MEMORANDUM OF LEASE
[TO BE ADDED AT COMMENCEMENT]
---------------------------
27
<PAGE>
EXHIBIT H.
RENEWAL OPTION
Tenant may, at its sole discretion, elect to renew this Lease for a period of
between two (2) and four (4) years (the "Extension Period"), the number of years
of such extension to be in Tenant's discretion, by giving Landlord written
notice of Tenant's intention to exercise this renewal option (the "Extension
Option") not later than five (5) months prior to the expiration of the initial
term. The Extension Period shall be subject to the same terms and conditions as
contained in this Lease, except that rent, as described in Section 3 of the
Lease, shall be nine and No/100 Dollars ($9.00) per square foot for a two (2)
year term and nine and 50/100 Dollars ($9.50) per square foot for a term of
three (3) years or greater.
In the event that Tenant agrees to exercise its extension option for an
extension period of three (3) years or greater, then Landlord shall provide a
refurbishment allowance equal to one dollar ($1.00) per square foot for each
year of the renewal term.
28
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE ("Amendment") is executed this 30 day of August,
1995 by and between INSPIRE PHARMACEUTICALS, INC. ("Tenant") and IMPERIAL
CENTER, LIMITED PARTNERSHIP ("Landlord").
W I T N E S S E T H:
THAT WHEREAS, Landlord and Tenant entered into a lease for certain space at
the Royal Center I, 4222 Emperor Boulevard, Morrisville, North Carolina, dated
May 17, 1995, as amended August 30 , 1995 (the "Lease"); and
--
WHEREAS, the Lease grants Tenant certain rights to space currently occupied
by Kelly Green 'Scapes (the "Kelly Green 'Scapes Space"); and
WHEREAS, Landlord and Tenant have agreed to modify the Lease as set forth
herein, primarily in order to modify Tenant's rights with respect to the Kelly
Green 'Scapes Space.
NOW THEREFORE, for the mutual covenants and premises herein, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
mutually acknowledged, the parties, intending to be bound, hereby agree as
follows.
1. Delivery of Kelly Green 'Scapes Space: Landlord warrants and agrees
-------------------------------------
that it shall deliver the Kelly Green 'Scapes space to Tenant on or before
December 1, 1995. It is understood that the Kelly Green 'Scapes Space shall be
in a "shell condition." If Landlord cannot deliver possession to Tenant of the
Kelly Green 'Scapes Space on or before December 1, 1995, the Lease shall not be
void or voidable, provided, however, that in such event, no obligations of
Tenant for rent due or other obligations for the Kelly Green 'Scapes Space shall
accrue until possession of the Kelly Green 'Scapes Space shall have been
delivered. If the period of actual delay of Kelly Green 'Scapes Space exceeds
(45) days, then Tenant may, at its option, terminate the Lease. Further, if
Landlord will be unable to deliver possession of the Kelly Green 'Scapes Space
on or before December 1, 1995, it shall provide Tenant with written notice of
such anticipated delay, together with a reasonable estimate of the actual
delivery date, not later than November 1, 1995, so that Tenant will not incur
unnecessary costs related to its anticipated possession of the Kelly Green
'Scapes Space .
2. Obligations of Tenant Upon Delivery: Upon occupancy of the Kelly Green
-----------------------------------
'Scapes Space, Tenant shall pay rent as provided in the Lease and shall be
subject to all terms and conditions of the Lease with respect to the Kelly Green
'Scapes Space.
3. Compensation to Landlord: Tenant acknowledges that in order to make
------------------------
the Kelly Green 'Scapes Space available not later than December 1, 1995 or
within 45 day period as referenced in Section 1. Landlord and certain
<PAGE>
of Landlord's tenants will incur costs relative to the relocation of Kelly Green
'Scapes. Tenant hereby agrees to pay Landlord a fee of Twenty Thousand and
No/100 Dollars ($20,000.00) in order to contribute to the costs of the
relocation, and in order to insure that the Kelly Green 'Scapes Space is
available for certain on or before December 1, 1995 or within 45 day period as
referenced in Section 1. This fee shall be paid by Tenant to Landlord within
ten (10) days of date Landlord delivers the Kelly Green 'Scapes Space to Tenant.
4. Full Force and Effect; Time of the Essence: Except as modified herein,
------------------------------------------
the Lease remains unchanged and in full force and effect. Time is of the
essence hereunder.
[Signature Page Attached Hereto and Incorporated Herein by Reference]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment under seal
the day and year first above written.
LANDLORD:
IMPERIAL CENTER, LIMITED PARTNERSHIP,
a North Carolina limited partnership (SEAL)
By: Petula Associates, Ltd.,
an Iowa corporation,
General Partner
APPROVED
By: /s/ Frank E. Schmitz BICB
------------------------------------ ------------
Printed Name: Frank E. Schmitz
------------------------------------
Title: Senior Regional Asset Manager
Commercial Real Estate Equities
------------------------------------
President
--------
ATTEST:
/s/ Ronald B. Franklin, Vice President
Secretary
- ----------
[AFFIX CORPORATE SEAL]
TENANT:
INSPIRE PHARMACEUTICALS, INC.
By: /s/ H. Jeff Leighton
----------------------------------------
Printed Name: H. Jeff Leighton
----------------------------------------
Title: President
--------
ATTEST:
/s/ Tim R. Gupton
Assistant Secretary
- ----------
[AFFIX CORPORATE SEAL]
None
<PAGE>
August 1, 1995
Inspire Pharmaceuticals, Inc.
4222 Emperor Blvd., Suite 470
Morrisville, NC 27560
Attn.: H. Jeff Leighton, Ph. D.
Petula Associates, Ltd.
c/o Tri-Properties, Inc.
Post Office Box 13163
RTP, NC 27709
Attn.: Amy Sears
Dear Ladies and Gentlemen:
We have received a written notice from Petula Associates, Ltd. advising us of
our right to exercise our right of first offer on the space now occupied by
Kelly Green 'Scapes and known as Suite 490, 4222 Emperor Boulevard, Morrisville,
North Carolina 27560 (the "Subject Space"): This right of first refusal is
pursuant to our lease dated December 17, 1992 between ICAgen, Inc. and Imperial
Center Partnership and Petula Associates, Ltd. (collectively, "Landlord").
ICAgen has agreed not to exercise its right of first offer based on the
following agreement:
1. Inspire Pharmaceuticals has agreed to sign a definitive lease for the
Subject Space.
2. In the event Inspire desires to assign or sublet the Subject Space or any
other space occupied by it in the Royal Center I Building, ICAgen will have
a right of first offer for twenty (20) calendar days on the Subject Space
or such other space at a fair market rate for the Subject Space or such
other space, as the case may be.
3. In the event that Inspire does not begin paying full market rent for the
Subject Space on or before the earlier of (a) 45 days after Landlord makes
the Subject Space available to Inspire for fit-up or (b) January 15, 1996,
ICAgen would again have a right of first offer as to the Subject space for
twenty (20) calendar days. In the event that ICAgen offers to take such
space, assuming space is made available, it shall be available to it at the
rate of Five Dollars and Fifty Cents ($5.50) per square foot and all the
terms and conditions contained in ICAgen's lease with Landlord shall apply
to the use and occupancy of such space and the term of such space shall be
coterminate (including options to renew) with the term of ICAgen's lease
with Landlord. If ICAgen exercises such right of first offer, then the
lease for the Subject Space between Petula and Inspire shall terminate.
<PAGE>
4. In the event ICAgen desires to assign or sublet any of its space in the
Royal Center I Building, Inspire will have a right of first offer for
twenty (20) calendar days on such space.
5. ICAgen shall have a right to renew its lease which is superior to any right
of first offer or first refusal given Inspire. In the event ICAgen does not
renew its lease, Inspire does have a right of first offer on ICAgen's
space. Landlord agrees to negotiate in good faith for such renewal with
ICAgen at the prevailing market rates for space in the Royal Center I
Building.
If you are in agreement with the terms of this letter agreement, please
sign one copy and return it to me and it shall constitute a binding
agreement among us governed by North Carolina law.
Sincerely,
/s/ P. Kay Wagoner, Ph.D.
P. Kay Wagoner, Ph.D.
President
Agreed to and accepted this
1st day of August, 1995
------------
<TABLE>
<CAPTION>
PETULA ASSOCIATES, LTD. INSPIRE PHARMACEUTICALS, INC.
<S> <C> <C> <C>
---------------------------------------- ----------------------------------------
By: /s/ Frank E. Schmitz By: /s/ H. Jeff Leighton
---------------------------------------- ----------------------------------------
Name: Frank E. Schmitz Name: H. Jeff Leighton
Senior Regional Asset Manager
Commercial Real Estate Equities
---------------------------------------- ----------------------------------------
Title: Title: CEO
---------------------------------------- ----------------------------------------
</TABLE>
<PAGE>
Exhibit 10.9
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated October 13, 1995 by and
between COMDISCO, INC. ("Lessor") and INSPIRE PHARMACEUTICALS, INC. ("Lessee")
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statement made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee upon Lessor's
request agrees to execute precautionary Uniform Commercial Code financing
statements showing the interest of the Owner, Lessor, and any Assignee or
Secured Party in the Equipment and to insert serial numbers in Summary Equipment
Schedules as appropriate. Lessee will, at its expense, keep the Equipment free
and clear from any liens or encumbrances of any kind (except any caused by
Lessor) and will indemnify and hold the Owner, Lessor, any Assignee and Secured
Party harmless from and against any loss caused by Lessee's failure to do so,
except where such is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee
meets the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the forms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or
Assignee. In that event, the term Lessor will mean the Assignee and any Secured
Party. However, any assignment, sale, or other transfer by Lessor will not
relieve Lessor of its obligation to the Lessee and will not materially change
Lessee's duties or materially increase the burdens of risks imposed on Lessee.
The Lessee consents to and will acknowledge such assignments in a written notice
given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder is absolute
and unconditional and is not subject to any abatement, reduction, set-off,
defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all
taxes, fees or any other charges (together with any related interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Summary Equipment Schedule against Lessor, Lessee or the
Equipment by any governmental authority (except only Federal, state, local and
franchise taxes on the capital or the net income of Lessor). Lessor will file
all personal property tax returns for the equipment and pay all such property
taxes due. Lessee will reimburse Lessor for property taxes within thirty (30)
days of receipt of an invoice.
7. Care, Use and Maintenance; Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Leasee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for Inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each Schedule
executed hereunder.
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its Incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
of the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business, and has full corporate power and authority to old property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule
-1-
<PAGE>
are not inconsistent with the Lessee's Articles of Incorporation or Bylaws, do
not contravene any law or governmental rule, regulation or order applicable to
it, do not and will not, contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument to which it is a
party or by which it is bound, and the Master Lease and each Schedule constitute
legal, valid and binding agreements of the Lessee, enforceable in accordance
with their terms, subject to the effect of applicable bankruptcy and other
similar laws affecting the rights of creditors generally and rules of law
concerning equitable remedies.
(c) There are no actions, suits, proceedings or other patent claims pending or,
to the knowledge of the Lessee, threatened against or affecting the Lessee in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the Lessee
will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
Liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is a
party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling
Upon request, Lessee will mark the equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, and Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liabilities
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each
item of Equipment in an amount not less than the Casualty Value. All policies
for such insurance will name the Lessor and any Secured party as additional
insured and as loss payee, and will provide for at least thirty (30) days prior
written notice to the Lessor of cancellation or expiration, and will be
primary without right of contribution from any insurance effected by Lessor.
Upon the execution of any Schedule, the Lessee will furnish appropriate evidence
of such insurance acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the Item of Equipment will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due if
that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule or
the material inaccuracy of any representation or warranty made by the Lessee in
the Schedule or in any document or certificate furnished to the Lessor hereunder
if that failure or inaccuracy continues for ten (10) business days after written
notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary Equipment
Schedule or other agreement between Lessee and Lessor or its Assignee or Secured
Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover the
present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty.
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs, or
-2-
<PAGE>
(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. Additional Provisions.
14.1 Board Attendance. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 Financial Statements. As soon as practicable at the end of each month
(and in any event within thirty (30) days), Lessee will provide to Lessor the
same information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at
the end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee, Lessee will promptly furnish to Lessor any additional
information including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if, (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party, to demand immediate payment
of any material indebtedness; (iii) there is a material adverse change in
Lessee's credit standing; or (iv) Lessor determines (in reasonable good faith)
that Lessee will be unable to perform the obligations under this Master Lease or
any Schedule.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9, Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 Entire Agreement. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master Lease or Schedule. The waiver by Lessor or Lessee of a
breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the benefit
of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHT OR OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 Notices. Any notice, request or other communication to either party by
the other will be given in writing and deemed received upon the earlier of
actual receipt or three days after mailing if mailed postage prepaid by regular
or airmail to Lessor (to the attention of "the Comdisco Venture Group") or
Lessee, at the address set out in the Schedule or, one day after it is sent by
courier or on the same day as sent via facsimile transmission, provided that the
original is sent by personal delivery or mail by the receiving party.
14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE, WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 Severability. If any one or more of the provisions of this Master Lease
or any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed in ay
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants
a security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 Licensed Products. Lessee will obtain no title to Licensed Products
which will at all times remain the property of the owner of the Licensed
Products. A license from the owner may be required and it is Lessee's
responsibility to obtain any required license before the use of the Licensed
Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and to
reproduce or sell the Licensed Products.
14.14 Secretary's Certificate. Lessee will, upon execution of this Master
Lease, provide Lessor with a secretary's certificate of incumbency and
authority.
14.15 Electronic Communications. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.17 Equipment Procurement Charges/Progress Payments. Lessee hereby agrees
that Lessor shall not, by virtue of its entering into this Master Lease, be
required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Master Lease.
14.18 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution of
- -------
each Schedule.
Assignee - means an entity to whom Lessor has sold or assigned its rights as
- --------
owner and Lessor of Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
- -------------
Casualty Value - means the greater of the aggregate Rent, remaining to be paid
- --------------
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
Commencement Date - is defined in each Schedule.
- -----------------
Default Costs - means reasonable attorney's fees and remarketing costs resulting
- -------------
from a Lessee default or Lessor's enforcement of its remedies.
Delivery Date - means date of delivery of Inventory Equipment to Lessee's
- -------------
address.
Equipment - means the property described on a Summary Equipment Schedule and any
- ---------
replacement for that property required or permitted by this Master Lease or a
Schedule.
Event of Default - means the events described in Subsection 13.1.
- ----------------
-3-
<PAGE>
Fair Market Value - means the aggregate amount which would be obtainable in an
- -----------------
arm's length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the first
- ------------
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
Interim Rent - means the pro-rata portion of Rent due for the period from the
- ------------
Commencement Date through but not including the first day of the firs full Rent
Interval included in the Initial Term.
Late Charge - means the lesser of five percent (5%) of the payment due or the
- -----------
maximum amount permitted by the law of the state where the Equipment is located.
Licensed Products - means any software or other licensed products attached to
- -----------------
the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the same
- --------------
model, type, configuration and manufacture as Equipment.
Merger - means any consolidate or merger of the Lessee with or into any other
- ------
corporation or entity, any sale or conveyance of all or substantially all of the
assets of the Leasee to any other person or entity or any stock acquisition of
the Lessee by any other person or entity in which Lessee is not the surviving
entity.
Notice Period - means not less than ninety (90) days nor more than twelve (12)
- -------------
months prior to the expiration of the lease term.
Owner - means the owner of Equipment.
- -----
Rent - means the rent Lessee will pay for each item of Equipment expressed in a
- ----
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
- -------------
Schedule.
Schedule - means either an Equipment Schedule or a Licensed Products Schedule
- --------
which incorporates all of the terms and conditions of this Master Lease.
Secured Party - means an entity to whom Lessor has granted a security Interest
- -------------
for the purpose of securing a loan.
Summary Equipment Schedule - means a certificate provided by Lessor summarizing
- --------------------------
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
INSPIRE PHARMACEUTICALS, INC. COMDISCO, INC.,
as Lessee as Lessor
By: /s/ Tim Gupton By: /s/ James P. Labe
------------------- -------------------
Title: CFO Title: President
------------------- -------------------
-5-
<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF October 13, 1995
TO MASTER LEASE AGREEMENT
DATED AS OF October 13, 1995 (THE "MASTER LEASE")
LESSEE: INSPIRE PHARMACEUTICALS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
Dan Routhier 6111 North River Road
Manager, Finance & Operations Rosemont, Illinois 60018
(919) 941-9777 Attn.: Venture Group
Address for Notices:
- -------------------
4222 Emperor Blvd., Suite 470
Morrisville, NC 27560
Attn.:
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
Same as Above
Attn.:
Lessee Reference No.:
-------------------
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
- --------------------- ------------
Same as Above (Number of Rent Intervals)
Lease Rate Factor: 2.481%
----------------- ------
Attn.:
EQUIPMENT (as defined below): Advance: $24,810.00
------- ----------
Less Commitment Deposit
- 5,000.00
--------
Due: $19,810.00
Equipment specifically approved by Lessor, which shall be delivered to
and accepted by Lessee during the period October 17, 1995 through April
17, 1996 ("Equipment Delivery Period"), for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of
$1,000,000 ("Commitment Amount"); excluding custom use equipment,
leasehold improvements, installation costs and delivery costs, rolling
stock, special tooling, "stand-alone" software, application software
bundled into computer hardware, hand held items, molds and fungible
items.
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease
to Lessee, either by one of the first three categories listed below or by
providing Lessee with Equipment from the fourth category, in a value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii) or (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgement at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
Lessor will finance only the acquisition of individual items of
Equipment with a cost to Lessor of more than $500.00.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
specifically approved by Lessor.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than November 17,
1995*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any sale-
leaseback Equipment will be placed on lease subject to: (1) Lessor
prior approval of the Equipment; and (2) if approved, at Lessor's
actual net appraised Equipment value pursuant to the schedule
below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL
DATE MANUFACTURER'S NET EQUIPMENT
COST PAID BY LESSOR
- ---------------------------------- ------------------------------
Between 5/1/95 and 11/17/95 100%
Between 3/1/95 and 4/30/95 80%
Between 12/1/94 and 2/28/95 70%
Between 9/1/94 and 11/30/94 65%
Between 6/1/94 and 8/31/94 60%
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) INVENTORY EQUIPMENT. Upon Lessee's request, Lessor may supply new
or used Equipment from its inventory at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the date Lessee approves the vendor invoice. The
Commencement Date for sale-leaseback Equipment shall be the date Lessor
tenders the purchase price, and the Commencement Date for inventory
Equipment shall be the Delivery Date or if such inventory Equipment
requires installation, the date such installation is completed. Lessor
will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar quarter into a
Summary Equipment Schedule in the form attached to this Schedule as Exhibit
1, and the Initial Term will begin the first day of the calendar quarter
thereafter. Each Summary Equipment Schedule will contain the Equipment
location, description, serial number(s) and cost and will incorporate the
terms and conditions of the Master Lease and this Schedule and will
constitute a separate lease.
<PAGE>
3. Option to Extend
So long as no Event of Default has occurred and is continuing
hereunder, and upon written notice no earlier than twelve (12) months and no
later than ninety (90) days prior to the expiration of the Initial Term of a
Summary Equipment Schedule, Lessee will have the right to extend the Initial
Term of such Summary Equipment Schedule for a period of one (1) year. In such
event, the rent to be paid during said extended period shall be mutually agreed
upon and if the parties cannot mutually agree, then the Summary Equipment
Schedule shall continue in full force and effect pursuant to the existing terms
and conditions until terminated in accordance with its terms. The Summary
Equipment Schedule will continue in effect following said extended period until
terminated by either party upon not less than ninety (90) days prior written
notice, which notice shall be effective as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing
hereunder, and upon written notice no earlier than twelve (12) months and no
later than ninety (90) days prior to the expiration of the Initial Term or the
extended term of the applicable Summary Equipment Schedule, Lessee will have
the option at the expiration of the Initial Term or extended term of the
Summary Equipment Schedule to purchase all, but not less than all, of the
Equipment listed therein for a purchase price not to exceed 20% of Lessor's
original equipment cost and upon terms and conditions to be mutually agreed upon
by the parties following Lessee's written notice, plus any taxes applicable at
time of purchase. Said purchase price shall be paid to Lessor at least thirty
(30) days before the expiration date of the Initial Term or extended term.
Title to the Equipment shall automatically pass to Lessee upon payment in full
of the purchase price but, in no event, earlier than the expiration of the fixed
Initial Term or extended term, if applicable. If the parties are unable to
agree on the purchase price or the terms and conditions with respect to said
purchase, then the Summary Equipment Schedule with respect to this Equipment
shall remain in full force and effect. Notwithstanding the exercise by Lessee
of this option and payment of the purchase price, until all obligations under
the applicable Summary Equipment Schedule have been fulfilled, it is agreed and
understood that Lessor shall retain a purchase money security interest in the
Equipment listed therein and the Summary Equipment Schedule shall constitute a
Security Agreement under the Uniform Commercial Code of the state in which the
Equipment is located.
5. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Subsection 14.2 "Financial Statements" in line 3, delete "Board of
--------------------
Directors" and insert "Series A Preferred stockholders".
Master Lease: This Schedule is issued pursuant to the Lease identified on
page 1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations
and warranties set forth in Section 8) except as modified herein by this
Schedule. This Schedule may not be amended or rescinded except by a writing
signed by both parties.
INSPIRE PHARMACEUTICALS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Tim Gupton By: /s/ James P. Labe
------------------------- -------------------------
Title: CFO Title: President
------------------------- -------------------------
Date: 10/13/95 Date: 10/14/95
------------------------- -------------------------
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated as of_____, 1995 is executed pursuant to
Equipment Schedule No. VL-1 dated as of October 13, 1995 to the Master Lease
Agreement dated as of October 13, 1995 between Comdisco, Inc. ("Lessor") and
Inspire Pharmaceuticals, Inc. ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. VL-1 are incorporated herein and made part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- -------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
- -- ----
6. Acceptance Doc Type:
-------------------
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF October 13, 1995
TO MASTER LEASE AGREEMENT
DATED AS OF October 13, 1995 (THE "MASTER LEASE")
LESSEE: INSPIRE PHARMACEUTICALS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
Dan Routhier 6111 North River Road
Manager, Finance & Operations Rosemont, Illinois 60018
(919) 941-9777 Attn.: Venture Group
Address for Notices:
- -------------------
4222 Emperor Blvd., Suite 470
Morrisville, NC 27560
Attn.:
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
Same as Above
Attn.:
Lessee Reference No.:
-------------------
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
- --------------------- ------------ ---------
Same as Above (Number of Rent Intervals)
Lease Rate Factor: 2.481%
----------------- ------
Attn.:
EQUIPMENT (as defined below): Advance: $6,202.50
---------
NMR, which shall be delivered to and accepted by Lessee by April 17, 1996
("Equipment Delivery Period"), for which Lessor receives a vendor invoice
approved for payment, up to an aggregate purchase price of $250,000.00
("Commitment Amount").
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease
to Lessee, either by one of the first three categories listed below or by
providing Lessee with Equipment from the fourth category, in a value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii) or (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgement at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
Lessor will finance only the acquisition of individual items of
Equipment with a cost to Lessor of more than $500.00.
(v) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
specifically approved by Lessor.
(vi) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than November 17,
1995*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any sale-
leaseback Equipment will be placed on lease subject to: (1) Lessor
prior approval of the Equipment; and (2) if approved, at Lessor's
actual net appraised Equipment value pursuant to the schedule
below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S NET
DATE EQUIPMENT COST PAID BY LESSOR
- -------------------------- ---------------------------------------
Between 5/1/95 and 11/17/95 100%
Between 3/1/95 and 4/30/95 80%
Between 12/1/94 and 2/28/95 70%
Between 9/1/94 and 11/30/94 65%
Between 6/1/94 and 8/31/94 60%
(vii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment
which is obtained from a third party by Lessee for its use
subject to Lessor's prior approval of the Equipment and at
Lessor's appraised value for such used Equipment.
(viii) INVENTORY EQUIPMENT. Upon Lessee's request, Lessor may supply
new or used Equipment from its inventory at rates provided by
Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the date Lessee approves the vendor invoice. The
Commencement Date for sale-leaseback Equipment shall be the date Lessor
tenders the purchase price, and the Commencement Date for inventory
Equipment shall be the Delivery Date or if such inventory Equipment
requires installation, the date such installation is completed. Lessor
will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar quarter into a
Summary Equipment Schedule in the form attached to this Schedule as Exhibit
1, and the Initial Term will begin the first day of the calendar quarter
thereafter. Each Summary Equipment Schedule will contain the Equipment
location, description, serial number(s) and cost and will incorporate the
terms and conditions of the Master Lease and this Schedule and will
constitute a separate lease.
<PAGE>
3. Option to Extend
So long as no Event of Default has occurred and is continuing
hereunder, and upon written notice no earlier than twelve (12) months and no
later than ninety (90) days prior to the expiration of the Initial Term of a
Summary Equipment Schedule, Lessee will have the right to extend the Initial
Term of such Summary Equipment Schedule for a period of one (1) year. In such
event, the rent to be paid during said extended period shall be mutually agreed
upon and if the parties cannot mutually agree, then the Summary Equipment
Schedule shall continue in full force and effect pursuant to the existing terms
and conditions until terminated in accordance with its terms. The Summary
Equipment Schedule will continue in effect following said extended period until
terminated by either party upon not less than ninety (90) days prior written
notice, which notice shall be effective as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing
hereunder, and upon written notice no earlier than twelve (12) months and no
later than ninety (90) days prior to the expiration of the Initial Term or the
extended term of the applicableSummary Equipment Schedule, Lessee will have the
option at the expiration of the Initial Term or extended term of the Summary
Equipment Schedule to purchase all, but not less than all, of the Equipment
listed therein for a purchase price not to exceed 20% of Lessor's original
equipment cost and upon terms and conditions to be mutually agreed upon by the
parties following Lessee's written notice, plus any taxes applicable at time of
purchase. Said purchase price shall be paid to Lessor at least thirty (30) days
before the expiration date of the Initial Term or extended term. Title to the
Equipment shall automatically pass to Lessee upon payment in full of the
purchase price but, in no event, earlier than the expiration of the fixed
Initial Term or extended term, if applicable. If the parties are unable to
agree on the purchase price or the terms and conditions with respect to said
purchase, then the Summary Equipment Schedule with respect to this Equipment
shall remain in full force and effect. Notwithstanding the exercise by Lessee
of this option and payment of the purchase price, until all obligations under
the applicable Summary Equipment Schedule have been fulfilled, it is agreed and
understood that Lessor shall retain a purchase money security interest in the
Equipment listed therein and the Summary Equipment Schedule shall constitute a
Security Agreement under the Uniform Commercial Code of the state in which the
Equipment is located.
6. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule
are hereby modified and amended as follows:
Subsection 14.2 "Financial Statements" in line 3, delete "Board of
--------------------
Directors" and insert "Series A Preferred stockholders".
Master Lease: This Schedule is issued pursuant to the Lease identified on
page 1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly
set forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representation
and warranties set forth in Section 8) except as modified herein by this
Schedule. This Schedule may not be amended or rescinded except by a writing
signed by both parties.
INSPIRE PHARMACEUTICALS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Tim Gupton By: /s/ James P. Labe
-------------------------------- -----------------------
Title: CFO Title: President
-------------------------------- -----------------------
Date: 10/13/95 Date: 10/14/95
-------------------------------- -----------------------
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated as of _______, 1995 is executed
pursuant to Equipment Schedule No. VL-2 dated as of October 13, 1995 to the
Master Lease Agreement dated as of October 13, 1995 between Comdisco, Inc.
("Lessor") and Inspire Pharmaceuticals, Inc. ("Lessee"). All of the terms,
conditions, representations and warranties of the Master Lease Agreement and
Equipment Schedule No. VL-2 are incorporated herein and made part hereof, and
this Summary Equipment Schedule constitutes a Schedule for the Equipment on the
attached invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- -------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
6. Rent:
- -- ----
6. Acceptance Doc Type:
-------------------
<PAGE>
EQUIPMENT SCHEDULE VL-3
DATED AS OF October 13, 1995
TO MASTER LEASE AGREEMENT
DATED AS OF October 13, 1995 (THE "MASTER LEASE")
LESSEE: INSPIRE PHARMACEUTICALS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
Dan Routhier 6111 North River Road
Manager, Finance & Operations Rosemont, Illinois 60018
(919) 941-9777 Attn.: Venture Group
Address for Notices:
- -------------------
4222 Emperor Blvd., Suite 470
Morrisville, NC 27560
Attn.:
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
Same as Above
Attn.:
Lessee Reference No.: -------------------
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
- --------------------- ------------ ---------
Same as Above (Number of Rent Intervals)
Lease Rate Factor: Annual
----------------- ------
interest rate equal to the
--------------------------
Prime Interest Rate, as
-----------------------
reported by The Wall Street
-------------------------------
Journal at the time of Lessor's
-------------------------------
approval of this Equipment
--------------------------
Schedule VL-3, plus 1%.
-----------------------
Attn.:
EQUIPMENT (as defined below): Advance: To Be Determined at
-------------------
the Time of Approval
--------------------
This Equipment Schedule VL-3 is wholly contingent upon Lessee's request and
Lessor's successful review of Lessee's financial and operational status and
execution by Lessee of a Warrant Agreement in form and substance satisfactory to
Lessor granting Lessor the right to purchase 50,000 shares of Lessee's Series A
Preferred Stock at an exercise price equal to the most recent venture capital
round price per share of such Preferred Stock
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period October 17, 1995 through April 17,
-- --
1996 ("Equipment Delivery Period"), for which Lessor receives vendor
invoices approved for payment up to an aggregate purchase price of
$500,000.00 ("Commitment Amount"); excluding custom use equipment,
leasehold improvements, installation costs and delivery costs, rolling
stock, special tooling, "stand-alone" software, application software
bundled into computer hardware, hand held items, molds and fungible items.
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease
to Lessee, either by one of the first two categories listed below or by
providing Lessee with Equipment from the third category, in a value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i) or (ii) below, the effectiveness of this Schedule as
it relates to those items of Equipment is contingent upon Lessee's
acknowledgement at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
Lessor will finance only the acquisition of individual items of
Equipment with a cost to Lessor of more than $500.00.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
specifically approved by Lessor.
(ii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iii) INVENTORY EQUIPMENT. Upon Lessee's request, Lessor may supply new
or used Equipment from its inventory at rates provided by Lessor.
3. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the date Lessee approves the vendor invoice. The
Commencement Date for sale-leaseback Equipment shall be the date Lessor
tenders the purchase price, and the Commencement Date for inventory
Equipment shall be the Delivery Date or if such inventory Equipment
requires installation, the date such installation is completed. Lessor
will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar quarter into a
Summary Equipment Schedule in the form attached to this Schedule as Exhibit
1, and the Initial Term will begin the first day of the calendar quarter
thereafter. Each Summary Equipment Schedule will contain the Equipment
location, description, serial number(s) and cost and will incorporate the
terms and conditions of the Master Lease and this Schedule and will
constitute a separate lease.
3. Option to Extend
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event, the
rent to be paid during said extended period shall be mutually agreed upon and if
the parties cannot mutually agree, then the Summary Equipment Schedule shall
continue in full force and effect pursuant to the existing terms and conditions
until terminated in accordance with its terms. The Summary Equipment Schedule
will continue in effect following said extended period until terminated by
either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term or extended term of the Summary Equipment
Schedule to purchase all, but not less than all, of the Equipment listed therein
for a purchase price not to exceed 20% of Lessor's original equipment cost and
upon terms and conditions to be mutually agreed upon by the parties following
Lessee's written notice, plus any taxes applicable at time of purchase. Said
purchase price shall be paid to Lessor at least thirty (30) days before the
expiration date of the Initial Term or
<PAGE>
extended term. Title to the Equipment shall automatically pass to Lessee upon
payment in full of the purchase price but, in no event, earlier than the
expiration of the fixed Initial Term or extended term, if applicable. If the
parties are unable to agree on the purchase price or the terms and conditions
with respect to said purchase, then the Summary Equipment Schedule with respect
to this Equipment shall remain in full force and effect. Notwithstanding the
exercise by Lessee of this option and payment of the purchase price, until all
obligations under the applicable Summary Equipment Schedule have been fulfilled,
it is agreed and understood that Lessor shall retain a purchase money security
interest in the Equipment listed therein and the Summary Equipment Schedule
shall constitute a Security Agreement under the Uniform Commercial Code of the
state in which the Equipment is located.
5. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Subsection 14.2 "Financial Statements" in line 3, delete "Board of Directors"
--------------------
and insert "Series A Preferred stockholders".
Master Lease: This Schedule is issued pursuant to the Lease identified on
page 1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations
and warranties set forth in Section 8) except as modified herein by this
Schedule. This Schedule may not be amended or rescinded except by a writing
signed by both parties.
INSPIRE PHARMACEUTICALS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Tim Gupton By: /s/ James P. Labe
-------------------------------- -----------------------
Title: CFO Title: President
-------------------------------- -----------------------
Date: 10/13/95 Date: 10/14/95
-------------------------------- -----------------------
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated as of _______, 1995 is executed
pursuant to Equipment Schedule No. VL-3 dated as of October 13, 1995 to the
Master Lease Agreement dated as of October 13, 1995 between Comdisco, Inc.
("Lessor") and Inspire Pharmaceuticals, Inc. ("Lessee"). All of the terms,
conditions, representations and warranties of the Master Lease Agreement and
Equipment Schedule No. VL-3 are incorporated herein and made part hereof, and
this Summary Equipment Schedule constitutes a Schedule for the Equipment on the
attached invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- -------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
7. Rent:
----
6. Acceptance Doc Type:
-------------------
<PAGE>
EQUIPMENT SCHEDULE VL-4
DATED AS OF JUNE 18, 1998
TO MASTER LEASE AGREEMENT
DATED AS OF OCTOBER 13, 1995 (THE "MASTER LEASE")
LESSEE: INSPIRE PHARMACEUTICALS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
Phone: (919) 941-9777 6111 North River Road
Fax: (919) 941-9797 Rosemont, Illinois 60018
Attn.: Venture Group
Address for Notices:
- -------------------
4222 Emperor Blvd., Suite 470
Durham, NC 27560
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.: -------------------
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 2.418%
-----------------
Attn.:
EQUIPMENT (as defined below): Advance: $8,583.90
---------
Laboratory Equipment specifically approved by Lessor, which shall be
delivered to and accepted by Lessee during the period June 18, 1999 through
November 18, 1999 ("Equipment Delivery Period"), for which Lessor receives
vendor invoices approved for payment, up to an aggregate purchase price of
$355,000.00 ("Commitment Amount"); excluding custom use equipment,
leasehold improvements, installation costs and delivery costs, rolling
stock, special tooling, "stand-alone" software, application software
bundled into computer hardware, hand held items, molds and fungible items.
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease
to Lessee, either by one of the first three categories listed below or by
providing Lessee with Equipment from the fourth category, in an aggregate value
up to the Commitment Amount referred to on the face of this Schedule. If the
Equipment acquired is of category (i), (ii), (iii) below, the effectiveness of
this Schedule as it relates to those items of Equipment is contingent upon
Lessee's acknowledgement at the time Lessor acquires the Equipment that Lessee
has either received or approved the relevant purchase documentation between
vendor and Lessor for that Equipment.
Lessor will finance only the acquisition of individual items of
Equipment with a cost to Lessor of more than $500.00.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than July 18,
1998*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any sale-
leaseback Equipment will be placed on lease subject to: (1) Lessor
prior approval of the Equipment; and (2) if approved, at Lessor's
actual net appraised Equipment value pursuant to the schedule
below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
- -------------------------- ----------------------------------
Between 6/18/98 and 3/20/98 100%
Between 1/18/98 and 3/19/98 80%
Between 10/19/97 and 1/17/98 70%
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Lessor's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its
inventory for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-
order Equipment will be the install date as confirmed in writing by Lessee
as set forth on the vendor invoice of which a facsimile transmission will
constitute an original document. The Commencement Date for sale-leaseback
Equipment shall be the date Lessor tenders the purchase price. The
Commencement Date for 800 Number Equipment shall be fifteen (15) days from
the ship date, such ship date to be set forth on the vendor invoice or if
unavailable on the vendor invoice the ship date will be determined by Lessor
upon other supporting shipping documentation. Lessor will summarize all
approved invoices, purchase documentation and evidence of delivery, as
applicable, received in the same calendar quarter into a Summary Equipment
Schedule in the form attached to this Schedule as Exhibit 1, and the Initial
Term will begin the first day of the calendar quarter thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of
the Master Lease and this Schedule and will constitute a separate lease.
3. Option to Extend
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event,
the rent to be paid during said extended period shall be mutually agreed upon
and if the parties cannot mutually agree, then the Summary
<PAGE>
Equipment Schedule shall continue in full force and effect pursuant to the
existing terms and conditions until terminated in accordance with its terms.
The Summary Equipment Schedule will continue in effect following said extended
period until terminated by either party upon not less than ninety (90) days
prior written notice, which notice shall be effective as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later
than ninety (90) days prior to the expiration of the Initial Term or the
extended term of the applicable Summary Equipment Schedule, Lessee will
have the option at the expiration of the Initial Term or extended term of
the Summary Equipment Schedule to purchase all, but not less than all, of
the Equipment listed therein for a purchase price not to exceed 20% of
Lessor's original equipment cost and upon terms and conditions to be
mutually agreed upon by the parties following Lessee's written notice, plus
any taxes applicable at time of purchase. Said purchase price shall be
paid to Lessor at least thirty (30) day s before the expiration date of the
Initial Term or extended term. Title to the Equipment shall automatically
pass to Lessee upon payment in full of the purchase price but, in no event,
earlier than the expiration of the fixed Initial Term or extended term, if
applicable. If the parties are unable to agree on the purchase price or
the terms and conditions with respect to said purchase, then the Summary
Equipment Schedule with respect to this Equipment shall remain in full
force and effect. Notwithstanding the exercise by Lessee of this option
and payment of the purchase price, until all obligations under the
applicable Summary Equipment Schedule have been fulfilled, it is agreed and
understood that Lessor shall retain a purchase money security interest in
the Equipment listed therein and the Summary Equipment Schedule shall
constitute a Security Agreement under the Uniform Commercial Code of the
state in which the Equipment is located.
5. Optional Commitment Amount
So long as no Event of Default shall have occurred and is continuing
hereunder, and upon written notice, Lessee will have the right to request
Lessor to release an Optional Commitment Amount of $497,000.00 under the
same terms and conditions as stated herein. Upon Lessor's approval of such
Optional Commitment Amount, Lessee will pay to Lessor an Advance Rent in
the amount of $ 12,017.46 and provide Lessor with a Warrant Agreement which
contains similar terms and conditions as the Warrant Agreement between the
parties dated 6/18/98 whereby Lessee shall grant Lessor the right to
purchase share of Series B Preferred Stock at an Exercise Price of $1.20.
6. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Subsection 14.2 "Financial Statements" in line 3, delete "Board of
Directors" and insert "Series B Preferred stockholders".
Master Lease: This Schedule is issued pursuant to the Lease identified on
page 1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly
set forth in this Schedule. The parties hereby reaffirm all of the terms
and conditions of the Lease (including, without limitation, the
representations and warranties set forth in Section 8) except as modified
herein by this Schedule. This Schedule may not be amended or rescinded
except by a writing signed by both parties.
INSPIRE PHARMACEUTICALS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Christy Shaffer By: /s/ James P. Labe
------------------------- -----------------------
Title: VP, Development, COO Title: President
------------------------- -----------------------
Date: June 18, 1998 Date: June 19, 1998
------------------------- -----------------------
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to Equipment
Schedule No. X to the Master Lease Agreement dated XXXX between Comdisco, Inc.
("Lessor") XXXX ("Lessee"). All of the terms, conditions, representations and
warranties of the Master Lease Agreement and Equipment Schedule No. X are
incorporated herein and made part hereof, and this Summary Equipment Schedule
constitutes a Schedule for the Equipment on the attached invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- -------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
<PAGE>
EQUIPMENT SCHEDULE VL-5
DATED AS OF JUNE 18, 1998
TO MASTER LEASE AGREEMENT
DATED AS OF OCTOBER 13, 1995 (THE "MASTER LEASE")
LESSEE: INSPIRE PHARMACEUTICALS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
Phone: (919) 941-9777 6111 North River Road
Fax: (919) 941-9797 Rosemont, Illinois 60018
Attn.: Venture Group
Address for Notices:
- -------------------
4222 Emperor Blvd., Suite 470
Durham, NC 27560
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.: -------------------
(24 digits maximum)
Location of Equipment: Initial Term: 30 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 3.666%
-----------------
Attn.:
EQUIPMENT (as defined below): Advance: $2,676.18
Computer Equipment specifically approved by Lessor, which shall be
delivered to and accepted by Lessee during the period June 18, 1999 through
November 18, 1999 ("Equipment Delivery Period"), for which Lessor receives
vendor invoices approved for payment, up to an aggregate purchase price of
$73,000.00 ("Commitment Amount"); excluding custom use equipment, leasehold
improvements, installation costs and delivery costs, rolling stock, special
tooling, "stand-alone" software, application software bundled into computer
hardware, hand held items, molds and fungible items.
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgement at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
Lessor will finance only the acquisition of individual items of
Equipment with a cost to Lessor of more than $500.00.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than July 18,
1998*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any sale-
leaseback Equipment will be placed on lease subject to: (1) Lessor
prior approval of the Equipment; and (2) if approved, at Lessor's
actual net appraised Equipment value pursuant to the schedule
below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
- -------------------------- ----------------------------------
Between 6/18/98 and 3/20/98 100%
Between 1/18/98 and 3/19/98 80%
Between 10/19/97 and 1/17/98 70%
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Lessor's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its
inventory for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800
Number Equipment shall be fifteen (15) days from the ship date, such ship date
to be set forth on the vendor invoice or if unavailable on the vendor invoice
the ship date will be determined by Lessor upon other supporting shipping
documentation. Lessor will summarize all approved invoices, purchase
documentation and evidence of delivery, as applicable, received in the same
calendar quarter into a Summary Equipment Schedule in the form attached to this
Schedule as Exhibit 1, and the Initial Term will begin the first day of the
calendar quarter thereafter. Each Summary Equipment Schedule will contain the
Equipment location, description, serial number(s) and cost and will incorporate
the terms and conditions of the Master Lease and this Schedule and will
constitute a separate lease.
3. Option to Extend
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event,
the rent to be paid during said extended period shall be mutually agreed upon
and if the parties cannot mutually agree, then the Summary Equipment Schedule
shall continue in full force and effect pursuant to the existing terms and
conditions until terminated in
<PAGE>
accordance with its terms. The Summary Equipment Schedule will continue in
effect following said extended period until terminated by either party upon not
less than ninety (90) days prior written notice, which notice shall be effective
as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 20% of the Equipment cost and upon terms and
conditions to be mutually agreed upon by the parties following Lessee's written
notice, plus any taxes applicable at time of purchase. Said purchase price shall
be paid to Lessor at least thirty (30) day s before the expiration date of the
Initial Term or extended term. Title to the Equipment shall automatically pass
to Lessee upon payment in full of the purchase price but, in no event, earlier
than the expiration of the fixed Initial Term or extended term, if applicable.
If the parties are unable to agree on the purchase price or the terms and
conditions with respect to said purchase, then the Summary Equipment Schedule
with respect to this Equipment shall remain in full force and effect.
Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. Technology Exchange Option
If Lessee is not in default, and there is no material adverse change
in Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the Equipment
subject to such summary Equipment Schedule with new technology equipment ("New
Technology Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software.
C. The cost of the New Technology Equipment must be equal to or greater than
the original equipment cost of the replaced equipment, but in no event shall
exceed 150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Lessor based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than the
balance of the remaining Initial Term for the replaced equipment.
6. Optional Commitment Amount
So long as no Event of Default shall have occurred and is continuing
hereunder, and upon written notice, Lessee will have the right to request Lessor
to release an Optional Commitment Amount of $102,200.00 under the same terms and
conditions as stated herein. Upon Lessor's approval of such Optional Commitment
Amount, Lessee will pay to Lessor an Advance Rent in the amount of $ 3,746.65
and provide Lessor with a Warrant Agreement which contains similar terms and
conditions as the Warrant Agreement between the parties dated 6/18/98 whereby
Lessee shall grant Lessor the right to purchase shares of Series B Preferred
Stock at an Exercise Price of $1.20.
7. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Subsection 14.2 "Financial Statements" in line 3, delete "Board of Directors"
--------------------
and insert "Series B Preferred stockholders".
<PAGE>
Master Lease: This Schedule is issued pursuant to the Lease identified on
page 1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations
and warranties set forth in Section 8) except as modified herein by this
Schedule. This Schedule may not be amended or rescinded except by a writing
signed by both parties.
INSPIRE PHARMACEUTICALS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Christy Shaffer By: /s/ James P. Labe
------------------------- -------------------------
Title: VP, Development, COO Title: President
------------------------- -------------------------
Date: June 18, 1998 Date: June 19, 1998
------------------------- -------------------------
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- -------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5 Rent:
----
6. Acceptance Doc Type:
-------------------
<PAGE>
EQUIPMENT SCHEDULE VL-6
DATED AS OF JUNE 18, 1998
TO MASTER LEASE AGREEMENT
DATED AS OF OCTOBER 13, 1995 (THE "MASTER LEASE")
LESSEE: INSPIRE PHARMACEUTICALS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
Phone: (919) 941-9777 6111 North River Road
Fax: (919) 941-9797 Rosemont, Illinois 60018
Attn.: Venture Group
Address for Notices:
- -------------------
4222 Emperor Blvd., Suite 470
Durham, NC 27560
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.: -------------------
(24 digits maximum)
Location of Equipment: Initial Term: 30 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 3.712%
-----------------
Attn.:
EQUIPMENT (as defined below): Advance: $2,672.64
---------
Software and tenant improvements specifically approved by Lessor, which
shall be delivered to and accepted by Lessee during the period June 18,
1998 through November 18, 1999 ("Equipment Delivery Period") for which
Lessor receives vendor invoices approved for payment, up to an aggregate
purchase price of $72,000.00 ("Commitment Amount"); excluding custom use
equipment, delivery costs, rolling stock, special tooling, hand held items,
molds and fungible items.
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgement at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(ix) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(x) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than July 18,
1998*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any sale-
leaseback Equipment will be placed on lease subject to: (1) Lessor
prior approval of the Equipment; and (2) if approved, at Lessor's
actual net appraised Equipment value pursuant to the schedule
below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
- -------------------------- ----------------------------------
Between 6/18/98 and 3/20/98 (90 days) 100%
Between 1/18/98 and 3/19/98 (60 days) 80%
Between 10/19/97 and 1/17/98 (90 days) 70%
(xi) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(xii) 800 NUMBER EQUIPMENT. Upon Lessee's use of Lessor's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its
inventory for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800
Number Equipment shall be fifteen (15) days from the ship date, such ship date
to be set forth on the vendor invoice or if unavailable on the vendor invoice
the ship date will be determined by Lessor upon other supporting shipping
documentation. Lessor will summarize all approved invoices, purchase
documentation and evidence of delivery, as applicable, received in the same
calendar quarter into a Summary Equipment Schedule in the form attached to this
Schedule as Exhibit 1, and the Initial Term will begin the first day of the
calendar quarter thereafter. Each Summary Equipment Schedule will contain the
Equipment location, description, serial number(s) and cost and will incorporate
the term and conditions of the Master Lease and this Schedule and will
constitute a separate lease.
3. Miscellaneous
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit
to Lessor an amount equal to 15% of Lessor's aggregate cost of software and
tenant improvements provided hereunder.
<PAGE>
4. Optional Commitment Amount
So long as no Event of Default shall have occurred and is continuing
hereunder, and upon written notice, Lessee will have the right to request Lessor
to release an Optional Commitment Amount of $100,800.00 under the same terms and
conditions as stated herein. Upon Lessor's approval of such Optional Commitment
Amount, Lessee will pay to Lessor an Advance Rent in the amount of $3,741.70 and
provide Lessor with a Warrant Agreement which contains similar terms and
conditions as the Warrant Agreement between the parties dated 6/18/98 whereby
Lessee shall grant Lessor the right to purchase shares of Series B Preferred
Stock at an Exercise Price of $1.20.
5. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
(a) Section 9, Delivery and Return of Equipment
-------------------------------------------
Delete second, third and fourth sentences in their entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by both
parties.
INSPIRE PHARMACEUTICALS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Christy Shaffer By: /s/ James P. Labe
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Title: VP, Development, COO Title: President
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Date: June 18, 1998 Date: June 19, 1998
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<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
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2. Initial Term Starts on: Initial Term:
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(Number of Rent Intervals)
3. Total Summary Equipment Cost:
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4. Lease Rate Factor:
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5. Rent:
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6. Acceptance Doc Type:
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<PAGE>
EXHIBIT 10.10
LEASE AGREEMENT
BY AND BETWEEN
PETULA ASSOCIATES, LTD.
(AS LANDLORD)
AND
INSPIRE PHARMACEUTICALS, INC.
(AS TENANT)
<PAGE>
TABLE OF CONTENTS
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Page
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1. DESCRIPTION OF PREMISES............................................... 1
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2. TERM.................................................................. 1
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3. RENTAL................................................................ 2
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4. DELIVERY AND UPFITTING OF PREMISES.................................... 5
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5. ALTERATIONS AND IMPROVEMENTS BY TENANT................................ 7
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6. USE OF PREMISES....................................................... 7
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7. TAXES ON LEASE AND TENANT'S PROPERTY.................................. 9
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8. FIRE AND EXTENDED COVERAGE INSURANCE.................................. 9
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9. LANDLORD'S COVENANT TO REPAIR AND REPLACE............................. 10
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10. TENANT'S COVENANT TO REPAIR........................................... 11
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11. TRADE FIXTURES AND EQUIPMENT.......................................... 11
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12. UTILITIES............................................................. 12
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13. DAMAGE OR DESTRUCTION OF PREMISES..................................... 12
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14. GOVERNMENTAL ORDERS................................................... 13
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15. MUTUAL WAIVER OF SUBROGATION.......................................... 14
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16. SIGNS AND ADVERTISING................................................. 14
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17. INDEMNIFICATION AND LIABILITY INSURANCE............................... 14
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18. LANDLORD'S RIGHT OF ENTRY............................................. 15
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19. EMINENT DOMAIN........................................................ 15
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20. EVENTS OF DEFAULT AND REMEDIES........................................ 16
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21. SUBORDINATION......................................................... 17
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22. ASSIGNING AND SUBLETTING.............................................. 18
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23. TRANSFER OF LANDLORD'S INTEREST....................................... 19
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24. COVENANT OF QUIET ENJOYMENT........................................... 19
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25. ESTOPPEL CERTIFICATES................................................. 19
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26. PROTECTION AGAINST LIENS.............................................. 19
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27. MEMORANDUM OF LEASE................................................... 20
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28. FORCE MAJEURE......................................................... 20
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29. REMEDIES CUMULATIVE - NONWAIVER....................................... 20
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30. HOLDING OVER.......................................................... 20
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31. NOTICES............................................................... 20
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32. LEASING COMMISSION.................................................... 21
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33. MISCELLANEOUS......................................................... 22
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34. SEVERABILITY.......................................................... 24
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35. REVIEW OF DOCUMENTS................................................... 24
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<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") made and entered into as of the 30th
day of December, 1997, by and between PETULA ASSOCIATES, LTD., an Iowa
corporation, hereinafter called "Landlord"; and INSPIRE PHARMACEUTICALS, INC., a
Delaware corporation, hereinafter called "Tenant":
W I T N E S S E T H:
In consideration of the mutual covenants and agreements contained
herein, the parties hereto agree for themselves, their successors and assigns,
as follows:
1. DESCRIPTION OF PREMISES.
Landlord hereby leases to Tenant, and Tenant hereby accepts and rents
from Landlord, that certain office/warehouse space (the "Premises") containing
approximately 5,400 rentable square feet known as Suite 225 and more
particularly described in Exhibit "B", located in the building known as Royal
Center II (the "Building") on a tract of land located at 4222 Emperor Boulevard,
Durham, North Carolina, in Imperial Center Business Park (the "Business Park"),
more particularly described on Exhibit "A" attached hereto; together with the
nonexclusive right to use all parking areas, driveways, sidewalks and other
common facilities furnished by Landlord from time to time. Landlord may, at any
time prior to, or during the first six (6) months of the first Lease Year (as
hereinafter defined), have its architect or engineer measure the actual total
square footage of the Premises. In the event the Premises shall contain an
amount of square footage which exceeds the amount of square feet referenced
above by more than two percent (2%) of such amount, the square footage of the
Premises shall be adjusted to reflect the actual square footage and the Annual
Rental (as hereinafter defined) shall be proportionately adjusted based on
actual square footage multiplied by the applicable square foot rental rate (and
such adjustment shall relate back to the Commencement Date if there is a
variance). The reasonable cost of such measure shall be borne by Landlord.
2. TERM.
Unless otherwise adjusted as hereinbelow provided, the term of this
Lease (the "Term") shall commence on the earlier of: (a) the date Tenant, or any
person occupying any portion of the Premises with Tenant's permission, commences
business operations from the Premises, or (b) December 1, 1997 (the
"Commencement Date") and shall end at midnight on the date (the "Expiration
Date") which is six (6) full years from the Commencement Date (as same may be
adjusted as hereinbelow provided); provided, however, for purposes hereof,
Tenant's installation or storage of furniture, fixtures and equipment within the
Premises shall not be deemed the commencement of business operations. Tenant
shall have the option to extend the Term in accordance with Exhibit "E" attached
hereto and incorporated herein by reference. As used herein, the term "Lease
Year" shall mean each consecutive twelve-month period of the Term, beginning
with the Commencement Date (as same may be adjusted as hereinbelow provided) or
any anniversary thereof.
<PAGE>
3. RENTAL.
During the term, Tenant shall pay to Landlord, without notice, demand,
reduction (except as may be applicable pursuant to the paragraphs of this Lease
entitled "Damage or Destruction of Premises" or the paragraph entitled "Eminent
Domain" of this Lease), setoff or any defense, a total rental (the "Annual
Rental") consisting of the sum total of the following:
(a) Minimum Rental.
(i) Beginning with the Commencement Date and continuing through the
earlier to occur of: (i) December 1, 1998, or (ii) the date upon which the
Tenant Improvements (as hereinafter defined) are substantially completed and a
permanent Certificate of Occupancy is issued for the Premises (the "Adjustment
Date"), Tenant shall pay a minimum annual rental (the "Minimum Rental") of
Thirty-One Thousand Fifty and No/100 Dollars ($31,050.00) [which represents a
rate of $5.75 per rentable square foot of the Premises], payable in equal
monthly installment of Two Thousand Five Hundred Eighty-Seven and 50/100 Dollars
($2,587.50) each in advance on or before the first day of each month.
(ii) Beginning with the Adjustment Date and continuing through the
Expiration Date or earlier termination of this Lease, Tenant shall pay Minimum
Rental of Fifty-One Thousand Three Hundred and No/100 Dollars ($51,300.00)
[which represents a rate of $9.50 per rentable square foot of the Premises],
payable in equal monthly installments of Four Thousand Two Hundred Seventy-Five
and No/100 dollars ($4,275.00) each in advance on or before the first day of
each month. In addition, Minimum Rental shall be increased annually, beginning
on the first anniversary of the Adjustment Date and continuing on each
anniversary of same thereafter, by an amount equal to three percent (3%) of the
Minimum Rental for the immediately preceding twelve (12) month period. For
purposes hereof, if the Commencement Date is a date other than the first day of
a calendar month, the Minimum Rental shall be prorated daily from such date to
the first day of the next calendar month and paid on the Commencement Date.
(b) Additional Rental. [Intentionally Deleted]
(c) Tenant's Share of Taxes.
Tenant shall pay an amount equal to Tenant's "proportionate share" of
any ad valorem taxes (or any tax hereafter imposed in lieu thereof) imposed upon
the Building and the Premises. Tenant's "proportionate share" of the taxes, the
insurance premiums and common area maintenance costs, as described below, shall
be a fraction, the numerator of which shall be the number of rentable square
feet within the Premises and the denominator of which shall be the number of
rentable square feet within the Building, which is currently estimated to be
32,713 rentable square feet. Tenant's proportionate share of taxes shall be paid
as provided in subparagraph (f) below. Provided, any increase in ad valorem
taxes on the Premises as a result of alterations, addition or improvements made
by, for or on account of Tenant shall be
<PAGE>
reimbursed by Tenant to Landlord within thirty (30) days after receipt of
written demand therefor.
(d) Tenant's Share of Insurance Premiums.
Tenant shall pay an amount equal to Tenant's "proportionate share" of
any premiums charged for fire and extended coverage and liability insurance with
all endorsements carried by Landlord on the Building payable for any calendar
year (including any applicable partial calendar year), provided such premiums
are not a direct result of another tenant's use of its premises in the Building.
Tenant's proportionate share of premiums shall be paid as provided in
subparagraph (f) below.
(e) Tenant's Share of Common Area Operating and Maintenance Costs.
Tenant shall pay an amount equal to Tenant's "proportionate share" of
the reasonable costs for operating and maintaining the Building's common areas,
including, but not limited to, building management (such management fees to be
consistent with customary fees in the Raleigh/Durham area), the cost of grass
mowing, shrub care and general landscaping, irrigation systems, maintenance and
repair to parking and loading areas, driveways, sidewalks, exterior lighting,
garbage collection and disposal, common water and sewer, common plumbing, common
signs and other facilities shared by the various tenants in the Building, and of
the Building's share of the common area operating and maintenance costs for the
entire Business Park (including without limitation a general Business Park fee).
Landlord shall use good faith efforts to keep the operating and maintenance
costs in line with costs for other similarly situated buildings in the
Raleigh/Durham market, taking into account rent and other relevant factors.
Tenant's proportionate share shall be paid as provided in subparagraph (f)
below. For purposes hereof, the expenses identified in subparagraphs (c), (d)
and (e) of this Section shall be deemed the "Tenant Expenses."
(f) Payment of Proportionate Shares.
Tenant shall pay to Landlord each month, along with Tenant's
installments of Minimum Rental (and Additional Rental, if applicable) a sum
equal to one-twelfth (1/12) of the amount estimated by Landlord (in its
reasonable discretion) as Tenant's proportionate share of the taxes, insurance
premiums and common area maintenance costs (including the Business Park fee) for
each calendar year. For the first calendar year beginning with January 1, 1998,
the amount of Tenant's estimated proportionate share of all Tenant Expenses
shall be Eight Thousand One Hundred and No/100 Dollars ($8,100.00) [which
represents $1.50 per rentable square foot of the Premises], payable in advance
in equal monthly installments of Six Hundred Seventy-Five and No/100 Dollars
($675.00). Landlord will make reasonable efforts to provide Tenant with
Landlord's estimate of Tenant's proportionate share of Tenant Expenses for the
upcoming calendar year on or before December 15 of each calendar year during the
term hereof. If Landlord fails to notify Tenant of Tenant's revised
proportionate share of Tenant Expenses by such date, Tenant shall continue to
pay the monthly installments of the proportionate share amount, if any, last
payable by Tenant until notified by Landlord of such new estimated amount.
<PAGE>
No later than May 1 of each calendar year from the Term, Landlord shall deliver
to Tenant a reasonably detailed written statement setting forth the actual
amount of Tenant's proportionate shares for taxes, insurance premiums and all
common area maintenance costs for the preceding calendar year. Tenant shall pay
the total amount of any balance due shown on such statement within thirty (30)
days after its delivery. In the event such annual costs decrease for any such
year, Landlord shall, within thirty (30) days after delivery of such written
statement, reimburse Tenant for any overage paid and the monthly rental
installments for the next period shall be reduced accordingly, but not below the
Minimum Rental. For the calendar year in which this Lease commences, the
proportionate shares of such amounts shall be prorated from the Commencement
Date through December 31 of such year. Further, Tenant shall be responsible for
payment of its proportionate share of Tenant Expenses for the calendar year in
which the Term expires, prorated from January 1 thereof through the Expiration
Date. Tenant shall pay any unpaid estimated proportionate shares within thirty
(30) days after the Expiration Date, which estimate shall be made by Landlord
based upon actual and estimated costs for such year. After the exact amount
payable for such proportionate shares shall have been determined, Landlord shall
return any excess security deposit to Tenant or Tenant shall promptly pay any
deficiency.
Tenant may audit Landlord's records and all information pertaining to
Tenant Expenses in order to verify the accuracy of Landlord's determination of
Tenant's proportionate share of same provided that:
(i) Tenant must give notice to Landlord of its election to undertake
said audit within one hundred twenty (120 days after receipt of the statement of
the actual amount of Tenant's proportionate share for the preceding calendar
year from Landlord;
(ii) Such audit will be conducted only during regular business hours at
the office where Landlord maintains records of Tenant Expenses and only after
Tenant gives Landlord fourteen (14) days' advance written notice;
(iii) Tenant shall deliver to Landlord a copy of the results of such
audit within fifteen (15) days of its receipt by Tenant and no such audit shall
be conducted if any other tenant of the Building has conducted an independent
audit for the time period Tenant intends to audit and Landlord furnishes to
Tenant a copy of the results of such audit;
(iv) No audit shall be conducted at any time that Tenant is in default
of any of the terms of this Lease;
(v) No subtenant shall have any right to conduct an audit and no
assignee shall conduct an audit for any period during which such assignee was
not in possession of the Premises; and
(vi) Such audit review by Tenant shall not postpone or alter the
liability and obligation of Tenant to pay any amounts due under the terms of
this Lease.
<PAGE>
Within thirty (30) days after Tenant's receipt of such audit, Tenant
must give notice to Landlord of any disputed amounts and identify all items
being contested in Landlord's statement of Tenant's proportionate share of
Tenant Expenses. If Landlord and Tenant cannot agree upon any such item as to
which Tenant shall have given such notice, the dispute shall be resolved by an
audit by a major accounting firm mutually acceptable to Landlord and Tenant and
the cost of said audit shall be paid by the non-prevailing party; provided
however, Tenant will not be considered the "prevailing party" for purposes of
this paragraph unless the accounting firm's audit reveals an overcharge by
Landlord in excess of five percent (5%) of Tenant's proportionate share of
Tenant Expenses for the particular calendar year in question.
Any adjustment required as a result of any audit shall be made by
adjustment to Tenant's proportionate share of Tenant Expenses so that said
adjustment is fully made (or recovered) in equal installments over the twelve
(12) month period immediately following the final resolution of said audit.
(g) Documentary Tax.
Landlord represents that there is currently no documentary stamp tax,
sales tax or any other tax or similar charge (exclusive of any income tax
payable by Landlord as a result hereof) which will be levied on the rental,
leasing or letting of the Premises, however, in the event that any such charge
or tax, whether local, state or federal, becomes applicable to the rental,
leasing or letting of the Premises and is required to be paid due to the
execution hereof or otherwise with respect to this Lease or the payments due
hereunder, the cost thereof shall be borne by Tenant and shall be paid promptly
and prior to same becoming past due. Tenant shall provide Landlord with copies
of all paid receipts respecting such tax or charge promptly after payment of
same.
(h) Late Payment.
If any monthly installment of Minimum Rental, Additional Rental (if
any) or any other sum due and payable pursuant to this Lease remains due and
unpaid ten (10) days after said amount becomes due, Tenant shall pay as
additional rent hereunder a late payment charge equal to the greater of (i) Five
Hundred and No/100 Dollars (500.00) or (ii) a sum equal to three percent (3%) of
the unpaid rent or other payment; provided, however, subject to Tenant's not
being in default hereunder, Tenant shall be entitled to one (1) additional ten
(10) day grace period per Lease Year during which Tenant may make such payment
without paying the late charge as hereinabove described. All unpaid rent and
other sums of whatever nature owed by Tenant to Landlord under this Lease shall
bear interest from the tenth (10th) day after the due date thereof until paid at
the lesser of two percent (2%) per annum above the "prime rate" as published in
the Wall Street Journal from time to time (the "Prime Rate"). Acceptance by
Landlord of any payment from Tenant hereunder in an amount less than that which
is currently due shall in no way affect Landlord's rights under this Lease and
shall in no way constitute an accord and satisfaction.
4. DELIVERY AND UPFITTING OF PREMISES.
<PAGE>
Landlord shall deliver the Premises to Tenant in its base building
condition on or before December 1, 1997. Tenant agrees that it is accepting the
Premises in its "as is" base building condition without any further improvements
thereto by Landlord. Tenant agrees to deliver the final plans and specifications
for the design and upfitting of the Premises (the "Plans") to Landlord for
Landlord's approval. Landlord shall not unreasonably withhold or delay its
approval of such of the Plans and agrees to provide Tenant with notice of any
objections to the Plans within twenty (20) days after Landlord's receipt of
same. At such time as Landlord approves the Plans, Landlord shall identify those
improvements described in the Plans which must be removed from the Premises upon
the expiration or earlier termination of this Lease as herein described;
provided, however, Landlord reserves the right to subsequently direct Tenant to
leave certain items previously designated for removal in the Premises. Upon
approval by Landlord of the Plans, they shall be attached as Exhibit C to this
Lease and made a part hereof. Once the Plans have been approved by Landlord,
tenant shall be responsible for the installation of the Tenant Improvements (as
hereinafter defined) in the Premises in accordance with the Plans. The general
contractor retained by Tenant to install the Tenant Improvements shall be
subject to Landlord's prior written approval, such approval not to be
unreasonably withheld, conditioned or delayed; provided further, Landlord and
Tenant shall mutually designate up to five (5) general contractors which shall
be deemed approved by Landlord.
Tenant will supervise the design, construction and installation of the
initial improvements in the Premises (the "Tenant Improvements") in accordance
with the Plans at Tenant's sole cost and expense. Landlord agrees to pay Tenant
at the time and in the manner set forth below an allowance (the "Tenant
Improvement Allowance") in the amount of Twenty-Two and No/100 Dollars ($22.00)
per rentable square foot of the Premises to cover the costs associated with the
design, construction and installation of the Tenant Improvements in the
Premises. Upon receipt of evidence from Tenant that such amounts have been
expended in connection with the design, construction and installation of the
Tenant Improvements (together with such other information as Landlord may
reasonably request from Tenant), Landlord shall, within twenty (20) days of
Landlord's receipt of such documentation, pay to Tenant the amount of all cost
and expenses shown thereby less the amount of any such payment or payments
previously made by Landlord to Tenant; provided, however, such disbursements of
the Tenant Improvement Allowance shall occur not more frequently than monthly
and the aggregate amount of all sums to be paid by Landlord to Tenant hereunder
with respect to the Premises shall not in any event exceed the sum of One
Hundred Eighteen Thousand Eight Hundred and No/100 Dollars ($118,800.00);
provided further, that Landlord shall have no obligation hereunder to make any
payment with respect to any such improvement which, when made, shall not be a
fixture and thus part of the Building to be surrendered to Landlord upon the
expiration of or earlier termination of this Lease (for purposes of this
Paragraph 4, all telephone, telecommunications and computer wiring equipment
shall be deemed a fixture). All savings or unused portions of the Tenant
Improvement Allowance shall be retained by Landlord.
In connection with the upfitting of the Premises, Tenant agrees to pay
Landlord a construction management fee equal to four percent (4%) of the total
cost of constructing the Tenant Improvements. In addition to the Tenant
Improvements, Tenant shall be solely responsible for the cost of constructing
any demising wall(s) required by Landlord and any
<PAGE>
required suite entrances or at Landlord's election, Landlord may proceed to
construct such demising wall(s) and reduce the Tenant Improvement Allowance by
the reasonable cost of same.
Notwithstanding anything contained herein to the contrary, upon the
expiration or earlier termination of the Term or Tenant's vacating the Premises,
Tenant shall, at its sole cost and expense, restore the Premises to its "base
building condition," which for purposes hereof, shall be defined as the
condition of the Premises as it existed when received by Tenant together with
such other Tenant Improvements as Landlord has approved as hereinabove provided
(ordinary wear and tear, damage by fire and other casualty, condemnation and
acts of God above excepted), or otherwise directs be left at the Premises;
provided, however, Tenant's restoration obligations with respect to the slab
floor in the Premises shall be limited to restoring the floor to a level slab of
commercially reasonable tolerances (i.e. one-eighth of an inch per ten feet).
Within ten (10) business days after Tenant's request for same (such request to
be made no earlier than sixty (60) days prior to the expiration or earlier
termination of the Term), Landlord shall provide Tenant with a list of those
Tenant Improvements which Landlord directs be left at the Premises upon the
expiration of the Term.
5. ALTERATIONS AND IMPROVEMENTS BY TENANT.
Tenant shall make no structural changes respecting the Premises or the
Building and shall make no changes of any kind respecting the Premises or the
Building that are visible from the exterior of the Premises without Landlord's
consent, to be granted or withheld in Landlord's sole discretion. Except for the
initial upfitting of the Premises in accordance with the Plans, any other
nonstructural changes or other alterations, additions, or improvements to the
Premises shall be made by or on behalf of Tenant only with the prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed. All alterations, additions or improvements, including without
limitation all partitions, walls, railings, carpeting, floor and wall coverings
and other fixtures (excluding, however, Tenant's trade fixtures as described in
the paragraph entitled "Trade Fixtures and Equipment" below) made by, for, or at
the direction of Tenant shall, when made, become the property of Landlord, at
Landlord's sole election, and shall, unless otherwise specified by Landlord at
the time Landlord gives its consent thereto, remain upon the Premises at the
expiration or earlier termination of this Lease.
Notwithstanding anything contained herein to the contrary, all
alterations and improvements undertaken by Tenant shall be consistent with the
then-existing quality, color scheme (where appropriate), general aesthetic
appearance and tenor of the balance of the Building and, in any event, Landlord
may withhold its consent to any proposed alteration or improvement by Tenant
unless Tenant agrees to remove said improvement at the end of the Term and/or
restore the Premises to the condition in which it existed prior to the
undertaking of the proposed alteration or improvement.
6. USE OF PREMISES
(a) Tenant shall use the Premises only for office, warehouse, storage
and light assembly and or laboratory purposes, all of which shall be consistent
with the pharmaceutical
<PAGE>
industry or similar scientific, research or technical industry and for no other
purposes. Tenant shall comply with all laws, ordinances, orders, regulations or
zoning classifications or any lawful governmental authority, agency or other
public or private regulatory authority (including insurance underwriters or
rating bureaus) having jurisdiction over the Premises. Tenant shall not do any
act or follow any practice relating to the Premises which shall constitute a
nuisance or detract in any way from the reputation of the Building as a real
estate development comparable to other comparable buildings in the
Raleigh/Durham market taking into account rent and other relevant factors.
Tenant's duties in this regard shall include allowing no noxious or offensive
odors, fumes, gases, smoke, dust, steam or vapors, or any loud or disturbing
noise or vibrations to originate in or emit from the Premises.
(b) Without limiting the generality of (a) above, and excepting only
(i) office supplies and cleaning materials used by Tenant in its ordinary day to
day business operations (but not held for sale, storage or distribution) and
customarily used in facilities such as the Building, and (ii) certain Hazardous
Materials (as herein defined) used in the ordinary course of Tenant's business,
and then only to the extent used, stored (but not any bulk storage),
transported, and disposed of strictly in accordance with all applicable laws,
regulations and manufacturer's recommendations and in a manner consistent with
commercially reasonable standards for comparable first-class flex-space
buildings, the Premises shall not be used for the treatment, storage,
transportation to or from, use or disposal of toxic or hazardous wastes,
materials, or substances, or any other substance that is prohibited, limited or
regulated by any governmental or quasi-governmental authority or that, even if
not so regulated, could or does pose a hazard to health and safety of the
occupants of the Building or surrounding property (collectively "Hazardous
Substances"). Prior to its occupancy of the Premises, Tenant shall provide
Landlord with a list of any Hazardous Substances which it plans to introduce to
the Premises and thereafter, on each anniversary of the Commencement Date,
Tenant shall update said list and identify which Hazardous Substances have been
used within the Premises and which Hazardous Substances may be used within the
Premises in the future. In addition, prior to Tenant's occupancy of the
Premises, Tenant shall submit a plan detailing the method of disposal, storage
and treatment of such Hazardous Substances to Landlord for Landlord's approval.
Tenant shall be liable for, and shall indemnify and hold Landlord harmless from,
all costs, damages and expenses (including reasonable attorney's fees) incurred
in connection with the use, storage, discharge or disposal of any Hazardous
Substances by Tenant or Tenant's Invitees.
(c) Except for possible restrictions with respect to signage (which
Tenant agrees to abide by in connection with its use of the Premises), there are
currently no restrictive covenants relating to the Building.
(d) Tenant shall exercise due care in its use and occupancy of the
Premises and shall not commit or allow waste to be committed on any portion of
the Premises; and at the expiration or earlier termination of this Lease, Tenant
shall deliver the Premises to Landlord in as good condition on the date of
completion of the Tenant Improvements in the Premises, ordinary wear and tear,
fire or other casualty, condemnation and acts of God alone excepted.
<PAGE>
(e) Tenant shall save Landlord harmless from any claims, liabilities,
penalties, fines, costs, expenses or damages resulting from the failure of
Tenant to comply with the provisions of this paragraph 6. This indemnification
shall survive the termination or expiration of this Lease.
7. TAXES ON LEASE AND TENANT'S PROPERTY.
(a) Landlord represents that there are currently no taxes, documentary
stamps or assessments of any nature which will be imposed or assessed upon this
Lease, Tenant's occupancy of the Premises or Tenant's trade fixtures, equipment,
machinery, inventory, merchandise or other personal property located on the
Premises and owned by or in the custody of Tenant; provided, however, in the
event any such charge or tax becomes applicable to this Lease, Tenant's
occupancy of the Premises or Tenant's equipment, Tenant shall be fully
responsible for the payment of same and shall pay such amount as promptly as all
such taxes or assessments may become due and payable without any delinquency.
(b) Landlord shall pay, subject to reimbursement from Tenant as
provided in the paragraph entitled "Rental" of this Lease, all ad valorem
property taxes which are now or hereafter assessed upon the Building and the
Premises, except as otherwise expressly provided in this Lease.
8. FIRE AND EXTENDED COVERAGE INSURANCE.
Landlord shall maintain and pay for fire and casualty special form "all
risk" insurance, with extended coverage, covering the Building equal to at least
eighty percent (80%) of the replacement cost thereof. Tenant shall not do or
cause to be done or permit on the Premises or in the Building anything deemed
extra hazardous on account of fire and Tenant shall not use the Premises or the
Building in any manner which will cause an increase in the premium rate for any
insurance in effect on the Building or a part thereof. If, because of anything
done, caused to be done, permitted or omitted by Tenant or Tenant's Invitees,
the premium rate for any kind of insurance in effect on the Building or any part
thereof shall be raised, Tenant shall pay Landlord on demand the amount of any
such increase in premium which Landlord shall pay for such insurance and if
Landlord shall demand that Tenant remedy the condition which caused any such
increase in an insurance premium rate, Tenant shall remedy such condition within
five (5) days after receipt of such demand or such reasonable time thereafter as
is possible, provided Tenant has commenced such cure and is diligently pursuing
the completion of same. Tenant shall maintain and pay for all fire and extended
coverage insurance on its contents in the Premises, including trade fixtures,
equipment, machinery, merchandise or other personal property belonging to or in
the custody of Tenant.
Notwithstanding anything herein to the contrary, Landlord reserves the
right for itself, successors and assigns to self-insure against any risk
required hereunder to be insured or otherwise assumed by Landlord so long as any
such program of self-insurance affords the same coverage of risks and benefits
which would be afforded in the event Landlord procured insurance from a
third-party insurer.
<PAGE>
9. LANDLORD'S COVENANT TO REPAIR AND REPLACE.
(a) During the Term, Landlord shall be responsible only for repairs or
replacements to the roof, exterior walls (including downspouts and gutters),
structural members (including foundation and subflooring of the Premises) and
for the central plumbing and electrical systems serving the entire Building up
to the respective applicable points of entry of same into the Premises except
for repairs or replacements caused by the negligent acts or omissions or
misconduct of Tenant or Tenant's Invitees unless such amounts are paid to
Landlord pursuant to an insurance policy. Landlord shall maintain such items in
compliance with applicable laws, regulations, ordinances and codes or
alternatively, any non-compliance shall not materially impair Tenant's use and
enjoyment of the Premises or constitute a threat or danger to the health or
safety of Tenant or Tenant's Invitees. Landlord's repairs and replacements shall
be made as soon as reasonably possible using due diligence and reasonable
efforts, taking into account in each instance all circumstances surrounding the
repair or replacement including without limitation, the materiality of the
repair or replacement to Tenants use and operation of its business within the
Premises and the relation thereof to the enjoyment of same. If Landlord cannot,
using due diligence, complete its repairs within one hundred eighty (180) days
after written notice from Tenant, then (unless the need for such repairs or
replacements is the result of the negligent acts or omissions or misconduct of
Tenant or Tenant's Invitees, in which event Tenant shall not be entitled to
terminate this Lease) either party may terminate this Lease effective upon
thirty (30) days' prior written notice, without prejudice to Landlord's rights
to receive payment from Tenant for uninsured damages caused directly or
indirectly by Tenant or Tenant's Invitees. If the need for such repairs or
replacements is the result of the negligent acts or omissions or misconduct of
Tenant or Tenant's Invitees, and the expense of such repairs or replacements are
not fully covered and paid by Landlord's insurance, then Tenant shall pay
Landlord the full amount of expenses not covered. Landlord's duty to repair or
replace as prescribed in this paragraph shall be Tenant's sole remedy and shall
be in lieu of all other warranties or guaranties of Landlord, express or
implied; provided, however, in the event Landlord fails to fulfill its
obligations under this Paragraph 9(a) with respect to a leak in the roof of the
Premises within thirty (30) days (or such longer period as may be required in
the exercise of due diligence) following receipt of written notice of such
failure to perform from Tenant, Tenant shall be entitled to hire a contractor
reasonably acceptable to Landlord to make the necessary repair or replacement to
the roof of the Premises, provided such activities shall not in any way void or
negatively impact Landlord's warranty on the roof of the Premises or the
Building, and thereafter, to the extent not reimbursed to Tenant within fifteen
(15) days after demand therefor, Tenant may pursue an action against Landlord
for collection of the actual costs of such repair or replacement to the extent
same is an obligation of Landlord hereunder.
(b) Landlord shall not be liable for any failure to make any repairs or
to perform any maintenance required of Landlord hereunder unless such failure
shall persist for an unreasonable period of time after written notice from
Tenant setting forth the need for such repair(s) or replacement(s) in reasonable
detail has been received by Landlord. Except as set forth in the paragraph of
this Lease, entitled "Damage or Destruction of Premises", there shall be no
abatement of rent. Except to the extent of the negligent acts or omissions or
misconduct of Landlord or Landlords Invitees, there shall be no liability of
Landlord by reason of any injury to
<PAGE>
or interference with Tenant's business arising from the making of any repairs,
replacements, alterations or improvements to any portion of the Building or the
Premises, or to fixtures, appurtenances and equipment therein. To the extent
permitted under applicable law, Tenant waives the right to make repairs at
Landlord's expense under any law, statute or ordinance now or hereafter in
effect.
10. TENANT'S COVENANT TO REPAIR.
Tenant shall be responsible for the repair, replacement and maintenance
in good order and condition of all parts and components of the Premises (other
than those specified for repair, replacement and maintenance by Landlord above),
including without limitation the plumbing, wiring, electrical systems, HVAC
system, glass and plate glass, equipment and machinery constituting fixtures,
unless such repairs or replacements are required as a result of the negligence,
misconduct or intentional acts or omissions of Landlord, its agent(s) ,
employee(s) or invitee(s) in which event Landlord shall be responsible for such
repairs. At the end of the Term, Tenant shall return the Premises to Landlord in
as good condition as they were when received, excepting only normal wear and
tear, acts of God, repairs required to be made by Landlord hereunder and damage
by fire and other casualty and condemnation (but only to the extent any casualty
proceeds applicable to the Tenant Improvements are paid over to Landlord).
Tenant's duty to maintain the HVAC system shall specifically include the duty to
enter into and maintain at Tenant's sole expense during the entire term of this
Lease a contract for the routine and periodic maintenance and regular inspection
of such HVAC system, the replacement of filters as recommended and the
performance of other recommended periodic servicing in accordance with
applicable manufacturer's standards and recommendations. Such contract: (a)
shall be with a reputable contractor reasonably satisfactory to Landlord; (b)
shall satisfy the requirements for routine and periodic maintenance, if any,
necessary to keep all applicable manufacturer's warranties in full force and
effect; and (c) shall provide that in the event this Lease expires or is earlier
terminated for any reason whatsoever that said contract shall be immediately
terminable by Landlord or Tenant without any cost, expense or other liability on
the part of Landlord.
11. TRADE FIXTURES AND EQUIPMENT.
Prior to installation, Tenant shall furnish to Landlord notice of all
trade fixtures and equipment of a permanent nature which it intends to install
within the Premises and the installation of same shall be subject to Landlord's
consent which shall not be unreasonably withheld, condition or delayed. Any
trade fixtures and equipment installed in the Premises at Tenant's expense and
identified by Tenant in notice to Landlord shall remain Tenant's personal
property and Tenant shall have the right at any time during the Term to remove
such trade fixtures and equipment. Upon removal of any trade fixtures or
equipment, Tenant shall immediately restore the Premises to substantially the
same condition in which it existed when received by Tenant, ordinary wear and
tear, condemnation damage by fire and other casualty and acts of God alone
excepted. Any trade fixtures not removed by Tenant at the expiration or an
earlier termination of the Lease shall, at Landlord's sole election, either (i)
become the property of Landlord, in which event Landlord shall be entitled to
handle and dispose of same in any manner Landlord deems fit without any
liability or obligation to Tenant or any other third party
<PAGE>
with respect thereto, or (ii) be subject to Landlord's removing such property
from the Premises and storing same, all at Tenant's expense and without any
recourse against Landlord with respect thereto. Without limiting the generality
of the foregoing, the following property shall in no event be deemed to be
"trade fixtures" and Tenant shall not remove any such property from the Premises
under any circumstances, regardless of whether installed by Landlord or Tenant:
(a) any air conditioning, air ventilating or heating fixtures or equipment; (b)
any lighting fixtures or equipment; (c) any carpeting or other permanent floor
coverings; (d) any paneling or other wall covering; (e) plumbing fixtures and
equipment; or (f) permanent shelving. Landlord hereby waives any lien interest
which it may have in Tenant's personal property; provided, however, and
notwithstanding anything contained herein to the contrary, in no event may
Tenant encumber or otherwise impair Landlord's title to the Premises, the
Building or the Building's common areas through the financing or any personal
property within the Premises of any other activities.
12. UTILITIES.
Tenant shall pay for all utilities or services related to its use of
the Premises including without limitation electricity, gas, heat, water, sewer,
telephone and janitorial services. To the extent that water and/or sewer usage
are not separately metered for the Premises, Tenant shall pay its proportionate
share of the applicable charges therefor, with such proportionate share being as
defined in subparagraph 3(c), and the manner for payment thereof shall be as set
forth in subparagraph 3(f). Landlord shall not be responsible for the stoppage
or interruption of utilities services other than as required by its limited
covenant to repair and replace set forth above, nor shall Landlord be liable for
any damages caused by or from the plumbing and sewer systems.
13. DAMAGE OR DESTRUCTION OF PREMISES.
If the Premises are damaged by fire or other casualty, but are not
rendered untenantable for Tenant's business, either in whole or in part,
Landlord shall cause such damage to be repaired without unreasonable delay and
the Annual Rental shall not abate. If by reason of such casualty the Premises
are rendered untenantable for Tenant's business, either in whole or in part,
Landlord shall cause the damage to be repaired or replaced without unreasonable
delay, and, in the interim, the Annual Rental shall be proportionately reduced
as to such portion of the Premises as is rendered untenantable. Any such
abatement of rent shall not, however, create an extension of the Terms.
Provided, however, if by reason of such casualty, the premises are rendered
untenantable in some material portion, and Landlord, in its reasonable
estimation, determines that the amount of time required to repair the damage
using due diligence is in excess of two hundred ten (210) days, then either
party shall have the right to terminate this Lease by giving written notice of
termination within thirty (30) days after the date of casualty, and the Annual
Rental shall abate as of the date of such casualty in proportion to the part of
the Premises rendered untenantable. Notwithstanding the foregoing, in the event
the casualty giving rise to an election to terminate is caused by the
negligence, misconduct or acts of omissions of Tenant or Tenant's Invitees,
Tenant shall have no right to terminate this Lease. Notwithstanding the other
provisions of this paragraph, in the event there should be a casualty loss to
the Premises to the extent of fifty percent (50%) or more of the replacement
value of the Premises or if the Premises is rendered
<PAGE>
untenantable for the conduct of Tenant's business operations during the last
Lease year of the Term or any extended term, as determined by Landlord in the
exercise of its reasonable discretion, either party may, at its option,
terminate this Lease by giving written notice within thirty (30) days after the
date of the casualty and the Annual Rental shall abate as of the date of such
notice. Except as provided herein, Landlord shall have no obligation to rebuild
or repair in case of fire or other casualty, and no termination under this
paragraph shall affect any rights of Landlord or Tenant hereunder because of
prior defaults of the other party. Tenant shall give Landlord immediate notice
of any fire or other casualty in the Premises.
14. GOVERNMENTAL ORDERS.
Except as hereinbelow set forth regarding compliance of the physical
structure of the Premises with applicable governmental regulations including
without limitation, compliance with the applicable requirements of the Americans
with Disabilities Act and the implementing regulations (the "ADA") as of the
Commencement Date, Tenant agrees, at its own expense, to comply promptly with
all requirements of any legally constituted public authority that may be in
effect from time to time made necessary be reason of Tenant's use or occupancy
of the Premises. Landlord agrees to comply promptly with any such requirements
if not made necessary by reason of Tenant's use or occupancy. With regard to the
physical structure of the Premises, Landlord agrees to use good faith and due
diligence to undertake those actions that are "readily achievable" (as such term
is defined in the ADA) in order to attempt to bring the physical structure of
the Premises in compliance with the applicable requirements of the ADA in effect
as of the Commencement Date. If it is determined that for any reason Landlord
shall have failed to cause the physical structure of the Premises to be brought
into compliance with the ADA as of the Commencement Date (to at least the
minimum extent required under applicable regulations then in effect), then
Landlord, as its sole obligation, will take the action(s) necessary to cause the
physical structure of the Premises to so comply, and Tenant acknowledges and
agrees that Landlord has and shall have no other obligation or liability
whatsoever to Tenant, or to anyone claiming by or through Tenant, regarding any
failure of the Premises or the activities therein to comply with the applicable
requirements of the ADA. Landlord and Tenant agree, however, that if in order to
comply with any of the above requirements, the cost to Landlord or Tenant, as
the case may be, shall exceed a sum equal to one (1) year's rent, then the party
who is obligated to comply with such requirements is privileged to terminate
this Lease by giving written notice of termination to the other party, which
termination shall become effective sixty (60) days after receipt of such notice,
and which notice shall eliminate the necessity of compliance with such
requirement by the party giving such notice, unless the party receiving such
notice of termination shall, before termination becomes effective, pay to the
party giving notice all costs of compliance in excess of one (1) year's rent, or
secure payment of said sum in a manner satisfactory to the party giving notice.
Notwithstanding anything contained herein to the contrary, it is agreed that:
(a) Tenant is exclusively responsible for all compliance with all requirements
of any legally constituted public authority in the event non-compliance relates
to Tenant's use of, or operations from, the Premises and (b) in the event of
non-compliance for which Landlord is responsible, Landlord shall not be deemed
in breach of this Lease if such non-compliance does not materially impair
Tenant's use of the Premises or threaten or endanger the health or safety of
Tenant or Tenant's Invitees.
<PAGE>
15. MUTUAL WAIVER OF SUBROGATION.
For the purpose of waiver of subrogation, the parties mutually release
and waive unto the other all rights to claim damages, costs or expenses for any
injury to property caused by a casualty or any other matter whatsoever in, on or
about the Premises to the extent that such damage, cost or expense has been paid
to such damaged party under the terms of any policy of insurance. All insurance
policies carried with respect to this Lease, if permitted under applicable law,
shall contain a provision whereby the insurer waives, prior to loss, all rights
of subrogation against either Landlord or Tenant.
16. SIGNS AND ADVERTISING.
(a) Tenant may install, in Tenant's sole discretion and at Tenant's
sole cost and expense, a tenant identification sign in accordance with Building
standards, such sign to be located at or near the Tenant's front entrance to the
Premises within the Building; provided, however, Tenant shall install, at a
minimum, the suite numerals of the Premises in accordance with Building
standards at or near the front entrance to the Premises within the Building. The
Tenant Improvement Allowance shall be reduced by an amount equal to any costs
incurred by Landlord in preparing or installing Tenant identification signage or
graphics on or within the Building or the Premises.
(b) In order to provide architectural control for the Building and
Business Park, Tenant shall not install any exterior signs, marquees,
billboards, outside lighting fixtures and/or other decorations on the Premises.
Landlord shall have the right to remove any such sign or other decoration and
restore fully the Premises at the cost and expense of Tenant if any such
exterior work is done without Landlord's prior written approval, which approval
Landlord shall be entitled to withhold or deny in its sole discretion. Tenant
shall not permit, allow or cause to be used in, on or about the Premises any
sound production devices, mechanical or moving display devices, bright lights,
or other advertising media, the effect of which would be visible or audible from
the exterior of the Premises.
17. INDEMNIFICATION AND LIABILITY INSURANCE.
(a) Except to the extent of the negligent acts or omissions or
misconduct of Landlord or Landlord's Invitees, Tenant shall indemnify and save
Landlord harmless against any and all claims, suits, demands, actions, fines,
damages, and liabilities, and all costs and expenses thereof (including without
limitation reasonable attorneys' fees) arising out of injury to persons
(including death) or tangible property occurring in, on or about, or arising out
of the Premises or other areas in the Building if caused or occasioned wholly or
in part by any act(s) or omission(s) of Tenant or Tenant's Invitees, except if
caused by any act(s) or omission(s) on the part of Landlord. The non-prevailing
party shall also pay all costs, expenses and reasonable attorneys' fees that may
be incurred by the prevailing party in enforcing the agreements of this Lease,
<PAGE>
whether incurred as a result of litigation or otherwise. Tenant shall give
Landlord immediate notice of any such happening causing injury to persons or
tangible property.
(b) At all times during the term of this Lease, Tenant shall at its own
expense keep in force adequate public liability insurance under the terms of a
commercial general liability policy (occurrence coverage) in the amount of not
less than Two Million and No/100Dollars ($2,000,000.00) single limit with such
company(ies) as shall from time to time be reasonably acceptable to Landlord
(and to any lender having a mortgage interest in the Premises) and naming
Landlord and Landlord's agent as an additional insured (and, if requested by
Landlord from time to time, naming Landlord's mortgagee as an additional
insured). Such insurance shall include, without limitation, personal injury and
contractual liability coverage for the performance by Tenant of the Indemnity
agreements set forth in this Lease. Tenant shall first furnish to Landlord
certificates of insurance evidencing the required coverage prior to the Commence
Date and thereafter prior to each policy renewal date. All policies required of
Tenant hereunder shall contain a provision whereby the insurer is not allowed to
cancel or change materially the coverage without first giving thirty (30) days'
written notice to Landlord.
(c) Landlord shall keep in force during the Term insurance in such
amounts and coverages as Landlord deems appropriate or is otherwise required of
Landlord by a third party such as its lender.
18. LANDLORD'S RIGHT OF ENTRY.
Landlord, and those persons authorized by it, shall have the right to
enter the Premises at all reasonable times and upon reasonable notice for the
purposes of making repairs, making connections, installing utilities, providing
services to the Premises or for any other tenant, making inspections or showing
the same to prospective purchasers and/or lenders (at any time during the Term
hereof), or prospective tenants (during the last nine (9) months of the Term) as
well as at any time in the event of emergency involving possible injury to
property or persons in or around the Premise or the Building.
19. EMINENT DOMAIN.
If any substantial portion of the Premises is taken under the power of
eminent domain (including any conveyance made in lieu thereof) or if such taking
shall materially impair the normal operation of Tenant's business, then either
party shall have the right to terminate this Lease by giving written notice of
such termination within thirty (30) days after such taking. If neither party
elects to terminate this lease, Landlord shall repair and restore the Premises
to the best possible tenantable condition and the Annual Rental shall be
proportionately and equitably reduced as of the date of the taking. All
compensation awarded for any taking (or the proceeds of a private sale in lieu
thereof) shall be the property of Landlord whether such award is for
compensation for damages to the Landlord's or Tenant's interest in the Premises,
and Tenant hereby assigns all of its interest in any such award to Landlord;
provided, however, Landlord shall not have any interest in any separate award
made to Tenant for loss of business, moving
<PAGE>
expense or the taking of Tenant's trade fixtures or equipment if a
separate award for such items is made to Tenant and if such separate award does
not reduce the award to Landlord.
20. EVENTS OF DEFAULT AND REMEDIES
(a) Upon the occurrence of any one or more of the following events (the
"Events of Default," any one an "Event of Default"), the party not in default
shall have the right to exercise any rights or remedies available in this Lease,
at law or in equity. Events of Default shall be:
(i) Tenant's failure to pay an Annual Rental payable hereunder
within five (5) days after same becomes due; provided, however, Tenant
shall be entitled to written notice and a five (5) day cure period with
respect to its failure to pay any Annual Rent once during each Lease
Year;
(ii) Tenant's failure to pay any other sum of money payable
hereunder within ten (10) days after written notice thereof from
Landlord of a deficiency in such payment;
(iii) Failure by either party to perform any other of the
terms, covenants or conditions contained in this Lease if not remedied
within thirty (30) days after receipt of written notice thereof, or if
such default cannot be remedied within such period, such party does not
within thirty (30) days after written notice thereof commence such act
or acts as shall be necessary to remedy the default and shall not
thereafter diligently prosecute such cure and complete such act or acts
within ninety (90) days after written notice thereof;
(iv) Tenant shall become bankrupt or insolvent, or file any
debtor proceedings, or file pursuant to any statute a petition in
bankruptcy or insolvency or for reorganization, or file a petition for
the appointment of a receiver or trustee for all or substantially all
of Tenant's assets and such petition or appointment shall not have been
set aside within sixty (60) days from the date of such petition or
appointment, or if Tenant makes an assignment for the benefit of
creditors, or petitions for or enters into an arrangement; or
(v) Tenant allows its leasehold estate to be taken under any
writ of execution and such writ is not vacated or set aside within
thirty (30) days.
(b) In addition to its other remedies, Landlord, upon an Event of
Default by Tenant, shall have the immediate right, after any applicable grace
period expressed herein, to terminate and cancel this Lease and/or terminate
Tenant's right of possession, and, in accordance with applicable laws, to
reenter and remove all persons and properties from the Premises and dispose of
such property as it deems fit, all without being guilty of trespass or being
liable for any damages caused thereby. If Landlord reenters the Premises, it may
either terminate this Lease or, from time to time without terminating this
Lease, terminate Tenant's right of possession and make such alterations and
repairs as may be necessary or appropriate to relet the Premises and
<PAGE>
relet the Premises upon such commercially reasonable terms and conditions as
Landlord deems advisable without any responsibility on Landlord whatsoever to
account to Tenant for any surplus rents collected. No retaking of possession of
the Premises by Landlord shall be deemed as an election to terminate this Lease
unless a written notice of such intention is given by Landlord to Tenant at the
time of reentry; but, notwithstanding any such reentry or reletting without
termination, Landlord may at any time thereafter elect to terminate for such
previous default. In the event of an elected termination by Landlord, whether
before or after reentry, Landlord may recover from Tenant damages, including the
costs of recovering the Premises and any costs incurred in reletting the
Premises, and Tenant shall remain liable to Landlord for the total Annual Rental
(which may at Landlord's election be accelerated to be due and payable in full
as of the Event of Default and recoverable as damages in a lump sum) as would
have been payable by Tenant hereunder for the remainder of the term less the
rentals actually received from any reletting or, at Landlord's election, less
the reasonable rental value of the Premises for the remainder of the term. In
determining the Annual Rental which would be payable by Tenant subsequent to
default, the Annual Rental for each Lease Year of the unexpired term shall be
equal to the Annual Rental payable by Tenant for the last Lease Year prior to
the default. If any rent owing under this Lease is collected by or through an
attorney, Tenant agrees to pay Landlord's reasonable attorneys' fees to the
extent allowed by applicable law. Landlord shall be required to reasonably
mitigate its damages.
21. SUBORDINATION.
This Lease is subject and subordinate to any and all mortgages or deeds
of trust currently existing on the property of which the Premises is a part, and
this clause shall be self-operative without any further instrument necessary to
effect such subordination; however, if requested by Landlord, Tenant shall
promptly execute and deliver to Landlord any such certificate(s) in a
commercially reasonable form as Landlord may reasonably request evidencing the
subordination of this Lease to or the assignment of this Lease as additional
security for such mortgages or deeds of trust; provided, further, upon Tenant's
request, Landlord shall use reasonable efforts to obtain a non-disturbance
agreement in a commercially reasonable form from any such mortgagee, trustee or
beneficiary currently having an interest in all or any portion of the Premises.
Subject to the condition precedent that Landlord provide Tenant with a
non-disturbance agreement in a commercially reasonable form in favor of Tenant
from any mortgagee, trustee or beneficiary this Lease shall be subject and
subordinate to any mortgage or deed of trust which may hereafter encumber the
property of which the Premises is a part. Tenant's obligations under this Lease
shall continue in full force and effect notwithstanding any such default
proceedings under a mortgage or deed of trust and shall attorn to the mortgagee,
trustee or beneficiary of such mortgage or deed of trust, and their successors
or assigns, and to the transferee under any foreclosure or default proceedings
and subject to the terms of the non-disturbance agreement, the mortgagee,
trustee or beneficiary or their successors or assigns shall be bound by all of
the obligations of Landlord under this Lease which accrue after such foreclosure
or default proceeding. Tenant will, upon request by Landlord, execute and
deliver to Landlord or to any other person designated by Landlord, any
instrument or instruments in a commercially reasonable form required to give
effect to the provisions of this paragraph.
<PAGE>
22. ASSIGNING AND SUBLETTING.
Tenant shall not assign, sublet, mortgage, pledge or encumber this
Lease, the Premises, or any interest in the whole or in any portion thereof,
directly or indirectly, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld, conditioned or delayed. In the event
of any assignment, sublease, mortgage, pledge or encumbrance, Tenant shall: (i)
remain primarily liable for the performance of all terms of this Lease, (ii) pay
all reasonable costs, including without limitation, attorney's fees, incurred by
Landlord in connection with such assignment, sublease or mortgage, and (iii) pay
to Landlord fifty percent (50%) of any rental or any fees or charges received by
Tenant (less the actual, reasonable expenses incurred by Tenant in connection
with such reletting as evidenced by written receipts thereof) in excess of the
Annual Rental payable to Landlord hereunder as further rental under this Lease.
Landlord's consent to one assignment or sublease will not waive the requirement
of its consent to any subsequent assignment or sublease as required herein. Upon
notice to Landlord of a proposed sublease or assignment of all or any portion of
the Premises for the balance of the Term (the "Proposed Space"), Landlord shall
have the option within fifteen (15) days after its receipt of such notice, to
terminate this Lease with respect to the Proposed Space, whereupon the parties
hereto shall have no further rights or liabilities with respect to the Proposed
Space except as otherwise expressly set forth herein. Tenant may assign or
sublet all or any portion of the Premises upon ten (10) days advance written
notice to Landlord (but without Landlord's consent), to an entity controlled by
Tenant or which controls Tenant or in connection with a merger, consolidation,
corporate reorganization, or a sale of all or substantially all of its assets,
provided that the new controlling entity has a consolidated net worth greater
than or equal to Tenant's consolidated net worth at the time of the proposed
transfer.
In the event of a proposed assignment of this Lease or subletting of
all or a part of the Premises, Tenant shall submit to Landlord, in writing, (i)
the name of the proposed assignee or sublessee, (ii) current financial
statements, if any, available to Tenant disclosing the financial condition of
the proposed assignee or subtenant, (iii) the nature of the business of the
proposed assignee or sublessee, and its proposed use of the Premises (any
assignment or subletting being subject to restrictions on use contained in this
Lease, the violation of which by the proposed assignee or sublessee shall
constitute absolute grounds for Landlord's denial of the requested assignment or
subletting, such grounds not being the exclusive grounds for denial under clause
(iii)) and (iv) the proposed commencement date of the assignment or subletting,
together with a copy of the proposed assignment or sublease. Within fifteen (15)
days after its receipt of such notice, Landlord shall either approve or
disapprove such proposed assignment or sublease in writing or give Tenant notice
of its election to terminate this Lease with respect to the Proposed Space (as
hereinabove described).
Notwithstanding anything in this Lease to the contrary, Tenant further
agrees that any assignment or sublease shall be subject to the following
additional limitations: (i) in no event may Tenant assign this Lease or sublet
all or any portion of the Premises to an existing Tenant of the Business Park or
its subtenant or assignee (unless Landlord consents to such assignment or
sublease); (ii) in no event shall the proposed subtenant or assignee be a person
or entity with whom Landlord or its agent is negotiating and to or from whom
Landlord, or its agent, has given
<PAGE>
or received any written oral proposal within the past six (6) months regarding a
lease of space in the Business Park; and (iii) Tenant shall not publicly
advertise the rate for which Tenant is willing to sublet the Premises, and all
public advertisements of the assignment of the Lease or sublet of the Premises;
and all public advertisements of the assignment of the Lease or sublet of the
Premises, or any portion thereof, shall be subject to prior written approval by
Landlord, such approval not to be unreasonably withheld or delayed. Said public
advertisement shall include, but not be limited to, the placement or display or
any signs or lettering on the exterior of the Premises or on the glass or any
window or door of the Premises or in the interior of the Premises if it is
visible from the exterior.
23. TRANSFER OF LANDLORD'S INTEREST.
If Landlord shall sell, assign or transfer all or any part of its
interest in the Premises or in this Lease to a successor in interest which
expressly assumes the obligations of Landlord hereunder, the Landlord shall
thereupon be released or discharged from all covenants and obligations
hereunder, and Tenant shall look solely to such successor in interest for
performance of all of Landlord's obligations and such successor shall be
obligated to perform all of Landlord's obligations under this Lease which accrue
after the date of such transfer. Tenant's obligations under this Lease shall in
no manner be affected by Landlord's sale, assignment, or transfer of all or any
part of such interest(s) of Landlord, and Tenant shall thereafter attorn and
look solely to such successor in interest as the Landlord hereunder.
24. COVENANT OF QUIET ENJOYMENT.
Landlord represents that it has full right and authority to lease the
Premises and Tenant shall peacefully and quietly hold and enjoy the Premises for
the full Term hereof, and any extensions or renewals terms, so long as no Event
of Default occurs hereunder.
25. ESTOPPEL CERTIFICATES.
Within twenty (20) days after a request by Landlord, Tenant shall
deliver a written estoppel certificate, in form supplied by or acceptable to
Landlord, certifying any facts that, to the best of Tenant's knowledge, are then
true with respect to this Lease, including without limitation that this Lease is
in full force and effect, that no Event of Default exists on the part of
Landlord or Tenant, that Tenant is in possession, that Tenant has commenced the
payment of rent, and that Tenant claims no defenses or offsets with respect to
payment of rentals under this Lease. Likewise, within ten (10) days after a
request by Tenant, Landlord shall deliver to Tenant a similar estoppel
certificate covering such matters as are reasonably required by Tenant.
26. PROTECTION AGAINST LIENS.
Tenant shall do all things necessary to prevent the filing of any
mechanics', materialmen's or other types of liens whatsoever, against all or any
part of the Premises by reason of any claims made by, against, through or under
Tenant. If any such lien is filed against the Premises, Tenant shall either
cause the same to be discharged of records within thirty (30) days after filing
or, if Tenant in its discretion and in good faith determines that such lien
should be contested, it shall
<PAGE>
furnish such security as may be necessary to prevent any foreclosure proceedings
against the Premises during the pendency of such contest. If Tenant shall fail
to discharge such lien within said time period or fail to furnish such security,
then Landlord may at its election, in addition to any other right or remedy
available to it, discharge the lien by paying the amount claimed to be due or by
procuring the discharge by giving security or in such other manner as may be
allowed by law. If Landlord acts to discharge or secure the lien then Tenant
shall immediately reimburse Landlord for all sums paid and all costs and
expenses (including reasonable attorneys' fees) incurred by Landlord involving
such lien together with interest on the total expenses and costs at an interest
rate equal to the Prime Rate plus two percent (2%).
27. MEMORANDUM OF LEASE.
If requested by Tenant, Landlord shall execute a recordable Memorandum
or Short Form Lease, prepared at Tenant's expense, specifying the exact term of
this Lease and such other terms as the parties shall mutually determine.
28. FORCE MAJEURE.
In the event Landlord or Tenant shall be delayed, hindered or prevented
from the performance of any act required hereunder, by reason of governmental
restrictions, scarcity of labor or materials, strikes, fire, or any other
reasons beyond its reasonable control, the performance of such act shall be
excused for the period of delay, and the period for performance of any such act
shall be extended as necessary to complete performance after the delay period.
However, the provisions of this paragraph shall in no way be applicable to
Tenant's obligations to pay Annual Rental or any other sums, monies, costs,
charges or expenses required by this Lease.
29. REMEDIES CUMULATIVE -- NONWAIVER.
Unless otherwise specified in this Lease, no remedy of Landlord or
Tenant shall be considered exclusive of any other remedy, but each shall be
distinct, separate and cumulative with other available remedies. Each remedy
available under this Lease or at law or in equity may be exercised by Landlord
or Tenant from time to time as often as the need may arise. No course of dealing
between Landlord and Tenant or any delay or omission of Landlord or Tenant in
exercise any right arising from the other party's default shall impair such
right or be construed to be a waiver of a default.
30. HOLDING OVER.
If Tenant remains in possession of the Premises or any part thereof
after the expiration of the Term, whether with or without Landlord's
acquiescence, Tenant shall be deemed only a tenant at will and there shall be no
renewal of this Lease without a written agreement signed by both parties
specifying such renewal. The "monthly" rental payable by Tenant during any such
tenancy at will period shall be one hundred fifty percent (150%) of the monthly
installments of Minimum Rental and one hundred percent (100%) of the monthly
installments of any Additional
<PAGE>
Rent and other pass-through changes payable during the final Lease Year
immediately preceding such expiration. Tenant shall also remain liable for any
and all damages, direct and consequential, suffered by Landlord as a result of
any holdover without Landlord's unequivocal written acquiescence.
31. NOTICES.
Any notice allowed or required by this Lease shall be deemed to have
been sufficiently served if the same shall be in writing and placed in the
United States mail, via certified mail or registered mail, return receipt
requested, with proper postage prepaid or delivered by a nationally recognized
overnight courier, and addressed as follows:
AS TO LANDLORD: Petula Associates, Ltd.
Commercial Real Estate Equities
711 High Street
Des Moines, IA 50392
Attention: Bruce K. Bruene
WITH A COPY TO: Tri Properties
Royal Center Property Manager
1009 Slater Road, Suite 110
Durham, NC 27703
Attention: David M. Adams
AS TO TENANT: Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, NC 27703
Attention: Geoff Grisham
WITH A COPY TO: Wyrick, Robbins, Yates & Ponton LLP
4101 Lake Boone Trail
Raleigh, NC 27607
Attention: Jeffrey J. Johnson
The addresses of Landlord and Tenant and the party, if any, to whose
attention a notice or copy of same shall be directed may be changed or added
from time to time by either party giving notice to the other in the prescribed
manner.
32. LEASING COMMISSION.
<PAGE>
Landlord and Tenant represent and warrant each to the other that they
have not dealt with any broker(s) or any other person claiming any entitlement
to any commission in connection with this transaction except Corporate Realty
Advisors (the "Broker"). Landlord and Tenant agree to indemnify and save each
other harmless from and against any and all claims, suits, liabilities, costs,
judgments and expenses, including reasonable attorneys' fees, for any leasing
commissions or other commissions, fees, charges or payments resulting from or
arising out of their respective actions in connection with this Lease. Landlord
agrees to be responsible for the leasing commission due Broker pursuant to a
separate written agreement between Landlord and Broker, and to hold Tenant
harmless respecting same.
33. MISCELLANEOUS.
(a) Rules and Regulations.
Landlord shall have the right from time to time to prescribe reasonable
rules and regulations (the "Rules and Regulations") for Tenant's use of the
Premises and the Building. A copy of Landlord's current Rules and Regulations
respecting the Premises and the Building is attached hereto as Exhibit "D".
Tenant shall abide by and actively enforce on all its employees, agents,
invitees and licensees such regulations including without limitation rules
governing parking of vehicles in designated areas, provided Tenant has received
written copies of such regulations and any amendments or revisions thereto. The
Rules and Regulations shall be applied uniformly to all tenants in the Building.
(b) Evidence of Authority.
If requested by Landlord, Tenant shall furnish reasonable legal
documentation evidencing the valid existence and good standing of Tenant and the
authority of any parties signing this Lease to act for Tenant.
(c) Limitation of Landlord's Liability.
If Landlord shall fail to perform any covenant, term or condition of
this Lease upon Landlord's part to be performed within thirty (30) days after
written notice from Tenant (unless such condition is incapable of being cured
within said thirty (30) day period, in which event it shall not be deemed a
default so long as Landlord is diligently pursuing the completion of same), and,
as a consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied solely out of the proceeds of sale
received upon execution of such judgment levied thereon against the right, title
and interest of Landlord in the Building as the same may then be encumbered
(including without limitation Landlord's interest in the rents and profits
arising out of Landlord's interest in the Building); and neither Landlord nor,
if Landlord be a partnership, any of the partners comprising Landlord shall have
any personal liability for any deficiency. It is understood and agreed that in
no event shall Tenant or any person claiming by or through Tenant have the right
to levy execution against any property of Landlord other than its interest in
the Building as hereinbefore expressly provided.
<PAGE>
(d) Nature and Extent of Agreement.
This Lease, together with all exhibits hereto, contains the complete
agreement of the parties concerning the subject matter, and there are no oral or
written understandings, representations, or agreements pertaining thereto which
have not been incorporated herein. This Lease creates only the relationship of
landlord and tenant between the parties, and nothing herein shall impose upon
either party any powers, obligations or restrictions not expressed herein. This
Lease shall be construed and governed by the laws of the state in which the
Premises are located.
(e) Binding Effect.
This Lease shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, successors and assigns. This Lease
shall not be binding on Landlord until executed by a Vice President of Landlord
and delivered to Tenant. No amendment or modification to this Lease shall be
binding upon Landlord unless same is in writing and executed by a Vice President
of Landlord.
(f) Captions and Headings.
The captions and headings in this Lease are for convenience and
reference only, and they shall in no way be held to explain, modify, or construe
the meaning of the terms of this Lease.
(g) Security Deposit.
Tenant has paid to Landlord upon signing this Lease Ten Thousand and
No/100 Dollars ($10,000.00) (the "Deposit") as security for Tenant's performance
of all obligations hereunder. The Deposit may be held by Landlord in such manner
as it shall elect and Landlord shall be entitled to any interest which accrues
on the Deposit. In the event of a default by Tenant, Landlord may, at its
option, apply all or any part of the Deposit to cure the default, and thereupon
Tenant shall immediately redeposit with Landlord the amount so applied in order
that Landlord will always have the full Deposit on hand during the term of this
Lease. Upon the termination of this Lease, provided that Tenant is not in
default hereunder, Landlord shall refund to Tenant any of the remaining balance
of the Deposit subject to final adjustments for payment of any rental required
by this Lease. If the Premises is sold, Landlord shall have the right to
transfer the Deposit to the new owner, and upon the new owner's express
assumption of the obligations for the Deposit required by this Lease, Landlord
shall thereupon be released from all liability for such Deposit, and Tenant
thereafter shall look only to the new owner for such Deposit provided that such
new owner has provided notice to Tenant of its assumption of such obligations.
The terms hereof shall apply to every transfer of the Deposit.
(h) Right to Relocate. [Intentionally Deleted]
(i) Lease Review.
<PAGE>
The submission of this Lease to Tenant for review does not constitute a
reservation of or option for the Premises, and this Lease shall become effective
as a contract only upon execution and delivery by Landlord and Tenant.
(j) Attorney's Fees. If either party places in the hands of an attorney
the enforcement of this Lease or any part thereof, for the collection of any
rent due or to become due hereunder, or recovery of the possession of the
Premises, or otherwise files suit hereunder, the non-prevailing (or defaulting)
party shall pay the other party's reasonable attorneys' fees and court costs.
(k) Principal Mutual Approval. This Lease is subject to approval by the
Principal Mutual Life Insurance Company Investment Committee and the Board of
Directors of Petula Associates, Ltd., such approval to be granted or denied
within ten (10) days after the full execution of this Lease.
34. SEVERABILITY.
If any term or provision of this Lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent permitted by law
notwithstanding the invalidity of any other term of provision hereof.
35. REVIEW OF DOCUMENTS.
If, following the execution of this Lease, either party hereto requests
that the other party execute any document or instrument that is other than (i) a
document or instrument the form of which is attached hereto as an exhibit, or
(ii) a document that solely sets forth facts or circumstances that are then
existing and reasonably ascertainable by the requested party with respect to the
Lease, then the party making such request shall be responsible for paying the
reasonable out-of-pocket costs and expenses (within thirty (30) days of such
parties receipt of reasonably detailed evidence supporting such expenses),
including without limitation, the attorneys fees, incurred by the requested
party in connection with the review (and, if applicable, the negotiations)
related to such document(s) or instrument(s), regardless of whether such
document(s) or instrument(s) is (are) ever executed by the requested party. In
the event the requesting party is Tenant, all such costs and expenses incurred
by Landlord in connection with its review and negotiation of any such
document(s) instrument(s) shall be deemed to be additional rental due hereunder
and shall be payable by Tenant as provided above.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and sealed pursuant to authority duly given as of the day and year
first above written.
"LANDLORD"
PETULA ASSOCIATES, LTD.
ATTEST:
/s/ Joyce N. Hottman By: /s/ Timothy E. Minton
--------------------- ----------------------
President
[CORPORATE SEAL]
"TENANT"
INSPIRE PHARMACEUTICALS, INC.
ATTEST:
/s/ Michael Lytton By: /s/ David Doutz
--------------------- ----------------------
Secretary President
[CORPORATE SEAL]
<PAGE>
STATE OF IOWA
COUNTY OF POLK
This 30th day of December, 1997, personally came before me Timothy E.
Minton, who being by me duly sworn, says that he is Vice President of Petula
Associates, Ltd., an Iowa corporation, and that said writing was signed by him,
in behalf of said corporation by its authority duly given, and acknowledged the
said writing to be the act and deed of said corporation.
/s/ Rachel J. Mischike
---------------------------
Notary Public
[NOTARIAL SEAL]
My Commission expires:
May 19, 2000
STATE OF NC
COUNTY OF Durham
This 5th day of December, 1997, personally came before me David L.
Drutz, M.D., who being by me duly sworn, says that he is _____ President of
Inspire Pharmaceuticals, Inc. a Delaware corporation, and that said writing was
signed by him, in behalf of said corporation,by its authority duly given, and
acknowledged the said writing to be the act and deed of said corporation.
/s/ Jean W. Lutes
---------------------------
Notary Public
[NOTARIAL SEAL]
My Commission expires:
August 5, 2001
<PAGE>
Exhibit A
DRAWING
<PAGE>
Exhibit B
DRAWING
<PAGE>
EXHIBIT "C"
FINAL PLANS
[To be attached upon approval by Landlord]
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
The following rules and regulations have been adopted by the Landlord
for the care, protection and benefit of the Building and for the general comfort
and welfare of the tenants. These Rules and Regulations shall remain in full
force and effect until Tenant is notified in writing by Landlord of any changes
and amendments. To the extent any of the Rules and Regulations set forth herein
are inconsistent with the provisions of the Lease, the terms and conditions of
the Lease shall prevail.
1. The sidewalks, entrances, halls, passages, elevators and stairways
shall not be obstructed or used by Tenant for any other purpose than for ingress
and egress. All loading and unloading of goods, furniture, fixtures, equipment
and supplies shall be done only in areas and through entrances designated for
such purposes.
2. Toilet rooms and other plumbing facilities shall not be used for any
purpose other than those for which they are constructed and no foreign substance
of any kind shall be disposed of therein. All repairs required due to breakage,
stoppage or damage resulting from a violation of this provision shall be at
Tenant's sole expense.
3. Tenant shall not do anything in the Premises, or bring or keep
anything therein, which shall in any way conflict with any law, ordinance, rule
or regulation affecting the occupancy and use of the Premises, which are or may
hereafter be enacted or promulgated by any public authority or by the Board of
Fire Underwriters.
4. Tenant shall at all times maintain an adequate number of suitable
fire extinguishers on the Premises for use in case of local fires, including
electrical fires.
5. Tenant shall keep the Premises heated at a temperature sufficiently
high to prevent freezing of water in pipes and fixtures.
6. Trucks shall not be allowed to remain overnight in the common area
whether loaded, unloaded or otherwise, without Landlord's prior written consent.
7. All garbage and refuse shall be placed for collection in containers
specified by Landlord outside the Premises or Building. Tenant shall pay the
cost of removal of any of Tenant's refuse or rubbish.
8. Tenant shall, at Tenant's expense, provide for regular pest
extermination within the Premises, as necessary, and shall provide Landlord with
a copy of such extermination contract.
9. In order to insure proper use and care of the Premises, neither the
Tenant nor agent nor employee of Tenant shall:
<PAGE>
(a) Allow any furniture, packages or articles of any kind to remain in
corridors except for short periods incidental to moving same in or out of
Building or to cleaning or rearranging occupancy of leased space.
(b) Mark or defile elevators, toilet rooms, walls, windows, doors or
any part of the Building.
(c) Except for "seeing-eye" dogs, keep animals or birds on the
Premises.
(d) Deposit waster paper, dirt or other substances in corridors,
stairways, elevators, toilets, restrooms, or any other part of the Building not
leased by Tenant.
(e) Except for pictures, wall hangings and other customary decorations
and items which would not cause permanent damage to the structural elements of
the Building, fasten any article, drill holes, drive nails or screws into walls,
floors, doors, or partitions or otherwise mar or deface them by paint, papers or
otherwise, without Landlord's prior written consent.
(f) Operate any machinery within the Building except customary
warehouse, training and office equipment, such as computers, dictaphones,
calculators, electric typewriters, televisions, video cassette records and the
like. Special equipment or machinery used in the trade or profession of the
Tenant may be operated only with Landlord's prior written consent.
(g) Leave Premises unoccupied without locking all exterior doors and
turning off all water outlets
(h) Burn any trash, refuse, debris or garbage of any kind in or about
the Premises or Building.
(i) Attach awnings, air-conditioning units or other fixtures to the
outside walls or window sills, or otherwise affix such so as to project from the
Premises or Building without Landlord's prior written consent..
(j) Except for Tenant's installation of a key card security system,
install additional locks or bolts of any kind on any doors or windows of the
Premises without Landlord's prior written consent. On the termination of
Tenant's tenancy, Tenant shall deliver to Landlord all keys to the Premises,
either furnished to or otherwise procured by Tenant.
(k) Install or operate any engine, boiler, machinery, or stove, or use
oil or any burning fluid (other than gas) for heating, warming or lighting, or
use any lighting other than incandescent or fluorescent electric lights, on the
Premises without Landlord's prior written consent. All stoves permitted in the
Premises shall be placed and installed. according to city ordinances. No
articles deemed extra hazardous on account of fire, and no explosives, shall be
brought into the Premises.
<PAGE>
(l) Use loudspeakers, televisions, radios or other devices in such a
manner as to be heard outside the Premises, or make, or permit to be made, any
unseeming or disturbing noises, nuisance or other activity objectionable to
other tenants.
(m) Use the Premises for the purpose of lodging or sleeping rooms, or
for any illegal purposes.
(n) Install any aerial, antenna, satellite dish or other equipment or
structure on the roof or exterior walls of the Premises, or on the grounds
without, in each instance, the prior written consent of Landlord. Any
installation so made without such prior written consent shall be subject to
removal without notice at any time, at Tenant's expense.
10. Landlord shall have the right to prohibit any advertising by Tenant
which, in its opinion, shall damage the reputation of the Building or its
desirability, and upon written notice from Landlord, Tenant shall discontinue
any such advertising.
11. Except for deliveries in the ordinary course of Tenant's business,
Landlord reserves the right to designate the time when and method whereby
freight, furniture, safes, goods, merchandise and other articles may be brought
into, moved or taken from the Building and the Premises leased by Tenant; and
workmen employed, designated or approved by Landlord must be employed by Tenants
for repairs, painting, material moving and other similar work that may be done
on the Premises.
12. Tenant will reimburse Landlord for the cost of repairing any damage
to the Premises or other parts of the Building caused by Tenant or the agents or
employees of Tenant, including replacing any glass broken.
13. Tenant shall not install in the Premises any metal safes or permit
any concentration of excessive weight in any portion thereof without first
having obtained the written permission of Landlord.
14. Landlord reserves the right at all times to exclude newsboys,
loiterers, vendors, solicitors and peddlers, from the Building or common area
and to require registration, satisfactory identification and credentials from
all person seeking access to any part of the Building or common area outside of
ordinary business hours. Ordinary business hours shall mean Monday through
Friday, 8:00 a.m. to 6:00 p.m., except on legal holidays. Landlord shall
exercise its best judgment in the execution of such control but shall not be
held liable for the granting or refusal of such access. Landlord reserves the
right to exclude the general public from the building after ordinary business
hours and on weekends and holidays.
<PAGE>
15. The attaching of wires to the outside of the Building is absolutely
prohibited, and no wires shall be run or installed in any part of the Building
without the Landlord's permission and direction.
16. Requests for services of janitors or other Bulding employees must
be made to the Landlord. Agents or employees of Landlord shall not perform any
work or do anything outside of their regular duties unless under special
instructions from Landlord.
17. Signs or any other Tenant identification shall be in accordance
with building standard signage. No signs of any nature shall be placed in the
windows so as to be visible from the exterior of the Building. All signs not
approved in writing by Landlord shall be subject to removal without notice.
18. Except as otherwise set forth in the Lease, any improvements or
alterations to the Premises by Tenant shall be approved in advance by Landlord
and all such work, if approved, shall be done at Tenant's sole expense under the
supervision of Landlord.
19. Tenant shall have a non-exclusive right to use of all driveways and
parking areas designated for Tenant and Tenant's employees, if deemed necessary
by Landlord.
20. If additional drapes or window decorations are desired by Tenant,
they shall be approved by Landlord and installed at Tenant's expense under the
direction of Landlord. Lining on drapes visible from the exterior shall be of a
color approved by Landlord.
21. The possession of weapons, including concealed handguns, is
strictly forbidden on the Premises and Building.
22. Tenant shall not use nor permit the use of the common area by its
employees, agents or invitees for the purpose of displaying or selling personal
property, automobiles, equipment, furniture, fixtures, merchandise or any other
item whether owned by Tenant or its employees, agents or invitees.
23. So long as such rescissions or amendments do not materially
interfere with Tenant's standard business operations within the Premises,
Landlord reserves the right to rescind, amend, alter or waive any of the
foregoing rules and regulations at any time in a reasonable and
nondiscriminatory manner, or make such other reasonable and non-discriminatory
rules and regulations as, in its sole judgment it deems necessary, desirable or
proper for its best interest and for the best interests of the tenants, or as
may from time to time be necessary for the safety, care and cleanliness of the
Premises, the Building or adjacent areas, and for the preservation of good order
therein. Any such rescission, amendment, alteration or waiver of any rules or
regulations or creation of any such new rules or regulations shall be effective
five (5) days after all tenants have been given written notice thereof. Landlord
shall not be responsible to any tenant for the non-observance or violation by
any other tenant of any of these rules and regulations at any time.
<PAGE>
EXHIBIT "E"
OPTION TO EXTEND
1. Notice and Exercise. Provided no Event of Default has occurred and is
continuing under this Lease, Tenant is hereby granted the option to extend
the Term once for an additional period of five (5) years (the "Renewal
Term") commencing upon the expiration of the initial Term on the same terms
and conditions (except as provided in this Section) as contained in the
other provisions of this Lease. This option shall be exercised only by
delivery of written notice (the "Renewal Notice") to Landlord no later than
nine (9) months prior to the scheduled Expiration Date referred to in
Paragraph 2 of this Lease. The Minimum Rental for the Premises shall be the
then fair market rental ("Market Rate") applicable to the Premises. Upon
Landlord's receipt of Tenant's election to extend the Term as herein
provided, Landlord shall notify Tenant in writing of Landlord's
determination of the Market Rate for the Renewal Term. If Tenant disagrees
with the Market Rate specified by Landlord for the Renewal Term, and
Landlord and Tenant cannot, using good faith reasonable efforts, agree upon
a mutually acceptable Market Rate for the Renewal Term, Tenant may, as
Tenant's sole right and remedy, revoke its election to extend the Term by
so notifying Landlord in writing within thirty (30) days following
Landlord's receipt of the Renewal Notice (the "Tenant Review Period"). In
the event Landlord and Tenant cannot agree upon a mutually acceptable
Market Rate for the Extension Term and Tenant fails to revoke its election
to extend the Term prior to the expiration of the Tenant Review Period, the
Market Rate for the Renewal Term shall be determined in accordance with
Section 2 hereunder and such determination shall be final and binding upon
both Landlord and Tenant. Notwithstanding anything contained herein to the
contrary, upon the expiration of the Tenant Review Period, Tenant shall
have no right to rescind or otherwise revoke its election to extend the
Term. Tenant's occupancy of the Premises during any renewal period shall be
subject to all other terms and conditions of this Lease, expressly
including without limitation, the obligation to pay Tenant's proportionate
share of the taxes, insurance premiums and common area maintenance costs;
provided, however, Landlord shall have no obligation to provide any
upfitting allowance for the Renewal Term and Tenant agrees to continue
leasing the Premises in its "as-is" condition.
2. Determination of Market Rate. For purposes of this Exhibit "E", the term
"Market Rate" shall mean the annual amount per rentable square foot that
comparable landlords of comparable buildings have accepted in then-current
transactions between non-affiliated parties from new, non-expansion,
non-renewal (unless the lease involved a procedure invoked by landlord and
tenant for a 100% determination of "fair market rental") and non-equity
tenants of comparable credit-worthiness, for comparable space, for a
comparable use, for a comparable period of time ("Comparable
Transactions"). In any determination of Comparable Transactions appropriate
consideration shall be given to the annual rental rates per rentable square
foot, the standard of measurement by which the
<PAGE>
rentable square footage is measured, the ratio of rentable square feet to
usable square feet, the type of escalation clause implemented, the extent
of tenant's liability under the lease, abatement provisions reflecting free
rent and/or no rent during the period of construction or subsequent to the
commencement date as to the space in question, parking considerations,
length of the lease term, size and location of premises being leased,
building standard work letter and/or tenant improvement allowances, if any,
or any other tenant concessions and other generally applicable conditions
of tenancy for such Comparable Transactions. The intent is that Tenant will
obtain the same rent and other economic benefits that Landlord would
otherwise give in Comparable Transactions and that Landlord will make, and
receive the same economic payments and concessions that Landlord would
otherwise make, and receive in Comparable Transactions.
Upon expiration of the Tenant Review Period, Landlord and Tenant shall
each place in a separate sealed envelope their final proposal as to Market
Rate and such determination shall be submitted to arbitration in accordance
with subsections (a) through (e) below.
(a) Landlord and Tenant (together with or through their designated
representatives) shall meet with each other within five (5) business days of the
Outside Agreement Date and exchange the sealed envelopes and then open such
envelopes in each other's presence. If Landlord and Tenant do not mutually agree
upon the Market Rate with one (1) business day of the exchange and opening of
envelopes, then, within ten (10) business days of exchange and opening of
envelopes Landlord and Tenant shall agree upon and jointly appoint a single
arbitrator who shall by profession be a real estate appraiser, lawyer or broker
who shall have been active over the five (5) year period ending on the date of
such appointment in the leasing of comparable commercial properties in the
vicinity of the Building (the "Arbitrator"). Neither Landlord nor Tenant shall
consult with such Arbitrator as to his or her opinion as to Market Rate prior to
the appointment. The determination of the Arbitrator shall be limited solely to
the issue of whether Landlord's or Tenant's submitted Market Rate for the
Premises is the closer to the actual Market Rate for the Premises as determined
by the Arbitrator, taking into account the requirements of this Section 2. Such
Arbitrator may hold such hearings and require such briefs as the Arbitrator, in
his or her sole discretion, determines as necessary. In addition, Landlord or
Tenant (together with or through their designated representatives) may submit to
the Arbitrator with a copy to the other party within five (5) business days
after the appointment of the Arbitrator any market data and additional
information that such party deems relevant to the determination of Market Rate
("MR Data") and the other party may submit a reply in writing within five (5)
business days after receipt of such MR Data.
(b) The Arbitrator shall, within thirty (30) days of his or her
appointment, reach a decision as to whether the parties shall use Landlord's or
Tenant's submitted Market Rate, and shall notify Landlord and Tenant of such
determination.
(c) The decision of the Arbitrator shall be binding upon Landlord and
Tenant.
<PAGE>
(d) If Landlord and Tenant fail to agree upon and appoint an
Arbitrator, then the appointment of the Arbitrator shall be made by the
Presiding Judge of the Superior Court, or, if he or she refuses to act, by any
judge having jurisdiction over the parties.
(e) The cost of arbitration shall be paid by Landlord and Tenants
equally.
Immediately after the base rent for the applicable Extension Period is
determined pursuant to this Exhibit, Landlord and Tenant shall execute an
amendment to the Lease stating the new base rent in effect.
<PAGE>
EXHIBIT 10.11
SUBLEASE AGREEMENT
This Sublease Agreement ("Sublease") dated this 22 day of September 1997, by and
between ICAgen, Inc., as sublessor ("Sublessor") and Inspire Pharmaceuticals,
Inc., as sublessee ("Sublessee").
WITNESETH:
----------
WHEREAS, pursuant to a Lease Agreement dated December 17, 1992, and amended
by First Amendment of Lease dated August 26, 1996 between Sublessor as Tenant,
and Imperial Center Partnership and Petula Associates, Ltd., as tenants in
common operating as a joint venture, as Landlord, (the "Lease"), attached hereto
as Exhibit A and made a part hereof, Sublessor has leased from Landlord certain
---------
building space located at 4222 Emperor Boulevard, Suite 500, Durham, North
Carolina containing approximately 2,372 square feet, such premises being shown
on the floor plan attached hereto as Exhibit B (the "Premises"); and
---------
WHEREAS, Sublessee desires to sublease from Sublessor the Premises on the
terms and conditions set forth herein; and
WHEREAS, Landlord has consented to the sublease of the Premises and all of
the terms and conditions of this Sublease as indicated by Landlord's Certificate
to be delivered within ten (10) days of the execution of this Sublease.
NOW THEREFORE, for and in consideration of the payments referenced herein,
and other mutual good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Sublease Term: Sublessor hereby subleases the Premises to Sublessee for a
--------------
period of approximately three (3) years commencing Sept 22, 1997 and
terminating on the Sublessor's initial lease termination date of August 31,
2000. Sublessee may extend this Sublease for one (1) additional term of
three (3) years (the "Renewal Term") pursuant to the provisions of this
Section 1. Sublessee shall give Sublessor written notice ("Sublessee's
Notice") of its desire to extend to Sublease at least one hundred and
eighty (180) days prior to the expiration of the original term, provided
Sublessee is not in default beyond any applicable cure period set forth in
this Sublease on the date of such notice. Within 30 days from the receipt
of the Sublessee's Notice, Sublessor shall give Sublessee written
("Sublessor's Notice") of the amount of the increase, if any, as determined
by the Landlord under paragraph 36A of the Lease, to the base Rent as
defined herein for such Renewal Term. Any such increase shall represent
Sublessor's increased costs under the Lease associated with the Premises.
Within 10 days from the receipt of Sublessor's Notice, Sublessee shall give
Sublessor written notice of its intention to extend the Sublease. In the
event Sublessee does not respond within 10 days to Sublessor's Notice, the
Sublease shall extend on the terms of the Sublessor's Notice. Such Renewal
Term
1
<PAGE>
shall be upon all of the terms and conditions hereof. The parties agree
that this Sublease shall terminate upon the termination of the Lease, for
whatever reason. As used herein, the "Term" of this Sublease shall include
the original term and any Renewal Term.
2. Base Rent: During the Term of this Sublease, Sublessee shall pay to
----------
Sublessor as Base Rent the monthly sum of $1,680.17 for the rent of the
Premises, which amount may be increased during any Renewal Term, provided,
however, that Base Rent for any partial month shall be prorated. East
installment of Base Rent shall be due and payable for each month during the
Term of this Sublease on or before the twentieth day of the previous month,
at the address shown for Sublessor in Article 12 hereof, or at such other
address as Sublessor may direct in writing.
3. Additional Rent: In addition to the Base Rent, Sublessee shall pay to
----------------
Sublessor, at the same time as monthly installment payments to rent are
made, a sum which represents Sublessor's proportionate share of insurance
costs, taxes and operating expense charges owed by Sublessor under the
terms of the Lease for the Premises. For the purposes of this Sublease, the
Sublessor's proportionate share of such pass through expenses paid by the
Sublessor under the Lease for the Premises is 5.77% (2,372 square feet of
the Premises divided by 41,094 square feet of the Building) and the initial
monthly estimated amount of such payment shall be $398.02. The actual
amount of additional rent due from Sublessee shall be adjusted when the
actual amount of Sublessor's proportionate share of insurance costs, taxes
and operating expense charges are determined under the Lease for the
Premises. Upon request of Sublessee, Sublessor shall provide Sublessee
evidence supporting any and all amounts allocated to the Premises.
4. Compliance with Lease: With respect to the Premises, Sublessee shall comply
----------------------
with all of the provisions of the Lease, except those provisions which
conflict with or are different from the terms of this Sublease in which
event the terms of this Sublease shall control, and all rules and
regulations of Landlord or Sublessor therein promulgated thereunder.
Notwithstanding anything to the contrary in this Sublease, Sublessee shall
not take any action or omit to take any action which would cause Sublessor
to be in default under the Lease.
5. Utilities: During the Term, Sublessee shall establish its own account and
----------
shall pay for all Utilities for the Premises. For purpose of this Section
5, "Utilities" shall mean costs with respect to the Premises for water,
electricity, gas, sewage and any other utilities used by the Sublessee at
the Premises.
6. Indemnity and Insurance: Sublessee agrees to indemnify and hold harmless
------------------------
Sublessor, from any liability for damages to any person or property in, on
or about the Premises from any cause, unless caused by the negligence or
willful act of Sublessor or it agents. If such damages are caused by the
negligence or willful act of Sublessor or its agents, Sublessor shall
indemnify and hold harmless Sublessee from any resulting liability.
2
<PAGE>
Sublessee shall procure and keep in effect during the Term public liability
and property damage insurance coverage of at least $1,000,000 per
occurrence, $2,000,000 aggregate limit with excess $2,000,000 and workers'
compensation insurance of at least $100,000 per employee and $500,000 per
occurrence with the Sublessor named as an additional insured thereunder.
Such policies shall contain language that the policies may not be canceled
or changed except after thirty (30) days notice to Sublessor. Sublessee
shall deliver copies of original policies or satisfactory certificates
thereof.
7. Condition of Premises: Sublessee acknowledges it has examined the Premises
----------------------
and accepts the same "as is". All improvements or alterations proposed for
the Premises must be approved by the Sublessor and the Landlord prior to
construction and shall be Sublessee's sole expense.
8. Assignment or Subletting: Sublessee may not assign its interest in the
-------------------------
Sublease or sublet the Premises.
9. Management Fee: Sublessee shall pay Sublessor an annual management fee of
---------------
$1,000 on the commencement of the Term and on each anniversary date of the
Term to reimburse the Sublessor for management of the Sublease.
10. Default: If at any time there shall occur any of the following events:
--------
a. If Sublessee shall default a payment of rent or any other sum of money
becoming due hereunder and such default shall continue for fifteen
(15) days after the due date; or
b. If Sublessee shall default on the performance of any other agreement,
covenant or stipulation set forth in this Sublease and such default
shall continue for thirty (30) days after a written notice thereof; or
c. If sublessee shall be adjudicated bankrupt or insolvent under any
federal or state law; or
d. If Sublessee shall file or have against it a petition for the
appointment of a receiver or trustee for all or essentially all of the
assets of Sublessee and such appointment shall not be vacated or set
aside within thirty (60) days
then and in any such event after the expiration of any applicable cure periods,
Sublessor, without excluding other rights or remedies that it may have, shall
have the right of reentry and may remove all persons and property from the
Premises and dispose of such property pursuant to summary or other legal process
and without being deemed guilty of trespass or becoming liable for any loss or
damage which may be occasioned hereby. If Sublessor should elect to reenter as
herein provided and take possession pursuant to legal proceedings, it may either
terminate this Sublease, or it may from time to time without terminating this
Sublease make such alterations or
3
<PAGE>
repairs as may be necessary in order to relet the Premises and relet the
Premises for any such term and at such rentals and upon such other terms and
conditions as Sublessor may deem advisable. No such reentry or taking possession
of the Premises by Sublessor shall be construed as an election to terminate this
Sublease unless a written notice of intention be given to Sublessee by Sublessor
at the time of such reentry, but, notwithstanding such reentry and reletting
without termination, Sublessor may at any time thereafter elect to terminate
this Sublease for such previous breach. In the event of any termination by
Sublessor, whether before or after reentry, Sublessee shall remain obliged
through the term of the Lease to continue to make monthly payments of Base Rent
and any additional rent pursuant to Section 3 hereof (except that the amount of
such continuing payments shall be reduced by the amount of any rental payments
received by Sublessor from a new subtenant in connection with the reletting of
the Premises), and Sublessor may recover from Sublessee damages incurred by
reason of such breach. Notwithstanding the foregoing, such damages shall not
include the cost of any upfitting of the Premises required to relet the Premises
to the extent that such costs are paid by the new subtenant. Sublessor agrees to
use its reasonable and good faith efforts to have such costs of upfitting paid
by such new subtenant. As a remedy upon occurrence of any default only in the
event that Sublessee fails to make timely and continued monthly payments,
Sublessor may accelerate the Base Rent to accrue during the remainder of the
Term and declare the same immediately due and payable. No remedy herein or
otherwise conferred upon or reserved to Sublessor shall be considered exclusive
of any other remedy but the same shall be distinct, separate and commutative and
shall be in addition to any other remedy given by Sublessor by this Sublease and
may be exercised from time to time as often as occasion may arise or may be
deemed expedient. No delay or omission of Sublessor to exercise any right or
power arising from any delay on the part of Sublessee shall impair any right or
power or shall be construed to be a waiver of any such default or any
acquisition thereto. Sublessee shall pay all costs, expenses and reasonable
attorney"s fees that may be incurred or paid by Sublessor in enforcing the
covenants, conditions and agreements of this Sublease with the remedies provided
hereunder whether incurred as a result of litigation or otherwise.
11. Authorization and Warranty: The parties warrant that they are fully
---------------------------
authorized and empowered to enter into this Agreement. Sublessor further
warrants that the Lease is not currently in default and will not be in
default at any time prior to the date of delivery of the Premises to
Sublessee. In the event Sublessor becomes aware or receives notice from the
Landlord of a default by Sublessor under the Lease, Sublessor shall
promptly notify Sublessee of the same, and Sublessee shall have such rights
as Sublessor has under the Lease to cure such default and sublessor
indemnifies Sublessee from and against the losses, costs and damages
arising out of Sublessee's curing such default.
12. Covenant of Quiet Enjoyment: Sublessor covenants that, provided Sublessee
----------------------------
is not in default hereunder beyond any applicable cure periods, Sublessee
shall have and enjoy the quiet and peaceful possession of the Premises
without interference from Sublessor.
13. Miscellaneous:
--------------
4
<PAGE>
(a) The headings of the various articles of this Agreement are intended
only for convenience and are not intended to limit, define or construe
the scope of any article of this Agreement, nor offset the provisions
thereof.
(b) Neither the method of computation of rent nor any other provision of
this Agreement shall be deemed to create any relationship between the
parties hereto other than that of Sublessor and Sublessee.
(c) This Agreement shall be governed by and construed in accordance with
the laws of North Carolina.
(d) This Agreement may be modified or amended only by written agreement of
both parties hereto.
(e) If any provision of this Agreement shall be deemed to be in
contravention of any law, then the court rendering such determination
shall have the authority to strike the contravening provision from
this Agreement, with the remaining provisions of this Agreement
remaining in full force and effect.
(f) This Agreement, and the covenants, conditions, warranties and
agreements made and entered into by the parties hereto are declared
binding on their respective heirs, successors, representatives and
assigns.
(g) Whenever under this Agreement a provision is made for notice of any
kind, it shall be deemed sufficient service thereof if such notice is
in writing addressed to the respective parties at the address shown
below and delivered via hand delivery or overnight courier, with proof
of delivery thereof.
(h) Sublessor and Sublessee respectively represent and warrant to each
other that neither of them has consulted or negotiated with any broker
or finder with regard to the Premises or otherwise in connection with
this transaction. Each such party shall indemnify the other against
and hold the other harmless from and against all liabilities, costs
and expenses (including reasonable attorneys' fees) for any claims for
fees or commissions from anyone arising out of their respective
actions in connection with this Sublease.
(i) If requested by Sublessee, Sublessor shall execute a recordable
Memorandum of Sublease, prepared by and at Sublessee's expense,
specifying the exact term of this Sublease and such other terms as the
parties shall mutually determine and agree.
14. Landlord's Consent: The execution and delivery, within ten (10) days of the
-------------------
execution of this Sublease, of a Landlord's Certificate in form reasonably
acceptable to both Sublessor and Sublessee shall be a condition precedent
to the effectiveness of this Sublease.
5
<PAGE>
If to Sublessor:
ICAgen, Inc.
4222 Emperor Boulevard, Suite 460
Durham, NC 27703
If to Sublessee:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 480
Durham, NC 27703
[Signature Page Attached and Incorporated herein by Reference]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
as of the day and year first written above.
SUBLESSOR:
ICAgen, Inc.
By: /s/ P. Kay Wagoner
-------------------------------
Its: President and CEO
-----------------------------
ATTEST:
/s/
--------------------------------
Secretary/Assistant Secretary
[CORPORATE SEAL]
SUBLESSEE:
Inspire Pharmaceuticals, Inc.
By: /s/ David Drutz
-------------------------------
Its: President and CEO
-----------------------------
ATTEST:
___________________________________
Secretary/Assistant Secretary
[CORPORATE SEAL]
7
<PAGE>
INSPIRE
PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
February 14, 2000
ICAgen, Inc.
4222 Emperor Boulevard, Suite 460
Durham, NC 27703
RE: Extension of Sublease Agreement
This letter serves as notice that, in accordance with Section 1. Sublease Term
-------------
of the Sublease Agreement ("Sublease") between ICAgen, Inc. ("Sublessor") and
Inspire Pharmaceuticals, Inc. ("Subleasee") dated September 22, 1997, Inspire
Pharmaceuticals, Inc. wishes to extend the Sublease for one (1) additional term
of three (3) years.
Please contact our Director of Finance, Roger Francis, should you have any
questions or need additional information.
Best Regards
/s/ Christy L. Shaffer
Christy L. Shaffer
President and CEO
- --------------------------------------------------------------------------------
4222 Emperor Boulevard, Suite 470 Durham, North Carolina 27703
Telephone 919.941.9777 Fax 919.941.9797
<PAGE>
Exhibit 10.12
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
EXCLUSIVE LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and entered into this 1st day of
September, 1998 (the "Effective Date" between THE UNIVERSITY of NORTH CAROLINA
AT CHAPEL HILL, having an address at 308 Bynum Hall, Chapel Hill, N.C.
(hereinafter referred to as "University") and Inspire Pharmaceuticals, Inc., a
corporation organized and existing under the laws of Delaware and having an
address at 4222 Emperor Boulevard, Suite 470, Durham, NC 27703 (hereinafter
referred to as "Licensee").
WITNESSETH
WHEREAS, University owns and controls the inventions described in and
encompassed by University invention disclosure number OTD 95-24 and U.S. Patent
No. 5,635,160, corresponding foreign applications entering national phase from
PCT/US96/09190 and U.S. Continuation-In-Part application 08/853,056, all
entitled "Dinucleotides Useful for the Treatment of Cystic Fibrosis and for
Hydrating Mucus Secretions", disclosure number OTD 96-83 and U.S. patent
application No. 08/624,914 entitled "Method of Treating Bronchitis with Uridine
Triphosphates and Related Compounds", and disclosure number OTD 99-13 and U.S.
patent application No. 08/744,267 entitled "Method of Treating Ciliary
Dyskinesia with Uridine Triphosphates and Related Compounds" (collectively,
"Inventions");
WHEREAS, the Inventions were developed by Drs. M. Jackson Stutts and
Richard C. Boucher, Eduardo R Lazarowski and Cara A. Geary (collectively, the
"Inventors"), of the University; and
WHEREAS, Licensee is desirous of producing, using and selling products
which include the use of the Inventions and is willing to expend best efforts to
do so if it can obtain a license to use the Inventions under the terms and
conditions set forth herein; and
WHEREAS, University desires to facilitate a timely transfer of its
information and technology concerning the Inventions for the ultimate benefit of
the public and this transfer is best accomplished by the grant of this license;
and
WHEREAS, in the opinion of the University, this transfer can best be
accomplished consistent with its mission by affiliation with Licensee;
NOW, THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:
1. Definitions
1.1. "University Technology" means any unpublished research
and development information, unpatented inventions, clinical data, and technical
data developed by the Inventors while employees of the University and in the
possession of the University prior to the Effective Date of this Agreement,
which relates to and is necessary for the practice of the Inventions and which
University has the right to provide to Licensee.
<PAGE>
1.2. "Licensed Products" means any method, procedure, product, or
component part thereof whose manufacture, sale, or use includes any use of
University Technology that is covered by any Valid Claim included in the Patent
Rights.
1.3. "Patent Rights" means any unexpired U.S. patents and/or
pending patent applications covering the Inventions owned or controlled by
University prior to or during the term of this Agreement and which University
has the right to provide to Licensee, as well as any continuations,
continuations in part, divisions, substitutions, continued patent applications,
patents issued thereon, or reissues thereof, and any foreign counterpart of any
of the foregoing. University's current U.S. and foreign patents and patent
applications which are included in Patent Rights and which exist on the
Effective Date of this Agreement are set forth on Exhibit A. Upon either party's
request, the parties shall cooperate in reviewing and updating Exhibit A from
time to time (but not more frequently than once during any twelve (12) month
period).
1.4. "Net Sales" means the gross amount invoiced for all Licensed
Products sold by or for Licensee and/or its sublicensees in arm's length sales
to unrelated third parties (excluding sales by Licensee to its sublicensees for
their resale) less deductions for (i) trade, quantity and cash discounts or
rebates actually allowed, (ii) credits or allowances actually given for
rejections or returns or because of rebates or retroactive reductions, (iii)
sales, use and value added taxes, and (iv) freight, shipping or other costs of
transportation charged to a customer. Such amounts shall be determined from the
books and records of Licensee or its sublicensees, maintained in accordance with
the accounting principles used by such entity, consistently applied. Licensed
Products will be considered sold when billed out, or when delivered or paid for
before delivery, whichever first occurs.
1.5. "Licensed Territory" means the entire world.
1.6. "Valid Claim" means a claim of an issued patent which has not
lapsed or become abandoned or been declared invalid or unenforceable by a
court of competent jurisdiction or an administrative agency for which there is
no right of appeal or for which the right of appeal is waived.
2. Grant of License and Term
2.1. University grants to Licensee to the extent of the Licensed
Territory, an exclusive license (with the right to grant sublicenses pursuant to
Article 5) under the Patent Rights to make, have made, use and sell, and have
sold Licensed Products, upon the terms and conditions set forth herein.
2.2 University grants to Licensee to the extent of the Licensed
Territory a nonexclusive license with the right to grant non-exclusive
sublicenses pursuant to Article 5) to use University Technology, subject to all
the terms and conditions of this Agreement.
2.3. Any license granted herein is exclusive for a term beginning on
the Effective Date of this Agreement and, unless terminated sooner as herein
provided, ending at the expiration of the last to expire Valid Claim of any
patent included in the Patent Rights.
2
<PAGE>
2.4. Licensee shall not disclose any unpublished University
Technology furnished by University pursuant to Article 2.2 above, nor shall
University disclose any of Licensee's confidential information received under
Articles 4.3, 5.2 or 18.1 below, to third parties during the term of this
Agreement or any time thereafter, provided, however, that disclosure may be made
by the receiving party of any such information it has received from the
disclosing party at any time: (1) with the prior written consent of the
disclosing party, (2) after the same shall have become public through no fault
of the disclosing party, (3) as demonstrated by documentary evidence, if the
same was independently developed or discovered by the disclosing party prior to
the time of its disclosure, (4) the same is or was disclosed to the disclosing
party at any time, whether prior to or after the time of its disclosure under
this Agreement, by a third party having no fiduciary relationship with the
disclosing party and having no obligation of confidentiality with respect to
such University Technology, (5) the same is required to be disclosed to comply
with applicable laws or governmental regulations, including disclosures made in
connection with securities regulation filings, provided the disclosing party
receives prior written notice of such disclosure and that Licensee takes all
reasonable and lawful actions to minimize the extent of such disclosure and, if
possible, to avoid such disclosure, or (6) where the same is provided by the
receiving party to third parties under substantially the same terms and
conditions, including confidentiality provisions to those in this Agreement, for
consulting, process and formulation development, manufacturing, external testing
and marketing trials; provided, further, that disclosure may be made when it is
necessary to disclose information in order to conduct clinical trials as in the
case of investigators' brochures, clinical protocols, other regulatory filings
or documents and due diligence processes.
2.5. Notwithstanding the foregoing, any and all licenses granted
hereunder are subject to the rights of the United States Government which arise
out of its sponsorship of the research which led to the Inventions.
3. License Fee, Milestone Payments and Royalties
3.1 Licensee shall pay to University the following fees:
(a) Upon execution of this Agreement, a license issue fee of
[CONFIDENTIAL TREATMENT REQUESTED] for Inventions
described in U.S. Patent No. 5,635,160, entitled
"Dinucleotides Useful for the Treatment of Cystic
Fibrosis and for Hydrating Mucus Secretions", University
file OTD 95-24, U.S. patent applications No. 08/624,914
entitled "Method of Treating Bronchitis with Uridine
Triphosphates and Related Compounds", University File
OTD 96-83, and U.S. patent application No. 08/744,267
entitled "Method of Treating Ciliary Dyskinesia with
Uridine Triphosphates and Related Compounds", University
File OTD 99-13;
(b) Licensee will continue to reimburse the University
for properly documented costs (including attorney's
fees) arising out of the patenting of the Inventions
pursuant to Article 10 of this Agreement;
(c) Licensee shall pay to University the following
milestone payments within sixty (60) days after each
milestone is achieved:
3
<PAGE>
Payment Milestone
[CONFIDENTIAL TREATMENT REQUESTED]
(d) In partial consideration of the license granted under
Article 2.1 of this Agreement, Licensee shall issue
to the University a total of Fifty Thousand (50,000)
shares of Common Stock of the Company upon execution
of this Agreement;
(e) All fees and the reimbursement of patenting costs
shall be non-refundable and shall not be a credit
against any other amounts due hereunder except as may
be provided for elsewhere in this Agreement;
(f) Milestone payments are payable only one time
hereunder and for all milestones accomplished in
connection with this Agreement the aggregate cash
payments shall not exceed [CONFIDENTIAL TREATMENT
REQUESTED].
[CONFIDENTIAL TREATMENT REQUESTED]
3.2. Beginning on the Effective Date of this Agreement and
continuing for the term of this Agreement, Licensee will pay University a
running royalty of [CONFIDENTIAL TREATMENT REQUESTED] of all Net Sales of the
Licensed Products(s). The obligation to pay royalties to University under this
Article 3.2 is imposed only once with respect to the same unit of Licensed
Product regardless of the number of Patent Rights pertaining thereto.
3.3. After the first commercial sale of a Licensed Product,
Licensee agrees to make quarterly written reports to University within sixty
(60) days after the first days of each January, April, July, and October during
the term of this Agreement and as of such dates, stating in each such report the
amount, description, and aggregate Net Sales of Licensed Products sold or
otherwise disposed of during the preceding three calendar months and upon which
royalty is payable as provided in Article 3.2 hereof. The first such report
shall include all such Licensed Products so sold or otherwise disposed of prior
to the date of such report.
3.4. Concurrently with the making of each such report,
Licensee shall pay to the University royalties at the rate specified in Article
3.2 of this Agreement on the Licensed Products included therein.
4
<PAGE>
3.5
(a) [CONFIDENTIAL TREATMENT REQUESTED]
(b) [CONFIDENTIAL TREATMENT REQUESTED]
3.6. University may, by sixty (60) days advance written
notice to Licensee, terminate this Agreement during any April subsequent to the
second anniversary of the first commercial sale of a Licensed Product if
Licensee, together with its sublicensees, have not practiced the Invention
during each calendar year which precedes each such April to the extent of
generating earned payments to University under Articles 3.2 of this Agreement in
an amount no less than [CONFIDENTIAL TREATMENT REQUESTED] provided, however, any
such termination shall not be effective if Licensee can demonstrate reasonable
efforts by Licensee or Licensee's sublicensee(s) toward first commercial sale of
Licensed Product during each such calendar year. Should there be a dispute as to
whether Licensee has, during such sixty (60) day period, demonstrated such
reasonable efforts, the parties shall conduct good faith discussions directed
toward resolution of the dispute. If, following such sixty (60) day period,
there is a dispute as to whether Licensee has demonstrated such reasonable
efforts, then such sixty (60) day period automatically shall be extended for
thirty (30) days, during which time the parties shall hold good faith
discussions in order to resolve such dispute. If, following such thirty (30) day
extension, such dispute has not been resolved, the original sixty (60) day
period shall be extended for an additional thirty (30) days, during which time
the Director of the Office of Technology Development at University and the Vice
President and Chief Operating Officer of Licensee shall use good faith,
reasonable efforts to resolve such dispute.
3.7. Should this Agreement become effective or terminate or
expire during a calendar year, the minimum annual royalty or maintenance fee
(whichever applicable) for such portion of a year shall be determined by
multiplying the minimum annual royalty or maintenance fee (whichever applicable)
set forth for the year in which this Agreement becomes effective, terminates or
expires, by a fraction, the numerator of which shall be the number of days
during such calendar year for which this Agreement shall be in effect and the
denominator of which shall be 365.
3.8. In the event of default in payment of any payment owing
to University under the terms of this Agreement, and if it becomes necessary for
University to undertake legal action to collect said payment, Licensee shall pay
all legal fees and costs incurred by University in connection therewith.
5
<PAGE>
3.9. In the event that Licensee is legally required to pay
royalties to one or more third parties for the license of technology other than
the Patent Rights or University Technology in order to make, use or sell a
Licensed Product, then Licensee shall be entitled to pay University a pro-rata
share of total royalties due on Net Sales of that Licensed Product, where the
reduction in royalties due to University under Article 3.2 above is
[CONFIDENTIAL TREATMENT REQUESTED]. By example, and for purpose of clarity, if a
Licensed Product requires Licensee to pay royalties of [CONFIDENTIAL TREATMENT
REQUESTED] of Net Sales to third parties under license of technologies other
than the Patent Rights or University Technology, the royalties payable to
University by Licensee would be calculated as follows:
royalties due University = [CONFIDENTIAL TREATMENT REQUESTED]
where: r\i\ = the royalty rate payable by Licnsee
for the ith third party license
N = total number of third party licenses
(N less than or equal to 4)
[CONFIDENTIAL TREATMENT REQUESTED]
3.10. Licensee shall make all royalty payments required under
this Agreement in the United States in United States Dollars. The royalty
payments due shall be translated at the rate of exchange at which United States
Dollars are listed in The Wall Street Journal for the currency of the country in
which the royalty is accrued on the last business day of the calendar quarter in
which such sales were made, or with respect to the sublicensees of the Licensee,
at the rate of exchange used by such sublicensees.
3.11. Licensee shall pay interest on any payment under this
Agreement that is not made by the date due hereunder at a rate equal to the
prime rate plus 2% obtained from The Wall Street Journal, Eastern U.S. edition,
on the business day next preceding the date such payment was due, from such date
until payment in full has been made.
4. Diligence Requirements
4.1. Licensee shall use its best efforts to proceed diligently
with the manufacture and sale of Licensed Products and shall earnestly and
diligently offer and continue to offer for sale such Licensed Products, both
under reasonable conditions and including the ability of the Licensee to
exercise its discretion with respect to commercial, financial and regulatory
variables affecting the commercialization of Licensed Products during the term
of this Agreement. Licensee shall be deemed to have used its best efforts in a
given country(ies) with respect to the foregoing
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obligations if Licensee grants a sublicense to a pharmaceutical company with a
market cap in excess of [CONFIDENTIAL TREATMENT REQUESTED] (a "Major
Pharmaceutical Company") who has agreed to use reasonable commercial efforts to
develop, market and sell Licensed Products in such country(ies), provided that
any such sublicense contains, for each sublicensed Licensed Product, performance
milestones analogous to those in Article 4.2 below.
4.2. In particular, Licensee shall use diligent efforts to
meet the performance milestones set forth below:
Date Milestone
[CONFIDENTIAL TREATMENT REQUESTED]
The parties acknowledge that the first milestone relating to the submission of
the IND has been accomplished by Licensee.
4.3. On each anniversary date of the Effective Date of this
Agreement, and until the time of first commercial sale of a Licensed Product,
Licensee shall provide University with a report describing progress toward
developmental milestones listed in Article 4.2 unless and until Licensee and/or
its sublicensee are no longer developing additional Licensed Products.
4.4.
(a) Following the first commercial sale of the first Licensed
Product pursuant to this Agreement, each party shall notify the other within
thirty (30) days after such party receives a Bona Fide Inquiry from a
prospective sublicensee that wishes to obtain a sublicense in a Field in which
Licensee is not developing or selling any Licensed Products at the time such
Bona Fide Inquiry is made. For purposes of this Article 4.4, "Bona Fide Inquiry"
shall mean an inquiry to obtain such sublicense on terms that are
scientifically, technologically and commercially reasonable, that is made by a
third party having or having reasonable access to reasonably sufficient
scientific knowledge, technology, drug development experience, personnel,
facilities and capital to support the development, commercialization and launch
of a product in such Field.
(b) Except as provided in Article 4.4(c), within ninety (90)
days after sending or receiving such a notice, as the case may be, Licensee
shall:
(i) Commence good faith negotiations with such
prospective sublicensee;
(ii) Agree, via a notice sent to University, to grant
back to University the right to license the University's rights in the Patent
Rights in such Field in connection with and simultaneously with University's
execution of a license agreement with such prospective sublicensee. In such
case, University shall have no further obligation to Licensee with respect to
any revenue resulting from such a license. In the event a prospective
sublicensee wishes to acquire
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an exclusive license under this Article 4.4(b)(ii) to any Patent Rights that are
jointly owned by University and Licensee, Licensee agrees, via a notice sent to
University, to grant back to University the right to license both Licensee's and
University's rights in the Patient Rights in such Field in connection with and
simultaneously with University's execution of a license agreement with such
prospective sublicensee. In such case, University agrees to pay Licensee
[CONFIDENTIAL TREATMENT REQUESTED] of all revenue generated from such license
agreement, after deducting [CONFIDENTIAL TREATMENT REQUESTED] from any such
revenue to cover University's costs associated with establishing and maintaining
each such license;
(iii) Provide University with a reasonable written
development plan that Licensee has initiated, or intends to initiate, to develop
a Licensed Product in such Field; or
(iv) [CONFIDENTIAL TREATMENT REQUESTED].
(c) Article 4.4(b) shall not apply with respect to any Bona
Fide Inquiry if, at the time such Bona Fide Inquiry is made or Licensee receives
notice thereof from University, as the case may be: (i) Licensee is undertaking
any actions under Articles 4.4(b), (iii) or (iv) with respect to any other Bona
Fide Inquiry in the same field; (ii) Licensee, either alone or in conjunction
with its collaborative partner(s), is already developing or selling a Licensed
Product having a formulation and/or delivery method substantially similar to the
product sought to be developed by such prospective sublicensee; or (iii)
Licensee, either alone or in conjunction with its collaborative partner(s), is
already developing an additional Licensed Product in any Field (i.e., until
development of such additional Licensed Product is abandoned or commercially
launched.
5. Sublicenses
5.1. Subject to this Article, Licensee may grant sublicenses
under its rights under Article 2.1 above and in connection therewith, Licensee
may grant non-exclusive sublicenses under its rights under Article 2.2 above,
provided that each sublicense (other than an sublicense to a Major
Pharmaceutical Company as defined in Article 4.1) contains a provision that such
sublicense and the rights thereby granted are personal to the sublicensee
thereunder and such sublicense cannot be further sublicensed.
5.2. Any sublicense granted pursuant to this Article shall be
in accordance with the terms and conditions of this Agreement. Licensee will
provide to University a copy of each sublicense agreement within thirty (30)
days of execution of the sublicense agreement. Each sublicense agreement
provided by Licensee to University shall be treated as confidential by
University in accordance with Article 2.4 herein. It is understood that Licensee
will not provide to University the financial terms of any sublicense agreement.
6. Cancellation
6.1. It is expressly agreed that, notwithstanding the
provisions of any other paragraph of this contract, if Licensee should fail to
deliver to University any royalty at the time or
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times that the same should be due to University or if either party should in any
material respect violate or fail to keep or perform any covenant, condition, or
undertaking of this Agreement on its part to be kept or performed hereunder,
then and in such event the affected party shall have the right to cancel and
terminate this Agreement, and the license herein provided for, by written notice
to the other party if such party has failed to cure any such breach within 30
days of receipt of written notice from the affected party describing such
breach. Notwithstanding the foregoing, a party shall be afforded an opportunity
to cure a material breach of an obligation to pay money under this Agreement
only twice within any period of eighteen (18) consecutive months. In the event a
party materially breaches an obligation to pay money more than twice during any
eighteen (18) month period, the non-breaching party shall have the right to
terminate this Agreement upon thirty (30) days written notice. For purposes of
this Article 6.1, a breach of an obligation to pay money under this Agreement
shall be material if such payment, as calculated under the terms of this
Agreement, is not made in full within sixty (60) days after such payment is due
hereunder.
6.2. In the event that, for any reason whatsoever, Licensee
does not achieve any part of the performance milestones set forth in Article
4.2, Licensee will provide to University a revised development plan with a
proposed extension date within thirty (30) days following the missed milestone
date. Within thirty (30) days of receipt of the second revised development plan,
University shall notify Licensee whether University approves an extension of the
milestone date as requested in the said plan; such approval shall not be
unreasonably withheld. If Licensee fails to meet the same performance milestone
a second time, Licensee will provide to University a revised development plan
with a proposed extension date and an extension fee of [CONFIDENTIAL TREATMENT
REQUESTED] within thirty (30) days following the missed milestone date. Payment
made by Licensee under this Article 6.2 shall not be creditable against payments
otherwise due under the Agreement. Within thirty (30) days of receipt of the
second revised development plan, University shall notify Licensee whether
University approves a second extension of the milestone date as requested in the
said plan; such approval shall not be unreasonably withheld. If, after securing
two such extensions, Licensee fails to meet the performance milestone by the
extended due date, University shall be free to terminate this Agreement
according to the terms of Article 6.1 of this Agreement upon thirty (30) days
written notice to Licensee. For the avoidance of doubt, University shall be free
to terminate this Agreement according to the terms of Article 6.1 of this
Agreement and upon thirty (30) days written notice to Licensee, if Licensee
fails to provide either an acceptable revised development plan or the extension
fee (if applicable) within thirty (30) days following the missed milestone date.
6.3. If Licensee should be adjudged bankrupt or enter into a
composition with or assignment to its creditors, then, subject to applicable
bankruptcy laws, in such event University shall have the right to cancel and
terminate this Agreement, and the license herein provided for, by written notice
to Licensee.
6.4. Licensee shall have the right to terminate this
Agreement, in whole or as to any Licensed Product in any country in the
Territory, at any time, and from time to time, by giving notice in writing to
University. Such termination shall be effective ninety (90) days from the date
such notice is given, and all Licensee's rights associated therewith shall cease
as of that date.
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6.5. Any termination or cancellation under any provision of
this Agreement shall not relieve Licensee of its obligation to pay any royalty
or other fees (including attorney's fees pursuant to Article 3.1 hereof) due or
owing at the time of such cancellation or termination.
6.6. Upon termination of this Agreement for any reason, all
sublicenses granted by Licensee under this Agreement shall be assigned to
University.
7. Disposition of Licensed Products on Hand Upon Cancellation or
Termination
7.1. Upon cancellation of this Agreement or upon termination
in whole or in part, Licensee shall provide University with a written inventory
of all Licensed Products in process of manufacture, in use or in stock. Except
with respect to termination by University for nonpayment of royalties pursuant
to Article 6.1, Licensee shall have the privilege of disposing of the inventory
of such Licensed Products within a period of one hundred and eighty (180) days
of such termination and royalties shall be paid to University with respect to
such Licensed Product as though this Agreement had not terminated. Licensee will
also have the right to complete performance of all contracts executed by
Licensee prior to cancellation or termination by University and requiring use of
the University Technology, Patent Rights (except in the case of termination by
University for nonpayment of royalties pursuant to Article 6.1) or Licensed
Products within and beyond said 180-day period provided that the remaining term
of any such contract does not exceed one year.
8. Use of University's Name
8.1. The use of the name of University, or any contraction
thereof, in any manner in connection with the exercise of this Agreement is
expressly prohibited except with prior written consent of University. The
foregoing notwithstanding Licensee shall have the right to identify the
University and to disclose the terms of this Agreement in any prospectus,
offering memorandum, or other document or filing required by applicable
securities laws or other applicable law or regulation, or where the use of the
name of the University is in the ordinary course of business and used for
identification purposes and not for marketing or promotional purposes.
9. University Use
9.1. It is expressly agreed that, notwithstanding any
provisions herein, University is free to make noncommercial use of University
Technology, Patent Rights and Licensed Products for its own research, public
service, clinical, teaching and educational purposes without payment of
royalties. Furthermore, University shall be free to publish University
Technology, as it sees fit, except that Licensee shall have the right to review
any proposed disclosure of University Technology at least sixty (60) days prior
to such disclosure to determine whether filing of a patent application covering
such disclosure is warranted. If it is determined by Licensee that a patent
application should be filed, University shall delay its publication or
disclosure for a period not to exceed thirty (30) days thereafter to allow time
for the filing of such patent application covering patentable subject matter.
All expenses associated with any such patent application are to be borne by
Licensee in accordance with Article 10 herein. Such delay, however, shall not be
imposed on the filing of any student thesis or dissertation. In addition, if it
is determined in good faith by Licensee that confidential or proprietary
information is being disclosed, the parties will
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consult in good faith to arrive at an agreement on mutually acceptable
modifications to the proposed disclosure to avoid such disclosure; provided that
University shall not be required to make any modification that are not
reasonably acceptable to University.
10. Patents and Infringements
10.1. Licensee shall continue to reimburse University for any
properly documented costs incurred in relation to patenting the Inventions. As
of the Effective Date of this Agreement, Licensee shall bear the cost of filing
and prosecuting U.S. Patent applications and maintenance of issued patents
included within the Patent Rights. Such filings and prosecution shall be by
counsel of University's choosing but shall be reasonably acceptable to Licensee.
University shall keep Licensee advised as to the prosecution of such
applications by forwarding to Licensee copies of all official correspondence,
(including, but not limited to, Applications, Office Actions, responses, etc.)
relating thereto. Licensee shall have the right to advise University as to such
prosecution, and further, shall have the right to make reasonable requests as to
the conduct of such prosecution.
10.2. As regards filing of foreign patent applications and
maintenance of issued patents corresponding to the U.S. application described in
Article 10.1 above, Licensee shall designate that country or those countries, if
any, in which Licensee desires such corresponding patent application(s) to be
filed. Licensee shall pay all costs and legal fees associated with the
preparation and filing of such designated foreign patent applications and
maintenance of issued patents, and such applications shall be in the
University's name and by counsel of the University's choosing and reasonably
acceptable to Licensee. University may elect to file corresponding patent
applications in countries other than those designated by Licensee, but in that
event University shall be responsible for all costs associated with such
non-designated filings. In such event, Licensee shall forfeit its rights under
this Agreement in the country or countries where University exercises its option
to file such corresponding patent applications and remains responsible for the
costs relating thereto. In those countries where Licensee pays the costs and
legal fees associated with foreign patent applications, University shall keep
Licensee advised as to the prosecution of such applications by forwarding to
Licensee copies of all official correspondence, (including, but not limited to,
Applications, Office Actions, responses, etc.) relating thereto. Licensee shall
have the right to advise University as to such prosecution, and further, shall
have the right to make reasonable requests as to the conduct of such
prosecution.
10.3. If the production, sale or use of Licensed Products
under this Agreement by Licensee results in any claim for patent infringement
against Licensee or its sublicensees, Licensee shall promptly notify the
University thereof in writing, setting forth the facts of such claim in
reasonable detail. As between the parties to this Agreement, Licensee shall have
the first and primary right and responsibility at its own expense to defend and
control the defense of any such claim against Licensee, by counsel of its own
choice. Licensee may settle any such claim in its sole discretion provided that
such settlement does not impose any obligation on University or adversely affect
University's rights in or to any Patent Rights or University Technology. It is
understood that any other settlement of such actions must be approved by
University. Such approval shall not be unreasonably withheld. University agrees
to cooperate with Licensee in any reasonable manner deemed by Licensee to be
necessary in defending any such action. Licensee shall reimburse University for
any out of pocket expenses incurred in providing such assistance.
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10.4. In the event that any Patent Rights licensed to Licensee
are infringed by a third party, Licensee shall have the primary right, but not
the obligation, to institute, prosecute and control any action or proceeding
with respect to such infringement, by counsel of its choice, including any
declaratory judgment action arising from such infringement. University agrees to
cooperate with Licensee in any reasonable manner deemed by Licensee to be
necessary in defending any such action, including joining such action if the
University is an indispensable party, provided that Licensee shall reimburse
University for its out-of-pocket expenses incurred in providing such assistance.
- -Any recovery or reimbursement received by Licensee from such action shall be
allocated first to reimburse Licensee for all costs and expenses incurred in
connection with any such action. Any remainder shall be allocated between the
parties as follows: [CONFIDENTIAL TREATMENT REQUESTED]
10.5. If an action is brought against Licensee as described in
Article 10.3, Licensee may offset the royalty paid to the University in each
quarterly royalty period by [CONFIDENTIAL TREATMENT REQUESTED] of the amount of
the expenses incurred in that royalty period as a result of such action, said
expenses to include costs, attorney's fees, judgments, and all other expenses
incident to the infringement action, to a maximum of [CONFIDENTIAL TREATMENT
REQUESTED] of the amount otherwise payable University in that royalty period.
Expenses in excess of the amounts due in any royalty period may be carried over
into subsequent royalty periods and deducted or offset in accordance with the
terms of this Agreement; provided, however if by settlement or court order
Licensee receives from the other side amount to cover some or all of its legal
defense costs, attorneys' fees or liability incurred in such infringement
suit(s), Licensee shall promptly remit to University its pro-rata share of such
amounts.
10.6. Notwithstanding the foregoing, and in University's sole
discretion, University shall be entitled to participate through counsel of its
own choosing in any legal action involving the Inventions. Nothing in the
foregoing sections shall be construed in any way which would limit the authority
of the Attorney General of North Carolina.
10.7 If University brings an action against its patent counsel
for malpractice or other breach of fiduciary duty as a result of the loss or
abandonment of any of Patent Rights caused by the negligent or intentional
actions or failure to act of the University's patent counsel, University shall
divide equally any recovery or reimbursement from such action with Licensee,
after deduction of University's expenses associated with bringing and
prosecuting the action.
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11. Waiver
11.1. It is agreed that no waiver by either party hereto of
any breach or default of any of the covenants or agreements herein set forth
shall be deemed a waiver as to any subsequent and/or similar breach or default.
12. License Restrictions
12.1. It is agreed that the rights and privileges granted to
Licensee are each and all expressly conditions upon the faithful performance on
the part of the Licensee of every requirement herein contained, and that each of
such conditions and requirements may be and the same are specific license
restrictions.
13. Assignments
13.1. This Agreement is binding upon and shall inure to the
benefit of the University, its successors and assigns. This Agreement shall not
be assignable or otherwise transferable by either party without the prior
written consent of the other, which consent shall not be unreasonably withheld,
except that Licensee may assign or otherwise transfer its rights under this
Agreement to the following parties without obtaining consent: (1) a successor to
Licensee's business, or a successor to that portion of Licensee's business that
pertains to the subject matter of the Patent Rights or any University
Technology, and (2) any entities controlled by, controlling, or under common
control with Licensee.
14. Indemnity
14.1. Licensee agrees to indemnify, hold harmless and defend
University, its officers, employees, and agents, against any and all claims,
suits, losses, damage, costs, fees, and expenses asserted by third parties, both
government and private, resulting from or arising out of the exercise of this
Agreement.
15. Insurance
15.1. Licensee is required to maintain in force at its sole
cost and expense, with reputable insurance companies, general liability
insurance and products liability insurance coverage in an amount reasonably
sufficient to protect against liability under Article 14.1, above. The
University shall have the right to ascertain from time to time that such
coverage exists, such right to be exercised in a reasonable manner.
16. Independent Contractor Status
16.1. Neither party hereto is an agent of the other for any
purpose.
17. Representations and Warranties
17.1. University represents that as of the Effective Date the
entire right, title, and interest in the patent application comprising the
Patent Rights have been assigned to it and
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that University has the authority to issue licenses under said Patent Rights.
University also represents that it has received no notification that the Patent
Rights are invalid nor that the exercise by Licensee of the rights granted
hereunder will infringe on any patent or other proprietary right of any third
party. University makes no warranties that any patent will issue on University
Technology or Inventions. University further makes no warranties, express or
implied as to any matter whatsoever, including, without limitation, the
condition of any invention(s) or product(s), that are the subject of this
Agreement; or the merchantability or fitness for a particular purpose of any
such invention or product. University shall not be liable for any direct,
consequential, or other damages suffered by Licensee or any others resulting
from the use of the Inventions of Licensed Products.
17.2. The transfer of Common Stock pursuant to Article 3.1(d)
of this Agreement is made with the University in reliance upon the University's
representation to the Licensee, which the University hereby confirms by
execution of this Agreement, except to the extent the University distributes
part of its Common Stock to the Inventors pursuant to University policy (which
does not require the Inventors to pay any consideration to University for such
Common Stock) that the Common Stock to be received by the University (the
"Securities") will be acquired for investment for University's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that the University has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, the University further represents that it does not have any
contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person, with
respect to any of the Securities.
17.3. The University has received all the information that it
considers necessary or appropriate for deciding whether to acquire the
Securities. The University further represents that it has had sufficient
opportunity to ask questions and receive answers from the Licensee regarding the
terms and conditions of the offering of the Securities.
17.4. The University acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Securities.
17.5. The University understands that the Securities are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from Licensee in a transaction not involving
a public offering and that under such laws and applicable regulations such
Securities may be resold without registration under the Securities Act of 1933,
as amended (the "Act"), only in certain limited circumstances. Further,
University understands that Licensee is under no obligation to register the
securities, in whole or in part, under the Act. In this regard, the University
represents that it is familiar with SEC Rule 144, as currently in effect, and
understands the resale limitations imposed thereby and by the Act. In addition,
prior to the distribution of Securities to any Inventor, as contemplated by
Article 17.1, University shall cause such Inventor to execute an acknowledgment
substantially in the form attached as Exhibit B.
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18. Accounting and Records
18.1. Licensee will keep complete, true and accurate books of
account and records for the purpose of showing the derivation of all amounts
payable to University under this Agreement. Such books and records will be kept
at Licensee's principal place of business for at least three (3) years following
the end of the calendar quarter to which they pertain, and will be open at all
reasonable times for inspection by a representative of University for the
purpose of verifying Licensee's royalty statements, or Licensee's compliance in
other respects with this Agreement. The representative and the University will
be obliged to treat as confidential all relevant matters except information
relating to the accuracy of such reports and payments or except as required by
law. Results of any such examination shall be made available to Licensee.
18.2. Such inspections shall be at the expense of University,
unless a variation or error in excess of five percent (5%) is discovered in the
course of any such inspection, whereupon all costs relating thereto shall be
paid by Licensee.
18.3. Licensee will pay to University within thirty (30) days
of receiving notice from University the full amount of any underpayment,
together with interest pursuant to Article 3.12.
19. Compliance with Laws
19.1. In exercising its rights under this Agreement, Licensee
shall fully comply with the requirements of any and all applicable laws,
regulations, rules and orders of any governmental body having jurisdiction over
the exercise of rights under this Agreement. Licensee further agrees to
indemnify and hold University harmless from and against any costs, expenses,
attorney's fees, citation, fine, penalty and liability of every kind and nature
which might be imposed by reason of any asserted or established violation of any
such laws, order, rules and/or regulations.
20. U.S. Manufacture
20.1. It is agreed that any Licensed Products sold in the
United States shall be substantially manufactured in the United States unless
Licensee has received a waiver from the United States Government, whose
sponsorship of the research led to the Invention. University shall use
reasonable efforts to support Licensee's effort to obtain such a waiver.
Licensee shall promptly inform University in the event it receives such a
waiver.
21. Notices
21.1. Any notice required or permitted to be given to the
parties hereto shall be deemed to have been properly given when received by
means of confirmed facsimile transmission, recognized national overnight
courier, or first-class certified mail to the other party at the appropriate
address or facsimile number as set forth below or to such other addresses or
facsimile numbers as may be designated in writing by the parties from time to
time during the term of this Agreement.
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UNIVERSITY LICENSEE
Dr. Francis J. Meyer Dr. Christy Shaffer
Director, Office of Technology Development Vice President & COO
CB #4105, 308 Bynum Hall Inspire Pharmaceuticals, Inc.
University of North Carolina at Chapel Hill 4222 Emperor Boulevard, Suite 470,
Chapel Hill, NC 27599-4105 Durham, NC 27703
Ph: (919) 966 3929 Ph: (919) 941 9777
Fax: (919) 962 0646 Fax: (919) 941 9797
22. Governing Laws
22.1. This Agreement shall be interpreted and construed in
accordance with the laws of the State of North Carolina.
23. Complete Agreement
23.1. It is understood and agreed between University and
Licensee that this Agreement constitutes the entire Agreement, both written and
oral, between the parties, and that all prior agreements respecting Patent
Rights and University Technology as defined herein, either written or oral,
expressed or implied, shall be abrogated, canceled, and are null and void and of
no effect.
24. Force Majeure
24.1. Neither party will be responsible for delays resulting
from acts beyond the control of such party, provided that the non-performing
party uses reasonable commercial efforts to avoid or remove such causes of
nonperformance and continues performance hereunder with reasonable dispatch
whenever such causes are removed.
25. Amendment
25.1. No amendment, modification or supplement of any
provision of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each party.
26. Descriptive Headings
26.1. The descriptive headings of this Agreement are for
convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.
27. Counterparts
27.1. This Agreement may be executed simultaneously in any
number of counterparts, any of which need not contain the signature of more than
one party but all such counterparts taken together shall constitute one and the
same agreement.
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28. Survival of Terms
28. The provisions of Articles 6.6, 7, 8, 9,10, 14, 15, 18,
19, 21, 22 and 28 shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, both University and Licensee have executed
this Agreement, in duplicate originals, by their respective officers hereunto
duly authorized, the day and year first above written. The Inventors have
likewise indicated their acceptance of the terms hereof by signing below.
UNIVERSITY OF NORTH CAROLINA AT INSPIRE PHARMACEUTICALS, INC.
CHAPEL HILL
/s/ Francis J. Meyer /s/ Christy Shaffer
- ---------------------------------- ----------------------------------
Francis J. Meyer Christy Shaffer
Director, Office of Technology Development Vice President & Development & COO
Date: Sept. 1, 1998 Date: August 12, 1998
------------- ---------------
Read and accepted:
INVENTORS:
/s/ M. Jackson Stutts
- -------------------------
M. Jackson Stutts
/s/ Richard C. Boucher
- -------------------------
Richard C. Boucher
/s/ Eduardo R. Lazarowski
- -------------------------
Eduardo R. Lazarowski
/s/ Cara A. Geary
- -------------------------
Cara A. Geary
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EXHIBIT A
LIST OF PATENT RIGHTS
1. U.S. Application No. 08/486,988 (now issued U.S. Patent No. 5,
635,160) "Dinucleotides Useful for the Treatment of Cystic Fibrosis
and for Hydrating Mucus Secretions", M.J. Stutts, III, R.C. Boucher,
Jr., E.R. Lazarowski, and C.A. Geary. Assignee: The University of
North Carolina at Chapel Hill, Chapel Hill, N.C. Issued June 3, 1997.
2. U.S. Application No. 08/744,367, "Method of Treating Bronchitis with
Uridine Triphosphates and Related Compounds", C.L. Shaffer, R.C.
Boucher, Jr., J.L. Rideout , and K.M. Jacobus. Assignee: Inspire
Pharmaceuticals, Inc., 4222 Emperor Blvd., Durham, N.C. and The
University of North Carolina at Chapel Hill, Chapel Hill, N.C. Filing
Date Nov. 7, 1996. PCT Filing Date Oct. 21, 1997.
3. U.S. Application No. 08/624,914, "Method of Treating Ciliary
Dyskinesia with Uridine Triphosphates and Related Compounds", K.M.
Jacobus, B.R. Yerxa, W. Pendergast, R.C. Boucher, Jr., J.L. Rideout,
D.J. Drutz, M.K. James, M.J. Stutts, III, C.A. Geary, and E.R.
Lazarowski. Assignee: Inspire Pharmaceuticals, Inc., 4222 Emperor
Blvd., Durham, N.C. and The University of North Carolina at Chapel
Hill, Chapel Hill, N.C. U.S. Filing Date March 27, 1996. PCT Filing
Date March 27, 1997.
4. U.S. Application No. 08/853,056 (CIP of U.S. Application No
08/486,988), "Dinucleotides Useful for the Treatment of Lung Disease",
M.J. Stutts, III, R.C. Boucher, Jr., E.R. Lazarowski, and C.A. Geary.
Assignee: The University of North Carolina at Chapel Hill, Chapel
Hill, N.C. Filing Date May 8, 1997
5. PCT/US96/09190 (international filing of U.S. Application No
08/486,988) "Dinucleotides Useful For The Treatment of Lung Disease",
M.J. Stutts, III, R.C. Boucher, Jr., E.R. Lazarowski, and C.A. Geary.
Assignee: The University of North Carolina at Chapel Hill, Chapel
Hill, N.C. PCT Filing Date June 6, 1996
6. New Zealand Patent Application No. 310713, "Dinucleotides Useful For
The Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr.,
E.R. Lazarowski, and C.A. Geary. Assignee: The University of North
Carolina at Chapel Hill, Chapel Hill, N.C.
7. Mexico Patent Application No. 979637, "Dinucleotides Useful For The
Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr., E.R.
Lazarowski, and C.A. Geary. Assignee: The University of North Carolina
at Chapel Hill, Chapel Hill, N.C.
8. Japan Patent Application No. 501572/97, "Dinucleotides Useful For The
Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr., E.R.
Lazarowski, and C.A. Geary. Assignee: The University of North Carolina
at Chapel Hill, Chapel Hill, N.C.
<PAGE>
9. Korea Patent Application No. 708775/97, "Dinucleotides Useful For The
Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr., E.R.
Lazarowski, and C.A. Geary. Assignee: The University of North Carolina
at Chapel Hill, Chapel Hill, N.C.
10. European Patent Application No. 96919139.4, "Dinucleotides Useful For
The Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr.,
E.R. Lazarowski, and C.A. Geary. Assignee: The University of North
Carolina at Chapel Hill, Chapel Hill, N.C. (designating Austria,
Belgium, Switzerland, Germany, Denmark, Spain, Finland, France, United
Kingdom, Greece, Ireland, Italy, Luxembourg, Monaco, Netherlands,
Portugal and Sweden)
11. Norway Patent Application No. 96919139.4, "Dinucleotides Useful For
The Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr.,
E.R. Lazarowski, and C.A. Geary. Assignee: The University of North
Carolina at Chapel Hill, Chapel Hill, N.C.
12. Australia Patent Application No. 61764/96, "Dinucleotides Useful For
The Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr.,
E.R. Lazarowski, and C.A. Geary. Assignee: The University of North
Carolina at Chapel Hill, Chapel Hill, N.C.
13. China Patent Application No. 96195028.5, "Dinucleotides Useful For The
Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr., E.R.
Lazarowski, and C.A. Geary. Assignee: The University of North Carolina
at Chapel Hill, Chapel Hill, N.C.
14. Canada Patent Application No. 2,223,894, "Dinucleotides Useful For The
Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr., E.R.
Lazarowski, and C.A. Geary. Assignee: The University of North Carolina
at Chapel Hill, Chapel Hill, N.C.
15. Brazil Patent Application No. PI9609063.4, "Dinucleotides Useful For
the Treatment of Lung Disease", M.J. Stutts, III, R.C. Boucher, Jr.,
E.R. Lazarowski, and C.A. Geary. Assignee: The University of North
Carolina at Chapel Hill, Chapel Hill, N.C.
<PAGE>
EXHIBIT B
ACKNOWLEDGMENT BY INVENTOR
In connection with the transfer of certain shares of Common Stock (the "Shares")
of Inspire Pharmaceuticals, Inc. ("Inspire") from The University of North
Carolina at Chapel Hill (the "University") to the undersigned pursuant to
University policy, the undersigned hereby acknowledges that the undersigned
understands that such Shares are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from Inspire in
a transaction not involving a public offering and that under such laws and
applicable regulations such Shares may be resold without registration under the
Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances.. In this regard, the undersigned represents that the undersigned
is familiar with SEC Rule 144, as currently in effect, and understands the
resale limitations imposed thereby and by the Act.
Date:
------------------ -------------------------------
(Print Name)
-------------------------------
(signature)
<PAGE>
EXHIBIT 10.13
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
JOINT DEVELOPMENT, LICENSE
AND SUPPLY AGREEMENT
BETWEEN
INSPIRE PHARMACEUTICALS, INC.
AND
KISSEI PHARMACEUTICAL CO., LTD.
DATED AS OF
SEPTEMBER 10, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
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<S> <C>
1. DEFINITIONS..............................................................................................1
2. REPRESENTATIONS AND WARRANTIES...........................................................................6
2.1 Representations and Warranties of Both Parties.........................................6
2.2 Representations and Warranties of Inspire..............................................7
2.3 Representations and Warranties of Kissei...............................................7
3. JOINT DEVELOPMENT COMMITTEE..............................................................................8
3.1 Members; Officers. ....................................................................8
3.2 Responsibilities.......................................................................8
3.3 Meetings...............................................................................9
3.4 Decisions.............................................................................10
3.5 Minutes...............................................................................10
3.6 Term. ................................................................................11
3.7 Expenses..............................................................................11
4. JOINT DEVELOPMENT PROGRAM...............................................................................11
4.1 Scope of Joint Development Program....................................................11
4.2 Specific Kissei Responsibilities......................................................11
4.3 Specific Inspire Responsibilities.....................................................12
4.4 Coordinator/Liaison Functions.........................................................13
4.5 Regulatory Matters....................................................................14
4.6 Funding of Joint Development Program. ...............................................15
4.7 Conduct of Joint Development Program..................................................15
4.8 Liability.............................................................................16
5. GRANT OF RIGHTS; COMMERCIALIZATION; MARKETING...........................................................17
5.1 Development Licenses..................................................................17
5.2 Commercialization License. ...........................................................17
5.3 Sublicensing. .......................................................................17
5.4 Grantback Rights. ....................................................................18
5.5 Commercialization Obligations, Rights.................................................19
5.6 Right of First Refusal. ..............................................................19
5.7 Adverse Reaction Reporting. .........................................................19
6. FEES, MILESTONES AND ROYALTIES..........................................................................21
6.1 Up-front Payment. ...................................................................21
6.2 Coordinator/Liaison Fees..............................................................21
6.3 Milestone Payments....................................................................22
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
6.4 Transfer Price........................................................................22
6.5 Royalty Payments. ....................................................................23
6.6 Obligation to Pay Royalties...........................................................23
7. PAYMENTS AND REPORTS....................................................................................24
7.1 Payments..............................................................................24
7.2 Mode of Payment. .....................................................................24
7.3 Records Retention.....................................................................24
7.4 Audit Request.........................................................................24
7.5 Cost of Audit.........................................................................25
7.6 No Non-Monetary Consideration for Sales...............................................25
7.7 Taxes.................................................................................26
8. MANUFACTURE AND SUPPLY..................................................................................26
8.1 Commercial Supply Agreement. .........................................................26
9. OWNERSHIP; PATENTS......................................................................................26
9.1 Ownership. ..........................................................................26
9.2 Patent Maintenance....................................................................27
9.3 Patent Enforcement....................................................................28
9.4 Infringement Action by Third Parties. ...............................................28
10. PUBLICATION; CONFIDENTIALITY............................................................................29
10.1 Notification..........................................................................29
10.2 Review................................................................................29
10.3 Exclusions............................................................................30
10.4 Confidentiality; Exceptions...........................................................30
10.5 Exceptions to Obligation. ............................................................30
10.6 Limitations on Use....................................................................31
10.7 Remedies..............................................................................31
11. INDEMNIFICATION.........................................................................................31
11.1 By Kissei.............................................................................31
11.2 By Inspire............................................................................32
11.3 Notice................................................................................32
11.4 Complete Indemnification. ............................................................32
12. TERM; TERMINATION.......................................................................................32
12.1 Term..................................................................................32
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
12.2 Termination for Cause.................................................................33
12.3 Termination by Kissei.................................................................33
12.4 Effect of Expiration or Termination...................................................33
12.5 Accrued Rights; Surviving Obligations.................................................35
13. FORCE MAJEURE...........................................................................................35
13.1 Events of Force Majeure...............................................................35
14. MISCELLANEOUS...........................................................................................36
14.1 Relationship of Parties. ............................................................36
14.2 Assignment............................................................................36
14.3 Books and Records.....................................................................36
14.4 Further Actions.......................................................................36
14.5 Notice. .............................................................................36
14.6 Use of Name. .........................................................................37
14.7 Public Announcements..................................................................37
14.8 Waiver................................................................................38
14.9 Compliance with Law. .................................................................38
14.10 Severability..........................................................................38
14.11 Amendment.............................................................................38
14.12 Governing Law; English Original Controlling...........................................38
14.13 Arbitration. .........................................................................38
14.14 Entire Agreement......................................................................39
14.15 Parties in Interest. ................................................................39
14.16 Descriptive Headings..................................................................39
14.17 Counterparts..........................................................................39
</TABLE>
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<PAGE>
TABLE OF CONTENTS - continued
-----------------------------
EXHIBITS
--------
EXHIBIT A INSPIRE'S COSTS
EXHIBIT B INITIAL PATENTS
EXHIBIT C INITIAL MEMBERS OF JOINT DEVELOPMENT
COMMITTEE
EXHIBIT D TERMS AND CONDITIONS OF THE COMMERCIAL
SUPPLY AGREEMENT
(iv)
<PAGE>
JOINT DEVELOPMENT, LICENSE
AND SUPPLY AGREEMENT
THIS JOINT DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (this "Agreement"),
dated as of September 10, 1998, is entered into by and between Inspire
Pharmaceuticals, Inc., a corporation organized and existing under the laws of
the State of Delaware, having offices located at 4222 Emperor Boulevard, Suite
470, Durham, North Carolina 27703, USA ("Inspire"), and Kissei Pharmaceutical
Co., Ltd., a corporation organized under the laws of Japan, having offices
located at 19-48, Yoshino, Matsumoto-City, Nagano-Prefecture, 399-8710, Japan
("Kissei").
PRELIMINARY STATEMENTS
----------------------
A. Inspire owns, and/or has exclusive rights to, the Patents and Know-How
in existence as of the Effective Date relating to the Compound. In addition,
Inspire has the expertise necessary to coordinate the worldwide development and
manufacture of the Product.
B. Kissei has the personnel, facilities and expertise necessary for the
development and commercialization of the Product in the Territory.
C. The Parties wish to collaborate to develop, commercialize and market
the Product, upon the terms and conditions set forth in this Agreement. In
connection therewith, Kissei desires to obtain, and Inspire desires to grant to
Kissei, an exclusive license under the Licensed Technology with respect to the
development and commercialization of the Product in the Territory for
applications in the Field, subject to Inspire's right to manufacture and supply
Finished Product and Delivery Systems for Kissei, all on the terms and
conditions set forth below.
D. Simultaneously with the execution of this Agreement, the Parties are
entering in that certain Stock Purchase Agreement (the "Stock Purchase
Agreement") and documents ancillary thereto, all dated of even date herewith,
pursuant to which Kissei is purchasing shares of Series C Preferred Stock of
Inspire.
NOW, THEREFORE, in consideration of the foregoing Preliminary Statements
and the mutual agreements and covenants set forth herein, the Parties hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set
forth in this Section 1 unless context dictates otherwise:
1
<PAGE>
1.1 "Affiliate," with respect to any Party, shall mean any entity
controlling, controlled by, or under common control with, such Party. For these
purposes, "control" shall refer to (i) the possession, directly or indirectly,
of the power to direct the management or policies of an entity, whether through
the ownership of voting securities, by contract or otherwise, or (ii) the
ownership, directly or indirectly, of at least 50% of the voting securities or
other ownership interest of an entity.
1.2 "Annual Development Plan" shall have the meaning assigned to such term
in Section 4.1(a).
1.3 "Cassette" shall mean a disposable self-contained unit to be filled
with a quantity of Formulated Material sufficient to provide the number of doses
as approved by the Joint Development Committee pursuant to Section 3.2(f) (e.g.,
sufficient for dosing for one week).
1.4 "cGMP" shall mean current Good Manufacturing Practice as defined in
Parts 210 and 211 of Title 21 of the Code of Federal Regulations, as may be
amended from time to time, or any successor thereto.
1.5 "Compound" shall mean the chemical compound designated as INS365,
whose chemical name is P1, P4-Di(uridine 5'-tetraphosphate), and all sodium
salts thereof.
1.6 "Compound Specifications" shall mean the specifications for the
Compound approved by the Joint Development Committee in consideration of the
regulatory requirements in the Territory, as may be amended from time to time.
1.7 "Confidential Information" shall have the meaning assigned to such
term in Section 10.4.
1.8 "Cost of Compound" shall mean Inspire's fully burdened costs
associated with the manufacture of the Compound, as determined pursuant to
Exhibit A.
1.9 "Cost of Delivery Systems" shall mean Inspire's fully burdened costs
associated with the manufacture of the Delivery System, as determined pursuant
to Exhibit A.
1.10 "Cost of Finished Product" shall mean Inspire's fully burdened costs
associated with the manufacture of the Finished Product, including without
limitation, the Cost of Formulated Material and the costs associated with
assembly of the Finished Product, as determined pursuant to Exhibit A.
1.11 "Cost of Formulated Material" shall mean Inspire's fully burdened
costs associated with the manufacture of the Formulated Material, as determined
pursuant to Exhibit A.
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<PAGE>
1.12 "Delivery System" shall mean the novel delivery system designed to
deliver Formulated Material contained within a Cassette to the lungs via
inhalation and to be reusable for at least one year, as approved by the Joint
Development Committee pursuant to Section 3.2(f).
1.13 "Delivery System Specifications" shall mean the specifications for
the Delivery System approved by the Joint Development Committee in consideration
of the regulatory requirements in the Territory, as may be amended from time to
time.
1.14 "Development Coordinator/Liaison" shall have the meaning assigned to
such term in Section 4.4(a).
1.15 "Effective Date" shall mean the date of this Agreement.
1.16 "Executive Officers" shall have the meaning assigned to such term in
Section 3.4(b).
1.17 "Field" shall mean the treatment (but not the diagnosis) of
respiratory diseases in humans, excluding otitis media and sinusitis.
1.18 "Finished Product" shall mean the Formulated Material: (i) loaded
into a Cassette, for use with a Delivery System, or (ii) contained in a
vial/nebule for use with standard nebulizers.
1.19 "Finished Product Specifications" shall mean the specifications for
the Finished Product approved by the Joint Development Committee in
consideration of the regulatory requirements in the Territory, and such other
packaging and labeling specifications as are agreed upon by the Joint
Development Committee or the Parties, as the case may be, for the Finished
Product, as may be amended from time to time.
1.20 "First Commercial Sale" shall mean, with respect to any Product, the
first sale for use or consumption by the general public of such Product in the
Territory after all required NDA Approvals have been granted, or, if such sale
is otherwise permitted, by the Regulatory Authority in the Territory.
1.21 "Formulated Material" shall mean any inhalation formulation of any
product containing the Compound as an active ingredient.
1.22 "Formulated Material Specifications" shall mean the specifications
for the Formulated Material approved by the Joint Development Committee in
consideration of the regulatory requirements in the Territory, as may be amended
from time to time.
1.23 "FTE" shall mean a full-time equivalent employee of Inspire assigned
to conduct coordination/liaison activities pursuant to Section 4.4, including
scientists, professionals or the like, but excluding non-technical, non-
professional personnel such as secretarial staff. As used herein,
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<PAGE>
a "full-time equivalent" shall mean a full-time person, or in the case of less
than a full- time dedicated person, a full-time, equivalent person year, based
upon a total of 1,880 hours per year of work related to such activities.
1.24 "Improved Analog" shall mean any dinucleotide P2Y2 receptor agonist
which has utility as an inhalation product for use in the Field.
1.25 "IND" shall mean any filing made with the Regulatory Authority in the
Territory for initiating clinical trials in the Territory with respect to the
Product.
1.26 "Invention" shall mean any new or useful process, manufacture,
compound or composition of matter relating to the Compound or the Product
(including, without limitation, the formulation, delivery or use thereof),
whether patentable or unpatentable, or any improvement thereof, that is
conceived or first reduced to practice or demonstrated to have utility during
the term of, and in connection with, the Joint Development Program.
1.27 "Joint Development Committee" shall have the meaning assigned to such
term in Section 3.1.
1.28 "Joint Development Program" shall mean the joint development program
with respect to the Product conducted by Kissei in collaboration with Inspire
pursuant to Section 4.
1.29 "Know-how" shall mean any and all Inventions, improvements,
discoveries, claims, formulae, processes, trade secrets, technologies and know-
how (including confidential data and Confidential Information) which is
generated, owned or controlled by Inspire at any time before or during the term
of this Agreement relating to, derived from or useful for the use or sale of the
Compound or the Product, including, without limitation, synthesis, preparation,
recovery and purification processes and techniques, control methods and assays,
chemical data, toxicological and pharmacological data and techniques, clinical
data, medical uses, product forms and product formulations and specifications.
1.30 "Licensed Claim" shall mean any claim of any Patent that relates to
and is necessary for the use and sale of the Compound or the Product, which
claim has not been held invalid or unenforceable by decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, and which is not admitted to be invalid through
disclaimer or otherwise not admitted by Inspire to be invalid.
1.31 "Licensed Technology" shall mean the Licensed Claims and Know-how,
collectively.
1.32 "Manufacturing Coordinator/Liaison" shall have the meaning assigned
to such term in Section 4.4(b).
-4-
<PAGE>
1.33 "Manufacturing Standards" shall mean, with respect to the Finished
Product and Delivery System, cGMP and such additional manufacturing
specifications or standards as may be established by mutual agreement of the
Parties from time to time.
1.34 "NDA" shall mean any filing of a New Drug Application made with the
Regulatory Authority in the Territory for NDA Approval with respect to the
Product.
1.35 "NDA Approval" shall mean approval of the NDA for the Product filed
in the Territory, including pricing or reimbursement, where applicable, by the
Regulatory Authority in the Territory.
1.36 "Net Sales" shall mean, with respect to the Product, the gross amount
invoiced for the Product by Kissei, its Affiliates and Sublicensees, if any, in
arm's length sales to Third Parties, commencing with the First Commercial Sale
of the Product, less deductions for: (i) trade, quantity and/or cash discounts,
allowances and rebates actually allowed or given; (ii) freight, postage,
shipping insurance and other transportation expenses (if separately identified
in such invoice); (iii) credits or refunds actually allowed for rejections,
defects or recalls of such Product, outdated or returned Product, or because of
rebates or retroactive price reductions; and (iv) sales, value-added, excise
taxes, tariffs and duties, and other taxes directly related to the sale, to the
extent that such items are included in the gross invoice price (but not
including taxes assessed against the income derived from such sale). Such
amounts shall be determined from the books and records maintained by Kissei, its
Affiliates or Sublicensees, as applicable.
1.37 "Party" shall mean Inspire or Kissei and, when used in the plural,
shall mean Inspire and Kissei.
1.38 "Patents" shall mean the patents set forth on Exhibit B, and any
other patents or patent applications in the Territory owned or controlled by
Inspire during the term of this Agreement that relate to the Compound or the
Product, together with any patents that may issue therefor in the Territory,
including any and all extensions, renewals, continuations, continuations-in-
part, divisions, patents-of-additions, reissues, supplementary protection
certificates or foreign counterparts of any of the foregoing.
1.39 "Product" shall mean any system which consists of Finished Product
and the Delivery System or Finished Product for use with standard nebulizers,
for use in the Field, the manufacture, use or sale of which either is: (i) based
upon, derived from or related to any of the Know-how; and/or (ii) covered by one
or more Licensed Claims and, but for this Agreement, would constitute an
infringement (whether directly, contributorily or by inducement) thereof.
1.40 "Regulatory Authority" shall mean the authority(ies) in the Territory
with responsibility for granting regulatory approval for the marketing and sale
of the Product in the Territory, and any successor(s) thereto.
-5-
<PAGE>
1.41 "Specifications" shall mean the Compound Specifications, the
Formulated Material Specifications, Finished Product Specifications or the
Delivery System Specifications, either respectively or collectively, as context
may dictate.
1.42 "Stock Purchase Agreement" shall have the meaning assigned to such
term in the Preliminary Statements.
1.43 "Strategic Partners" shall have the meaning assigned to such term in
Section 4.4(a).
1.44 "Sublicensee" shall mean a Third Party to which Kissei has granted a
sublicense to develop, use or sell the Product in the Territory, or who acts as
a distributor of Kissei for the resale of any Product to the trade in the
Territory, pursuant to Section 5.3.
1.45 "Supplied Goods" shall have the meaning assigned to such term in
Section 8.1.
1.46 "Supply Agreement" shall have the meaning assigned to such term in
Section 8.1.
1.47 "Territory" shall mean Japan.
1.48 "Testing Methods" shall have the meaning assigned to such term in
Section 5(c) of Exhibit D.
1.49 "Third Party" shall mean any person who or which is neither a Party
nor an Affiliate of a Party.
1.50 "Third Party Manufacturer" shall have the meaning assigned to such
term in Section 7(a) of Exhibit D.
1.51 "Transfer Price" shall have the meaning assigned to such term in
Section 6.4.
1.52 [CONFIDENTIAL TREATMENT REQUESTED].
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of Both Parties. Each Party
represents and warrants to the other Party, as of the Effective Date, that:
-6-
<PAGE>
(a) such Party is duly organized and validly existing under the laws
of the jurisdiction of its incorporation and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof;
(b) such Party is free to enter into this Agreement;
(c) in so doing, such Party will not violate any other agreement to
which it is a party;
(d) such Party has taken all corporate action necessary to authorize
the execution and delivery of this Agreement and the performance of its
obligations under this Agreement; and
(e) no person or entity has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon such Party for any commission, fee or other compensation as a
finder or broker because of any act or omission by such Party or any of its
agents.
2.2 Representations and Warranties of Inspire. Inspire represents and
warrants to Kissei, as of the Effective Date, that:
(a) Inspire is the owner of, or has exclusive rights to, all of the
Patents in existence on the Effective Date, and has the exclusive right to grant
the licenses granted under this Agreement therefor;
(b) to the best of Inspire's knowledge, Inspire has exclusive rights
to all of the Know-how in existence on the Effective Date and the exclusive
right to grant licenses with respect thereto; and
(c) Inspire has not entered into any agreement with any Third Party
which is in conflict with the rights granted to Kissei pursuant to this
Agreement.
2.3 Representations and Warranties of Kissei. Kissei represents and
warrants to Inspire, as of the Effective Date, that:
(a) Kissei has the facilities, personnel and experience sufficient in
quantity and quality to perform its obligations under this Agreement;
(b) All of the personnel assigned to perform such obligations shall be
qualified and properly trained; and
(c) Kissei shall perform such obligations in a manner commensurate
with professional standards generally applicable in its industry.
-7-
<PAGE>
3. JOINT DEVELOPMENT COMMITTEE.
3.1 Members; Officers. The Parties shall establish a joint development
committee (the "Joint Development Committee"), which shall consist of six
members, three members from each Party. At least one member from each Party
must be a clinical development professional. The initial members of the Joint
Development Committee are set forth on Exhibit C. Members of the Joint
Development Committee may be represented at any meeting by a designee appointed
by such member for such meeting. The chairperson and secretary of the Joint
Development Committee shall serve coterminous one-year terms, each commencing on
the Effective Date or an anniversary thereof, as the case may be. The right to
name the chairperson and the secretary of the Joint Development Committee shall
alternate between the Parties, and each chairperson and secretary shall be named
no later than 10 days after the commencement of his or her term. The initial
chairperson shall be selected by Kissei and is designated on Exhibit C. The
initial secretary shall be selected by Inspire and is designated on Exhibit C.
Each Party shall be free to change its members, on prior written notice to the
other Party. Each Party may, in its discretion, invite non-member
representatives of such Party to attend meetings of the Joint Development
Committee, provided that the other Party approves such Party's invitee(s) in
advance.
3.2 Responsibilities. Subject to the other terms of this Agreement, the
Joint Development Committee shall oversee the development of the Product
pursuant to this Agreement, from the commencement of any development efforts
through the date on which all NDA Approvals in the Territory for the Product
actively being sought have been obtained. After all such NDA Approvals have
been obtained, the Parties shall continue to collaborate in complying with all
regulatory requirements of maintaining such NDA Approvals (including post-
marketing surveillance and adverse event reporting). Without limiting the
generality of the foregoing, the Joint Development Committee shall:
(a) plan, supervise and coordinate the development of the Product
under this Agreement;
(b) commencing on the Effective Date, discuss and prepare an Annual
Development Plan for the first year of the term of the Joint Development Program
and, not later than 90 days after the Effective Date, finalize an Annual
Development Plan for the first year of the term of the Joint Development
Program;
(c) not later than three months prior to each anniversary of the
Effective Date during the term of the Joint Development Program, discuss and
prepare an Annual Development Plan, and, prior to each anniversary of the
Effective Date during the term of the Joint Development Program, finalize an
Annual Development Plan for the next year of the term of the Joint Development
Program;
-8-
<PAGE>
(d) determine whether to approve proposed amendments or modifications
to any Annual Development Plan;
(e) review and determine whether to approve clinical study protocols,
the selection of clinical investigators, clinical study write-ups, regulatory
submissions, NDAs and the like relating to the Joint Development Program;
(f) review and determine whether to approve the final design of the
Cassette and the Delivery System;
(g) evaluate data from the Joint Development Program;
(h) review all proposed publications and presentations of the Parties
pursuant to Section 10.2;
(i) review all studies relating to the Product and any other studies
proposed to be performed in connection with the registration process for the
Product under this Agreement;
(j) allocate responsibilities between the Parties, coordinate the
activities of the Parties, and review and evaluate progress, all under the Joint
Development Program, provided that the Joint Development Committee shall not
have authority to make any determination that either Party is in breach of its
obligations under the Joint Development Program;
(k) determine, review and amend, from time to time, the
Specifications;
(l) provide a mechanism for the exchange of information between the
Parties with regard to Know-how and Inventions;
(m) resolve disputes between the Parties with respect to the
foregoing; and
(n) have such other responsibilities as may be assigned to the Joint
Development Committee pursuant to this Agreement or as may be mutually agreed
upon by the Parties from time to time.
3.3 Meetings. During the term of the Joint Development Program and the
12-month period thereafter, the Joint Development Committee shall meet at least
twice during every calendar year, and more frequently as the Parties deem
appropriate, on such dates, and at such places and times, as the Parties shall
agree. During each calendar year during the term of the Joint Development
Program and the 12-month period thereafter, meetings of the Joint Development
Committee shall be held in Japan, North Carolina or such other place as the
Parties may agree. Thereafter, during the remainder of the term of this
Agreement, the Joint Development Committee shall meet on an as needed basis on
such dates, and at such places and times, as the Parties shall agree. The
chairperson
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shall, if practicable, send notice of all meetings to all members of the Joint
Development Committee no less than 20 days before the date of each meeting. The
Joint Development Committee may also convene or be polled or consulted from time
to time by means of telecommunications, video conferences or correspondence, as
deemed necessary or appropriate; provided, however, that the Joint Development
Committee must meet in person at least twice every calendar year during the term
of the Joint Development Program and the 12-month period thereafter.
3.4 Decisions.
(a) The Joint Development Committee may make decisions with respect to
any subject matter that is subject to the Joint Development Committee's
decision-making authority. All decisions of the Joint Development Committee
shall be made by consensus of the members (or their designees) present at any
meeting.
(b) In the event that consensus cannot be reached by the Joint
Development Committee after good faith discussions with respect to a matter that
is subject to its decision-making authority, the matter shall be referred for
further review and resolution to the Vice Chairman of the Board, currently Dr.
David Drutz, at Inspire, or such other similar position designated by Inspire
from time to time, and the Managing Director, R&D, currently Dr. Masanori
Iwadare, at Kissei, or such other similar position designated by Kissei from
time to time (such officers collectively, the "Executive Officers"). The
Executive Officers shall use reasonable efforts to resolve the matter within 30
days after the matter is referred to them.
3.5 Minutes. Promptly after each Joint Development Committee meeting,
the chairperson or the secretary of Inspire shall prepare and distribute to all
members of the Joint Development Committee draft minutes of the meeting within
10 days after the meeting. Such minutes shall provide a description, in
reasonable detail, of the discussions had at the meeting and a list of any
actions, decisions or determinations approved by the Joint Development Committee
and a list of any issues to be resolved by the Executive Officers. The
chairperson or the secretary of Kissei shall then have 10 days after receiving
such draft minutes to collect Kissei members= comments thereon and provide them
to the chairperson or the secretary of Inspire. Upon the expiration of such
second 10-day period, the chairperson and the secretary of the Joint Development
Committee shall have an additional 10 days to discuss each other's comments and
finalize the minutes. The secretary and chairperson shall each sign and date
the final minutes. The signature of the chairperson and the secretary upon the
final minutes shall indicate each Party=s assent to the minutes. With the sole
exception of specific items of the meeting minutes to which the chairperson and
the secretary cannot agree and which are escalated as provided below, definitive
minutes of all Joint Development Committee meetings shall be finalized no later
than 30 days after the meeting to which the minutes pertain. If at any time
during the preparation and finalization of Joint Development Committee meeting
minutes the secretary and the chairperson do not agree on any issue with respect
to the minutes, such issue shall be resolved by the escalation process provided
in Section 3.4(b). The decision resulting from the escalation process shall be
recorded by the chairperson or the secretary
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of Inspire in amended finalized minutes for said meeting. All other issues in
the minutes which are not subject to such escalation shall be finalized within
the above-mentioned 30-day period.
3.6 Term. The Joint Development Committee shall exist until the
termination or expiration of the Joint Development Program and for such longer
period as necessary to perform the responsibilities assigned to it under this
Agreement.
3.7 Expenses. Each Party shall be responsible for all travel and
related costs and expenses for its members and approved invitees to attend
meetings of, and otherwise participate on, the Joint Development Committee.
4. JOINT DEVELOPMENT PROGRAM.
4.1 Scope of Joint Development Program.
(a) The Joint Development Committee, acting in accordance with
Sections 3.2(b) and (c), shall prepare and provide to each Party, in form and
substance mutually acceptable to each Party, a detailed description of the
specific actions to be taken under the Joint Development Program during the
upcoming year, which shall include a reasonably detailed description of the
goals and scope of such research, the allocation of responsibilities to the
respective Parties and a research plan (each, an "Annual Development Plan").
(b) If the Joint Development Committee fails to agree on an Annual
Development Plan: (i) the Parties nevertheless shall continue to fund the Joint
Development Program in accordance with Section 4.6; (ii) each Party nevertheless
shall continue to conduct the Joint Development Program in accordance with the
goals and scope of such research as reasonably determined by such Party, within
the scope of the Joint Development Program conducted to date (or, with respect
to the first year of the Joint Development Program, within the scope of this
Agreement); and (iii) Inspire nevertheless shall continue to supply Compound,
Finished Product and Delivery Systems necessary for the conduct of the Joint
Development Program in accordance with this Section 4.
4.2 Specific Kissei Responsibilities. As part of the Joint Development
Program, and pursuant to the Annual Development Plans, Kissei shall:
(a) Conduct, or cause to be conducted, manage and oversee any pre-
clinical studies, or additional pre-clinical studies, required by the Regulatory
Authorities in order to file an NDA for the Product in the Territory; (b)
Conduct, or cause to be conducted, manage and oversee all clinical studies
required by the Regulatory Authorities in order to obtain NDA Approvals for the
Product in the Territory;
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(c) Make all regulatory filings, based on the information and
documentation provided by Inspire, and conduct all analysis and other support
necessary with respect to the manufacture of the Finished Product, Delivery
Systems or Product in the Territory; and
(d) Perform such other obligations with respect to the Joint
Development Program as the Joint Development Committee may assign to it from
time to time.
4.3 Specific Inspire Responsibilities. As part of the Joint Development
Program and pursuant to the Annual Development Plans, Inspire shall:
(a) Immediately after the Effective Date, provide to Kissei copies of
all pre-clinical and clinical data, studies and materials in Inspire's
possession and control that relate to the development and commercialization of
the Product;
(b) Thereafter provide to Kissei copies of all data, studies and
material that come into Inspire's possession and control during the term of this
Agreement that relate to the development and commercialization of the Product
(including, without limitation, such data, studies and materials of Strategic
Partners, to the extent Inspire has the right to provide same to Kissei);
(c) In consultation with Kissei, finalize the design of and the
manufacturing process for the Delivery System and the Finished Product, subject
to review and approval of the Joint Development Committee;
(d) In consultation with Kissei, make all necessary changes to: (i)
the formulation, chemistry, manufacturing process and manufacturing controls
for the Compound, Formulated Material and Finished Product; and (ii) the design
and manufacturing method for the Delivery System and the Finished Product,
subject in each case to review and approval of the Joint Development Committee;
(e) Supply Kissei or its designee(s) with sufficient quantities of
the Compound and/or the Formulated Material to complete all pre-clinical studies
of the Product in which Kissei is required to engage by the applicable
Regulatory Authorities until the filing of, or the affirmative decision of the
Joint Development Committee not to pursue, an IND with respect to the Product in
the Territory. Such Compound and/or Formulated Material shall be supplied in
accordance with quarterly forecasts therefor provided by Kissei at least 180
days prior to the anticipated delivery date for each shipment thereof, provided,
however, in the event that Kissei requires Compound and/or Formulated Material
in fewer than 180 days, Kissei shall notify Inspire of such need and Inspire
will use all reasonable efforts to meet Kissei's delivery request;
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(f) Supply Kissei or its designee(s) with sufficient quantities of
Finished Product and Delivery Systems to complete all clinical studies and all
development, analysis, regulatory support, cGMP and all other NDA Approval-
related activities with respect to the Product in which Kissei is required to
engage by applicable law or regulation until the commercial launch, or the
affirmative decision of the Joint Development Committee not to pursue the
commercial launch, of the Product in the Territory. Such Finished Product and
Delivery Systems shall be supplied in accordance with quarterly forecasts
therefor provided by Kissei at least 180 days prior to the anticipated delivery
date for each shipment of Finished Product or Delivery Systems, provided,
however, in the event that Kissei requires Finished Product and/or Delivery
Systems in fewer than 180 days, Kissei shall notify Inspire of such need and
Inspire will use all reasonable efforts to meet Kissei's delivery request;
(g) As Inspire and its Third Party Manufacturers gain knowledge and
experience in producing the pre-clinical and clinical supplies required pursuant
to Sections 4.3(e) and (f), use reasonable efforts to reduce the lead time
needed to manufacture Compound, Formulated Material, Finished Product and/or
Delivery Systems such that Inspire could be in a position to meet Kissei's
delivery requirements on fewer than 180 days prior notice;
(h) Designate and maintain coordinator/liaisons in accordance with
Section 4.4;
(i) Negotiate in good faith with all relevant Strategic Partners to
obtain the right to: (i) disclose to Kissei all Third Party data or information
owned by such Strategic Partners that this Agreement contemplates will be shared
with Kissei to the extent that Inspire has the right to do so, and (ii) grant
Kissei the right to cross-reference regulatory filings owned by such Strategic
Partners that this Agreement contemplates will be granted to Kissei to the
extent that Inspire has the right to do so; and
(j) Perform such other obligations with respect to the Joint
Development Program as the Joint Development Committee may assign to it from
time to time.
4.4 Coordinator/Liaison Functions. Within 90 days after the Effective
Date, Inspire shall designate two FTEs, to be funded by Kissei pursuant to
Section 6.2, who shall perform the following functions:
(a) One FTE shall serve as a project manager (the "Development
Coordinator/Liaison") who shall be responsible for coordinating, and
facilitating communication regarding, the worldwide development of the Product
among Inspire, Kissei and Inspire's other strategic partners and/or licensees
(collectively, "Strategic Partners"). Inspire shall continue to provide a
Development Coordinator/Liaison until NDA Approval for the Product is received,
or definitively abandoned, in the Territory, whichever occurs first; and
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(b) The second FTE shall serve as a project manager (the "Manufacturing
Coordinator/Liaison") who shall be responsible for coordinating, and
facilitating communication regarding, the design and development of the Delivery
System and the Finished Product, the manufacture of the Compound, the
formulation of the Formulated Material and the manufacture of the Product among
Inspire, Kissei and Inspire's Strategic Partners. Inspire shall continue to
provide a Manufacturing Coordinator/Liaison until Kissei files the NDA for the
Product with the Regulatory Authority in the Territory , or until definitely
abandoned, whichever occurs first. Thereafter Inspire shall continue to provide
a Manufacturing Coordinator/Liaison as and when determined by the Joint
Development Committee.
Each such coordinator/liaison shall maintain regular communication with Kissei
and each of Inspire's Strategic Partners with respect to the matters for which
such coordinator/liaison is responsible. Such communication may include
attendance of meetings and telephone conferences to be held from time to time,
at the request and convenience of the Parties and any Third Parties involved.
4.5 Regulatory Matters.
(a) Kissei shall be responsible for preparing and filing INDs, NDAs
and other regulatory filings for the Product in the Territory up to and
including NDA Approval, and thereafter shall be responsible for maintaining such
NDA Approvals. All such filings shall be in Kissei's name.
(b) Kissei shall own all INDs, NDAs, NDA Approvals and other
regulatory filings for the Product in the Territory.
(c) In order to assist Kissei in the performance of its obligations
under this Section 4.5, Inspire, to the extent it has the right to do so, shall
provide Kissei or its designee(s) with complete copies (or copies of relevant
portions) of, and shall grant Kissei or its designee(s), free of charge, the
right to cross-reference, any INDs, NDAs, NDA Approvals or other regulatory
filings made or held in any country in North America and Europe for the Product.
Inspire shall execute, acknowledge and deliver such further instruments, and
shall do all such other acts, all as promptly as possible after Kissei's request
therefor, that may be necessary or appropriate to effectuate such right in each
such country. Inspire shall not guarantee or warrant that the information and
documents provided to Kissei under this Section shall be useful or effective or
free from any defect.
(d) Kissei shall provide Inspire with complete copies (or copies of
relevant portions) of, and shall grant Inspire free of charge the right to
cross-reference any INDs, NDAs, NDA Approvals or other regulatory filings made
or held in the Territory in the name of Kissei (or that of its Affiliates or
Sublicensees) reasonably necessary or useful to enable Inspire to market
products either within the Territory and outside the Field, or outside the
Territory. Kissei shall execute, acknowledge and deliver such further
instruments, and shall do all such other acts, all as promptly as possible after
Inspire's request therefor, that may be necessary or appropriate to effectuate
such right in the Territory. Kissei also shall provide such copies and such
right to cross-
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reference, free of charge, to any Strategic Partner that grants Kissei or its
designee(s) the right to cross-reference such Strategic Partner's INDs, NDAs,
NDA Approvals or other regulatory filings made or held in any countries in North
America and/or Europe to enable such Strategic Partner to market products
outside the Territory in North America and Europe, and any other countries in
which such Strategic Partners hold such rights. Moreover, Kissei shall provide
such copies and such right to cross-reference, with a reasonable charge, to any
Strategic Partner that does not have rights in any countries in North America
and/or Europe to enable such Strategic Partner to market products outside the
Territory in such countries. Kissei shall not guarantee or warrant that the
information and documents provided to Inspire under this Section shall be useful
or effective or free from any defect.
(e) Kissei shall keep Inspire informed as to the status of all
regulatory filings made pursuant to this Section 4.5, permit Inspire to review
any revisions to any filings or communications with Regulatory Authorities
during their preparation and shall confer with Inspire regarding the preparation
of such filings, communications with Regulatory Authorities and other matters
pertaining to or affecting the registration process.
(f) In connection with any IND or NDA filed by Kissei pursuant to this
Section 4.5, Kissei shall notify Inspire as soon as reasonably possible of any
meeting with the Regulatory Authority in the Territory scheduled by Kissei
(which notification shall describe the subject matter of any such meeting),
shall permit Inspire to assist Kissei in the preparation for any such meeting
and shall promptly advise Inspire in writing of the outcome of any such meeting.
4.6 Funding of Joint Development Program.
(a) Except as otherwise expressly provided in this Agreement, each
Party shall bear the entire cost and expense it incurs in connection with
fulfillment of its obligations under the Joint Development Program.
(b) Kissei shall pay [CONFIDENTIAL TREATMENT REQUESTED], as the case
may be, in connection with the manufacture and supply of Compound, Formulated
Material, Finished Product and Delivery Systems pursuant to Sections 4.3(e) and
(f). Inspire shall be entitled to invoice Kissei therefor following shipment of
such Compound, Formulated Material, Finished Product and Delivery Systems from
time to time. Payment shall be made by Kissei in U.S. Dollars within 30 days
after Kissei's receipt of each invoice therefor, by telegraphic transfer
remittance.
4.7 Conduct of Joint Development Program. The Parties, acting in
accordance with this Section 4 and relevant Annual Development Plans, shall use
all commercially reasonable efforts to develop the Product in the Territory.
Kissei, acting in accordance with this Section 4 and relevant Annual Development
Plans, shall use all commercially reasonable efforts to obtain NDA Approvals
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necessary to market and sell the Product in the Territory. Without limiting the
generality of the foregoing, during the term of the Joint Development Program,
each Party shall:
(a) undertake an interactive, cooperative Joint Development Program
with the other Party as set forth in the applicable Annual Development Plan, and
such other activities that, from time to time, the Joint Development Committee
decides are necessary for the commercial success of the Joint Development
Program;
(b) use all reasonable efforts and proceed diligently to perform the
work set out for such Party to perform in the Annual Development Plan,
including, without limitation, by using personnel with sufficient skills and
experience, together with sufficient equipment and facilities (it being
acknowledged that neither Party shall have an obligation to acquire additional
equipment or to expand its facilities in order to perform its obligations under
the Joint Development Program);
(c) conduct the Joint Development Program in good scientific manner,
and in compliance in all material respects with all requirements of applicable
laws, rules and regulations, and all other requirements of any applicable
current good clinical practice, good laboratory practice and current good
manufacturing practice to attempt to achieve the objectives of the Joint
Development Program efficiently and expeditiously;
(d) within 30 days after the end of each six-month period during the
term of the Joint Development Program and within 30 days following the
expiration or termination of the Joint Development Program, furnish the Joint
Development Committee with reasonably detailed, written reports on all
activities conducted by such Party under the Joint Development Program during
such six-month period or the term of the Joint Development Program, as the case
may be;
(e) maintain records, in sufficient detail and in good scientific
manner, which shall be complete and accurate and shall fully and properly
reflect all work done and results achieved in connection with the Joint
Development Program in the form required under all applicable laws and
regulations. Each Party shall have the right, during normal business hours and
upon reasonable notice, to inspect and copy all such records. Each Party shall
maintain such records and information contained therein in confidence in
accordance with Section 10 and shall not use such records or information except
to the extent otherwise permitted by this Agreement; and
(f) allow representatives of the other Party, upon reasonable notice
and during normal business hours, to visit such Party's facilities where the
Joint Development Program is being conducted, and consult, during such visits
and by telephone, with such Party's personnel performing work on the Joint
Development Program.
4.8 Liability. Each Party shall be responsible for, and hereby assumes,
any and all risks of personal injury or property damage attributable to the
negligent or willful acts or omissions,
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during the term of the Joint Development Program, of such Party or its
Affiliates, and their respective directors, officers, employees and agents.
5. GRANT OF RIGHTS; COMMERCIALIZATION; MARKETING.
5.1 Development Licenses.
(a) Inspire hereby grants to Kissei, during the term of the Joint
Development Program, the exclusive (except as to Inspire), paid-up license, with
the right to grant sublicenses solely to the extent provided in Section 5.3(a),
under the Licensed Technology, to conduct the Joint Development Program.
(b) Kissei hereby grants to Inspire, during the term of the Joint
Development Program, the exclusive (except as to Kissei), paid-up license, with
no right to grant sublicenses (except to the extent necessary to conduct the
Joint Development Program), under Kissei's interest in any Inventions, to
conduct the Joint Development Program.
5.2 Commercialization License. Inspire hereby grants to Kissei an
exclusive (even as to Inspire) license throughout the Territory, with the right
to grant sublicenses in accordance with the terms of this Agreement, under the
Licensed Technology, to develop, use, market and sell Products in the Field.
With respect to any such Patents that may issue in Japan during the term of this
Agreement, a statement referencing the exclusive license granted to Kissei
pursuant to this Section 5.2 shall be registered with the Japanese Patent Office
at Kissei=s cost, as soon as is practically possible after the issuance of the
respective Patents. Inspire hereby agrees that it will execute such documents
and instruments as may be required to effect the registration of such statement
and otherwise cooperate with Kissei in connection with the registration of such
statement with the Japanese Patent Office.
5.3 Sublicensing.
(a) Solely in connection with the grant of a sublicense of the
licenses granted to Kissei under Section 5.2, Kissei shall have the right to
grant a sublicense of the licenses granted to Kissei under Section 5.1(a) for
purposes of such Affiliates' or Sublicensees' performance of Kissei's
obligations under Section 4, provided that, in addition to the requirements set
forth in Section 5.3(b), each Affiliate or Sublicensee agrees in writing to
maintain scientific records and permit Inspire to inspect and copy such records
and visit such facilities pursuant to the relevant provisions of Section 4.7,
and to observe all other applicable terms, of this Agreement.
(b) Kissei shall have the right to grant sublicenses to any of its
Affiliates or Sublicensees of the licenses granted to Kissei under Section 5.2
for purposes of such Affiliates' or Sublicensees' performance of Kissei's
obligations under Section 5.5, provided that: (i) Kissei shall
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submit all proposed sublicenses to Inspire for approval, which approval shall
not be unreasonably withheld; (ii) Kissei shall guarantee and be responsible for
the making of all payments due, and the making of any reports under this
Agreement, with respect to sales of Product by its Affiliates or Sublicensees
and their compliance with all applicable terms of this Agreement; and (iii) each
Affiliate or Sublicensee agrees in writing to maintain books and records and
permit Inspire to review such books and records pursuant to the relevant
provisions, and to observe all other applicable terms, of this Agreement.
Kissei shall promptly provide Inspire with notice of any sublicense granted
pursuant to this Section 5.3, and provide a copy of the sublicense to Inspire
upon its request.
(c) Kissei hereby unconditionally guarantees the performance of any of
its Affiliates and Sublicensees hereunder. In the event of a breach by such an
Affiliate or Sublicensee in the observance of applicable terms of this
Agreement, Inspire shall be entitled to proceed against either such Affiliate or
Sublicensee or directly against Kissei, as Inspire may determine in its sole
discretion, to enforce this Agreement.
5.4 Grantback Rights. Subject to the terms and conditions of this
Agreement, Kissei hereby grants to Inspire:
(a) With respect to any unpatented know-how that embodies or relates
to Inventions and that are owned or controlled by Kissei or its Affiliates, an
exclusive (except as to Kissei), paid-up, perpetual license thereunder: (i) to
develop, make, have made, use, offer to sell, sell and have sold products with
applications outside the Field for all purposes worldwide (including, without
limitation, within the Territory), and (ii) to develop, make, have made, use,
offer to sell, sell and have sold Products with applications within the Field
for all purposes outside the Territory. The foregoing licenses shall include
the right to grant sublicenses.
(b) With respect to any patents or patent applications that embody or
relate to Inventions and that are owned or controlled by Kissei or its
Affiliates, an exclusive (except as to Kissei), paid-up, perpetual license
thereunder, to develop, make, have made, use, offer to sell, sell and have sold
Products with applications within the Field for all purposes outside the
Territory. The foregoing licenses shall include the right to grant sublicenses.
(c) With respect to any patents or patent applications that embody or
relate to Inventions and that are owned or controlled by Kissei or its
Affiliates, an exclusive (except as to Kissei) license, with fees and royalties
as consideration to Kissei, to develop, make, have made, use, offer to sell,
sell and have sold products with applications outside the Field for all purposes
worldwide (including, without limitation, within the Territory); provided that
Inspire shall grant Kissei a right of first offer with respect to co-development
and co-marketing of products covered by such Inventions. The foregoing licenses
shall include the right to grant sublicenses. The Parties shall negotiate the
license fees and royalty rates for the license to such Inventions in good faith
and consistent with customary business practices therefor and the other terms
and conditions set forth in this Agreement.
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5.5 Commercialization Obligations, Rights. Kissei shall use all
commercially reasonable efforts to develop and commercialize the Product in the
Territory. In connection therewith, Kissei shall dedicate resources to the
development and commercialization of the Product consistent with the resources
that Kissei, at all relevant times, would dedicate to products containing
compounds that were generated from Kissei's own research efforts which Kissei
decided to develop commercially and market and that have pricing, volume and
marketing potentials similar to those of the Product. Kissei, either itself
and/or by and through its Affiliates and Sublicensees, shall be responsible for,
and shall have the exclusive right to engage in, all marketing, advertising,
promotional, launch and sales activities in connection with such efforts.
5.6 Right of First Refusal. [CONFIDENTIAL TREATMENT REQUESTED]
5.7 Adverse Reaction Reporting.
(a) Each Party shall record, evaluate, summarize and review all
adverse drug experiences associated with the Compound and the Product. In order
that each Party may be fully informed of the adverse drug experiences associated
therewith that are known to the other Party, each Party shall report:
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(i) In the case of Inspire, to:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
USA
Attention: Patricia Edgar, Ph.D., Director, Regulatory
Affairs
Facsimile No.: (919) 941-9797
Telephone No.: (919) 941-9777 ext. 277
(ii) In the case of Kissei, to:
Kissei Pharmaceutical Co., Ltd.
1-3, Koishikawa
3-Chome, Bunkyo-Ku, Tokyo
112-0002
JAPAN
Attention: Haruo Suzawa, Ph.D., Director, Member of the
Board, Clinical Development, R & D
Facsimile No.: (03)5804-8560
Telephone No.: (03)5684-3539
all "adverse events," as defined by the then current ICH guidelines, involving
the Compound and/or the Product (all such reports, "AE Reports"). "Serious"
adverse events shall be reported to the other Party within three working days
after a Party's (a "reporting Party") becoming aware of such an event and shall
either be reported by facsimile or telephone. The reporting Party shall report
on a quarterly basis all other adverse events that are known to the reporting
Party through either the receipt of clinical study documentation or post-market
surveillance. In addition, the reporting Party shall report all known instances
of use of the Product during pregnancy. In any event, each Party shall promptly
notify the other of any complaint received by such Party in sufficient detail
and in sufficient time to allow the responsible Party to comply with any and all
regulatory requirements imposed upon it in the Territory. Each Party shall also
advise the other of any regulatory developments (e.g., proposed recalls,
labeling and other registrational dossier changes, etc.) affecting the Compound
or the Product in the Territory.
(b) According to current ICH guidelines, an "adverse event" is any
untoward medical occurrence in a patient or clinical investigation subject
administered a pharmaceutical product, which occurrence does not necessarily
have to have a causal relationship with the treatment.
(c) According to current ICH guidelines, a "serious" adverse event is
any untoward medical occurrence that, at any dose, results in death, is life-
threatening (at the time of the
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event), requires inpatient hospitalization or prolongation of existing
hospitalization, results in persistent or significant disability or incapacity,
or is a congenital anomaly or birth defect.
(d) The details of adverse reaction reporting during development stage
and thereafter shall be stipulated in separate agreements to be entered into by
the Parties in due course.
6. FEES, MILESTONES AND ROYALTIES.
6.1 Up-front Payment.
(a) As partial consideration to Inspire for the license and other
rights granted to Kissei under this Agreement, upon the execution of this
Agreement by both Parties, Kissei shall pay to Inspire the sum of [CONFIDENTIAL
TREATMENT REQUESTED] in connection with the license and other rights in the
Territory. Such sum shall be non-refundable.
(b) As further consideration to Inspire for the license and other
rights granted to Kissei under this Agreement, pursuant to the Stock Purchase
Agreement and simultaneously with the execution of this Agreement, Kissei is
purchasing 375,000 shares of Inspire's Series C Preferred Stock for an aggregate
purchase price of US$900,000.
6.2 Coordinator/Liaison Fees. As consideration to Inspire for
designating and maintaining the Development Coordinator/Liaison and the
Manufacturing Coordinator/Liaison:
(a) For every calendar year during which Inspire maintains a
Development Coordinator/Liaison, Kissei shall pay Inspire the sum of
[CONFIDENTIAL TREATMENT REQUESTED], which shall be payable, in advance, on the
first day of each calendar quarter, in equal installments, until NDA Approval
for the Product is received, or definitively abandoned, in the Territory,
whichever occurs first; and
(b) For every calendar year during which Inspire maintains a
Manufacturing Coordinator/Liaison, Kissei shall pay Inspire the sum of
[CONFIDENTIAL TREATMENT REQUESTED], which shall be payable, in advance, on the
first day of each calendar quarter, in equal installments until Kissei files the
NDA for the Product with the Regulatory Authority in the Territory , or until
definitely abandoned, whichever occurs first. Thereafter Kissei shall continue
to make such payments for the Manufacturing Coordinator/Liaison as and when
determined by the Joint Development Committee. In addition, during any period
when Kissei is paying such amount for the Manufacturing Coordinator/Liaison,
Kissei shall also reimburse Inspire for all reasonable travel, lodging, meals
and other necessary out-of-pocket expenses incurred by Inspire in connection
with the Manufacturing Coordinator/Liaison's performance of his or her
obligations under this Agreement.In addition, on the Effective Date, Kissei
shall pay Inspire a quarterly installment of each of the Development
Coordinator/Liaison fee and the Manufacturing Coordinator/Liaison fee, pro rated
for
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the number of days remaining after the Effective Date in the calendar quarter in
which the Effective Date falls. Similarly, Inspire shall refund to Kissei such
portion of quarterly installment of each of the Development Coordinator/Liaison
fee and the Manufacturing Coordinator/Liaison fee as prorated for the number of
days remaining after the termination of each of their services in the calendar
quarter in which the termination occurs.
6.3 Milestone Payments. As further consideration to Inspire for the
license and other rights granted to Kissei under this Agreement, Kissei shall
pay to Inspire the following milestone payments upon the first occurrence of
each event set forth below with respect to each Product:
[CONFIDENTIAL TREATMENT REQUESTED]
Each of the payments required pursuant to this Section 6.3 shall be
paid within 30 days after such milestone has been achieved.
6.4 Transfer Price.
(a) The transfer price to Kissei for the Supplied Goods shall be an
amount equal to [CONFIDENTIAL TREATMENT REQUESTED] (the "Transfer Price").
(b) Notwithstanding Section 6.4(a), in the event and to the extent
that Kissei provides Delivery Systems to health care providers and/or patients
at a nominal charge or no charge,
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Inspire and Kissei will negotiation in good faith for [CONFIDENTIAL
TREATMENT REQUESTED].
(c) [CONFIDENTIAL TREATMENT REQUESTED]
6.5 Royalty Payments. As further consideration to Inspire for the
license and other rights granted to Kissei under this Agreement, during the term
of this Agreement, Kissei shall pay to Inspire a royalty on Net Sales of the
Product commencing on the First Commercial Sale of the Product by Kissei, its
Affiliates or its Sublicensees, on a Product-by-Product basis, in an amount
equal to [CONFIDENTIAL TREATMENT REQUESTED] of the aggregate Net Sales of the
Product by Kissei, its Affiliates and its Sublicensees throughout the Territory.
Notwithstanding the foregoing, the royalty rate shall be reduced to
[CONFIDENTIAL TREATMENT REQUESTED] with respect to a Product when such Product
ceases to be covered by any Licensed Claims in the Territory or when one or more
Third Parties markets a generic product. For purposes of this provision,
"generic product" means a Third Party product: (i) having as a pharmaceutically
active ingredient the same Compound or its salt as such Product, AND (ii) where
the manufacture, use or sale of such Third Party product is not covered by a
Licensed Claim. Such reduced royalty rate shall be effective for the first full
calendar quarter commencing after the date of any such event.
6.6 Obligation to Pay Royalties. The obligation to pay royalties to
Inspire under this Section 6 is imposed only once with respect to the same unit
of Product regardless of the number of Patents or quantity of Know-how
pertaining thereto. There shall be no obligation to pay royalties to Inspire
under this Section 6 on sales of Product between Kissei and its Affiliates and
Sublicensees, but in such instances the obligation to pay royalties shall arise
upon the sale by Kissei or its Affiliates or Sublicensees to unrelated Third
Parties. Payments due under this Section 6 shall be deemed to accrue when
Product is billed.
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7. PAYMENTS AND REPORTS.
7.1 Payments.
(a) Inspire shall submit invoices to Kissei for the Transfer Price of
Supplied Goods promptly after each shipment thereof. Each such invoice shall
include any previously uninvoiced adjustments to the Cost of Delivery Systems
pursuant to Section 6.4(b). Payments shall be made by Kissei within 30 days
after Kissei's receipt of each invoice therefor, by telegraphic transfer
remittance.
(b) Beginning with the calendar quarter in which the First Commercial
Sale of Products is made in the Territory and for each calendar quarter
thereafter, Kissei shall submit a statement, Product-by-Product, of the amount
of Net Sales during such quarter and the amount of royalties due on such Net
Sales. Each such statement shall also include information on the number of
Delivery Systems delivered by Kissei during such calendar quarter and the price
Kissei charged therefor. Each such statement shall be accompanied by payment of
the royalties due. The statement, together with the accompanying payment, shall
be submitted quarterly within 30 days after the end of each calendar quarter.
7.2 Mode of Payment. All invoices submitted by Inspire shall be stated
in U.S. Dollars. Kissei shall make all payments required under this Agreement as
directed by Inspire from time to time, net of any out-of-pocket transfer costs
or fees, in U.S. Dollars. All payments due shall be translated at the
Telegraphic Transfer Selling rate (TTS) quoted by Tokyo Mitsubishi Bank, Japan
on the day and time of remittance.
7.3 Records Retention. Kissei and its Affiliates and Sublicensees shall
keep complete and accurate records pertaining to the sale of Products, and
Inspire shall keep complete and accurate records pertaining to Inspire's Cost of
Compound, Formulated Material, Cost of Finished Product and Cost of Delivery
Systems, for a period of three calendar years after the year in which such sales
or costs occurred, and in sufficient detail to permit the other Party to confirm
the accuracy of the aggregate royalty and/or Transfer Price calculations
hereunder.
7.4 Audit Request.
(a) At the request and expense of Inspire, Kissei and its Affiliates
and Sublicensees shall permit an independent, certified public accountant
appointed by Inspire and reasonably acceptable to Kissei, at reasonable times
and upon reasonable notice, to examine such records as may be necessary to: (i)
determine the correctness of any report or payment made under this Agreement; or
(ii) obtain information as to the aggregate Transfer Price and/or royalties
payable for any calendar quarter in the case of Kissei's failure to report or
pay pursuant to this Agreement. Said accountant shall not disclose to Inspire
any information other than information relating to said
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reports, royalties, and payments. Results of any such examination shall be made
available to both Parties.
(b) At the request and expense of Kissei, Inspire shall permit an
independent, certified public accountant appointed by Kissei and reasonably
acceptable to Inspire, at reasonable times and upon reasonable notice, to
examine those records as may be necessary to verify the aggregate Cost of
Compound, Cost of Formulated Material, Cost of Finished Product and/or Cost of
Delivery Systems incurred for any period. Said accountant shall not disclose to
Kissei any information other than information relating to said Cost of Compound,
Cost of Formulated Material, Cost of Products and/or Cost of Delivery Systems.
Results of any such examination shall be made available to both Parties.
7.5 Cost of Audit.
(a) Inspire shall bear the full cost of the performance of any audit
requested by Inspire except as hereinafter set forth. If, as a result of any
inspection of the books and records of Kissei, its Affiliates or its
Sublicensees, it is shown that Kissei's payments under this Agreement were less
than the amount which should have been paid, then Kissei shall make all payments
required to be made to eliminate any discrepancy revealed by said inspection
within 30 days after Inspire's demand therefor. Furthermore, if the payments
made were less than 95% of the amount that should have been paid during the
period in question, Kissei shall also reimburse Inspire for the reasonable costs
of such audit and shall make such payment required to be made to eliminate such
discrepancy.
(b) Kissei shall bear the full cost of the performance of any audit
requested by Kissei except as hereinafter set forth. If, as a result of any
inspection of the books and records of Inspire, it is shown that Inspire
overstated its Cost of Compound, Cost of Formulated Material, Cost of Finished
Product and/or Cost of Delivery Systems under this Agreement for any period,
then Kissei shall be entitled to a credit in the amount necessary to eliminate
any discrepancy revealed by said inspection. Such credit may be applied against
any amounts due and owing to Inspire pursuant to this Agreement (e.g.,
milestones, royalties, Transfer Price). Furthermore, if the amounts for any
period were overstated by more than five percent, Inspire shall also reimburse
Kissei for the reasonable costs of such audit and shall make such payment
required to be made to eliminate such discrepancy.
7.6 No Non-Monetary Consideration for Sales. Without the prior written
consent of Inspire, Kissei and its Affiliates and Sublicensees shall not accept
or solicit any non-monetary consideration of the sale of the Product other than
as would be reflected in Net Sales. The use by Kissei and its Affiliates and
Sublicensees of a commercially reasonable amount of Product for promotional
sampling shall not violate this Section 7.6.
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7.7 Taxes.
(a) In the event that Kissei is required to withhold any tax to the
tax or revenue authorities in the Territory regarding any payment to Inspire due
to the laws of such country, such amount shall be deducted from the payment to
be made by Kissei, and Kissei shall notify Inspire and promptly furnish Inspire
with copies of any tax certificate or other documentation evidencing such
withholding. Each Party agrees to cooperate with the other party in claiming
exemptions from such deductions or withholdings under any agreement or treaty
from time to time in effect.
(b) If Inspire has the legal obligation to collect and/or pay any
sales, use, excise or value added taxes, the appropriate amount shall be added
to Kissei's invoice and paid by Kissei, unless Kissei provides Inspire with a
valid tax exemption certificate authorized by the appropriate taxing authority.
8. MANUFACTURE AND SUPPLY.
8.1 Commercial Supply Agreement. Both Parties recognize the importance
of Inspire establishing and maintaining a reliable and steady source of supply
of Finished Product and Delivery Systems (collectively, "Supplied Goods") for
commercial marketing in the Territory by Kissei so that supply shortages do not
occur. Commencing on the Effective Date, Inspire intends to work toward that
goal with its Third Party Manufacturers, and will keep Kissei informed, through
the Joint Development Committe, of the actions being undertaken by Inspire to do
so. Inspire shall also give Kissei, through the Joint Development Committee or
otherwise, as Kissei may desire, an opportunity to review Inspire's actions and
provide input into other actions deemed appropriate. At such time as the Joint
Development Committee determines is appropriate, the Parties shall negotiate in
good faith the terms of a commerical supply agreement to be entered into by the
Parties (the "Supply Agreement") pursuant to which Inspire shall provide Kissei
with its commercial supply requirements of Supplied Goods. The Supply Agreement
shall contain mutually acceptable terms and conditions, substantially consistent
with the terms and conditions set forth on Exhibit D.
9. OWNERSHIP; PATENTS.
9.1 Ownership.
(a) Except as otherwise provided in Section 9.1(b) or (c), Inspire
shall retain all right, title and interest in and to the Patents and Know-how,
regardless of which Party prepares and prosecutes the applications associated
therewith, or maintains the patents, copyrights or other intellectual property
rights related thereto, subject to the license granted to Kissei pursuant to
Section 5.2. Rights to Inventions made solely by employees of Inspire shall
belong to Inspire.
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Notwithstanding any other provision of this Agreement, Kissei shall not own any
right, title or interest in and to any Inventions relating to the Cassette or
Delivery System.
(b) Rights to Inventions made solely by employees of Kissei shall
belong to Kissei.
(c) Rights to Inventions which were made jointly by employees of
Inspire and by employees of Kissei shall belong jointly to Inspire and to
Kissei. Such joint Inventions shall be subject to the terms and conditions of
this Agreement.
(d) Inspire shall not own any right, title or interest in any
trademark or trade name selected by Kissei or the Joint Development Committee
to appear on any Product label or to be inscribed on any Product or component
part thereof.
9.2 Patent Maintenance.
(a) Inspire shall have full responsibility for, and shall control the
preparation and prosecution of, all patent applications and the maintenance of
all patents relating to the Licensed Technology (including the Patents)
throughout the Territory. Inspire shall pay all costs and expenses of filing,
prosecuting and maintaining the Patents and the patents covering Inventions
owned by Inspire in the Territory.
(b) Inspire shall select qualified independent patent counsel to file
and prosecute all patent applications pursuant to Section 9.2(a). Inspire shall
provide copies to Kissei of any filings made to, and written communications
received from, any patent office relating, in whole or in part, to the Licensed
Claims.
(c) Each Party agrees promptly to provide to the other Party a
complete written disclosure of any Invention made by such Party. Inspire shall
determine whether any Invention owned solely by Inspire or jointly by Inspire
and Kissei is patentable, and if so, shall proceed with the preparation and
prosecution of a patent application covering any such Invention. Kissei shall
determine whether any Invention owned solely by Kissei is patentable, and if so,
shall proceed with the preparation and prosecution of a patent application
covering any such Invention.
(d) Inspire and Kissei shall share all costs and expenses of filing,
prosecuting and maintaining the Patents and the patents covering Inventions
owned jointly by Kissei and Inspire in the Territory. If either Party elects
not to pay for: (i) the filing of a patent application in the Territory on any
such Patent or Invention which the other Party reasonably believes is
patentable, or (ii) the further prosecution or maintenance of any such Patent or
Invention in the Territory, or (iii) the filing of any divisional or continuing
patent application based on any Patent or Invention in the Territory, such Party
shall notify the other Party in a timely manner and the other Party may do so at
its own expense. In such event, such patent or application in the Territory
shall be assigned by such Party
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to the other Party, all of such assigning Party's rights in such patent or
application in the Territory shall cease, and, in the case where Kissei is the
assigning Party, the license granted to Kissei under Section 5.2 with respect
thereto shall terminate.
(e) Each Party agrees to cooperate with the other Party to execute all
lawful papers and instruments, to make all rightful oaths and declarations and
to provide consultation and assistance as may be necessary in the preparation,
prosecution, maintenance, and enforcement of all such patents.
9.3 Patent Enforcement.
(a) If either Party learns of an infringement, unauthorized use,
misappropriation or ownership claim or threatened infringement or other such
claim (an "infringement") by a Third Party with respect to any Licensed
Technology within the Territory, such Party shall promptly notify the other
Party and shall provide such other Party with available evidence of such
infringement. In addition, Inspire shall notify Kissei when Inspire becomes
aware of any infringement action involving the Product in any country outside
the Territory in a timely manner.
(b) Kissei shall have the first right, but not the duty, to institute
patent infringement actions against Third Parties based on any Licensed
Technology in the Territory. If Kissei does not secure actual cessation of such
infringement or institute an infringement proceeding against an offending Third
Party within 180 days of learning of such infringement, Inspire shall have the
right, but not the duty, to institute such an action with respect to any
infringement by such Third Party. The costs and expenses of any such action
(including fees of attorneys and other professionals) shall be borne by the
Party instituting the action, or, if the Parties elect to cooperate in
instituting and maintaining such action, such costs and expenses shall be borne
by the Parties in such proportions as they may agree in writing. Each Party
shall execute all necessary and proper documents and take such actions as shall
be appropriate to allow the other Party to institute and prosecute such
infringement actions. Any award paid by Third Parties as a result of such an
infringement action (whether by way of settlement or otherwise) shall be applied
first to reimburse both Parties for all costs and expenses incurred by the
Parties with respect to such action on a pro rata basis and, if after such
reimbursement any funds shall remain from such award, [CONFIDENTIAL TREATMENT
REQUESTED].
9.4 Infringement Action by Third Parties. In the event of the
institution or threatened institution of any suit by a Third Party against
Kissei for patent infringement involving the sale, distribution or marketing of
any Product in the Territory where such infringement claim is a result of the
use of the Licensed Technology, Kissei shall promptly notify Inspire in writing
of such suit. Unless otherwise covered by Section 11.2(c), Kissei shall have
the right to defend such suit at its own expense,
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and Inspire hereby agrees to assist and cooperate with Kissei, at Inspire's own
expense, to the extent necessary in the defense of such suit. During the
pendency of such action and thereafter, Kissei shall continue to make all
payments due under this Agreement; provided, however, that Kissei shall be
entitled to a credit against royalties otherwise owing on such Product in an
amount equal to [CONFIDENTIAL TREATMENT REQUESTED] of the royalties or other
damages due to such Third Party in any calendar quarter, except that in no event
shall any such credit reduce the royalty rate to less than [CONFIDENTIAL
TREATMENT REQUESTED]. Further, if Kissei finally prevails and receives an award
from such Third Party as a result of such action (whether by way of judgment,
award, decree, settlement or otherwise), such award shall be allocated in the
manner provided in Section 9.3(b).
10. PUBLICATION; CONFIDENTIALITY.
10.1 Notification.
(a) Both Parties recognize that each may wish to publish the results
of their work relating to the subject matter of this Agreement. However, both
Parties also recognize the importance of acquiring patent protection.
Consequently, subject to any applicable laws or regulations obligating either
Party to do otherwise, any proposed publication by either Party shall comply
with this Section 10.1(a). At least 30 days before a manuscript is to be
submitted to a publisher, the publishing Party will provide the Joint
Development Committee with a copy of the manuscript. Any such manuscript, if
not in English, shall be accompanied by an English language summary thereof,
which shall include a translation of all data tables to be included in such
manuscript. In such event, the publishing Party shall provide an English
translation of such manuscript, in whole or in part, as requested by any member
of the Joint Development Committee, at least 10 days prior to submission of such
manuscript to the publisher. If the publishing Party wishes to make an oral
presentation, it will provide the Joint Development Committee with a copy of the
abstract (if one is submitted) at least 30 days before it is to be submitted.
(b) In addition, Inspire shall provide Kissei with a copy of any
publications relating to the Compound or the Product published by any of
Inspire's Strategic Partners in a timely manner after such publication.
10.2 Review. The Joint Development Committee will review the
manuscript, abstract, text or any other material provided under Section 10.1(a)
to determine whether patentable subject matter is disclosed. The Joint
Development Committee will notify the publishing Party within 30 days of receipt
of the proposed publication if the Joint Development Committee, in good faith,
determines that patentable subject matter is or may be disclosed, or if the
Joint Development Committee, in good faith, believes Confidential Information
(as defined in Section 10.4) is or may be disclosed. If it is determined by the
Joint Development Committee that patent applications should be filed, the
publishing Party shall delay its publication or presentation for a period not to
exceed 90 days from the Joint Development Committee's receipt of the proposed
publication or presentation to allow time for the filing of patent applications
covering patentable subject matter. In the event that the delay
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needed to complete the filing of any necessary patent application will exceed
the 90 day period, the Joint Development Committee will discuss the need for
obtaining an extension of the publication delay beyond the 90 day period. If it
is determined in good faith by the Joint Development Committee that Confidential
Information or proprietary information is being disclosed, the Parties will
consult in good faith to arrive at an agreement on mutually acceptable
modifications to the proposed publication or presentation to avoid such
disclosure.
10.3 Exclusions. Nothing in Sections 10.1 and 10.2 shall prevent either
Party: (i) in connection with efforts to secure financing at any time during the
term of this Agreement, from issuing statements as to achievements made, and the
status of the work being done by the Parties, under this Agreement, so long as
such statements do not jeopardize the ability to obtain patent protection on
Inventions or disclose non-public technical or scientific Confidential
Information; or (ii) from issuing statements that such Party determines to be
necessary to comply with applicable law (including the disclosure requirements
of the U.S. Securities and Exchange Commission, Nasdaq or any other stock
exchange on which securities issued by such Party are traded); provided that, to
the extent practicable under the circumstances, such Party shall provide the
other Party with a copy of the proposed text of such statements sufficiently in
advance of the scheduled release thereof to afford such other Party a reasonable
opportunity to review and comment upon the proposed text.
10.4 Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, during the term of this Agreement and for five years thereafter, the
receiving Party, its Affiliates, its licensees and its sublicensees shall keep,
and shall ensure that its employees, officers and directors keep, completely
confidential and shall not publish or otherwise disclose and shall not use for
any purpose any information furnished to it by the other Party, its Affiliates,
its licensees or its sublicensees or developed under or in connection with this
Agreement, except to the extent that it can be established by the receiving
Party by competent proof that such information: (i) was already known to the
receiving Party, other than under an obligation of confidentiality, at the time
of disclosure by the other Party; (ii) was generally available to the public or
otherwise part of the public domain at the time of its disclosure to the
receiving Party; (iii) became generally available to the public or was otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement; or (iv) was
disclosed to the receiving Party, other than under an obligation of
confidentiality, by a Third Party who had no obligation to the disclosing Party
not to disclose such information to others (all such information to which none
of the foregoing exceptions applies, "Confidential Information").
10.5 Exceptions to Obligation. The restrictions contained in Section
10.4 shall not apply to Confidential Information that: (i) is submitted by the
recipient to governmental authorities to facilitate the issuance of NDA
Approvals for the Product, provided that reasonable measures shall be taken to
assure confidential treatment of such information; (ii) is provided by the
recipient to Third Parties under confidentiality provisions at least as
stringent as those in this Agreement, for consulting, manufacturing development,
manufacturing, external testing, marketing trials and, with
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respect to Kissei, to Third Parties who are Sublicensees or other
development/marketing partners of Kissei with respect to any of the subject
matter of this Agreement; or (iii) is otherwise required to be disclosed in
compliance with applicable laws or regulations or order by a court or other
regulatory body having competent jurisdiction; provided that if a Party is
required to make any such disclosure of the other Party's Confidential
Information such Party will, except where impracticable for necessary
disclosures, for example to physicians conducting studies or to health
authorities, give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its best efforts to secure confidential treatment
of such Confidential Information required to be disclosed.
10.6 Limitations on Use. Each Party shall use, and cause each of its
Affiliates, its licensees and its sublicensees to use, any Confidential
Information obtained by such Party from the other Party, its Affiliates, its
licensees or its sublicensees, pursuant to this Agreement or otherwise, solely
in connection with the activities or transactions contemplated hereby.
10.7 Remedies. Each Party shall be entitled, in addition to any other
right or remedy it may have, at law or in equity, to an injunction, without the
posting of any bond or other security, enjoining or restraining the other Party,
its Affiliates, its licensees and/or its sublicensees from any violation or
threatened violation of this Section 10.
11. INDEMNIFICATION.
11.1 By Kissei. Kissei shall indemnify, defend and hold harmless
Inspire and its Affiliates, and their respective directors, officers, employees
and agents, from and against any and all liabilities, damages, losses, costs and
expenses (including the reasonable fees of attorneys and other professionals)
arising out of or resulting from:
(a) negligence, recklessness or wrongful intentional acts or
omissions of Kissei, its Affiliates or its Sublicensees, if any, and their
respective directors, officers, employees and agents, in connection with the
work performed by Kissei under the Joint Development Program;
(b) any warranty claims, Product recalls or any tort claims of
personal injury (including death) or property damage relating to or arising out
of any manufacture, use, distribution or sale of any Product by Kissei, its
Affiliates or its Sublicensees due to any negligence, recklessness or wrongful
intentional acts or omissions by, or strict liability of, Kissei, its Affiliates
or its Sublicensees, and their respective directors, officers, employees and
agents, except, in each case, to the comparative extent such claim arose out of
or resulted from the negligence, recklessness or wrongful intentional acts or
omissions of Inspire and its Affiliates, and their respective directors,
officers, employees and agents; or
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(c) any breach of any representation or warranty made by Kissei
pursuant to Section 2.
11.2 By Inspire. Inspire shall indemnify, defend and hold harmless
Kissei, its Affiliates and its Sublicensees, and their respective directors,
officers, employees and agents, from and against any and all liabilities,
damages, losses, costs and expenses (including the reasonable fees of attorneys
and other professionals) arising out of or resulting from:
(a) negligence, recklessness or wrongful intentional acts or
omissions of Inspire or its Affiliates, and their respective directors,
officers, employees and agents, in connection with the work performed by Inspire
under the Joint Development Program;
(b) any warranty claims, Product recalls or any tort claims of
personal injury (including death) or property damage relating to or arising out
of any manufacture, use, distribution or sale of any Supplied Goods by Inspire
or its Affiliates due to any negligence, recklessness or wrongful intentional
acts or omissions by, or strict liability of, Inspire or its Affiliates, and
their respective directors, officers, employees and agents, except, in each
case, to the comparative extent such claim arose out of or resulted from the
negligence, recklessness or wrongful intentional acts or omissions of Kissei,
its Affiliates or its Sublicensees, and their respective directors, officers,
employees and agents; or
(c) any breach of any representation or warranty made by Inspire
pursuant to Section 2.
11.3 Notice. In the event that any person (an "indemnitee") entitled to
indemnification under Section 11.1 or 11.2 is seeking such indemnification, such
indemnitee shall inform the indemnifying Party of the claim as soon as
reasonably practicable after such indemnitee receives notice of such claim,
shall permit the indemnifying Party to assume direction and control of the
defense of the claim (including the sole right to settle it at the sole
discretion of the indemnifying Party, provided that such settlement does not
impose any obligation on the indemnitee or the other Party) and shall cooperate
as requested (at the expense of the indemnifying Party) in the defense of the
claim.
11.4 Complete Indemnification. As the Parties intend complete
indemnification, all costs and expenses incurred by an indemnitee in connection
with enforcement of this Section 11 shall also be reimbursed by the indemnifying
Party.
12. TERM; TERMINATION.
12.1 Term. This Agreement shall become effective as of the Effective
Date and, unless earlier terminated pursuant to the other provisions of this
Section 12, shall expire as follows:
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(a) As to each Product in the Territory, this Agreement shall expire
on the later of (i) the tenth anniversary of the First Commercial Sale of such
Product in the Territory, or (ii) the date on which the sale of such Product
ceases to be covered by a Licensed Claim in the Territory.
(b) This Agreement shall expire in its entirety upon the expiration
of this Agreement with respect to all Products in the Territory.
12.2 Termination for Cause. Either Party (the "non-breaching Party")
may, without prejudice to any other remedies available to it at law or in
equity, terminate this Agreement in the event the other Party (the "breaching
Party") shall have materially breached or defaulted in the performance of any of
its material obligations hereunder (but excluding any such breach or default
under the Supply Agreement, which shall be addressed in such separate Supply
Agreement), and such default shall have continued for 60 days after written
notice thereof was provided to the breaching party by the non-breaching party
(or, if such default cannot be cured within such 60-day period, if the breaching
party does not commence and diligently continue actions to cure such default
during such 60-day period). Any such termination shall become effective at the
end of such 60-day period unless the breaching party has cured any such breach
or default prior to the expiration of such 60-day period (or, if such default
cannot be cured within such 60-day period, if the breaching party has commenced
and diligently continued actions to cure such default). The right of either
party to terminate this Agreement as provided in this Section 12.2 shall not be
affected in any way by its waiver or failure to take action with respect to any
previous default.
12.3 Termination by Kissei. In the event that Kissei, in its sole good
faith discretion, determines that continued development or marketing of the
Product pursuant to this Agreement is scientifically or economically infeasible,
Kissei shall have the right to terminate this Agreement in its entirety upon
three months' prior written notice.
12.4 Effect of Expiration or Termination.
(a) Following the expiration of the term of this Agreement with
respect to a Product in the Territory pursuant to Section 12.1(a):
(i) Kissei shall have a non-exclusive, royalty-free, perpetual right
to continue to use, market, distribute, sell, manufacture and have manufactured
any Product in the Territory, and the non-exclusive, perpetual and paid-up right
to use the Licensed Technology in connection therewith. To that end, Kissei may
continue to hold and use all data, reports, records and materials that relate to
or are prepared in the course of the Joint Development Program, and may hold all
INDs, NDAs, NDA Approvals and other regulatory filings made or filed by Kissei
for such Product, pursuant to this Agreement, and may in its sole discretion
continue any sublicense granted by Kissei under this Agreement; and
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(ii) Inspire shall have the fully-paid non-exclusive right to
continue to cross-reference and otherwise exercise its rights as set forth in
Section 4.5(d) under the NDA Approval(s) and other regulatory filings for such
Product in the Territory.
(b) Following expiration of the term of this Agreement in its
entirety pursuant to Section 12.1(b):
(i) Kissei shall have a non-exclusive, royalty-free, perpetual right
to continue to use, market, distribute, sell manufacture and have manufactured
all Products in the Territory, and the non-exclusive, perpetual and paid-up
right to use the Licensed Technology in connection therewith. To that end,
Kissei may continue to hold and use all data, reports, records and materials
that relate to or are prepared in the course of the Joint Development Program,
and may hold all INDs, NDAs, NDA Approvals and other regulatory filings made or
filed by Kissei for all Products, pursuant to this Agreement, and may in its
sole discretion continue any sublicense granted by Kissei under this Agreement;
(ii) Inspire shall have: (A) the fully-paid non-exclusive right to
continue to cross-reference and otherwise exercise its rights as set forth in
Section 4.5(d) under the NDA Approvals and other regulatory filings for Products
in such countries; and (B) the fully-paid, non-exclusive, perpetual right to
continue to use patents or know-how that embody or relate to Inventions and that
are owned or controlled by Kissei or its Affiliates as set forth in Section 5.4.
(c) If this Agreement is terminated by Inspire pursuant to Section
12.2 by reason of a breach or default by Kissei, in addition to any other
remedies available to Inspire at law or in equity, or by Kissei pursuant to
Section 12.3: (i) Kissei shall promptly transfer to Inspire copies of all data,
reports, records and materials in Kissei's possession or control that relate to
the Joint Development Program and return to Inspire all relevant records and
materials in Kissei's possession or control containing Confidential Information
of Inspire (provided that Kissei may keep one copy of such Confidential
Information of Inspire for archival purposes only); (ii) all licenses granted by
Inspire to Kissei under Sections 5.1 and 5.2 shall terminate; (iii) ownership of
all INDs, NDAs, NDA Approvals and other regulatory filings made or filed for the
Product shall be transferred promptly to Inspire; and (iv) all sublicenses
granted by Kissei under this Agreement shall terminate. Furthermore, Inspire
shall have the fully-paid, non-exclusive, perpetual right to continue to use
patents or know-how that embody or relate to Inventions and that are owned or
controlled by Kissei or its Affiliates as set forth in Section 5.4.
(d) If this Agreement is terminated by Kissei pursuant to Section
12.2 by reason of a breach or default by Inspire, in addition to any other
remedies available to Kissei at law or in equity,: (i) the license granted to
Inspire by Kissei under Section 5.4 shall terminate; (ii) Kissei shall have an
exclusive, royalty-free, perpetual right to continue to use, market, distribute,
sell, manufacture and have manufactured any Product in the Territory, and the
exclusive, perpetual and paid-up right to use the Licensed Technology in
connection therewith. To that end, Kissei may
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<PAGE>
continue to hold and use all data, reports, records and materials that relate to
or are prepared in the course of the Joint Development Program, and may hold all
INDs, NDAs, NDA Approvals and other regulatory filings made or filed by Kissei
for the Products, pursuant to this Agreement, and may in its sole discretion
continue any sublicenses granted by Kissei under this Agreement; and (iii) in
order to secure the right of Kissei in clause (ii) of this Section 12.4(d),
Inspire hereby grants Kissei the Manufacturing License as provided in the Supply
Agreement, and will use all reasonable efforts to enable Kissei to manufacture,
or have manufactured Finished Product and Delivery Systems, including working
with Kissei to establish arrangements with the Third Party Manufacturers.
12.5 Accrued Rights; Surviving Obligations.
(a) Termination, relinquishment or expiration of this Agreement for
any reason shall be without prejudice to any rights which shall have accrued to
the benefit of either Party prior to such termination, relinquishment or
expiration. Such termination, relinquishment or expiration shall not relieve
either Party from obligations which are expressly indicated to survive
termination or expiration of this Agreement.
(b) All of the Parties' rights and obligations under Sections 3.7,
4.7(d), 4.7(e), 4.8, 5.7, 7, 9.1, 9.3 (solely with respect to actions commenced
before the effective date of termination of this Agreement), 9.4 (solely with
respect to actions commenced before the effective date of termination of this
Agreement), 10.4, 10.5, 10.6, 10.7, 11, 12.4, 12.5, 14.12 and 14.13 shall
survive termination, relinquishment or expiration of this Agreement.
13. FORCE MAJEURE.
13.1 Events of Force Majeure. Neither Party shall be held liable or
responsible to the other Party nor be deemed to be in default under, or in
breach of any provision of, this Agreement for failure or delay in fulfilling or
performing any obligation of this Agreement when such failure or delay is due to
force majeure, and without the fault or negligence of the Party so failing or
delaying. For purposes of this Agreement, force majeure is defined as causes
beyond the control of the Party, including, without limitation, acts of God;
acts, regulations, or laws of any government; war; civil commotion; destruction
of production facilities or materials by fire, flood, earthquake, explosion or
storm; labor disturbances; epidemic; and failure of public utilities or common
carriers. In such event Inspire or Kissei, as the case may be, shall
immediately notify the other Party of such inability and of the period for which
such inability is expected to continue. The Party giving such notice shall
thereupon be excused from such of its obligations under this Agreement as it is
thereby disabled from performing for so long as it is so disabled and the 30
days thereafter. To the extent possible, each Party shall use reasonable
efforts to minimize the duration of any force majeure.
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<PAGE>
14. MISCELLANEOUS.
14.1 Relationship of Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the Parties. No Party shall incur any debts or
make any commitments for the other, except to the extent, if at all,
specifically provided herein.
14.2 Assignment. Neither Party shall be entitled to assign its rights
hereunder without the express written consent of the other Party hereto, except
that each Party may assign its rights and transfer its duties hereunder to any
assignee of all or substantially all of its business (or that portion thereof to
which this Agreement relates) or in the event of such Party's merger,
consolidation or involvement in a similar transaction. No assignment and
transfer shall be valid or effective unless done in accordance with this Section
14.2 and unless and until the assignee/transferee shall agree in writing to be
bound by the provisions of this Agreement.
14.3 Books and Records. Any books and records to be maintained under
this Agreement by a Party or its Affiliates or Sublicensees shall be maintained
in accordance with generally accepted accounting principles, consistently
applied.
14.4 Further Actions. Each Party shall execute, acknowledge and deliver
such further instruments, and do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
14.5 Notice.
(a) Any notice or request required or permitted to be given under or
in connection with this Agreement shall be deemed to have been sufficiently
given if in writing and personally delivered or sent by certified mail (return
receipt requested), facsimile transmission (receipt verified), or overnight
express courier service (signature required), prepaid, to the Party for which
such notice is intended, at the address set forth for such Party below:
(i) In the case of Inspire, to:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
USA
Attention: Christy L. Shaffer, Ph.D.
Facsimile No.: (919) 941-9797
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<PAGE>
(ii) In the case of Kissei, to:
Kissei Pharmaceutical Co., Ltd.
19-48, Yoshino
Matsumoto-City, Nagano-Prefecture
399-8710
JAPAN
Attention: Masanori Iwadare, Ph.D.
Facsimile No.: (263) 28-2174
or to such other address for such Party as it shall have specified by like
notice to the other Party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery shall be deemed to be the next business day after such notice
or request was deposited with such service. If sent by certified mail, the date
of delivery shall be deemed to be the third business day after such notice or
request was deposited with the U.S. or Japanese Postal Service, as the case may
be.
(b) All correspondence, notices and other communications shall be
promptly provided to the other Party in English. If any data, information and
document or literature which relate to Joint Development Program or any
regulatory filings is written in non-English language, an appropriate summary in
English shall be attached to it, and an English translation will follow in a
timely manner if requested.
14.6 Use of Name. Except as otherwise provided herein, neither Party
shall have any right, express or implied, to use in any manner the name or other
designation of the other Party or any other trade name or trademark of the other
Party for any purpose in connection with the performance of this Agreement.
14.7 Public Announcements. Except as required by law (including,
without limitation, disclosure requirements of the U.S. Securities and Exchange
Commission, Nasdaq or any other stock exchange on which securities issued by a
Party are traded) and as permitted by Section 10.3, neither Party shall make any
public announcement concerning this Agreement or the subject matter hereof
without the prior written consent of the other, which shall not be unreasonably
withheld, provided that it shall not be unreasonable for a Party to withhold
consent with respect to any public announcement containing any of such Party's
Confidential Information. In the event of a required public announcement, to
the extent practicable under the circumstances, the Party making such
announcement shall provide the other Party with a copy of the proposed text
prior to such announcement sufficiently in advance of the scheduled release of
such announcement to afford such other Party a reasonable opportunity to review
and comment upon the proposed text.
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<PAGE>
14.8 Waiver. A waiver by either Party of any of the terms and
conditions of this Agreement in any instance shall not be deemed or construed to
be a waiver of such term or condition for the future, or of any subsequent
breach hereof. All rights, remedies, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either Party.
14.9 Compliance with Law. Nothing in this Agreement shall be deemed to
permit a Party to export, reexport or otherwise transfer any Product sold under
this Agreement without compliance with applicable laws.
14.10 Severability. When possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
14.11 Amendment. No amendment, modification or supplement of any
provisions of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each Party.
14.12 Governing Law; English Original Controlling. This Agreement shall
be governed by and interpreted in accordance with the laws of Delaware without
regard to its choice of law principles; provided, however, that any arbitration
proceeding conducted pursuant to Section 14.13 shall be governed by the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June
10, 1958. The English original of this Agreement shall prevail over any
translation hereof.
14.13 Arbitration.
(a) Except as expressly otherwise provided in this Agreement, any
dispute arising out of or relating to any provisions of this Agreement shall be
finally settled by arbitration to be held in San Francisco, California, under
the auspices and then current commercial arbitration rules of the International
Chamber of Commerce. Such arbitration shall be conducted by three arbitrators
appointed according to said rules and in the English language. The Parties
shall instruct such arbitrators to render a determination of any such dispute
within 30 days after their appointment.
(b) Any award rendered by the arbitrator(s) shall be final and
binding upon the Parties. Judgment upon any award rendered may be entered in
any court having jurisdiction, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case may
be. Each Party shall pay its own expenses of arbitration, and the expenses of
the arbitrator(s) shall be equally shared unless the arbitrator(s) assesses as
part of his or
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her award all or any part of the arbitration expenses of one Party (including
reasonable attorneys' fees) against the other Party.
(c) This Section 14.13 shall not prohibit a Party from seeking
injunctive relief from a court of competent jurisdiction in the event of a
breach or prospective breach of this Agreement by the other Party which would
cause irreparable harm to the first Party.
14.14 Entire Agreement. This Agreement, together with the Exhibits
hereto and every Annual Development Plan approved by the Joint Development
Committee, sets forth the entire agreement and understanding between the Parties
as to the subject matter hereof and merges all prior discussions and
negotiations between them, and neither of the Parties shall be bound by any
conditions, definitions, warranties, understandings or representations with
respect to such subject matter other than as expressly provided herein or as
duly set forth on or subsequent to the date hereof in writing and signed by a
proper and duly authorized officer or representative of the Party to be bound
thereby.
14.15 Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties hereto and their respective permitted successors and assigns.
14.16 Descriptive Headings. The descriptive headings of this Agreement
are for convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.
14.17 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, any one of which need not contain the signature of
more than one Party but all such counterparts taken together shall constitute
one and the same agreement.
* * *
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<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed by its duly authorized representative as of the day and year first
above written.
INSPIRE PHARMACEUTICALS, INC.
By: /s/ David J. Drutz
-----------------------------------
David J. Drutz, M.D., Vice Chairman
KISSEI PHARMACEUTICALS CO., LTD.
By:/s/ Mutsuo Kanzawa
-------------------------------
Mutsuo Kanzawa, President and
Chief Executive Officer
<PAGE>
EXHIBIT A
---------
INSPIRE'S COSTS
---------------
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
EXHIBIT B
---------
INITIAL PATENTS
---------------
1. US Patent No. 5,635,160 " Dinucleotides Useful for the Treatment of Cystic
Fibrosis and for Hydrating Mucus Secretions", M. J. Stutts, III, R. C.
Boucher, Jr., E. R. Lazarowski, and C. A. Geary. Assignee: The University
of North Carolina at Chapel Hill, Chapel Hill, N.C. Issued: June 3, 1997.
2. [CONFIDENTIAL TREATMENT REQUESTED]
3. [CONFIDENTIAL TREATMENT REQUESTED]
4. US Patent No. 5,763,447 "Method of Preventing or Treating Pneumonia in
Immobilized Patients with Uridine Triphosphates and Related Compounds", K.
M. Jacobus and H. J. Leighton. Assignee: Inspire Pharmaceuticals, Inc.,
4222 Emperor Blvd., Durham, N.C. Issued: June 9, 1998.
5. [CONFIDENTIAL TREATMENT REQUESTED].
<PAGE>
EXHIBIT C
---------
INITIAL MEMBERS OF
------------------
JOINT DEVELOPMENT COMMITTEE
---------------------------
A. Initial Designees of Inspire:
1. Christy Shaffer, Ph.D., Initial Secretary
2. Richard Evans, Ph.D.
3. Patricia Edgar, Ph.D.
B. Initial Designees of Kissei:
1. Toshiro Kobayashi, Initial Chairperson
2. Kinji Izuka, Ph.D.
3. Haruo Suzawa, Ph.D.
<PAGE>
EXHIBIT D
---------
TERMS AND CONDITIONS OF
-----------------------
THE COMMERCIAL SUPPLY AGREEMENT
-------------------------------
Defined terms used in the Exhibit shall have the meaning assigned to such terms
in the Joint Development, License and Supply Agreement dated as of September 10,
1998 between the Parties (the "License Agreement").
1. Supply. Commencing on the commercial launch of the Product and
thereafter during the term of the Supply Agreement, Inspire shall have, or have
obtained, all rights necessary to make, or have made, Finished Product and
Delivery Systems. Commencing on the commercial launch of the Product and
thereafter during the term of the Supply Agreement, subject to the terms and
conditions of this agreement, Inspire shall supply Kissei with all of Kissei's
requirements for Supplied Goods for commercial use in the Territory (which shall
be deemed to include all of the requirements of Kissei's Affiliates and
Sublicensees), and Kissei shall purchase from Inspire all of such requirements
for the Supplied Goods. Kissei may place orders for the requirements of its
Affiliates and Sublicensees, and either have Inspire ship directly to such
Affiliates or Sublicensees or to Kissei for its reshipment to such Affiliates
and Sublicensees. Inspire shall prepare all Supplied Goods in bulk containers
for shipment to Kissei. Kissei shall be responsible for putting the Supplied
Goods in final packaged form, including, without limitation, all product
labeling and other package inserts and materials required by the applicable
Regulatory Authorities.
2. Forecasts. Commencing 24 months prior to the anticipated commercial
launch of the first Product in the Territory, no later than 180 days prior to
the first day of each calendar quarter ("Q1"), Kissei shall provide Inspire with
a non-binding, good faith rolling forecast of estimated quantities in trade
units and anticipated delivery schedules for the Supplied Goods for the
following 12-month period (i.e., Q1 and the next three calendar quarters ("Q2,"
"Q3," etc., respectively)), by calendar quarters. The quantity indicated for Q1
shall be considered a firm order. Such forecasts shall be revised and updated
quarterly, including firm orders for the next succeeding quarter.
3. Orders.
(a) Together with each forecast provided under Section 2 (the "Current
Forecast"), Kissei shall place its firm order on a quarterly basis with Inspire,
setting forth trade units, delivery dates and shipping instructions with respect
to each shipment of Supplied Goods for delivery in Q1. Inspire shall accept
such orders from Kissei, subject to the other terms and conditions of the Supply
Agreement, to the extent such quantity of Finished Product or Delivery Systems,
as the case may be, is: (i) no more than the least of: (A) the quantity thereof
reflected in the Current Forecast for Q1; (B) [CONFIDENTIAL TREATMENT REQUESTED]
of the quantity thereof reflected for Q2 in the forecast that next preceded the
Current Forecast; and (C) [CONFIDENTIAL TREATMENT REQUESTED] of the quantity
thereof reflected for Q3 in the forecast that next preceded the forecast
referred to in clause (i)(B); and (ii) no less than the greatest
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<PAGE>
of: (A) the quantity thereof reflected in the Current Forecast for Q1; (B)
[CONFIDENTIAL TREATMENT REQUESTED] of the quantity thereof reflected for Q2 in
the forecast that next preceded the Current Forecast; and (C) [CONFIDENTIAL
TREATMENT REQUESTED] of the quantity thereof reflected for Q3 in the forecast
that next preceded the forecast referred to in clause (ii)(B). Kissei's orders
shall be made pursuant to purchase orders which are in a form mutually
acceptable to the Parties, to the extent that such form is not inconsistent with
the terms of the Supply Agreement.
(b) Inspire shall not be obligated to accept orders for Q1 to the
extent the quantity of Supplied Goods ordered exceeds the foregoing limitations,
but shall use good faith efforts to fill such orders for such excess quantities
from available supplies. In the event that Inspire, despite the use of good
faith efforts, is unable to supply such excess quantities to Kissei, such
inability to supply shall not be deemed to be a breach of Inspire's obligations
under this Supply Agreement. Inspire shall use all reasonable efforts to notify
Kissei within 10 days after receipt of an order of Inspire's ability to fill any
amounts of such orders in excess of the quantities that Inspire is obligated to
supply.
(c) In the event that Kissei submits orders of Supplied Goods with
respect to any Q1 for less than the minimum quantity of Product that Kissei is
required to purchase under this Supply Agreement, Inspire nevertheless shall
have the right to supply and ship to Kissei, and Kissei shall have the
obligation to purchase and accept from Inspire, such minimum quantity of
Supplied Goods.
(d) By way of illustration, examples of the maximum quantities of
Finished Product or Delivery Systems that Inspire is required to supply, and the
minimum quantities of Finished Product or Delivery Systems that Kissei is
required to order (and that Inspire is entitled to supply), are set forth on
Schedule 1.
4. Delivery. With respect to exact shipping dates, Inspire shall use all
reasonable commercial efforts to ship quantities of Supplied Goods that Inspire
is obligated to supply pursuant to Section 3 on the dates specified in Kissei's
purchase orders submitted and accepted in accordance with Section 3. All
Supplied Goods delivered pursuant to the terms of the Supply Agreement shall be
suitably packed for shipment by Inspire, marked for shipment to the destination
point indicated in Kissei's purchase order. All Supplied Goods will be
delivered CIF the arrival point designated by Kissei. The shipping packaging
shall be in accordance with the package specifications which shall be approved
by both Parties from time to time.
5. Conformity; Specifications; Quality Control.
(a) All quantities of Supplied Goods supplied by Inspire pursuant to
the Supply Agreement will comply with all applicable Specifications and
applicable Manufacturing Standards and shall adhere to all applicable
governmental laws and regulations relating to the manufacture, sale
D-2
<PAGE>
and shipment of the respective Supplied Goods at the time they arrive at the
point designated by Kissei.
(b) Kissei shall have the right to change the Specifications, from
time to time, to accommodate the demands or requests of any Regulatory
Authority at any time during the term of the Supply Agreement on not less than
12 months' prior written notice to Inspire. Any costs or expenses incurred by
Inspire in connection with such changes shall be borne by Kissei, and Inspire
shall be entitled to include such costs and expenses in invoices submitted to
Kissei pursuant to Section 7.1(a) of the License Agreement, from time to time.
In addition, other changes to the Specifications shall be made only upon the
mutual consent of the Parties. In this case, any costs or expenses derived from
such changes shall be paid by the Party which demands or requests such changes.
In any such event, Inspire shall use reasonable commercial efforts to meet any
of the foregoing changes.
(c) Inspire shall conduct, or cause to be conducted, quality control
testing of Supplied Goods prior to shipment in accordance with the applicable
Specifications and applicable Manufacturing Standards as are in effect from time
to time and such other quality control testing procedures agreed to by the
Parties from time to time (collectively, the "Testing Methods"). Inspire or its
designee shall retain records pertaining to such testing. Each shipment of
Supplied Goods hereunder shall be accompanied by a certified quality control
protocol and certificate of analysis for each lot of Supplied Goods therein as
well as such customs and other documentation as is necessary or appropriate.
6. Acceptance/Rejection; Interim Replacement.
(a) Kissei may test or cause to be tested Supplied Goods in accordance
with Kissei's customary procedures within 30 days of its receipt at Kissei's
plant or that of its designee. Kissei or its designee shall have the right to
reject any shipment of Supplied Goods made to it under this Agreement that does
not meet the applicable Specifications and applicable Manufacturing Standards
when received by it at such destination when tested in accordance with the
Testing Methods. All claims by Kissei of non-conforming Supplied Goods shall be
deemed waived unless made by Kissei in writing and received by Inspire within
such 30-day period.
(b) All claims of non-conforming Supplied Goods shall be accompanied
by a report of analysis (including a sample of the Supplied Goods from the batch
analyzed) of the allegedly non-conforming Supplied Goods that shall have been
made by Kissei or its designee, using the Testing Methods. If, after its own
analysis of such sample, Inspire confirms such non-conformity, then Inspire
shall replace such shipment at its expense, including charges incurred by Kissei
for shipping and/or storage, if applicable. If, after its own analysis, Inspire
does not confirm such non-conformity, the Parties shall agree to retest the
shipment or otherwise in good faith attempt to agree upon a settlement of the
issue. In the event that the Parties cannot resolve the issue, the Parties
shall submit the disputed Supplied Goods to an independent testing laboratory,
to be agreed
D-3
<PAGE>
upon by the Parties, for testing in accordance with the Testing Methods.
Notwithstanding Section 14.13 of the License Agreement, the findings of such
laboratory shall be binding on the Parties, absent manifest error. Expenses of
such testing shall be borne by the Party adversely affected by such findings.
In the event that any such shipment or batch thereof is ultimately agreed or
found not to meet the applicable Specifications or Manufacturing Standards,
Inspire agrees to replace such shipment at its expense, including charges
incurred by Kissei for shipping and/or storage, if applicable. Kissei shall
return any such rejected shipment to Inspire if so instructed by Inspire, at
Inspire's expense.
(c) During the pendency of any dispute concerning the conformity of a
shipment of Supplied Goods to the applicable Specifications and applicable
Manufacturing Standards, Inspire shall replace the shipment under dispute, at
the request of Kissei. Such replacement Supplied Goods shall be ordered in
accordance with Section 3.
(d) Notwithstanding any other provision of the License Agreement or
the Supply Agreement, Kissei shall not be required to pay for any shipment of
Supplied Goods that fails to meet the applicable Specifications, but Kissei
shall be obligated to pay in full for any rejected shipment of Supplied Goods
that is subsequently determined to meet the applicable Specifications. In the
event that Kissei pays for a shipment of Supplied Goods and subsequently rejects
such shipment in accordance with the terms of the Supply Agreement, Kissei shall
be entitled to a refund or credit equal to the amount paid with respect to such
rejected shipment. Any such refund or credit shall be reflected in the
statements submitted by Kissei pursuant to Section 7.1(b) of the License
Agreement.
(e) Based on the information currently available regarding the
Finished Product, Inspire anticipates that the commercial shelf-life of Finished
Product will be at least 24 months. The targeted commercial shelf-life of
Finished Product is 36 months.
7. Third Party Manufacturers.
(a) The Parties acknowledge and agree that Inspire shall satisfy its
supply obligations to Kissei hereunder through arrangements with Third Parties
engaged to perform services or supply facilities or goods (including Compound,
Formulated Material, Finished Product and Delivery Systems) in connection with
the manufacture, testing, and/or packaging of Supplied Goods (each, a "Third
Party Manufacturer"). Inspire shall ensure that all such facilities comply with
the applicable Manufacturing Standards in effect from time to time, and such
Third Party Manufacturers shall permit Kissei to inspect such facilities, at
Kissei=s request at any time during the term of the Supply Agreement or the
License Agreement.
(b) Inspire acknowledges and agrees that such Third Party
Manufacturers shall be subject to Section 5(a) and that use of a Third Party
Manufacturer shall not relieve Inspire of its obligations under Section 5(a).
D-4
<PAGE>
8. Manufacturing Plan. At least 12 months prior to the anticipated launch
of the Product, Inspire shall prepare a proposed manufacturing plan for Supplied
Goods, including, without limitation, plans and timing for establishing Third
Party Manufacturers and back-up and/or secondary Third Party Manufacturers (to
the extent feasible and practicable) for review and approval by the Joint
Development Committee (the "Manufacturing Plan"). Upon approval of the
Manufacturing Plan by the Joint Development Committee, Inspire shall use
commercially reasonable efforts to comply with the Manufacturing Plan.
9. Shortage of Supply. Inspire shall notify Kissei: (i) within 30 days
of Inspire's receipt of a firm order from Kissei as provided in Section 3, or
(ii) immediately upon becoming aware of an event of force majeure under Section
13 of the License Agreement or any other event that would render Inspire unable
to supply the quantity of Supplied Goods to Kissei that Inspire is required to
supply hereunder, if Inspire is unable to supply such quantities of Supplied
Goods. In such event, Inspire shall implement all reasonable measures to remedy
the shortage.
10. Inability to Supply.
(a) In the event of any Inability to Supply (as defined herein) with
respect to any Supplied Goods, Kissei shall have the option, exercisable by
providing Inspire written notice thereof, to manufacture (or have manufactured)
such Supplied Goods for sufficient supply thereof in the Territory in order to
settle the Inability to Supply. In such event: (i) Inspire shall provide to
Kissei copies of all documentation within Inspire's possession and control that
is reasonably necessary to enable Kissei to manufacture (or have manufactured)
Supplied Goods with respect to which an Inability to Supply has occurred; (ii)
Inspire shall provide such technical assistance to Kissei as is reasonably
necessary to enable Kissei to manufacture (or have manufactured) such Supplied
Goods pursuant to the applicable Specifications and Manufacturing Standards; and
(iii) Inspire shall reasonably cooperate with Kissei to establish an alternative
supply, including sources of materials. Notwithstanding the foregoing, Inspire
shall continue to resolve the Inability to Supply as provided in Section 9.
Once Inspire has resolved the Inability to Supply, Inspire shall notify Kissei
and shall resume manufacturing of such Supplied Good to meet Kissei's
requirements as soon as practicable.
(b) For purposes of this Section 10, an "Inability to Supply" shall
mean, with respect to any Supplied Goods, Inspire's failure to supply Kissei
with quantities of such Supplied Goods meeting the applicable Specifications and
Manufacturing Standards: (i) in any two consecutive calendar quarters, equal to
at least 70%, or (ii) in any 12-month period, equal to at least 80%, of the
lesser of (i) the quantity of such Supplied Goods ordered by Kissei for the
applicable period, and (ii) the maximum quantity of such Supplied Goods that
Inspire is obligated to supply under Section 3 for the applicable period.
(c) The remedy provided in this Section 10 shall be Kissei's sole
remedy for Inability to Supply unless such Inability to Supply results from a
material breach of Inspire's material obligations contained in the Supply
Agreement. However, in the event that such Inability to Supply
D-5
<PAGE>
results from a material breach of Inspire=s material obligations contained in
the Supply Agreement, the remedy provided in this Section 10 shall be in
addition to any other remedies available to Kissei at equity or in law.
11. Right to Manufacture. In the event that Kissei exercised the option
referred to in Section 10(a), Inspire hereby grants to Kissei, and Kissei hereby
accepts, a royalty-free license (the "Manufacturing License") under the Licensed
Technology necessary to make, have made, use and sell such Supplied Goods in the
Territory for use in applications within the Field. Such Manufacturing License
shall be subject to all other terms and conditions of the Supply Agreement. In
such event, Kissei shall be relieved of its obligation to purchase the
quantities of Supplied Goods from Inspire, to the extent that Kissei has elected
to exercise the Manufacturing License.
12. Investigation; Recall. In the event that the Supplied Product
supplied hereunder, or any portion thereof, should be alleged or proven not to
meet the applicable Specifications, applicable Manufacturing Standards or other
applicable mandatory standards for same, Kissei shall notify Inspire
immediately, and both Parties shall cooperate fully regarding the investigation
and disposition of any such matter. Each Party shall bear all costs and
expenses associated with any Product recall that is due to or arises from an act
or omission with respect to which such Party has an obligation to provide
indemnification under Section 11 of the License Agreement.
13. Supply Following Expiration of the License Agreement. Following the
expiration of the term of the License Agreement in its entirety pursuant to
Section 12.1(b) of the License Agreement, the Parties shall hold discussions
concerning the desirability and feasibility of Inspire's continued supply of
Supplied Goods to Kissei. If the Parties agree that such an arrangement would
be desirable and feasible, then they shall negotiate in good faith the terms
upon which such supply shall be made.
D-6
<PAGE>
Schedule 1 - Maximum/minimum Orders under Section 3
- ----------
The following examples are intended to illustrate the operation of Section 3
regarding the maximum quantity of Supplied Goods that Inspire is required to
accept orders for, and the minimum quantity of Supplied Goods that Kissei is
required to purchase (and Inspire is entitled to supply), with respect to any
particular Q1.
Assumptions
1. The following examples are restricted to the supply of Finished Product.
Identical calculations would be made with respect to Inspire's supply of
Delivery Systems but are omitted for purposes of clarity.
2. "Forecast 1" refers to the quarterly forecast for Finished Product to be
supplied by Inspire during the fourth calendar quarter of 2001 (the
"Subject Quarter") which forecast is delivered to Inspire by Kissei on or
before the first day of the fourth calendar quarter of 2000.
3. "Forecast 2" refers to the quarterly forecast for Finished Product to be
supplied by Inspire during the Subject Quarter which forecast is delivered
to Inspire by Kissei on or before the first day of the first calendar
quarter of 2001.
4. "Forecast 3" refers to the quarterly forecast for Finished Product to be
supplied by Inspire during the Subject Quarter which forecast is delivered
to Inspire by Kissei on or before the first day of the second calendar
quarter of 2001.
Example 1
Kissei's forecasts for Finished Product for the Subject Quarter, as provided
over a three-quarter period, are as follows:
====================================================================
Forecast 1 Forecast 2 Forecast 3
====================================================================
* * *
====================================================================
The first forecast (Forecast 1), provided to Inspire before the start of the
fourth quarter 2000, forecasts * of Finished Product. The second
forecast (Forecast 2), provided to Inspire before the start of the first quarter
2001, forecasts * of Finished Product. The third forecast (Forecast 3),
provided to Inspire before the start of the second quarter 2001, forecasts *
units of Finished Product.
*[CONFIDENTIAL TREATMENT REQUESTED]
D-7
<PAGE>
Kissei's forecasts for Finished Product have increased over this three-quarter
period. Pursuant to clause (i) of Section 3(a), Kissei is entitled to purchase,
and Inspire is obligated to deliver no more Finished Product than the least of:
(A) [*] of the quantity of Finished Product reflected in Forecast 1
(*);
(B) [*] of the quantity of Finished Product reflected in Forecast 2
(*); or
(C) the quantity of Finished Product reflected in Forecast 3 (*).
Therefore, Inspire will not be obligated to accept orders for, or supply, more
than * of Finished Product during the Subject Quarter.
Example 2
Kissei's forecasts for Finished Product for the Subject Quarter, as provided
over a three-quarter period, are as follows:
====================================================================
Forecast 1 Forecast 2 Forecast 3
====================================================================
* * *
====================================================================
Kissei's forecasts for Finished Product have decreased over this three-quarter
period. Pursuant to clause (ii) of Section 3(a), Kissei is required to
purchase, and Inspire is entitled to supply, no less Finished Product than the
greatest of:
(A) [*] of the quantity of Finished Product reflected in Forecast 1 (*);
(B) [*] of the quantity of Finished Product reflected in Forecast 2 (*);
or
(C) the quantity of Finished Product reflected in Forecast 3 (*).
Therefore, Kissei is obligated to purchase, and Inspire is entitled to supply, *
of Finished Product during the Subject Quarter.
Example 3
Kissei's forecasts for Finished Product for the Subject Quarter, as provided
over a three-quarter period, are as follows:
*[CONFIDENTIAL TREATMENT REQUESTED]
D-8
<PAGE>
====================================================================
Forecast 1 Forecast 2 Forecast 3
====================================================================
* * *
====================================================================
Kissei's forecasts for Finished Product have decreased between the two most
recent forecasts. Pursuant to clause (ii) of Section 3(a), Kissei is required
to purchase, and Inspire is entitled to supply, no less Finished Product than
the greatest of:
(A) * of the quantity of Finished Product
reflected in Forecast 1 (*);
(B) [CONFIDENTIAL TREATMENT REQUESTED] of the quantity of Finished Product
reflected in Forecast 2 (*); or
(C) the quantity of Finished Product reflected in Forecast 3 (*).
Therefore, Kissei is obligated to purchase, and Inspire is entitled to supply,
* of Finished Product during the Subject Quarter.
Example 4
Kissei's forecasts for Finished Product for the Subject Quarter, as provided
over a three quarter period, are as follows:
====================================================================
Forecast 1 Forecast 2 Forecast 3
====================================================================
* * *
====================================================================
Kissei's forecasts for Finished Product have increased between the two most
recent forecasts. Pursuant to clause (i) of Section 3(a), Kissei is entitled to
purchase, and Inspire is obligated to deliver no more Finished Product than the
least of:
(A) * of the quantity of Finished Product
reflected in Forecast 3 (*);
(B) * of the quantity of Finished Product
reflected in Forecast 2 (*); or
(C) the quantity of Finished Product reflected in Forecast 3 (*).
Therefore, Inspire will not be obligated to accept orders for, or supply, more
than * of Finished Product during the Subject Quarter.
* [CONFIDENTIAL TREATMENT REQUESTED]
D-9
<PAGE>
EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Agreement dated as of September 10, 1998 is entered into by and among
Inspire Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and
Kissei Pharmaceuticals Co., Ltd. (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Series C
Convertible Preferred Stock Purchase Agreement of even date herewith (the
"Purchase Agreement"); and
WHEREAS, the Company and the Purchaser desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"1997 Registration Rights Agreement" shall have the meaning set forth
----------------------------------
in Section 2(b).
"Commission" means the Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.001 par value per share, of
------------
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in Section
---------------------
"Registrable Shares" means (i) the shares of Common Stock issued or
------------------
issuable upon conversion of the Shares, (ii) any shares of Common Stock, and any
shares of Common Stock issued or issuable upon the conversion or exercise of any
other securities, and (iii) any other shares of Common Stock issued in respect
of such shares (because of stock splits, stock
1
<PAGE>
dividends, reclassifications, recapitalizations, or similar events); provided,
--------
however, that shares of Common Stock which are Registrable Shares shall cease to
- -------
be Registrable Shares (i) upon any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act or (ii) upon any sale in any manner to a
person or entity which, by virtue of Section 11 of this Agreement, is not
entitled to the rights provided by this Agreement. Wherever reference is made in
this Agreement to a request or consent of holders of a certain percentage of
Registrable Shares, the determination of such percentage shall include shares of
Common Stock issuable upon conversion of the Shares even if such conversion has
not yet been effected.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Shares" shall have the meaning specified in Subsection 1.1(b) of the
------
Purchase Agreement.
"Selling Stockholders" shall mean all stockholders who desire to sell
--------------------
shares of stock pursuant to registration rights granted under (i) this Agreement
and (ii) the 1997 Registration Rights Agreement.
"Stockholder" means the Purchaser and any persons or entities to whom
-----------
the rights granted under this Agreement are transferred by the Purchaser, its
successors or assigns pursuant
to Section 11 hereof.
2. Incidental Registration
-----------------------
a. Whenever the Company proposes to file a Registration Statement at
any time and from time to time, it will, prior to such filing, give written
notice to all Stockholders of its intention to do so and, upon the written
request of a Stockholder or Stockholders given within 20 days after the Company
provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its best efforts
to cause all Registrable Shares which the Company has been requested by such
Stockholder or Stockholders to register to be registered under the Securities
Act to the extent necessary to permit their sale or other disposition in
accordance with the intended methods of distribution specified in the request of
such Stockholder or Stockholders; provided that the Company shall have the right
to postpone or withdraw any registration effected pursuant to this Section 2
without obligation to any Stockholder.
b. In connection with any registration under this Section 2
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided that such terms must be consistent with
this Agreement). If in the opinion of the managing underwriter it is appropriate
because of marketing factors to limit the number of Registrable Shares and other
shares of Common Stock of the Company (including shares of Common Stock issued
or issuable upon conversion of shares of any currently unissued series of
preferred stock of the Company) (the "Other Shares") with registration rights
granted pursuant to the Investors' Rights Agreement,
2
<PAGE>
dated as of April 8, 1997, by and among the Company and the Investors named
therein, as amended by Amendment No. 1 to Series B Convertible Preferred Stock
Purchase Agreement and Second Amended and Restated Stockholders' Agreement
effective as of June 30, 1997, and as further amended by Amendment No. 2 to
Series B Convertible Preferred Stock Purchase Agreement and Second Amended and
Restated Stockholders' Agreement effective as of September 9, 1997 (as amended,
the "1997 Registration Rights Agreement") to be included in the offering, then
the Company shall be required to include in the registration only that number
of Registrable Shares and Other Shares, if any, which the managing underwriter
believes should be included therein; provided that no persons or entities other
than the Company, the Stockholders and persons or entities holding registration
rights shall be permitted to include securities in the offering. If the number
of Registrable Shares and Other Shares to be included in the offering in
accordance with the foregoing is less than the total number of shares which the
holders of Registrable Shares and Other Shares have requested to be included,
then the number of Registrable Shares and Other Shares to be included in the
registration statement by holders of Registrable Securities and holders of Other
Shares shall be reduced by excluding first up to all shares proposed to be
included in the registration statement by holders of the Registrable Shares and
any further reduction shall be among the holders of Other Shares pursuant to the
provisions of the 1997 Registration Rights Agreement. If any holder would thus
be entitled to include more securities than such holder requested to be
registered, the excess shall be allocated among other requesting holders pro
rata based upon their total ownership of shares of Common Stock (giving effect
to the conversion into Common Stock of all securities convertible thereinto).
3. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
a. file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
b. as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or 120 days after
the effective date thereof;
c. as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Stockholder; and
d. as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts
3
<PAGE>
and things that may be necessary or desirable to enable the selling Stockholders
to consummate the public sale or other disposition in such states of the
Registrable Shares owned by the selling Stockholder; provided, however that the
-------- -------
Company shall not be required in connection with this paragraph (d) to qualify
as a foreign corporation or execute a general consent to service of process in
any jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
4. Allocation of Expenses. The Company will pay all Registration Expenses
----------------------
of all registrations under this Agreement. For purposes of this Section 4, the
term "Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Agreement, including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, fees and expenses of
counsel for the Company and the fees and expenses of one counsel selected by the
Selling Stockholders pursuant to the provisions of the 1997 Registration Rights
Agreement and this Agreement to represent all Selling Stockholders (whether
governed by the 1997 Registration Rights Agreement, or this Agreement, or both),
state Blue Sky fees and expenses, and the expense of any special audits incident
to or required by any such registration, but excluding underwriting discounts,
selling commissions and the fees and expenses of Selling Stockholders' own
counsel (other than the counsel selected to represent all Selling
Stockholders).
5. Indemnification and Contribution.
--------------------------------
a. In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company will reimburse such seller, underwriter
and each such controlling person for any legal or any other expenses reasonably
incurred by such seller, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company
- -------- --------
4
<PAGE>
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
omission made in such Registration Statement, preliminary prospectus or final
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by or on
behalf of such seller, underwriter or controlling person specifically for use in
the preparation thereof.
b. In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment or
supplement; provided, however, that the obligations of such Stockholders
--------- --------
hereunder shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such registration.
c. Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided, that counsel for the Indemnifying
---------
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
-------- -------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 5. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
-------- -------
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any
5
<PAGE>
judgment or settle such claim or litigation without the prior written consent of
the Indemnifying Party.
d. In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
5; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
required to contribute any amount in excess of the proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement, and (B)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11 (f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.
6. Information by Holder. Each Stockholder including Registrable
---------------------
Shares in any registration shall furnish to the Company such information
regarding such Stockholder and the distribution proposed by such Stockholder as
the Company may reasonably request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
7. "Stand-Off" Agreement. Each Stockholder, if requested by the
--------------------
Company and the managing underwriter of an offering by the Company of Common
Stock or other securities of the Company pursuant to a Registration Statement,
shall agree not to sell publicly or otherwise transfer or dispose of any
Registrable Shares or other securities of the Company held by such Stockholder
for a specified period of time (not to exceed 180 days) following the effective
date of such Registration Statement; provided,that:
--------
a. such agreement shall only apply to the first Registration
Statement covering Common Stock to be sold on its behalf to the public in an
underwritten offering; and
b. all Stockholders holding not less than the number of shares
of Common Stock held by such Stockholder (including shares of Common Stock
issuable upon the conversion of Shares, or other convertible securities, or upon
the exercise of options, warrants or rights) and all officers and directors of
the Company enter into similar agreements.
8. Rule 144 Requirements. After the earliest of (i) the closing of
---------------------
the sale of securities of the Company pursuant to a Registration Statement, (ii)
the registration by the
6
<PAGE>
Company of a class of securities under Section 12 of the Exchange Act, or (iii)
the issuance by the Company of an offering circular pursuant to Regulation A
under the Securities Act, the Company agrees to:
a. comply with the requirements of Rule 144(c) under the
Securities Act with respect to current public information about the Company;
b. use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
c. furnish to any holder of Registrable Shares upon request (i)
a written statement by the Company as to its compliance with the requirements of
said Rule 144(c), and the reporting requirements of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such
holder may reasonably request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without registration.
9. Mergers, Etc. The Company shall not, directly or indirectly, enter
------------
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to be references to
the securities which the Stockholders would be entitled to receive in exchange
for Registrable Shares under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Section 9 shall not apply in the
- -------- -------
event of any merger, consolidation or reorganization in which the Company is not
the surviving corporation if all Stockholders are entitled to receive in
exchange for their Registrable Shares consideration consisting solely of (i)
cash, (ii) securities of the acquiring corporation which may be immediately sold
to the public without registration under the Securities Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within 90 days of completion of the transaction for resale to the
public pursuant to the Securities Act.
10. Termination. All of the Company's obligations to register Registrable
-----------
Shares under this Agreement shall terminate five (5) years after the closing of
a firm commitment underwritten public offering pursuant to an effective
registration statement under the, Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public.
11. Transfers of Rights. This Agreement, and the rights and obligations of
-------------------
the Purchaser hereunder, may be assigned by the Purchaser to any person or
entity to which Shares are transferred by the Purchaser, and such transferee
shall be deemed a "Purchaser" for purposes of this Agreement; provided that the
transferee provides written notice of such assignment to the Company.
7
<PAGE>
12. General.
-------
a. Notices. All notices, requests, consents, and other
-------
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by first class certified or registered mail, return receipt
requested, postage prepaid:
If to the Company, at Inspire Pharmaceuticals, Inc., 4222 Emperor
Boulevard, Suite 470, Durham, NC 27703 USA, Attention: President, or at such
other address or addresses as may have been furnished in writing by the Company
to the Purchaser; or
If to the Purchaser, at 19-48, Yoshino, Matsumoto-City, Nagano-Prefectuer,
399-8710 JAPAN, Attention: President, or at such other address or addresses as
may have been furnished to the Company in writing by the Purchaser.
Notices provided in accordance with this Section 12(a) shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
b. Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
c. Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least 50% of the Registrable Shares; provided, that this Agreement may be
--------
amended with the consent of the holders of less than all Registrable Shares only
in a manner which affects all Registrable Shares in the same fashion. No waivers
of or exceptions to any term, condition or provision of this Agreement, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
d. Counterparts. This Agreement may be executed in one or more
-------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
e. Severability. The invalidity or unenforceability of any provision
------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
f. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
8
<PAGE>
Executed as of the date first written above.
COMPANY:
INSPIRE PHARMACEUTICALS, INC.
By: /s/ David Drutz
---------------
David Drutz, M.D.
Vice Chairman
PURCHASER:
KISSEI PHARMACEUTICALS CO., LTD.
By: /s/ Mutsuo Kanzawa
------------------
Mutsuo Kanzawa
President and Chief Executive Officer
9
<PAGE>
EXHIBIT 10.15
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
DEVELOPMENT, LICENSE
AND SUPPLY AGREEMENT
BETWEEN
INSPIRE PHARMACEUTICALS, INC.
AND
SANTEN PHARMACEUTICAL CO., LTD.
DATED AS OF
DECEMBER 16, 1998
<PAGE>
TABLE OF CONTENTS
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Page
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1. DEFINITIONS........................................................ 1
2. REPRESENTATIONS AND WARRANTIES..................................... 5
2.1 Representations and Warranties of Both Parties................ 5
2.2 Representations and Warranties of Inspire..................... 5
2.3 Representations and Warranties of Santen...................... 6
3. COORDINATING COMMITTEE............................................. 6
3.1 Members; Chairperson.......................................... 6
3.2 Responsibilities.............................................. 7
3.3 Meetings...................................................... 7
3.4 Term.......................................................... 8
3.5 Expenses...................................................... 8
4. DEVELOPMENT PROGRAM................................................ 8
4.1 Generally..................................................... 8
4.2 Specific Santen Responsibilities.............................. 8
4.3 Inspire Activities............................................ 9
4.4 Regulatory Matters............................................ 11
4.5 Funding....................................................... 12
4.6 Liability..................................................... 12
4.7 Termination................................................... 12
5. GRANT OF RIGHTS; MARKETING......................................... 12
5.1 Development License........................................... 12
5.2 Commercialization License..................................... 13
5.3 Sublicensing.................................................. 13
5.4 Grantback Rights.............................................. 14
5.5 Marketing Obligations, Rights................................. 14
5.6 Trademarks.................................................... 14
5.7 Adverse Reaction Reporting.................................... 14
6. MILESTONES AND ROYALTIES........................................... 16
6.1 Milestone Payments............................................ 16
6.2 Transfer Price................................................ 16
6.3 Royalty Payments.............................................. 17
6.4 Reduction for Generic Competition............................. 17
6.5 Obligation to Pay Royalties................................... 17
(i)
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TABLE OF CONTENTS
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(continued)
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7. PAYMENTS AND REPORTS............................................... 17
7.1 Payments...................................................... 17
7.2 Mode of Payment............................................... 17
7.3 Records Retention............................................. 18
7.4 Audit Request................................................. 18
7.5 Cost of Audit................................................. 18
7.6 No Non-Monetary Consideration for Sales....................... 19
7.7 Taxes......................................................... 19
8. MANUFACTURE AND SUPPLY............................................. 19
8.1 Supply; Processing of Finished Product........................ 19
8.2 Forecasts..................................................... 20
8.3 Orders........................................................ 20
8.4 Delivery...................................................... 21
8.5 Conformity; Specifications; Quality Control................... 21
8.6 Acceptance/Rejection; Interim Replacement..................... 22
8.7 Third Party Manufacturers..................................... 23
8.8 Shortage of Supply............................................ 24
8.9 Inability to Supply; Election of Remedies..................... 24
8.10 Right to Manufacture.......................................... 25
9. OWNERSHIP; PATENTS................................................. 25
9.1 Ownership..................................................... 25
9.2 Patent Maintenance............................................ 26
9.3 Patent Enforcement............................................ 27
9.4 Infringement Action by Third Parties.......................... 28
10. PUBLICATION; CONFIDENTIALITY....................................... 28
10.1 Notification................................................. 28
10.2 Review....................................................... 29
10.3 Exclusions................................................... 29
10.4 Confidentiality; Exceptions.................................. 29
10.5 Exceptions to Obligation..................................... 30
10.6 Limitations on Use........................................... 30
10.7 Remedies..................................................... 30
11. RECALL; INDEMNIFICATION............................................ 30
11.1 Investigation; Recall........................................ 30
(ii)
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TABLE OF CONTENTS
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(continued)
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11.2 Indemnification by Santen................................... 31
11.3 Indemnification by Inspire.................................. 31
11.4 Notice of Indemnification................................... 32
11.5 Complete Indemnification.................................... 32
12. TERM; TERMINATION................................................. 32
12.1 Term........................................................ 32
12.2 Termination for Cause....................................... 32
12.3 Effect of Expiration or Termination......................... 33
12.4 Accrued Rights; Surviving Obligations....................... 34
13. FORCE MAJEURE..................................................... 35
13.1 Events of Force Majeure..................................... 35
14. MISCELLANEOUS..................................................... 35
14.1 Relationship of Parties..................................... 35
14.2 Assignment.................................................. 35
14.3 Books and Records........................................... 36
14.4 Further Actions............................................. 36
14.5 Notice...................................................... 36
14.6 Use of Name................................................. 37
14.7 Public Announcements........................................ 37
14.8 Waiver...................................................... 37
14.9 Compliance with Law......................................... 37
14.10 Severability................................................ 37
14.11 Amendment................................................... 37
14.12 Governing Law; English Original Controlling................. 37
14.13 Arbitration................................................. 38
14.14 Entire Agreement............................................ 38
14.15 Parties in Interest......................................... 38
14.16 Descriptive Headings........................................ 38
14.17 Counterparts................................................ 39
(iii)
<PAGE>
TABLE OF CONTENTS
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(continued)
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LIST OF EXHIBITS
----------------
EXHIBIT A INSPIRE'S COST OF COMPOUND
EXHIBIT B INITIAL PATENTS
EXHIBIT C INITIAL MEMBERS OF COORDINATING COMMITTEE
EXHIBIT D MAXIMUM/MINIMUM ORDERS UNDER SECTION 8.3
(iv)
<PAGE>
DEVELOPMENT, LICENSE
AND SUPPLY AGREEMENT
THIS DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (this "Agreement"), dated as
of December 16, 1998, is entered into by and between Inspire Pharmaceuticals,
Inc., a corporation organized and existing under the laws of the State of
Delaware, having offices located at 4222 Emperor Boulevard, Suite 470, Durham,
North Carolina 27703, USA ("Inspire"), and Santen Pharmaceutical Co., Ltd., a
corporation organized under the laws of Japan, having offices located at 3-9-19
Shimoshinjo, Higashiyodogawa-ku, Osaka, 533-8651, Japan ("Santen").
PRELIMINARY STATEMENTS
----------------------
A. Inspire owns, and/or has exclusive rights to, the Patents and Know-How
in existence as of the Effective Date relating to the Compound.
B. Santen has the personnel, facilities and expertise necessary for the
development and commercialization of the Product in the Territory.
C. Santen wishes to develop and commercialize the Product in the Territory,
and Inspire wishes to have Santen do so, upon the terms and conditions set forth
in this Agreement. In connection therewith, Santen desires to obtain, and
Inspire desires to grant to Santen, an exclusive license under the Licensed
Technology with respect to the commercialization of the Product in the Territory
for applications in the Field, subject to Inspire's right to manufacture and
supply Compound for Santen, all on the terms and conditions set forth below.
D. Simultaneously with the execution of this Agreement, the Parties are
entering in that certain Stock Purchase Agreement (the "Stock Purchase
Agreement") and the documents ancillary thereto, all dated of even date
herewith, pursuant to which Santen is purchasing shares of Series D Preferred
Stock of Inspire.
NOW, THEREFORE, in consideration of the foregoing Preliminary Statements
and the mutual agreements and covenants set forth herein, the Parties hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set
forth in this Section 1 unless context dictates otherwise:
1.1 "Affiliate," with respect to any Party, shall mean any entity
controlling, controlled by, or under common control with, such Party. For these
purposes, "control" shall refer to: (i) the possession, directly or indirectly,
of the power to direct the management or policies of an entity, whether through
the ownership of voting securities, by contract or otherwise, or (ii) the
ownership, directly or indirectly, of at least 50% of the voting securities or
other ownership interest of an entity.
<PAGE>
1.2 "cGMP" shall mean current Good Manufacturing Practice as defined in
Parts 210 and 211 of Title 21 of the U.S. Code of Federal Regulations, as may be
amended from time to time, or any successor thereto.
1.3 "Compound" shall mean the chemical compound designated as INS365, whose
chemical name is P1, P4-Di(uridine 5'-tetraphosphate), and all sodium salts
thereof.
1.4 "Compound Specifications" shall mean the specifications for the
Compound agreed upon by the Parties, in accordance with Section 8.1(c), in
consideration of the regulatory requirements in each country in the Territory,
as may be amended from time to time.
1.5 "Confidential Information" shall have the meaning assigned to such term
in Section 10.4.
1.6 "Coordinating Committee" shall have the meaning assigned to such term
in Section 3.1.
1.7 "Cost of Compound" shall mean Inspire's fully burdened costs associated
with the manufacture of the Compound, as determined pursuant to Exhibit A.
1.8 "Development Program" shall mean the development program with respect
to the Product conducted by Santen to obtain Registration of the Product in each
country in the Territory pursuant to Section 4.
1.9 "Effective Date" shall mean the date of this Agreement.
1.10 "Executive Officers" shall have the meaning assigned to such term in
Section 3.2(b).
1.11 "Field" shall mean the therapeutic treatment of ocular surface
diseases (including dry eye, regardless of how caused) in humans.
1.12 "First Commercial Sale" shall mean the first sale for use or
consumption by the general public of the Product in any country in the Territory
after all required Registrations have been granted, or such sale is otherwise
permitted, by the Regulatory Authority in such country.
1.13 "Generic Product" shall mean, on a country-by-country basis, the
ophthalmic formulation of any product for use in the Field that contains the
Compound as an active ingredient: (i) the manufacture, use or sale of which is
not covered by a Licensed Claim in such country, and (ii) [CONFIDENTIAL
TREATMENT REQUESTED].
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1.14 "IND" shall mean any filing made with the Regulatory Authority in any
country in the Territory for initiating clinical trials in such country with
respect to the Product.
1.15 "Invention" shall mean any new or useful process, manufacture,
compound or composition of matter relating to the Compound or the Product
(including, without limitation, the formulation, delivery or use thereof),
whether patentable or unpatentable, or any improvement thereof, that is
conceived or first reduced to practice or demonstrated to have utility during
the term of this Agreement.
1.16 "Know-how" shall mean any and all Inventions, improvements,
discoveries, claims, formulae, processes, trade secrets, technologies and know-
how (including confidential data and Confidential Information) that is
generated, owned or controlled by Inspire at any time before or during the term
of this Agreement relating to, derived from or useful for the use or sale of the
Compound or the Product, including, without limitation, synthesis, preparation,
recovery and purification processes and techniques, control methods and assays,
chemical data, toxicological and pharmacological data and techniques, clinical
data, medical uses, product forms and product formulations and specifications.
1.17 "Licensed Claim" shall mean any claim of any Patent that relates to
and is necessary for the use and sale of the Compound or the Product, which
claim has not been held invalid or unenforceable by decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, and which is not admitted to be invalid through
disclaimer or otherwise not admitted by Inspire to be invalid.
1.18 "Licensed Technology" shall mean the Licensed Claims and Know-how,
collectively.
1.19 "Manufacturing Standards" shall mean, with respect to the Compound,
cGMP and such additional manufacturing specifications or standards as may be
established by mutual agreement of the Parties from time to time, in accordance
with Section 8.1(c).
1.20 "Net Sales" shall mean, with respect to the Product, the gross amount
invoiced for the Product by Santen, its Affiliates and Sublicensees, if any, in
arm's length sales to Third Parties, commencing with the First Commercial Sale,
less deductions for: (i) trade, quantity and/or cash discounts, allowances and
rebates actually allowed or given; (ii) freight, postage, shipping insurance and
other transportation expenses (if separately identified in such invoice); (iii)
credits or refunds actually allowed for rejections, defects or recalls of such
Product, outdated or returned Product, or because of rebates or retroactive
price reductions; and (iv) sales, value-added, excise taxes, tariffs and duties,
and other taxes directly related to the sale, to the extent that such items are
included in the gross invoice price (but not including taxes assessed against
the income derived from such sale). Such amounts shall be determined from the
books and records maintained by Santen, its Affiliates or Sublicensees, as
applicable.
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<PAGE>
1.21 "Party" shall mean Inspire or Santen and, when used in the plural,
shall mean Inspire and Santen.
1.22 "Patents" shall mean the patents set forth on Exhibit B, and any other
patents or patent applications in the Territory owned or controlled by Inspire
during the term of this Agreement that relate to the Compound or the Product,
together with any patents that may issue therefor in the Territory, including
any and all extensions, renewals, continuations, continuations-in- part,
divisions, patents-of-additions, reissues, supplementary protection certificates
or foreign counterparts of any of the foregoing.
1.23 "Product" shall mean all ophthalmic formulations of any product for
use in the Field that contains the Compound as an active ingredient, the
manufacture, use or sale of which either is: (i) based upon, derived from or
related to any of the Know-how; and/or (ii) covered by one or more Licensed
Claims and, but for this Agreement, would constitute an infringement (whether
directly, contributorily or by inducement) thereof.
1.24 "Registration" shall mean, with respect to each country in the
Territory, approval of the Registration Application for the Product filed in
such country, including pricing or reimbursement, where applicable, by the
Regulatory Authority in such country.
1.25 "Registration Application" shall mean any filing(s) made with the
Regulatory Authority in any country in the Territory for regulatory approval of
the manufacture and sale of the Product in such country.
1.26 "Regulatory Authority" shall mean the authority(ies) in each country
in the Territory with responsibility for granting regulatory approval for the
manufacturing and sale of the Product in such country, and any successor(s)
thereto.
1.27 "Stock Purchase Agreement" shall have the meaning assigned to such
term in the Preliminary Statements.
1.28 "Strategic Partners" shall have the meaning assigned to such term in
Section 4.3(e).
1.29 "Sublicensee" shall mean a Third Party to which Santen has granted a
sublicense to develop, manufacture, use or sell the Product in any country in
the Territory, pursuant to Section 5.3.
1.30 "Territory" shall mean Japan, China, South Korea, the Philippines,
Thailand, Vietnam, Taiwan, Singapore, Malaysia and Indonesia.
1.31 "Testing Methods" shall have the meaning assigned to such term in
Section 8.5(c).
1.32 "Third Party" shall mean any person who or which is neither a Party
nor an Affiliate of a Party.
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<PAGE>
1.33 "Third Party Manufacturer" shall have the meaning assigned to such
term in Section 8.7(a).
1.34 "Trademark" shall have the meaning assigned thereto in Section 5.6.
1.35 "Transfer Price" shall have the meaning assigned to such term in
Section 6.2.
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of Both Parties. Each Party
represents and warrants to the other Party, as of the Effective Date, that:
(a) such Party is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has full
corporate power and authority to enter into this Agreement and to carry out the
provisions hereof;
(b) such Party is free to enter into this Agreement;
(c) in so doing, such Party will not violate any other agreement to
which it is a party;
(d) such Party has taken all corporate action necessary to authorize
the execution and delivery of this Agreement and the performance of its
obligations under this Agreement; and
(e) except as expressly provided in Section 2.2(e), no person or
entity has or will have, as a result of the transactions contemplated by this
Agreement, any right, interest or valid claim against or upon such Party for any
commission, fee or other compensation as a finder or broker because of any act
or omission by such Party or any of its agents.
2.2 Representations and Warranties of Inspire. Inspire represents and
warrants to Santen, as of the Effective Date, that:
(a) Inspire is the owner of, or has exclusive rights to, all of the
Patents in existence on the Effective Date, and has the exclusive right to grant
the licenses granted under this Agreement therefor;
(b) to the best of Inspire's knowledge, Inspire has exclusive rights
to all of the Know-how in existence on the Effective Date and the exclusive
right to grant licenses with respect thereto;
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<PAGE>
(c) to the best of Inspire's knowledge, Santen's use of the Compound
in the Field, in accordance with the terms of this Agreement, does not infringe
upon or conflict with any patent or other proprietary rights in the Territory of
any Third Party;
(d) Inspire has not entered into any agreement with any Third Party
that is in conflict with the rights granted to Santen pursuant to this
Agreement; and
(e) Pharma $ Logic Development, Inc. has acted as a consultant/broker
on behalf of Inspire with respect to the transactions contemplated by this
Agreement. Inspire has paid, or will pay, Pharma $ Logic Development, Inc. all
fees and expenses due to it in connection herewith.
2.3 Representations and Warranties of Santen . Santen represents and
warrants to Inspire, as of the Effective Date, that:
(a) Santen has the facilities, personnel and experience sufficient in
quantity and quality to perform its obligations under this Agreement;
(b) All of the personnel assigned to perform such obligations shall be
qualified and properly trained; and
(c) Santen shall perform such obligations in a manner commensurate
with professional standards generally applicable in its industry.
3. COORDINATING COMMITTEE.
3.1 Members; Chairperson. The Parties shall establish a coordinating
committee (the "Coordinating Committee"), that shall consist of four to six
members, as the Parties may deem necessary from time to time, with an equal
number of members from each Party. At least one member from each Party must be a
product development professional. The Coordinating Committee shall initially
consist of six members, who are set forth on Exhibit C. A member of the
Coordinating Committee may be represented at any meeting by a designee appointed
by such member for such meeting. The chairperson of the Coordinating Committee
shall serve a one-year term, commencing on the Effective Date or an anniversary
thereof, as the case may be. The right to name the chairperson of the
Coordinating Committee shall alternate between the Parties, and each chairperson
shall be named no later than 10 days after the commencement of his or her term.
The initial chairperson shall be selected by Santen and is designated on Exhibit
C. Each Party shall be free to change its members, upon prior written notice to
the other Party. Each Party may, in its discretion, invite non-member
representatives of such Party to attend meetings of the Coordinating Committee,
provided that the other Party approves such Party's invitee(s) in advance.
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<PAGE>
3.2 Responsibilities.
(a) Subject to the other terms of this Agreement, the Coordinating
Committee shall review and evaluate the sufficiency of Santen's progress in the
development and commercialization of the Product in each country in the
Territory and shall provide input and recommendations regarding the development
of the Product. Without limiting the generality of the foregoing, the
Coordinating Committee shall:
(i) review data and reports arising from and generated in connection
with the Development Program;
(ii) review all proposed publications and presentations of the
Parties pursuant to Section 10.2;
(iii) review all studies relating to the Product and any other
studies proposed to be performed in connection with the registration process for
the Product under this Agreement;
(iv) provide a mechanism for the exchange of information between the
Parties with regard to Know-how and Inventions; and
(v) have such other responsibilities as may be assigned to the
Coordinating Committee pursuant to this Agreement or as may be mutually agreed
upon by the Parties from time to time.
(b) In the event that, after good faith discussions, the Coordinating
Committee cannot reach consensus regarding whether Santen shall have made
reasonably sufficient progress in the development and commercialization of the
Product in any country in the Territory, the matter shall be referred for
further review and resolution to an officer at the senior executive level at
Inspire, and an officer at the senior executive level at Santen (such officers
collectively, the "Executive Officers"). The Executive Officers shall use
reasonable efforts to resolve the matter within 30 days after the matter is
referred to them. If the Executive Officers are unable to reach a resolution of
the matter within this period of time, the matter shall be submitted to binding
arbitration in San Francisco, California, for arbitration pursuant to then
current commercial arbitration rules of the American Arbitration Association,
but otherwise pursuant to Section 14.13.
(c) Although the Coordinating Committee shall provide its input and
recommendations regarding the development of the Product, Santen shall have the
sole control and discretion over the development of the Product in any manner
consistent with its obligations under this Agreement.
3.3 Meetings. During the term of the Development Program and the 12-month
period thereafter, the Coordinating Committee shall meet at least twice during
every calendar year, and
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<PAGE>
more frequently as the Parties deem appropriate, on such dates, and at such
times and places, as the Parties shall agree; provided, however, that at least
one meeting during each calendar year shall be held in each of the United States
and Japan, unless the Parties otherwise agree. Thereafter, during the remainder
of the term of this Agreement, the Coordinating Committee shall meet on an as-
needed basis on such dates, and at such places and times, as the Parties shall
agree. The chairperson shall, if practicable, send notice of all meetings to all
members of the Coordinating Committee no less than 20 days before the date of
each meeting. The Coordinating Committee may also convene or be polled or
consulted from time to time by means of telecommunications, video conferences or
correspondence, as deemed necessary or appropriate; provided, however, that the
Coordinating Committee must meet in person at least twice every calendar year
during the term of the Development Program and the 12-month period thereafter.
3.4 Term. The Coordinating Committee shall exist until the termination or
expiration of the Development Program and for such longer period as the Parties
may mutually agree (taking into consideration the responsibilities (e.g., review
of proposed publications) assigned to the Coordinating Committee under this
Agreement).
3.5 Expenses. Each Party shall be responsible for all travel and related
costs and expenses for its members and approved invitees to attend meetings of,
and otherwise participate on, the Coordinating Committee.
4 DEVELOPMENT PROGRAM.
4.1 Generally . Santen shall use all commercially reasonable efforts
diligently to develop and commercialize the Product in each country in the
Territory (including, without limitation, obtaining all Registrations necessary
to market and sell the Product in each such country), in such order of priority
as Santen reasonably shall deem appropriate. In connection therewith, Santen
shall dedicate resources to the development and commercialization of the Product
consistent with the resources that Santen, at all relevant times, would dedicate
to products containing compounds with similar indications and side effects
profiles to those of the Compound that were generated from Santen's own research
efforts and that Santen decided to develop commercially and market.
4.2 Specific Santen Responsibilities. As part of the Development Program,
Santen shall:
(a) Conduct, or cause to be conducted, manage and oversee any additional
pre-clinical pharmacological or toxicological studies, required by the
Regulatory Authorities in order to file a Registration Application for the
Product in each country in the Territory;
(b) Conduct, or cause to be conducted, manage and oversee formulation of
the Product for use in clinical studies and for subsequent marketing;
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<PAGE>
(c) Conduct, or cause to be conducted, manage and oversee all
clinical studies required by the Regulatory Authorities in order to obtain
Registration for the Product in each country in the Territory;
(d) Make and pursue all regulatory filings (including, without
limitation, all INDs and Registration Applications), based in part on the
information and documentation provided by Inspire and in part on information and
data generated and obtained by Santen in connection with the Development
Program, and conduct all analysis and other support necessary with respect to
the manufacture and sale of the Product in the Territory;
(e) Use all commercially reasonable efforts and proceed diligently to
perform such obligations, including, without limitation, by using personnel with
sufficient skills and experience, together with sufficient equipment and
facilities;
(f) Conduct the Development Program in good scientific manner, and in
compliance in all material respects with all requirements of applicable laws,
rules and regulations, and all other requirements of any applicable current good
clinical practice, current good laboratory practice and current good
manufacturing practice to attempt to achieve the objectives of the Development
Program efficiently and expeditiously;
(g) Within 30 days after the end of each six-month period during the
term of the Development Program and within 30 days following the expiration or
termination of the Development Program, furnish the Coordinating Committee with
reasonably detailed, written reports on all activities conducted by Santen under
the Development Program during such six-month period or the term of the
Development Program, as the case may be;
(h) Maintain records, in sufficient detail and in good scientific
manner, which shall be complete and accurate and shall fully and properly
reflect all work done and results achieved in connection with the Development
Program in the form required under all applicable laws and regulations. Inspire
shall have the right, during normal business hours and upon reasonable notice,
to inspect and copy all such records. Inspire shall maintain such records and
information contained therein in confidence in accordance with Section 10 and
shall not use such records or information except to the extent otherwise
permitted by this Agreement; and
(i) Allow representatives of Inspire, upon reasonable notice and
during normal business hours, to visit Santen's facilities where the Development
Program is being conducted, and consult informally, during such visits and by
telephone, with Santen's personnel performing work on the Development Program.
4.3 Inspire Activities. In support of the Development Program, Inspire
shall:
(a) Immediately after the Effective Date, provide to Santen copies of
all (or relevant portions of) primary and secondary pre-clinical
pharmacological, toxicological, formulation
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<PAGE>
and stability data, either in the Field or outside the Field but having utility
in the Field, relating to the development and commercialization of the Product,
in Inspire's possession and control (including, without limitation, such data,
studies and materials of Strategic Partners, to the extent Inspire has the right
to provide same to Santen);
(b) Thereafter, provide to Santen copies of: (i) all primary and
secondary pre-clinical pharmacological, toxicological, formulation and stability
data, either in the Field or outside the Field but having utility in the Field,
relating to the development and commercialization of the Product, and (ii) all
preclinical data concerning the Field, that comes into Inspire's possession and
control during the term of this Agreement (including, without limitation, such
data, studies and materials of Strategic Partners, to the extent Inspire has the
right to provide same to Santen);
(c) Supply Santen or its designee(s) with sufficient quantities of
Compound, manufactured in accordance with cGMP and the Compound Specifications,
to complete all pre-clinical and clinical studies and all development, analysis,
regulatory support, manufacturing and all other Registration-related activities
with respect to the Product in which Santen is required to engage by applicable
law or regulation until the commercial launch, or the affirmative decision of
Santen not to pursue the commercial launch, of the Product in each country in
the Territory. Such Compound shall be supplied to Santen at the Transfer Price
set forth in Section 6.2, and shall be paid as provided in Section 4.5(b). Such
Compound shall be supplied in accordance with quarterly forecasts therefor
provided by Santen at least 180 days prior to the anticipated delivery date for
each shipment of Compound. Santen shall have the right, at reasonable times and
upon reasonable notice, to inspect all facilities at which Compound is
manufactured pursuant to this Section 4.3(c) for compliance with cGMP;
(d) Within 30 days after the end of each six-month period during the
term of the Development Program, furnish the Coordinating Committee with
reasonably detailed, written reports on all activities conducted by Inspire and
its Strategic Partners (to the extent Inspire has the right to provide such
information to Santen) during such six-month period in connection with the
development and commercialization of all products for respiratory indications
that contain the Compound as an active ingredient.
(e) Negotiate in good faith with all of Inspire's other strategic
partners and/or licensees for the Compound (collectively, "Strategic Partners")
that are relevant to obtain the right: (i) to disclose to Santen all Third Party
data or information owned by such Strategic Partners that this Agreement
contemplates will be shared with Santen to the extent that Inspire has the right
to do so, and (ii) to grant Santen the right to cross-reference regulatory
filings owned by such Strategic Partners that this Agreement contemplates will
be granted to Santen to the extent that Inspire has the right to do so.
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4.4 Regulatory Matters.
(a) Santen shall be responsible for preparing and filing INDs,
Registration Applications and other regulatory filings for the Product in each
country in the Territory through and including Registration, and thereafter
shall be responsible for maintaining such Registrations. All such filings shall
be in Santen's name (or that of its Affiliates, Sublicensees or distributors, as
the case may be). Santen shall also obtain any export approvals required by the
Regulatory Authorities to export Product among the countries of the Territory.
(b) Santen or, where required by applicable law, its designees(s)
shall own all INDs, Registration Applications, Registrations and other
regulatory filings for the Product in each country in the Territory.
(c) In order to assist Santen in the performance of its obligations
under this Section 4.4, Inspire shall provide Santen or its designee(s) with
complete copies (or copies of relevant portions) of, and shall grant Santen or
its designee(s) the right to cross-reference, all of Inspire's and its Strategic
Partners' (to the extent Inspire has the right to provide such information to
Santen) INDs, registration applications, registrations or other regulatory
filings made or held in any country for all products that contain the Compound
as an active ingredient. Inspire shall execute, acknowledge and deliver such
further instruments, and shall do all such other acts, all as promptly as
possible after Santen's request therefor, at Santen's expense, that may be
necessary or appropriate to effectuate such right.
(d) Upon Inspire's written request, Santen shall provide Inspire with
complete copies (or copies of relevant portions) of, and shall grant Inspire the
right to cross-reference any INDs, Registration Applications, Registrations or
other regulatory filings made or held in each country in the Territory in the
name of Santen (or that of its Affiliates, Sublicensees or distributors, as the
case may be) reasonably necessary or useful to enable Inspire to market products
either within the Territory and outside the Field, or outside the Territory.
Santen shall not be obligated to provide English translations of such filings,
but shall provide any English translations made by Santen, in its sole
discretion, if requested by Inspire. Santen shall execute, acknowledge and
deliver such further instruments, and shall do all such other acts, all as
promptly as possible after Inspire's request therefor, at Inspire's expense,
that may be necessary or appropriate to effectuate such right in each such
country. Santen also shall provide such copies and such right to cross-
reference to any Strategic Partner that grants Santen or its designee(s) the
right to cross-reference such Strategic Partner's INDs, registration
applications, registrations or other regulatory filings made or held in any
country for products that contain the Compound as an active ingredient.
(e) Santen shall keep Inspire informed as to the status of all
regulatory filings made pursuant to this Section 4.4.
(f) In connection with any IND or Registration Application filed by
Santen pursuant to this Section 4.4, Santen shall notify Inspire as soon as
reasonably possible of any
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meeting with the Regulatory Authority in any country in the Territory scheduled
by Santen (which notification shall describe the subject matter of any such
meeting), shall permit Inspire to assist Santen in the preparation for any such
meeting and shall promptly advise Inspire in writing of the outcome of any such
meeting.
4.5 Funding.
(a) Except as otherwise expressly provided in this Agreement, each
Party shall bear the entire cost and expense it incurs in connection with
fulfillment of its obligations under this Section 4.
(b) Inspire shall invoice Santen for, and Santen shall pay, the
Transfer Price for the Compound supplied by Inspire pursuant to Section 4.3(c)
in accordance with Sections 6.2 and 7.
4.6 Liability. Santen shall be responsible for, and hereby assumes, any
and all risks of personal injury or property damage attributable to the
negligent or willful acts or omissions, during the term of the Development
Program, of Santen or its Affiliates, and their respective directors, officers,
employees and agents. Inspire shall be responsible for, and hereby assumes, any
and all risks of personal injury or property damage attributable to the
negligent or willful acts or omissions, during the term of the Development
Program, of Inspire or its Affiliates, and their respective directors, officers,
employees and agents.
4.7 Termination. In the event that, following the review by the
Coordinating Committee and the Executive Officers pursuant to Section 3.2,
Inspire believes that Santen has not made reasonably sufficient progress in the
development and commercialization of the Product in any country in the Territory
in a manner consistent with its obligations under Section 4.1, Inspire may
submit the matter to arbitration in San Francisco, California, for arbitration
pursuant to then current commercial arbitration rules of the American
Arbitration Association, but otherwise pursuant to Section 14.13. If the
arbitrators (who shall take into account, among other things, the relative
potential economic cost vs. benefit of developing and commercializing the
Product in such country) determine that Santen has not made reasonably
sufficient progress, Inspire shall have the right to terminate this Agreement
with respect to all countries except Japan pursuant to pursuant to Section 12.2;
provided, however, that if the arbitrators determine that Santen has not made
sufficiently reasonable progress with respect to Japan, Inspire shall have the
right to terminate this Agreement int its entirety pursuant to Section 12.2.
5 GRANT OF RIGHTS; MARKETING.
5.1 Development License . Inspire hereby grants to Santen, during the term
of the Development Program, the exclusive (except as to Inspire as necessary for
the purposes of this
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Agreement), paid-up license, with the right to grant sublicenses in accordance
with the terms of this Agreement, under the Licensed Technology, to conduct the
Development Program.
5.2 Commercialization License . Inspire hereby grants to Santen an
exclusive (even as to Inspire) license throughout the Territory, with the right
to grant sublicenses in accordance with the terms of this Agreement, under the
Licensed Technology, to develop, use, manufacture, register, market and sell
Products in the Field; provided, however, that nothing in this Section 5.2
grants Santen the right to manufacture the Compound used in the manufacture of
the Products. With respect to any Patents that may issue in Japan during the
term of this Agreement, a statement referencing the exclusive license granted to
Santen pursuant to this Section 5.2 shall be registered with the Japanese Patent
Office at Santen=s cost, as soon as is practically possible after the issuance
of the respective Patents. Inspire hereby agrees that it will execute such
documents and instruments as may be required to effect the registration of such
statement and otherwise cooperate with Santen in connection with the
registration of such statement with the Japanese Patent Office, and in other
counties where required or permitted by applicable law.
5.3 Sublicensing.
(a) Santen may grant sublicenses of the licenses granted to Santen
under Section 5.2 for purposes of an Affiliate's or Sublicensee's co-performance
with Santen of Santen's obligations under Section 5.5 in Japan. In addition,
solely in connection with the grant of such sublicenses, Santen shall have the
right to grant a sublicense of the licenses granted to Santen under Section 5.1
for purposes of an Affiliate's or Sublicensee's co-performance with Santen of
Santen's obligations under Section 4 in Japan.
(b) Santen shall have the right to grant sublicenses of the licenses
granted to Santen under Section 5.2 for purposes of an Affiliate's or
Sublicensee's performance of Santen's obligations under Section 5.5 in all
countries in the Territory other than Japan. In addition, solely in connection
with the grant of such sublicenses, Santen shall have the right to grant a
sublicense of the licenses granted to Santen under Section 5.1 for purposes of
an Affiliate's or Sublicensee's performance of Santen's obligations under
Section 4 in all countries in the Territory other than Japan.
(c) No sublicense granted by Santen pursuant to this Section 5.3 shall
be valid unless: (i) Santen shall submit all proposed sublicenses to Inspire for
approval, which approval shall not be unreasonably withheld; (ii) Santen shall
guarantee and be responsible for the making of all payments due, and the making
of any reports under this Agreement, with respect to sales of Product by its
Affiliates or Sublicensees and their compliance with all applicable terms of
this Agreement; and (iii) each Affiliate or Sublicensee agrees in writing to
maintain books and records and permit Inspire to review such books and records
pursuant to the relevant provisions, and to observe all other applicable terms,
of this Agreement. In addition, no sublicense granted by Santen pursuant to this
Section 5.3 of the licenses granted to Santen under Section 5.1 shall be valid
unless each such Affiliate or Sublicensee agrees in writing to maintain
scientific records and permit Inspire to inspect and copy such records and visit
such facilities pursuant to the relevant provisions of Section 4.2, and
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to observe all other applicable terms, of this Agreement. Santen shall promptly
provide Inspire with notice of any sublicense granted pursuant to this Section
5.3, and provide a copy of the sublicense to Inspire upon its request.
(d) Santen hereby unconditionally guarantees the performance of any of
its Affiliates and Sublicensees hereunder. In the event of a breach by such an
Affiliate or Sublicensee in the observance of applicable terms of this
Agreement, Inspire shall be entitled to proceed against either such Affiliate or
Sublicensee or directly against Santen, as Inspire may determine in its sole
discretion, to enforce this Agreement.
5.4 Grantback Rights . Subject to the terms and conditions of this
Agreement, Santen hereby grants to Inspire an exclusive (except as to Santen),
paid-up license under any patents or know-how that embody or relate to
Inventions that are owned or controlled by Santen or its Affiliates and relate
specifically to the Compound and/or the Product and are not of general utility
(i.e., useful for purposes other than uses with the Compound and/or Product):
(i) to develop, make, have made, use, offer to sell, sell and have sold products
with applications outside the Field for all purposes worldwide (including,
without limitation, within the Territory), and (ii) to develop, make, have made,
use, offer to sell, sell and have sold Products with applications within the
Field for all purposes outside the Territory. The foregoing licenses shall
include the right to grant sublicenses.
5.5 Marketing Obligations, Rights. Santen shall use all commercially
reasonable efforts to market the Product in the Territory. In connection
therewith, Santen shall dedicate resources to marketing the Product that are
consistent with the resources that Santen, at all relevant times, would dedicate
to products containing compounds that were generated from Santen's own research
efforts which Santen decided to develop commercially and market and that have
pricing, volume and marketing potentials similar to those of the Product.
Santen, either itself and/or by and through its Affiliates, Sublicensees and
distributors, as the case may be, shall be responsible for, and shall have the
exclusive right to engage in, all marketing, advertising, promotional, launch
and sales activities in connection with such efforts.
5.6 Trademarks. Santen shall market the Product throughout the Territory
under a trademark or trademarks (collectively, the "Trademark") selected by
Santen. Except as otherwise expressly provided in this Agreement, Santen shall
own all right, title and interest in and to such Trademark.
5.7 Adverse Reaction Reporting .
(a) Each Party shall record, evaluate, summarize and review all
adverse drug experiences associated with the Compound and the Product. In order
that each Party may be fully informed of the adverse drug experiences associated
therewith that are known to the other Party, each Party shall report:
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(i) In the case of Inspire, to:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
USA
Attention: JoAnn Gorden, Manager, Regulatory Affairs &
Project Management
Facsimile No.: (919) 941-9797
Telephone No.: (919) 941-9777 ext. 288
(ii) In the case of Santen, to:
Santen Pharmaceutical Co., Ltd.
3-9-19 Shimoshinjo
Higashiyodogawa-ku
Osaka 533-8651
JAPAN
Attention: Koji Yamamoto, Ph.D., Deputy General Manager
Facsimile No.: (06) 6321-5312
Telephone No.: (06) 6321-9987
all "adverse events," as defined by the then current ICH guidelines, involving
the Compound and/or the Product (all such reports, "AE Reports"). "Serious"
adverse events shall be reported to the other Party within four working days (if
the event is fatal or life-threatening) or ten working days (if otherwise) after
a Party's (a "reporting Party") becoming aware of such an event and shall either
be reported by facsimile or telephone. The reporting Party shall report on a
quarterly basis all other adverse events that are known to the reporting Party
through either the receipt of clinical study documentation or post-market
surveillance. In addition, the reporting Party shall report all known instances
of use of the Product during pregnancy. In any event, each Party shall promptly
notify the other of any complaint received by such Party in sufficient detail
and in sufficient time to allow the responsible Party to comply with any and all
regulatory requirements imposed upon it in any country in the Territory. Each
Party shall also advise the other of any regulatory developments (e.g., proposed
recalls, labeling and other registrational dossier changes, etc.) affecting the
Compound or the Product in any country in the Territory.
(b) According to current ICH guidelines, an "adverse event" is any
untoward medical occurrence in a patient or clinical investigation subject
administered a pharmaceutical product, which occurrence does not necessarily
have to have a causal relationship with the treatment.
(c) According to current ICH guidelines, a "serious" adverse event is
any adverse drug experience that, at any dose, results in any of the following
outcomes: death, a life-threatening (at the time of the event) condition,
inpatient hospitalization or prolongation of existing
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hospitalization, persistent or significant disability or incapacity, or a
congenital anomaly or birth defect. Other important medical events not meeting
such criteria may be considered serious if, based on appropriate medical
judgment, the event jeopardized the subject and required medical intervention to
prevent any one or more of such outcomes.
(d) The details of adverse reaction reporting during the development
stage and thereafter shall be stipulated in a separate agreement to be entered
into by the Parties in due course.
6. MILESTONES AND ROYALTIES.
6.1 Milestone Payments. As further consideration to Inspire for the
license and other rights granted to Santen under this Agreement, Santen shall
pay to Inspire the following milestone payments upon the first occurrence of
each event set forth below with respect to the Product:
[CONFIDENTIAL TREATMENT REQUESTED].
Each of the payments required pursuant to this Section 6.1 shall be paid within
15 days after such milestone has been achieved.
6.2 Transfer Price. The transfer price to Santen for Compound supplied by
Inspire under this Agreement shall be an amount equal to [CONFIDENTIAL TREATMENT
REQUESTED]; provided, however, that the maximum amount to be included in
Inspire's Cost of Compound for the manufacture and supply of Compound to Santen
following the First Commercial Sale shall be [CONFIDENTIAL TREATMENT REQUESTED].
Such maximum amount shall be adjusted, commencing on January 1, 2000 and on each
January 1 thereafter, to reflect the change in the Producer Price Index for
Pharmaceutical Manufacturers (or such other index as the Parties may agree upon
from time to time) in the country in which the Compound was manufactured during
the preceding calendar year. The transfer price
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of Compound to Santen, as determined under this Section 6.2, shall be referred
to as the "Transfer Price."
6.3 Royalty Payments. As further consideration to Inspire for the license
and other rights granted to Santen under this Agreement, during the term of this
Agreement, Santen shall pay to Inspire a royalty on Net Sales of the Product
commencing on the First Commercial Sale by Santen, its Affiliates or its
Sublicensees, on a country-by-country and Product-by-Product basis, in an amount
equal to: (i) [CONFIDENTIAL TREATMENT REQUESTED] of the aggregate Net Sales of
the Product by Santen, its Affiliates and its Sublicensees in Japan; and (ii)
[CONFIDENTIAL TREATMENT REQUESTED] of the aggregate Net Sales of the Product by
Santen, its Affiliates and its Sublicensees throughout the remainder of the
Territory.
6.4 Reduction for Generic Competition. With respect to any country in the
Territory where a product that is a Generic Product is being marketed by a Third
Party or Parties, the royalties payable to Inspire under Section 6.3 with
respect to Net Sales of the Product in such country shall be reduced by
[CONFIDENTIAL TREATMENT REQUESTED], commencing with the calendar quarter during
which such product becomes a Generic Product in such country.
6.5 Obligation to Pay Royalties. The obligation to pay royalties to
Inspire under this Section 6 is imposed only once with respect to the same unit
of Product regardless of the number of Patents or quantity of Know-how
pertaining thereto. There shall be no obligation to pay royalties to Inspire
under this Section 6 on sales of Product between Santen and its Affiliates and
Sublicensees, but in such instances the obligation to pay royalties shall arise
upon the sale by Santen or its Affiliates or Sublicensees to unrelated Third
Parties, such as end users and distributors. Payments due under this Section 6
shall be deemed to accrue when Product is shipped or billed, whichever event
shall first occur.
7 PAYMENTS AND REPORTS.
7.1 Payments.
(a) Inspire shall submit invoices to Santen for the Transfer Price of
Compound promptly after each shipment thereof. Payments shall be made by Santen
within 30 days after the invoice date.
(b) Beginning with the calendar quarter in which the First Commercial
Sale is made in the Territory and for each calendar quarter thereafter, Santen
shall submit a statement, Product-by-Product and country-by-country, of the
amount of Net Sales during such quarter and the amount of royalties due on such
Net Sales. Each such statement shall be accompanied by the payment due and shall
be submitted quarterly within 60 days after the end of each calendar quarter.
7.2 Mode of Payment. All invoices submitted by Inspire shall be stated
in U.S. Dollars. Santen shall make all payments required under this Agreement as
directed by Inspire from time to
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time, net of any out-of-pocket transfer costs or fees, in U.S. Dollars. All
payments due shall be translated at the current applicable foreign exchange rate
quoted by Sanwa Bank, Ltd., or any other bank of equivalent size and stature
that becomes Santen's principal bank during the term of this Agreement, on the
day and time of remittance.
7.3 Records Retention. Santen and its Affiliates and Sublicensees shall
keep complete and accurate records pertaining to the sale of Product, and
Inspire shall keep complete and accurate records pertaining to Inspire's Cost of
Compound, for a period of three calendar years after the year in which such
sales or costs occurred, and in sufficient detail to permit the other Party to
confirm the accuracy of the aggregate royalty and/or Transfer Price calculations
hereunder.
7.4 Audit Request.
(a) During the term of this Agreement and for a period of two years
thereafter, at the request and expense of Inspire, Santen and its Affiliates and
Sublicensees shall permit an independent, certified public accountant appointed
by Inspire and reasonably acceptable to Santen, at reasonable times and upon
reasonable notice, to examine such records as may be necessary to: (i) determine
the correctness of any report or payment made under this Agreement; or (ii)
obtain information as to the aggregate royalties payable for any calendar
quarter in the case of Santen's failure to report or pay pursuant to this
Agreement. Said accountant shall not disclose to Inspire any information other
than information relating to said reports, royalties, and payments. Results of
any such examination shall be made available to both Parties.
(b) During the term of this Agreement and for a period of two years
thereafter, at the request and expense of Santen, Inspire shall permit an
independent, certified public accountant appointed by Santen and reasonably
acceptable to Inspire, at reasonable times and upon reasonable notice, to
examine those records as may be necessary to verify the aggregate Cost of
Compound incurred by Inspire for any period. Said accountant shall not disclose
to Santen any information other than information relating to said Cost of
Compound. Results of any such examination shall be made available to both
Parties.
7.5 Cost of Audit.
(a) Inspire shall bear the full cost of the performance of any audit
requested by Inspire except as hereinafter set forth. If, as a result of any
inspection of the books and records of Santen, its Affiliates or its
Sublicensees, it is shown that Santen's payments under this Agreement were less
than the amount which should have been paid, then Santen shall make all payments
required to be made to eliminate any discrepancy revealed by said inspection
within 30 days after Inspire's demand therefor. Furthermore, if the payments
made were less than 95% of the amount that should have been paid during the
period in question, Santen shall also reimburse Inspire for the reasonable costs
of such audit.
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(b) Santen shall bear the full cost of the performance of any audit
requested by Santen except as hereinafter set forth. If, as a result of any
inspection of the books and records of Inspire, it is shown that Inspire
overstated its Cost of Compound under this Agreement for any period, then Santen
shall be entitled to a credit in the amount necessary to eliminate any
discrepancy revealed by said inspection. Such credit may be applied against any
amount due and owing to Inspire pursuant to this Agreement (e.g., milestone
payments, royalties, Transfer Price, etc.). Furthermore, if the amounts for any
period were overstated by more than five percent, Inspire shall also reimburse
Santen for the reasonable costs of such audit.
7.6 No Non-Monetary Consideration for Sales. Without the prior written
consent of Inspire, Santen, its Affiliates and its Sublicensees shall not accept
or solicit any non-monetary consideration of the sale of the Product other than
as would be reflected in Net Sales. The use by Santen, its Affiliates and its
Sublicensees of a commercially reasonable amount of Product for promotional
sampling shall not violate this Section 7.6.
7.7 Taxes.
(a) In the event that Santen is required to withhold any tax to the
tax or revenue authorities in any country in the Territory regarding any payment
to Inspire due to the laws of such country, such amount shall be deducted from
the payment to be made by Santen, and Santen shall promptly notify Inspire of
such withholding and, within a reasonable amount of time after making such
deduction, furnish Inspire with copies of any tax certificate or other
documentation evidencing such withholding. Each Party agrees to cooperate with
the other Party in claiming exemptions from such deductions or withholdings
under any agreement or treaty from time to time in effect.
(b) If Inspire has the legal obligation to collect and/or pay any
sales, use, excise or value added taxes, the appropriate amount shall be added
to Santen's invoice and paid by Santen, unless Santen provides Inspire with a
valid tax exemption certificate authorized by the appropriate taxing authority.
8 MANUFACTURE AND SUPPLY.
8.1 Supply; Processing of Finished Product.
(a) Commencing on the commercial launch of the Product and thereafter
during the term of this Agreement, subject to the terms and conditions of this
Section 8, Inspire shall supply Santen with all of Santen's requirements for
Compound for commercial use in the Territory (which shall be deemed to include
all of the requirements of Santen's Affiliates and Sublicensees), and Santen
shall purchase from Inspire all of such requirements for Compound. Santen shall
place orders for the requirements of its Affiliates and Sublicensees, and either
have Inspire ship directly to such Affiliates or Sublicensees or to Santen for
its reshipment to such Affiliates and Sublicensees.
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(b) Santen (or its Affiliates or Sublicensees) shall be responsible
for processing the Compound manufactured and supplied by Inspire into Product in
finished form and for putting such Product in final packaged form, including,
without limitation, all product labeling and other package inserts and materials
required by the applicable Regulatory Authorities.
(c) The Parties shall cooperate in good faith and shall establish the
Compound Specifications for this Agreement. The Parties acknowledge and agree
that Inspire has granted, and may continue to grant, Third Parties licenses to
develop and commercialize the Compound outside the Field in Japan. In order to
facilitate manufacture of the Compound and the Product, as the Parties deem
appropriate, the Parties shall cooperate in good faith with such Third Parties
to establish Compound Specifications and Manufacturing Standards for this
Agreement that conform to the extent practicable to the specifications and
standards applicable to Inspire's manufacture of the Compound and products
containing the Compound for such Third Parties, and Inspire shall use all
reasonable efforts to cause such Third Parties to do the same.
8.2 Forecasts. Commencing 12 months prior to the anticipated commercial
launch of the Product in any country in the Territory, no later than 180 days
prior to the first day of each calendar quarter ("Q1"), Santen shall provide
Inspire with a non-binding (except with respect to Q1), good faith rolling
forecast of estimated quantities in kilograms and anticipated delivery schedules
for Compound for the following 12-month period (i.e., Q1 and the next three
calendar quarters ("Q2," "Q3" and "Q4," respectively)), by calendar quarters.
The quantity indicated for Q1 shall be considered a firm order, in accordance
with Section 8.3. Such forecasts shall be revised and updated quarterly,
including firm orders for the next succeeding quarter.
8.3 Orders.
(a) Together with each forecast provided under Section 8.2 (the
"Current Forecast"), Santen shall place its firm order on a quarterly basis with
Inspire, setting forth kilograms, delivery dates and shipping instructions with
respect to each shipment of Compound for delivery in Q1. Inspire shall accept
such orders from Santen, subject to the other terms and conditions of this
Agreement, to the extent such quantity of Compound is: (i) no more than the
least of: (A) the quantity thereof reflected in the Current Forecast for Q1; (B)
[CONFIDENTIAL TREATMENT REQUESTED] of the quantity thereof reflected for Q2 in
the forecast that next preceded the Current Forecast; and (C) [CONFIDENTIAL
TREATMENT REQUESTED] of the quantity thereof reflected for Q3 in the forecast
that next preceded the forecast referred to in clause (i)(B); and (ii) no less
than the greatest of: (A) the quantity thereof reflected in the Current Forecast
for Q1; (B) [CONFIDENTIAL TREATMENT REQUESTED] of the quantity thereof reflected
for Q2 in the forecast that next preceded the Current Forecast; and (C)
[CONFIDENTIAL TREATMENT REQUESTED] of the quantity thereof reflected for Q3 in
the forecast that next preceded the forecast referred to in clause (ii)(B).
Santen's orders shall be made pursuant to purchase orders which are in a form
mutually acceptable to the Parties, to the extent that such form is not
inconsistent with the terms of this Agreement.
(b) Inspire shall not be obligated to accept orders for Q1 to the
extent the quantity of Compound ordered exceeds the foregoing limitations, but
shall use good faith efforts to fill such
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orders for such excess quantities from available supplies. In the event that
Inspire, despite the use of good faith efforts, is unable to supply such excess
quantities to Santen, such inability to supply shall not constitute a breach of
Inspire's obligations under this Section 8 or an Inability to Supply (as defined
in Section 8.9). Inspire shall use all reasonable efforts to notify Santen
within 10 days after receipt of an order of Inspire's ability to fill any
amounts of such orders in excess of the quantities that Inspire is obligated to
supply. Santen shall use all reasonable efforts to notify Inspire as soon as
possible of an increase in Santen's requirements for Compound materially in
excess of the limits set forth in Section 8.3(a).
(c) In the event that Santen submits orders for Compound with respect
to any Q1 for less than the minimum quantity of Compound that Santen is required
to purchase under this Section 8, Inspire nevertheless shall have the right to
supply and ship to Santen (in accordance with the shipping instructions most
recently supplied by Santen), and Santen shall have the obligation to purchase
and accept from Inspire, such minimum quantity of Compound. Santen shall use all
reasonable efforts to notify Inspire as soon as possible of a decrease in
Santen's requirements for Compound materially below the limits set forth in
Section 8.3(a). In the event of such a decrease, Inspire shall use all
reasonable efforts, but shall not be required, to reduce accordingly the orders
for Compound that Inspire has placed with its Third Party Manufacturers or to
allocate to other purchasers Compound that Santen would have purchased but for
such decrease.
(d) By way of illustration, examples of the maximum quantities of
Compound that Inspire is required to supply, and the minimum quantities of
Compound that Santen is required to order (and that Inspire is entitled to
supply), are set forth on Exhibit D.
8.4 Delivery. With respect to exact shipping dates, Inspire shall use all
reasonable commercial efforts to ship quantities of Compound that Inspire is
obligated to supply pursuant to Section 8.3 on the dates specified in Santen's
purchase orders submitted and accepted in accordance with Section 8.3. All
Compound delivered pursuant to the terms of this Agreement shall be suitably
packed in bulk containers for shipment by Inspire, marked for shipment to the
destination point indicated in Santen's purchase order. All Compound will be
delivered F.O.B. the shipping point designated by Inspire. The shipping
packaging used by Inspire shall be in accordance with good commercial practice
with respect to protection of the Compound during transportation.
8.5 Conformity; Specifications; Quality Control.
(a) All quantities of Compound supplied by Inspire pursuant to this
Section 8 will comply with the Compound Specifications and applicable
Manufacturing Standards and shall adhere to all applicable governmental laws and
regulations relating to the manufacture, sale and shipment of each shipment of
Compound at the time it is shipped by Inspire hereunder.
(b) Santen shall have the right to change the Compound Specifications,
from time to time, to accommodate the demands or requests of any Regulatory
Authority in the Territory at any time during the term of this Agreement on not
less than 12 months' prior written notice to Inspire.
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Inspire shall use reasonable commercial efforts to meet such changes. In
addition, other changes to the Compound Specifications shall be made only upon
the mutual consent of the Parties. Any costs or expenses incurred by Inspire in
connection with such changes shall be borne by Santen, and Inspire shall be
entitled to include such costs and expenses in invoices submitted to Santen
pursuant to Section 7.1(a), from time to time.
(c) Inspire shall conduct, or cause to be conducted, quality control
testing of Compound prior to shipment, in accordance with the Compound
Specifications and applicable Manufacturing Standards as are in effect from time
to time and such other quality control testing procedures agreed to by the
Parties from time to time (collectively, the "Testing Methods"). Inspire or its
designee shall retain records pertaining to such testing. Each shipment of
Compound hereunder shall be accompanied by a certified quality control protocol
and certificate of analysis for each lot of Compound therein as well as such
customs and other documentation as is necessary or appropriate.
(d) Santen shall have the right, at reasonable times and upon
reasonable notice, to inspect all facilities at which Compound is manufactured
pursuant to this Section 8 for compliance with cGMP.
8.6 Acceptance/Rejection; Interim Replacement.
(a) Santen may test or cause to be tested Compound supplied under this
Section 8 in accordance with Santen's customary procedures within 30 days
(subject to increase to 45 days if Inspire obtains the consent of the supplier)
of its receipt at Santen's plant or that of its designee. Santen or its designee
shall have the right to reject any shipment of Compound made to it under this
Agreement that does not meet the Compound Specifications and applicable
Manufacturing Standards when received by it at such destination when tested in
accordance with the Testing Methods. All claims by Santen of non- conforming
Compound shall be deemed waived unless made by Santen in writing and received by
Inspire within such 30-day period.
(b) All claims of non-conforming Compound shall be accompanied by a
report of analysis (including a sample of the Compound from the batch analyzed)
of the allegedly non-conforming Compound that shall have been made by Santen or
its designee, using the Testing Methods. If, after its own analysis of such
sample, Inspire confirms such non-conformity, then Inspire shall replace such
shipment at its expense, including charges incurred by Santen for shipping
and/or storage, if applicable. If, after its own analysis, Inspire does not
confirm such non-conformity, the Parties shall agree to retest the shipment or
otherwise in good faith attempt to agree upon a settlement of the issue. In the
event that the Parties cannot resolve the issue, the Parties shall submit the
disputed Compound to an independent testing laboratory, to be agreed upon by the
Parties, for testing in accordance with the Testing Methods. Notwithstanding
Section 14.13, the findings of such laboratory shall be binding on the Parties,
absent manifest error. Expenses of such testing shall be borne by the Party
adversely affected by such findings. In the event that any such shipment or
batch thereof is ultimately agreed or found not to meet the Compound
Specifications
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or Manufacturing Standards, Inspire agrees to replace such shipment at its
expense, including charges incurred by Santen for shipping and/or storage, if
applicable. Santen shall return any such rejected shipment to Inspire if so
instructed by Inspire, at Inspire's expense.
(c) During the pendency of any dispute concerning the conformity of a
shipment of Compound to the Compound Specifications and applicable Manufacturing
Standards, Inspire shall replace the shipment under dispute, at the request of
Santen. Such replacement Compound shall be ordered in accordance with Section
8.3.
(d) Notwithstanding any other provision of this Agreement, Santen
shall not be required to pay for any shipment of Compound that fails to meet the
Compound Specifications, but Santen shall be obligated to pay in full for any
rejected shipment of Compound that is subsequently determined to meet the
Compound Specifications. In the event that Santen pays for a shipment of
Compound and subsequently rejects such shipment in accordance with the terms of
this Agreement, Santen shall be entitled to a refund or credit equal to the
amount paid with respect to such rejected shipment. Any such refund or credit
shall be reflected in the statements submitted by Santen pursuant to Section
7.1(b).
8.7 Third Party Manufacturers.
(a) The Parties acknowledge and agree that Inspire shall satisfy its
supply obligations to Santen hereunder through arrangements with Third Parties
who are engaged to perform services or supply facilities or goods (including,
without limitation, Compound) in connection with the manufacture, testing and/or
packaging of the Compound (each, a "Third Party Manufacturer"). Inspire shall
ensure that all such services, facilities and goods comply with the applicable
Manufacturing Standards in effect from time to time.
(b) Santen hereby acknowledges and agrees that it has approved
[CONFIDENTIAL TREATMENT REQUESTED] Corporation as a Third Party Manufacturer.
(c) In the event that Inspire intends to make arrangements with any
other Third Party Manufacturer, Inspire shall notify Santen thereof. In the
event that Santen objects to a particular Third Party Manufacturer that Inspire
intends to use to satisfy its obligations under this Section 8 (which objection
shall not be unreasonably made), then Santen shall no longer be required to
purchase Compound from Inspire pursuant to this Section 8 and shall be entitled
to have Compound manufactured by a qualified Third Party of Santen's own
choosing, subject to Inspire's right to fulfill uncancellable orders for
Compound intended for Santen under this Section 8. In the event of any such
objection by Santen, Inspire hereby grants to Santen, and Santen hereby accepts,
a royalty-free license (a "Manufacturing License") under the Licensed Technology
necessary to make, have made, use and sell Compound for all of Santen's (and its
Affiliates' and Sublicensees') requirements in the Territory for use in
connection with the fulfillment of Santen's obligations under Section 5.5. Such
Manufacturing License shall be subject to all other terms and conditions of this
Agreement. In addition, Santen agrees not to exercise any of its rights under
such Manufacturing
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License except to the extent expressly permitted in this Section 8.7(c). In such
event, Inspire shall: (i) provide to Santen copies of all documentation within
Inspire's possession and control that is reasonably necessary for Santen to have
manufactured Compound; and (ii) provide such technical assistance to Santen as
is reasonably necessary to enable Santen to have manufactured Compound in
accordance with the Compound Specifications and Manufacturing Standards.
(d) Inspire acknowledges and agrees that such Third Party
Manufacturers shall be subject to Section 8.5(a) and that use of a Third Party
Manufacturer shall not relieve Inspire of its obligations under Section 8.5(a).
8.8 Shortage of Supply.
(a) Inspire shall notify Santen: (i) as promptly as possible, but in
no event more than 30 days after Inspire's receipt of a firm order from Santen
as provided in Section 8.3, or (ii) immediately upon becoming aware of an event
of force majeure under Section 13 or any other event that would render Inspire
unable to supply the quantity of Compound to Santen that Inspire is required to
supply hereunder, if Inspire is unable to supply such quantities of Compound. In
such event, Inspire shall implement all reasonable measures to remedy such
shortage.
(b) In the event that Inspire is unable to supply both Santen's
requirements of Compound and Inspire's and Third Parties' requirements for other
products containing the Compound or the Compound, as the case may be, due to
force majeure or otherwise, Inspire shall allocate the Compound that Inspire has
in inventory and that Inspire is able to produce among the quantities of all
such products, so that Santen receives at least its proportionate share of such
available supplies, as determined from reasonable forecasts (taking into
consideration past sales and sales performance against forecast) for the Product
and for such other products.
8.9 Inability to Supply; Election of Remedies.
(a) In the event of any Inability to Supply (as defined herein) the
Compound, Santen may elect either: (i) to manufacture (or have manufactured)
pursuant to Section 8.10 such quantity of Compound for sale in the Territory
that Inspire fails to so supply; or (ii) to assume full responsibility for the
supply of all of Santen's requirements for Compound under this Agreement. In
either case, Inspire shall cooperate with Santen in taking all actions that the
Parties deem reasonably necessary in order to remedy such Inability to Supply.
In the case of clause (ii), Santen's right so to supply shall continue until
such time as Inspire provides Santen with three months' written notice of
Inspire's desire to resume manufacturing and reasonably demonstrates that
Inspire is able adequately to supply Santen's requirements for Compound. In
addition, Santen's right so to supply shall continue thereafter for any
remaining noncancellable period of any contract that Santen shall have entered
into with any Third Party Manufacturer for the supply of Compound.
(b) For purposes of this Section 8.9, an "Inability to Supply" shall
mean Inspire's failure for any reason, including without limitation force
majeure reasons or otherwise, to supply
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Santen with quantities of Compound meeting the Compound Specifications and
Manufacturing Standards: [CONFIDENTIAL TREATMENT REQUESTED].
(c) The remedy provided in this Section 8.9 shall be Santen's sole
remedy for Inability to Supply unless such Inability to Supply results from a
material breach of Inspire's material obligations contained in this Section 8.
In the event, however, that such Inability to Supply results from a material
breach of Inspire's material obligations contained in this Section 8, the remedy
provided in this Section 8.9 shall be in addition to any other remedies
available to Santen at law or in equity.
8.10 Right to Manufacture. In the event that Santen duly exercises the
option provided in Section 8.9(a), Inspire hereby grants to Santen, and Santen
hereby accepts, a royalty-free license (the "Manufacturing License") under the
Licensed Technology necessary to make, have made, use and sell Compound for such
of Santen's requirements therefor as Santen has elected pursuant clause (i) or
(ii) of Section 8.9(a) in the Territory for use in connection with the
fulfillment of Santen's obligations under Section 5.5. Such Manufacturing
License shall be subject to all other terms and conditions of this Agreement. In
addition, Santen agrees not to exercise any of its rights under the
Manufacturing License except to the extent expressly permitted in Section
8.9(a). In such event: (i) Inspire shall provide to Santen copies of all
documentation within Inspire's possession and control that is reasonably
necessary for Santen to manufacture (or have manufactured) Compound; (ii)
Inspire shall provide such technical assistance to Santen as is reasonably
necessary to enable Santen to manufacture (or have manufactured) Compound in
accordance with the Compound Specifications and Manufacturing Standards; (iii)
to the extent that Santen manufactures (or has manufactured) Compound pursuant
to the Manufacturing License, Santen shall be relieved of its obligation to
purchase from Inspire such quantities of Compound; and (iv) Inspire shall
reasonably cooperate with Santen to establish an alternative supply, including
locating qualified Third Party manufacturers and sources of materials.
9. OWNERSHIP; PATENTS.
9.1 Ownership.
(a) Except as otherwise provided in Section 9.1(b) or (c), Inspire
shall retain all right, title and interest in and to the Patents and Know-how,
regardless of which Party prepares and prosecutes the applications associated
therewith, or maintains the patents, copyrights or other intellectual property
rights related thereto, subject to the license granted to Santen pursuant to
Section 5.2. Rights to Inventions made solely by employees of Inspire shall
belong to Inspire.
(b) Rights to Inventions made solely by employees of Santen shall
belong to Santen.
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(c) Rights to Inventions which were made jointly by employees of
Inspire and by employees of Santen shall belong jointly to Inspire and to
Santen. Such joint Inventions shall be subject to the Field and territorial
restrictions of this Agreement with respect to manufacture, use and sale of such
Inventions. The Parties shall be under no territorial or field restrictions with
respect to Joint Inventions outside of the Field, and shall have the right to
manufacture, have manufactured, use, sell, and offer to sell Joint Inventions
outside of the Field anywhere, and to license others to do so, without
accounting to each other.
9.2 Patent Maintenance.
(a) Inspire shall have full responsibility for, and shall control the
preparation and prosecution of, all patent applications and the maintenance of
all patents relating to the Licensed Technology (including the Patents)
throughout the Territory. In connection therewith, Inspire shall consult with
Santen in order to assure that all future filings with respect to the Patents
are made in a timely manner and identify the relevant countries in the
Territory, to the extent that Inspire can do so. Inspire shall pay all costs and
expenses of filing, prosecuting and maintaining the Patents and the patents
covering Inventions owned by Inspire in the Territory. Notwithstanding the
foregoing, Inspire shall not have the right to file patent applications or
maintain patents for Inventions solely owned by Santen, regardless of whether
such Inventions relate to the Licensed Technology.
(b) Inspire shall select qualified independent patent counsel to file
and prosecute all patent applications pursuant to Section 9.2(a). Inspire shall
provide copies to Santen of any filings made to, and written communications
received from, any patent office relating, in whole or in part, to the Licensed
Claims.
(c) Each Party agrees promptly to provide to the other Party a
complete written disclosure of any Invention made by such Party. Inspire shall
determine whether any Invention owned solely by Inspire or jointly by Inspire
and Santen is patentable and whether filing a patent application is economically
justifiable, and if so, shall proceed with the preparation and prosecution of a
patent application covering any such Invention. If Inspire elects not to file
patent applications for any Invention owned jointly by the Parties, Santen shall
have the right to file and prosecute patent applications for such Joint
Inventions in any country in which Inspire elects not to file for patent
protection. Santen shall determine whether any Invention owned solely by Santen
is patentable and whether filing a patent application is economically
justifiable, and if so, shall proceed with the preparation and prosecution of a
patent application covering any such Invention.
(d) Inspire and Santen shall share all costs and expenses of filing,
prosecuting and maintaining patents covering Inventions owned jointly by Santen
and Inspire in the Territory. If either Party elects not to pay for: (i) the
filing of a patent application in the Territory on any such Patent or Invention
which the other Party reasonably believes is patentable, or (ii) the further
prosecution or maintenance of any such Patent or Invention in the Territory, or
(iii) the filing of any divisional or continuing patent application based on any
Patent or Invention in the Territory, such Party shall notify the other Party in
a timely manner and the other Party may do so at its own
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expense. In such event, such patent or application in the Territory shall be
assigned by such Party to the other Party, all of such assigning Party's rights
in such patent or application in the Territory shall cease, and, in the case
where Santen is the assigning Party, the licenses granted to Santen under
Section 5 shall be deemed to cover such patent or application.
(e) Each Party agrees to cooperate with the other Party to execute all
lawful papers and instruments, to make all rightful oaths and declarations and
to provide consultation and assistance as may be necessary in the preparation,
prosecution, maintenance and enforcement of all such patents and patent
applications.
9.3 Patent Enforcement.
(a) If either Party learns of an infringement, unauthorized use,
misappropriation or ownership claim or threatened infringement or other such
claim (any of the foregoing, an "infringement") by a Third Party with respect to
any Licensed Technology within the Territory, such Party shall promptly notify
the other Party and shall provide such other Party with available evidence of
such infringement.
(b) Inspire shall have the first right, but not the duty, to institute
patent infringement actions against Third Parties based on any Licensed
Technology in the Territory. If Inspire (or its designee) does not secure actual
cessation of such infringement or institute an infringement proceeding against
an offending Third Party within 180 days of learning of such infringement,
Santen shall have the right, but not the duty, to institute such an action with
respect to any infringement by such Third Party. The costs and expenses of any
such action (including fees of attorneys and other professionals) shall be borne
by the Party instituting the action, or, if the Parties elect to cooperate in
instituting and maintaining such action, such costs and expenses shall be borne
by the Parties in such proportions as they may agree in writing. Each Party
shall execute all necessary and proper documents, take such actions as shall be
appropriate to allow the other Party to institute and prosecute such
infringement actions and shall otherwise cooperate in the institution and
prosecution of such actions (including, without limitation, consenting to being
named as a nominal party thereto). Any award paid by Third Parties as a result
of such an infringement action (whether by way of settlement or otherwise) shall
be applied first to reimburse both Parties for all costs and expenses incurred
by the Parties with respect to such action on a pro rata basis and, if after
such reimbursement any funds shall remain from such award, they shall be
allocated as follows: [CONFIDENTIAL TREATMENT REQUESTED].
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9.4 Infringement Action by Third Parties.
(a) In the event of the institution or threatened institution of any
suit by a Third Party against Santen for patent infringement involving the sale,
distribution or marketing of the Product in the Territory where such
infringement claim is a result of the use of the Licensed Technology, Santen
shall promptly notify Inspire in writing of such suit. Unless otherwise covered
by Section 11.3(c), Santen shall have the right to defend such suit at its own
expense and shall be responsible for all damages incurred as a result thereof.
Inspire hereby agrees to assist and cooperate with Santen, at Santen's
reasonable request and expense, in the defense of such suit (including, without
limitation, consenting to being named as a nominal party thereto). During the
pendency of such action and thereafter, Santen shall continue to make all
payments due under this Agreement.
(b) In the event that Santen incurs any liability to a Third Party for
royalties or other damages as the result of any such action as described in
Section 9.4(a), Santen shall be entitled to a credit against royalties due under
this Agreement in an amount equal to [CONFIDENTIAL TREATMENT REQUESTED] of
Santen's actual costs in defending any such action, and [CONFIDENTIAL TREATMENT
REQUESTED] of the royalties and other damages Santen pays such Third Party;
provided, however, that Santen shall not be entitled to take as a credit in any
period any amount in excess of [CONFIDENTIAL TREATMENT REQUESTED] of the
royalties otherwise due under this Agreement with respect to Net Sales in the
country in which such action takes place. Any credit under this Section which is
not applied in the period incurred as a result of the foregoing limitation may
be carried forward and applied to any subsequent period until the credit has
been fully applied.
(c) Any award from such Third Party that arises as a result of such
action as described in Section 9.4(a) (whether by way of judgment, award,
decree, settlement or otherwise) shall be allocated as follows: (i) if Santen
finally prevails, such award shall be applied first to reimburse Santen for all
costs and expenses incurred by it with respect to such action and, if after such
reimbursement any funds shall remain from such award, [CONFIDENTIAL TREATMENT
REQUESTED].
10. PUBLICATION; CONFIDENTIALITY.
10.1 Notification . Both Parties recognize that each may wish to publish
the results of their work relating to the subject matter of this Agreement.
However, both Parties also recognize the importance of acquiring patent
protection. Consequently, subject to any applicable laws or regulations
obligating either Party to do otherwise, any proposed publication by either
Party shall comply with this Section 10.1. At least 30 days before a manuscript
is to be submitted to a
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publisher, the publishing Party will provide the Coordinating Committee with a
copy of the manuscript (or an English translation thereof). If the publishing
Party wishes to make an oral presentation, it will provide the Coordinating
Committee with a copy of the abstract (if one is submitted) at least 30 days
before it is to be submitted. The publishing Party will also provide to the
Coordinating Committee a copy of the text of the presentation, including all
slides, posters, and any other visual aids, at least 30 days before the
presentation is made.
10.2 Review . The Coordinating Committee will review the manuscript,
abstract, text or any other material provided under Section 10.1 to determine
whether patentable subject matter is disclosed. The Coordinating Committee will
notify the publishing Party within 30 days of receipt of the proposed
publication if the Coordinating Committee, in good faith, determines that
patentable subject matter is or may be disclosed, or if the Coordinating
Committee, in good faith, believes Confidential Information is or may be
disclosed. If it is determined by the Coordinating Committee that patent
applications should be filed, the publishing Party shall delay its publication
or presentation for a period not to exceed 90 days from the Coordinating
Committee's receipt of the proposed publication or presentation to allow time
for the filing of patent applications covering patentable subject matter. In the
event that the delay needed to complete the filing of any necessary patent
application will exceed the 90-day period, the Coordinating Committee will
discuss the need for obtaining an extension of the publication delay beyond the
90-day period. If it is determined in good faith by the Coordinating Committee
that Confidential Information or proprietary information is being disclosed, the
Parties will consult in good faith to arrive at an agreement on mutually
acceptable modifications to the proposed publication or presentation to avoid
such disclosure.
10.3 Exclusions . Nothing in Sections 10.1 and 10.2 shall prevent either
Party: (i) in connection with efforts to secure financing at any time during the
term of this Agreement, from issuing statements as to achievements made, and the
status of the work being done by the Parties, under this Agreement, so long as
such statements do not jeopardize the ability to obtain patent protection on
Inventions or disclose non-public technical or scientific Confidential
Information; or (ii) from issuing statements that such Party determines to be
necessary to comply with applicable law (including the disclosure requirements
of the U.S. Securities and Exchange Commission, Nasdaq or any other stock
exchange on which securities issued by such Party are traded); provided,
however, that, to the extent practicable under the circumstances, such Party
shall provide the other Party with a copy of the proposed text of such
statements sufficiently in advance of the scheduled release thereof to afford
such other Party a reasonable opportunity to review and comment upon the
proposed text. In addition, the provisions of Section 10.1 and 10.2 shall not
apply to Inventions solely owned by Santen.
10.4 Confidentiality; Exceptions . Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, during the term of this Agreement and for five years thereafter, the
receiving Party, its Affiliates, its licensees and its sublicensees shall, and
shall ensure that their respective employees, officers and directors shall, keep
completely confidential and not publish or otherwise disclose and not use for
any purpose any information furnished to it or them by the other Party, its
Affiliates, its licensees or its sublicensees or developed
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under or in connection with this Agreement, except to the extent that it can be
established by the receiving Party by competent proof that such information: (i)
was already known to the receiving Party, other than under an obligation of
confidentiality, at the time of disclosure by the other Party; (ii) was
generally available to the public or otherwise part of the public domain at the
time of its disclosure to the receiving Party; (iii) became generally available
to the public or was otherwise part of the public domain after its disclosure
and other than through any act or omission of the receiving Party in breach of
this Agreement; or (iv) was disclosed to the receiving Party, other than under
an obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others (all such
information to which none of the foregoing exceptions applies, "Confidential
Information").
10.5 Exceptions to Obligation. The restrictions contained in Section 10.4
shall not apply to Confidential Information that: (i) is submitted by the
recipient to governmental authorities to facilitate the issuance of
Registrations for the Product, provided that reasonable measures shall be taken
to assure confidential treatment of such information; (ii) is provided by the
recipient to Third Parties under confidentiality provisions at least as
stringent as those in this Agreement, for consulting, manufacturing development,
manufacturing, external testing, marketing trials and, with respect to Santen,
to Third Parties who are Sublicensees or other development/marketing partners of
Santen with respect to any of the subject matter of this Agreement; or (iii) is
otherwise required to be disclosed in compliance with applicable laws or
regulations or order by a court or other regulatory body having competent
jurisdiction; provided that if a Party is required to make any such disclosure
of the other Party's Confidential Information such Party will, except where
impracticable for necessary disclosures (for example, to physicians conducting
studies or to health authorities), give reasonable advance notice to the other
Party of such disclosure requirement and, except to the extent inappropriate in
the case of patent applications, will use its best efforts to secure
confidential treatment of such Confidential Information required to be
disclosed.
10.6 Limitations on Use. Each Party shall use, and cause each of its
Affiliates, its licensees and its sublicensees to use, any Confidential
Information obtained by such Party from the other Party, its Affiliates, its
licensees or its sublicensees, pursuant to this Agreement or otherwise, solely
in connection with the activities or transactions contemplated hereby.
10.7 Remedies. Each Party shall be entitled, in addition to any other right
or remedy it may have, at law or in equity, to an injunction, without the
posting of any bond or other security, enjoining or restraining the other Party,
its Affiliates, its licensees and/or its sublicensees from any violation or
threatened violation of this Section 10.
11. RECALL; INDEMNIFICATION.
11.1 Investigation; Recall. In the event that the Regulatory Authority in
any country in the Territory shall allege or prove that the Product does not
comply with applicable rules and regulations in such country, Santen shall
notify Inspire immediately and both Parties shall cooperate fully
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regarding the investigation and disposition of any such matter. If Santen is
required or should deem it appropriate to recall the Product and such recall is
due to any negligence, recklessness or wrongful intentional acts or omissions
by, or strict liability of, or breach of representation and warranty by,
Inspire, then and in such event Inspire shall bear all reasonable direct costs
associated with such recall, including, without limitation, refund of the
selling price and the actual cost of conducting the recall in accordance with
the recall guidelines of the applicable Regulatory Authority. Otherwise, Santen
shall bear all costs and expenses associated with such recall.
11.2 Indemnification by Santen. Santen shall indemnify, defend and hold
harmless Inspire and its Affiliates, and their respective directors, officers,
employees and agents, from and against any and all liabilities, damages, losses,
costs and expenses (including the reasonable fees of attorneys and other
professionals) arising out of or resulting from:
(a) negligence, recklessness or wrongful intentional acts or omissions
of Santen, its Affiliates or its Sublicensees, if any, and their respective
directors, officers, employees and agents, in connection with the work performed
by Santen under the Development Program;
(b) any warranty claims, Product recalls or any tort claims of
personal injury (including death) or property damage relating to or arising out
of any manufacture, use, distribution or sale of the Product by Santen, its
Affiliates or its Sublicensees (except for claims based solely on the Compound)
due to any negligence, recklessness or wrongful intentional acts or omissions
by, or strict liability of, Santen, its Affiliates or its Sublicensees, and
their respective directors, officers, employees and agents, except, in each
case, to the comparative extent such claim arose out of or resulted from the
negligence, recklessness or wrongful intentional acts or omissions of Inspire
and its Affiliates, and their respective directors, officers, employees and
agents; or
(c) any breach of any representation or warranty made by Santen under
Section 2.
11.3 Indemnification by Inspire. Inspire shall indemnify, defend and hold
harmless Santen, its Affiliates, its Sublicensees and distributors, and their
respective directors, officers, employees and agents, from and against any and
all liabilities, damages, losses, costs and expenses (including the reasonable
fees of attorneys and other professionals) arising out of or resulting from:
(a) negligence, recklessness or wrongful intentional acts or omissions
of Inspire or its Affiliates, and their respective directors, officers,
employees and agents, in connection with Inspire's fulfillment of its
obligations under Section 4;
(b) any warranty claims, Product recalls or any tort claims of
personal injury (including death) or property damage relating to or arising out
of any manufacture, use, distribution or sale of any Compound by Inspire or its
Affiliates due to any negligence, recklessness or wrongful intentional acts or
omissions by, or strict liability of, Inspire or its Affiliates, and their
respective directors, officers, employees and agents, except, in each case, to
the comparative extent such claim
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arose out of or resulted from the negligence, recklessness or wrongful
intentional acts or omissions of Santen, its Affiliates or its Sublicensees, and
their respective directors, officers, employees and agents; or
(c) any breach of any representation or warranty made by Inspire
under Section 2.
11.4 Notice of Indemnification. In the event that any person (an
"indemnitee") entitled to indemnification under Section 11.2 or 11.3 is seeking
such indemnification, such indemnitee shall inform the indemnifying Party of the
claim as soon as reasonably practicable after such indemnitee receives notice of
such claim, shall permit the indemnifying Party to assume direction and control
of the defense of the claim (including the sole right to settle it at the sole
discretion of the indemnifying Party, provided that such settlement does not
impose any obligation on, or otherwise adversely affect, the indemnitee or the
other Party) and shall cooperate as requested (at the expense of the
indemnifying Party) in the defense of the claim.
11.5 Complete Indemnification. As the Parties intend complete
indemnification, all costs and expenses incurred by an indemnitee in connection
with enforcement of Sections 11.2 and 11.3 shall also be reimbursed by the
indemnifying Party.
12. TERM; TERMINATION.
12.1 Term. This Agreement shall become effective as of the Effective Date
and, unless earlier terminated pursuant to the other provisions of this Section
12, shall expire as follows:
(a) As to each Product in each country in the Territory, this
Agreement shall expire on the later of: (i) the [CONFIDENTIAL TREATMENT
REQUESTED] of the First Commercial Sale of such Product in such country, or (ii)
the date on which the sale of such Product ceases to be covered by a Licensed
Claim in such country.
(b) This Agreement shall expire in its entirety upon the expiration of
this Agreement with respect to all Products in all countries in the Territory
pursuant to Section 12.1(a).
12.2 Termination for Cause. Either Party (the "non-breaching Party") may,
without prejudice to any other remedies available to it at law or in equity,
terminate this Agreement (or a portion of this Agreement as provided in Section
4.7) in the event the other Party (the "breaching Party") shall have materially
breached or defaulted in the performance of any of its material obligations
hereunder, and such default shall have continued for 60 days after written
notice thereof was provided to the breaching party by the non-breaching party
(or, if such default cannot be cured within such 60-day period, if the breaching
party does not commence and diligently continue actions to cure such default
during such 60-day period). Any such termination shall become effective at the
end of such 60-day period unless the breaching party has cured any such breach
or default prior to
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the expiration of such 60-day period (or, if such default cannot be cured within
such 60-day period, if the breaching party has commenced and diligently
continued actions to cure such default). The right of either Party to terminate
this Agreement, or a portion of this Agreement, as provided in this Section 12.2
shall not be affected in any way by such Party's waiver or failure to take
action with respect to any previous default.
12.3 Effect of Expiration or Termination.
(a) Following the expiration of the term of this Agreement with
respect to a Product in a country pursuant to Section 12.1(a):
(i) Santen shall have a non-exclusive, royalty-free, perpetual right,
with the right to grant sublicenses, to continue to make, have made, market,
distribute and sell such Product in such country, and the non-exclusive,
perpetual and paid-up right to use the Licensed Technology in connection
therewith; and
(ii) Inspire shall have the fully-paid non-exclusive right, with the
right to grant sublicenses, to continue to cross-reference and otherwise
exercise its rights as set forth in Section 4.4(d) under the Registration(s) and
other regulatory filings for such Product in such country.
(b) Following expiration of the term of this Agreement in its
entirety pursuant to Section 12.1(b):
(i) Santen shall have a non-exclusive, royalty-free, perpetual right
to continue to make, have made, use, market, distribute and sell all Products in
all countries in the Territory, and the non-exclusive, perpetual and paid-up
right to use the Licensed Technology in connection therewith;
(ii) Inspire shall have: (A) the fully-paid non-exclusive right to
continue to cross-reference and otherwise exercise its rights as set forth in
Section 4.4(d) under the Registrations and other regulatory filings for all
Products in all countries in the Territory; and (B) the fully-paid, non-
exclusive, perpetual right to continue to use patents or know-how that embody or
relate to the Inventions described in Section 5.4 solely for the purposes set
forth in Section 5.4;
(c) If this Agreement is terminated with respect to a portion of the
Territory (the "Subject Portion") by Inspire pursuant to Sections 4.7 and 12.2,
in addition to any other remedies available to Inspire at law or in equity: (i)
Santen shall promptly transfer to Inspire copies of all data, reports, records
and materials in Santen's possession or control that relate, whether exclusively
or non-exclusively, to the Development Program in the Subject Portion and return
to Inspire all relevant records and materials in Santen's possession or control
that relate exclusively to the Subject Portion and contain Confidential
Information of Inspire (provided that Santen may keep one copy of such
Confidential Information of Inspire for archival purposes only); (ii) all
licenses granted by Inspire to Santen under Sections 5.1 and 5.2 shall terminate
with respect to the Subject Portion; (iii) Santen
-33-
<PAGE>
shall transfer to Inspire, or shall cause its designee(s) under Section 4.4(b)
to transfer to Inspire, ownership of all INDs, Registration Applications,
Registrations and other regulatory filings made or filed for the Product in the
Subject Portion if permitted by applicable laws and regulations; and (iv) all
sublicenses granted by Santen under this Agreement with respect to the Subject
Territory shall terminate.
(d) If this Agreement is terminated in its entirety by Inspire
pursuant to Section 12.2 by reason of a breach by Santen, in addition to any
other remedies available to Inspire at law or in equity: (i) Santen shall
promptly transfer to Inspire copies of all data, reports, records and materials
in Santen's possession or control that relate to the Development Program and
return to Inspire all relevant records and materials in Santen's possession or
control containing Confidential Information of Inspire (provided that Santen may
keep one copy of such Confidential Information of Inspire for archival purposes
only); (ii) all licenses granted by Inspire to Santen under Sections 5.1 and 5.2
shall terminate; (iii) Santen shall transfer to Inspire, or shall cause its
designee(s) under Section 4.4(b) to transfer to Inspire, ownership of all INDs,
Registration Applications, Registrations and other regulatory filings made or
filed for the Product if permitted by applicable laws and regulations; (iv)
Santen shall license, royalty-free, to Inspire all rights to use the Trademark
with respect to the Product in all countries throughout the Territory under
terms and conditions to be agreed upon between the Parties; and (v) all
sublicenses granted by Santen under this Agreement shall terminate. Furthermore,
Inspire shall have a fully-paid, non-exclusive, perpetual right to continue to
use patents or know-how that embody or relate to the Inventions described in
Section 5.4 solely for the purposes set forth in Section 5.4.
(e) If this Agreement is terminated by Santen pursuant to Section 12.2
by reason of a breach or default by Inspire, in addition to any other remedies
available to Santen at law or in equity,: (i) the license granted to Inspire by
Santen under Section 5.4 shall terminate; (ii) Santen shall have an exclusive,
royalty-free, perpetual right, with the right to grant sublicenses, to continue
to make, have made, use, market, distribute, sell, manufacture and have
manufactured any Product in the Territory, and the exclusive, perpetual and
paid-up right, with the right to grant sublicenses, to use the Licensed
Technology in connection therewith. To that end, Santen may continue to hold and
use all data, reports, records and materials that relate to or are prepared in
the course of the Development Program, and may hold all INDs, NDAs, NDA
Approvals and other regulatory filings made or filed by Santen for the Product,
pursuant to this Agreement, and may in its sole discretion continue any
sublicenses granted by Santen under this Agreement; and (iii) in order to secure
the right of Santen in clause (ii) of this Section 12.3(e), Inspire hereby
grants Santen the Manufacturing License and will use all reasonable efforts to
enable Santen to manufacture, or have manufactured Compound, including working
with Santen to establish arrangements with the Third Party Manufacturers.
12.4 Accrued Rights; Surviving Obligations.
(a) Termination, relinquishment or expiration of this Agreement for
any reason shall be without prejudice to any rights that shall have accrued to
the benefit of either Party prior to
-34-
<PAGE>
such termination, relinquishment or expiration. Such termination, relinquishment
or expiration shall not relieve either Party from obligations which are
expressly indicated to survive termination or expiration of this Agreement.
(b) All of the Parties' rights and obligations under Sections 3.5,
4.2(g), 4.2(h), 4.5, 4.6, 5.3(d), 5.6, 5.7 (so long as Santen sells Product), 7,
8.5(a), 8.6, 9.1, 9.3 (solely with respect to actions commenced before the
effective date of termination of this Agreement), 9.4, 10.4, 10.5, 10.6, 10.7,
11, 12.3, 12.4, and 14 shall survive termination, relinquishment or expiration
of this Agreement.
13. FORCE MAJEURE.
13.1 Events of Force Majeure. Neither Party shall be held liable or
responsible to the other Party nor be deemed to be in default under, or in
breach of any provision of, this Agreement for failure or delay in fulfilling or
performing any obligation of this Agreement when such failure or delay is due to
force majeure, and without the fault or negligence of the Party so failing or
delaying. For purposes of this Agreement, force majeure is defined as causes
beyond the control of the Party, including, without limitation, acts of God;
acts, regulations, or laws of any government; war; civil commotion; destruction
of production facilities or materials by fire, flood, earthquake, explosion or
storm; labor disturbances; epidemic; and failure of public utilities or common
carriers. In such event Inspire or Santen, as the case may be, shall immediately
notify the other Party of such inability and of the period for which such
inability is expected to continue. The Party giving such notice shall thereupon
be excused from such of its obligations under this Agreement as it is thereby
disabled from performing for so long as it is so disabled and the 30 days
thereafter. To the extent possible, each Party shall use reasonable efforts to
minimize the duration of any force majeure.
14. MISCELLANEOUS.
14.1 Relationship of Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the Parties. No Party shall incur any debts or make
any commitments for the other, except to the extent, if at all, specifically
provided herein.
14.2 Assignment . Neither Party shall be entitled to assign its rights
hereunder without the express written consent of the other Party hereto, except
that each Party may assign its rights and transfer its duties hereunder to any
assignee of all or substantially all of its business (or that portion thereof to
which this Agreement relates) or in the event of such Party's merger,
consolidation or involvement in a similar transaction. No assignment and
transfer shall be valid or effective unless done in accordance with this Section
14.2 and unless and until the assignee/transferee shall agree in writing to be
bound by the provisions of this Agreement.
-35-
<PAGE>
14.3 Books and Records . Any books and records to be maintained under this
Agreement by a Party or its Affiliates or Sublicensees shall be maintained in
accordance with generally accepted accounting principles, consistently applied.
14.4 Further Actions . Each Party shall execute, acknowledge and deliver
such further instruments, and do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
14.5 Notice.
(a) Any notice or request required or permitted to be given under or
in connection with this Agreement shall be deemed to have been sufficiently
given if in writing and personally delivered or sent by certified mail (return
receipt requested), facsimile transmission (receipt verified), or overnight
express courier service (signature required), prepaid, to the Party for which
such notice is intended, at the address set forth for such Party below:
(i) In the case of Inspire, to:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
USA
Attention: Christy Shaffer, Ph.D.
Facsimile No.: (919) 941-9797
(ii) In the case of Santen, to:
Santen Pharmaceuticals Co., Ltd.
3-9-19 Shimoshinjo
Higashiyodogawa-ku
Osaka 533-8651
JAPAN
Attention: Ichiro Otokozawa, General Manager
Business Development Dept.
Facsimile No.: 06-6321-8400
or to such other address for such Party as it shall have specified by like
notice to the other Party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery shall be deemed to be the next business day after such notice
or request was deposited with such service. If sent by certified mail, the date
of delivery shall be deemed to be the third business day
-36-
<PAGE>
after such notice or request was deposited with the U.S. or Japanese Postal
Service, as the case may be.
(b) All correspondence, notices and other communications of any kind
whatsoever given between the Parties, including, without limitation, all data,
information and reports relating to the Development Program and all regulatory
filings, shall be promptly provided to the other Party in English, or as an
English translation thereof, as the case may be.
14.6 Use of Name. Except as otherwise provided herein, neither Party shall
have any right, express or implied, to use in any manner the name or other
designation of the other Party or any other trade name or trademark of the other
Party (including, without limitation, the Trademark) for any purpose in
connection with the performance of this Agreement.
14.7 Public Announcements. Except as permitted by Section 10.3, neither
Party shall make any public announcement concerning this Agreement or the
subject matter hereof without the prior written consent of the other Party,
which shall not be unreasonably withheld, provided that it shall not be
unreasonable for a Party to withhold consent with respect to any public
announcement containing any of such Party's Confidential Information.
14.8 Waiver. A waiver by either Party of any of the terms and conditions
of this Agreement in any instance shall not be deemed or construed to be a
waiver of such term or condition for the future, or of any subsequent breach
hereof. All rights, remedies, undertakings, obligations and agreements contained
in this Agreement shall be cumulative and none of them shall be in limitation of
any other remedy, right, undertaking, obligation or agreement of either Party.
14.9 Compliance with Law. Nothing in this Agreement shall be deemed to
permit a Party to export, reexport or otherwise transfer any Product sold under
this Agreement without compliance with applicable laws.
14.10 Severability. When possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
14.11 Amendment. No amendment, modification or supplement of any provisions
of this Agreement shall be valid or effective unless made in writing and signed
by a duly authorized officer of each Party.
14.12 Governing Law; English Original Controlling . This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Delaware
without regard to conflicts of law principles; provided, however, that any
arbitration proceeding conducted pursuant to Section 14.13 shall be governed by
the Convention on the Recognition and Enforcement of Foreign Arbitral
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<PAGE>
Awards of June 10, 1958. The English original of this Agreement shall prevail
over any translation hereof.
14.13 Arbitration.
(a) Except as expressly otherwise provided in this Agreement, any
dispute arising out of or relating to any provisions of this Agreement shall be
finally settled by arbitration to be held in Raleigh-Durham, North Carolina, if
initiated by Santen, under the then current commercial arbitration rules of the
American Arbitration Association, or in Osaka, Japan, if initiated by Inspire,
under the commercial arbitration rules of the Japan Commercial Arbitration
Association. Such arbitration shall be conducted by three arbitrators appointed
according to said rules and in the English language. The Parties shall instruct
such arbitrators to render a determination of any such dispute within four
months after their appointment.
(b) Any award rendered by the arbitrator shall be final and binding
upon the Parties. Judgment upon any award rendered may be entered in any court
having jurisdiction, or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may be. Each
Party shall pay its own expenses of arbitration, and the expenses of the
arbitrators shall be equally shared unless the arbitrators assess as part of
their award all or any part of the arbitration expenses of one Party (including
reasonable attorneys' fees) against the other Party.
(c) This Section 14.13 shall not prohibit a Party from seeking
injunctive relief from a court of competent jurisdiction in the event of a
breach or prospective breach of this Agreement by the other Party which would
cause irreparable harm to the first Party.
14.14 Entire Agreement. This Agreement and the Stock Purchase Agreement and
the other documents and agreements executed in connection herewith and
therewith, together with the schedules and exhibits to any of the foregoing,
sets forth the entire agreement and understanding between the Parties as to the
subject matter hereof and merges all prior discussions and negotiations between
them, and neither of the Parties shall be bound by any conditions, definitions,
warranties, understandings or representations with respect to such subject
matter other than as expressly provided herein or as duly set forth on or
subsequent to the date hereof in writing and signed by a proper and duly
authorized officer or representative of the Party to be bound thereby.
14.15 Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties hereto and their respective permitted successors and assigns.
14.16 Descriptive Headings. The descriptive headings of this Agreement are
for convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.
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<PAGE>
14.17 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, any one of which need not contain the signature of more
than one Party but all such counterparts taken together shall constitute one and
the same agreement.
* * *
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed by its duly authorized representative as of the day and year first
above written.
INSPIRE PHARMACEUTICALS, INC.
By: /s/ David J. Drutz
------------------------------------
David J. Drutz, M.D., Vice Chairman
SANTEN PHARMACEUTICAL CO., LTD.
By: /s/ Takakazu Morita
------------------------------------
Takakazu Morita, Chief Executive Officer
and President
<PAGE>
EXHIBIT 10.15(a)
EXHIBIT A
---------
INSPIRE'S COST OF COMPOUND
--------------------------
The terms Cost of Compound shall mean the purchase unit costs incurred by
Inspire in connection with the manufacture of Compound by Third Parties,
including all Related Third Party Costs (as defined below) with respect thereto.
For purposes of the calculation of Inspire's Cost of Compound under this
Agreement, "Related Third Party Costs" shall mean all other Third Party costs
incurred by Inspire in connection with the manufacture and supply of Compound to
Santen (or of any component or ingredient thereof), including, without
limitation, freight, storage and insurance costs.
<PAGE>
EXHIBIT 10.15(b)
EXHIBIT B
---------
INITIAL PATENTS
---------------
1. US Application No. 08/797,472 AMethod of Treating Dry Eye Disease with
Purinergic Receptor Agonists@, B. R. Yerxa, K. M. Jacobus, W. Pendergast,
and J. L. Rideout. Assignee: Inspire Pharmaceuticals, Inc., 4222 Emperor
Blvd., Durham, N.C. US Filing Date February 6, 1997. PCT Filing Date
February 6, 1998. Notice of Allowance by US PTO August 17, 1998.
2. [CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
EXHIBIT 10.15(c)
EXHIBIT C
---------
INITIAL MEMBERS OF
------------------
COORDINATING COMMITTEE
----------------------
A. Initial Designees of Inspire:
1. Christy Shaffer, Ph.D., Initial Secretary
2. Richard Evans, Ph.D.
3. Ben Yerxa, Ph.D.
B. Initial Designees of Santen:
1. Koji Yamamoto, Ph.D., Chairperson
2. Yoichi Kawashima, Ph.D.
3. Katsuhiko Nakata, Ph.D.
<PAGE>
EXHIBIT 10.15(d)
EXHIBIT D
---------
MAXIMUM/MINIMUM
---------------
ORDERS UNDER SECTION 8.3
------------------------
The following examples are intended to illustrate the operation of Section 8.3
regarding the maximum quantity of Compound that Inspire is required to accept
orders for, and the minimum quantity of Compound that Santen is required to
purchase (and Inspire is entitled to supply), with respect to any particular Q1.
Assumptions
1. "Forecast 1" refers to the quarterly forecast for Compound to be supplied
by Inspire during the fourth calendar quarter of 2001 (the "Subject
Quarter"), which forecast is delivered to Inspire by Santen on or before
the first day of the fourth calendar quarter of 2000.
3. "Forecast 2" refers to the quarterly forecast for Compound to be supplied
by Inspire during the Subject Quarter, which forecast is delivered to
Inspire by Santen on or before the first day of the first calendar quarter
of 2001.
4. "Forecast 3" refers to the quarterly forecast for Compound to be supplied
by Inspire during the Subject Quarter, which forecast is delivered to
Inspire by Santen on or before the first day of the second calendar quarter
of 2001.
Example 1
Santen's forecasts for Compound for the Subject Quarter, as provided over a
three-quarter period, are as follows:
=============================================================================
Forecast 1 Forecast 2 Forecast 3
- ---------------------------------------------------------====================
* * *
=============================================================================
The first forecast (Forecast 1), provided to Inspire before the start of the
fourth quarter 2000, forecasts *** ********* of Compound. The second forecast
(Forecast 2), provided to Inspire before the start of the first quarter 2001,
forecasts *** ********* of Compound. The third forecast (Forecast 3), provided
to Inspire before the start of the second quarter 2001, forecasts *** *********
of Compound.
Santen's forecasts for Compound have increased over this three-quarter period.
Pursuant to clause (i) of Section 8.3(a), Santen is entitled to purchase, and
Inspire is obligated to deliver no more Compound than the least of:
* [CONFIDENTIAL TREATMENT REQUESTED]
D-1
<PAGE>
(A) * of the quantity of Compound
reflected in Forecast 1 ( * );
(B) * of the quantity of Compound
reflected in Forecast 2 ( * ); or
(C) the quantity of Compound reflected in Forecast 3 (*************
********* **********).
Therefore, Inspire will not be obligated to accept orders for, or supply, more
than *** ********* of Compound during the Subject Quarter.
Example 2
Santen's forecasts for Compound for the Subject Quarter, as provided over a
three-quarter period, are as follows:
=============================================================================
Forecast 1 Forecast 2 Forecast 3
- ---------------------------------------------------------====================
* * *
=============================================================================
Santen's forecasts for Compound have decreased over this three-quarter period.
Pursuant to clause (ii) of Section 8.3(a), Santen is required to purchase, and
Inspire is entitled to supply, no less Compound than the greatest of:
(A) * of the quantity of Compound
reflected in Forecast 1 ( * );
(B) * of the quantity of Compound
reflected in Forecast 2 ( * ); or
(C) the quantity of Compound reflected in Forecast 3 ( *
).
Therefore, Santen is obligated to purchase, and Inspire is entitled to supply,
*** ********* of Compound during the Subject Quarter.
Example 3
Santen's forecasts for Compound for the Subject Quarter, as provided over a
three-quarter period, are as follows:
=============================================================================
Forecast 1 Forecast 2 Forecast 3
- ---------------------------------------------------------====================
* * *
=============================================================================
*[CONFIDENTIAL TREATMENT REQUESTED]
D-2
<PAGE>
Santen's forecasts for Compound have decreased between the two most recent
forecasts. Pursuant to clause (ii) of Section 8.3(a), Santen is required to
purchase, and Inspire is entitled to supply, no less Compound than the greatest
of:
(A) * of the quantity of Compound
reflected in Forecast 1 ( * );
(B) * of the quantity of Compound
reflected in Forecast 2 ( * ); or
(C) the quantity of Compound reflected in Forecast 3 ( *
).
Therefore, Santen is obligated to purchase, and Inspire is entitled to supply,
*** ********* of Compound during the Subject Quarter.
Example 4
Santen's forecasts for Compound for the Subject Quarter, as provided over a
three quarter period, are as follows:
=============================================================================
Forecast 1 Forecast 2 Forecast 3
- ---------------------------------------------------------====================
* * *
=============================================================================
Santen's forecasts for Compound have increased between the two most recent
forecasts. Pursuant to clause (i) of Section 8.3(a), Santen is entitled to
purchase, and Inspire is obligated to deliver no more Compound than the least
of:
(A) * of the quantity of Compound
reflected in Forecast 3 ( * );
(B) * of the quantity of Compound
reflected in Forecast 2 ( * ); or
(C) the quantity of Compound reflected in Forecast 3 ( *
).
Therefore, Inspire will not be obligated to accept orders for, or supply, more
than *** ********* of Compound during the Subject Quarter.
*[CONFIDENTIAL TREATMENT REQUESTED]
D-3
<PAGE>
EXHIBIT 10.16
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
December 16, 1998 is entered into by and between Inspire Pharmaceuticals, Inc.,
a Delaware corporation (the "Company"), and Santen Pharmaceutical Co., Ltd., a
Japan corporation ("Santen").
WHEREAS, the Company and Santen have entered into a Series D Preferred
Stock Purchase Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, the Company and Santen desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.001 par value per share,
------------
of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"Prior Registration Rights Agreements" means (i) the Investors'
------------------------------------
Rights Agreement, dated as of April 8, 1997, by and among the Company and the
Investors named therein, as amended by Amendment No.1 to Series B Convertible
Preferred Stock Purchase Agreement and Second Amended and Restated Stockholders'
Agreement effective as of June 30, 1997, and as further amended by Amendment No.
2 to Series B Convertible Preferred Stock Purchase Agreement and Second Amended
and Restated Stockholders' Agreement effective as of September 9, 1997, as may
be further amended from time to time, and (ii) the Registration Rights
Agreement, dated September 10, 1998, by and between the Company and Kissei
Pharmaceuticals Co., Ltd., as may be amended from time to time.
"Registrable Shares" means (i) the shares of Common Stock issued
------------------
or issuable upon conversion of the Shares, and (ii) any Common Stock issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with respect to, or
in exchange for or in replacement of, the shares of Common Stock referred to in
clause (i); provided, however, that shares of Common Stock which are Registrable
-------- -------
Shares shall cease to be Registrable Shares (x) upon any sale pursuant to a
Registration Statement or Rule 144 under the Securities Act, or (y) upon any
sale in any manner to a person or entity which, by virtue of Section
<PAGE>
12 of this Agreement, is not entitled to the rights provided by this Agreement.
Wherever reference is made in this Agreement to a request or consent of holders
of a certain percentage of Registrable Shares, the determination of such
percentage shall include shares of Common Stock issuable upon conversion of the
Shares even if such conversion has not yet been effected.
"Registration Expenses" means the expenses described in
---------------------
Section 4.
"Registration Statement" means a registration statement filed by
----------------------
the Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Securities Act" means the Securities Act of 1933, as amended, or
--------------
any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Selling Stockholders" means all stockholders who desire to sell
--------------------
shares of stock pursuant to registration rights granted under (i) this Agreement
and (ii) the Prior Registration Rights Agreements.
"Shares" means (i) the "Shares," as such term is defined in
------
Section 1.1(b) of the Purchase Agreement, and (ii) any other shares of Common
Stock, whether issued or merely issuable, with respect to which rights have been
granted under this Agreement that are held by any Stockholder.
"Stockholder" means each Santen and any other person granted
-----------
rights under this Agreement by the Company, and any persons or entities to whom
the rights granted under this Agreement are transferred by a Stockholder, its
successors or assigns pursuant to Section 12 hereof.
2. Incidental Registration.
-----------------------
a. Whenever the Company proposes to file a Registration
Statement at any time and from time to time, it will, prior to such filing, give
written notice to all Stockholders of its intention to do so and, upon the
written request of a Stockholder or Stockholders given within 20 days after the
Company provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its best efforts
to cause all Registrable Shares which the Company has been requested by such
Stockholder or Stockholders to register to be registered under the Securities
Act to the extent necessary to permit their sale or other disposition in
accordance with the intended methods of distribution specified in the request of
such Stockholder or Stockholders; provided, however, that the Company shall have
-------- -------
the right to postpone or withdraw any registration effected pursuant to this
Section 2 without obligation to any Stockholder.
2
<PAGE>
b. In connection with any registration under this Section 2
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided that such terms must be consistent with
this Agreement). If in the opinion of the managing underwriter it is
appropriate because of marketing factors to limit the number of Registrable
Shares and other shares of Common Stock of the Company (including shares of
Common Stock issued or issuable upon conversion of shares of any currently
unissued series of preferred stock of the Company) (the "Other Shares") with
registration rights granted pursuant to the Prior Registration Rights Agreement
to be included in the offering, then the Company shall be required to include in
the registration only that number of Registrable Shares and Other Shares, if
any, which the managing underwriter believes should be included therein;
provided, however, that no persons or entities other than the Company, the
- -------- -------
Stockholders and persons or entities holding registration rights shall be
permitted to include securities in the offering. If the number of Registrable
Shares and Other Shares to be included in the offering in accordance with the
foregoing is less than the total number of shares which the holders of
Registrable Shares and Other Shares have requested to be included, then the
number of Registrable Shares and Other Shares to be included in the registration
statement by holders of Registrable Securities and holders of Other Shares shall
be reduced by excluding first up to all of the Registrable Shares; any further
reduction shall be among the holders of Other Shares pursuant to the provisions
of the respective Prior Registration Rights Agreements. If any holder would
thus be entitled to include more securities than such holder requested to be
registered, the excess shall be allocated among other requesting holders pro
rata based upon their total ownership of shares of Common Stock (giving effect
to the conversion into Common Stock of all securities convertible thereinto).
3. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
a. file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
b. as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or 120 days after
the effective date thereof;
c. as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Stockholder may
3
<PAGE>
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Shares owned by the selling Stockholder; and
d. as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; provided, however, that the Company shall not be
-------- -------
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
4. Allocation of Expenses. The Company will pay all Registration
----------------------
Expenses of all registrations under this Agreement. For purposes of this
Section 4, the term "Registration Expenses" shall mean all expenses incurred by
the Company in complying with this Agreement, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, fees and
expenses of counsel for the Company and the fees and expenses of one counsel
selected by the Selling Stockholders pursuant to the provisions of the
respective Prior Registration Rights Agreements and this Agreement to represent
all Selling Stockholders (which shall be the counsel selected by the Selling
Stockholders who are parties to the Prior Registration Rights Agreements, unless
no such Selling Stockholders are participating in the subject registration, in
which event the holders of the Registrable Securities shall select such
counsel), state Blue Sky fees and expenses, and the expense of any special
audits incident to or required by any such registration, but excluding
underwriting discounts, selling commissions and the fees and expenses of Selling
Stockholders' own counsel (other than the counsel selected to represent all
Selling Stockholders).
5. Indemnification and Contribution.
--------------------------------
a. In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities
4
<PAGE>
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such seller,
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by such seller, underwriter or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
-------- -------
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus or final prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such seller,
underwriter or controlling person specifically for use in the preparation
thereof.
b. In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment or
supplement; provided, however, that the obligations of such Stockholders
-------- -------
hereunder shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such registration.
c. Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, however, that counsel for the
-------- -------
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of any
-------- -------
5
<PAGE>
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 5. The Indemnified
Party may participate in such defense at such party's expense; and provided,
--------
still further, that the Indemnifying Party shall pay such expense if
- -------------
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect of such
claim or litigation, and no Indemnified Party shall consent to entry of any
judgment or settle such claim or litigation without the prior written consent of
the Indemnifying Party.
d. In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
5; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
required to contribute any amount in excess of the proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement, and (B)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11(f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.
6. Information by Holder. Each Stockholder including Registrable Shares
---------------------
in any registration shall furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
7. "Stand-Off" Agreement. Each Stockholder, if requested by the Company
--------------------
and the managing underwriter of an offering by the Company of Common Stock or
other securities of the Company pursuant to a Registration Statement, shall
agree not to sell publicly or otherwise transfer
6
<PAGE>
or dispose of any Registrable Shares or other securities of the Company held by
such Stockholder for a specified period of time (not to exceed 180 days)
following the effective date of such Registration Statement; provided, however,
-------- -------
that:
a. such agreement shall only apply to the first Registration
Statement covering Common Stock to be sold on its behalf to the public in an
underwritten offering; and
b. all Stockholders holding not less than the number of shares of
Common Stock held by such Stockholder (including shares of Common Stock issuable
upon the conversion of Shares, or other convertible securities, or upon the
exercise of options, warrants or rights) and all officers and directors of the
Company enter into similar agreements.
8. Rule 144 Requirements. After the earliest of (i) the closing of the
---------------------
sale of securities of the Company pursuant to a Registration Statement, (ii) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
a. comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about the Company;
b. use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
c. furnish to any holder of Registrable Shares upon request (i) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c), and the reporting requirements of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such
holder may reasonably request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without registration.
9. Mergers, Etc. The Company shall not, directly or indirectly,
------------
enter into any merger, consolidation or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation or reorganization, agree in writing
to assume the obligations of the Company under this Agreement, and for that
purpose references hereunder to "Registrable Shares" shall be deemed to be
references to the securities which the Stockholders would be entitled to receive
in exchange for Registrable Shares under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 9 shall
-------- -------
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if all Stockholders are entitled to
receive in exchange for their Registrable Shares consideration consisting solely
of (i) cash, (ii) securities of the acquiring corporation which may be
immediately sold to the public without registration under the Securities
7
<PAGE>
Act, or (iii) securities of the acquiring corporation which the acquiring
corporation has agreed to register within 90 days of completion of the
transaction for resale to the public pursuant to the Securities Act.
10. Additional Registration Rights. The Company, at its discretion, may
------------------------------
grant registration rights, pari passu with the rights granted in Section 2, to
----------
persons who become holders of Common Stock or other securities convertible into
Common Stock subsequent to the date of this Agreement by causing such holders to
execute a copy of this Agreement, and shall not be obligated to seek or obtain
the consent of the Stockholders in order to do so.
11. Termination. All of the Company's obligations to register Registrable
-----------
Shares under this Agreement shall terminate five (5) years after the closing of
a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public.
12. Transfers of Rights. This Agreement, and the rights and obligations
-------------------
of any Stockholder hereunder, may be assigned by such Stockholder to any person
or entity to which Shares are transferred by such Stockholder, and such
transferee shall be deemed a "Stockholder" for purposes of this Agreement;
provided, however, that the transferee provides written notice of such
- -------- -------
assignment to the Company.
13. General.
-------
a. All notices, requests, consents, and other communications under
this Agreement shall be in writing and shall be delivered by hand or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid:
If to the Company, at Inspire Pharmaceuticals, Inc., 4222 Emperor
Boulevard, Suite 470, Durham, North Carolina 27703, USA, Attention: Christy
Shaffer, Ph.D., or at such other address or addresses as may have been furnished
in writing by the Company to the Stockholders;
If to Santen, at 3-9-19 Shimoshinjo, Higashiyodogawa-ku, Osaka,
533-8651, JAPAN, Attention: Ichiro Otokozawa, General Manager, Business
Development Department, or at such other address or addresses as may have been
furnished in writing by Santen to the Company; or
If to any other Stockholder, to the most recent address appearing
on the records of the Company for such Stockholder.
Notices provided in accordance with this Section 13(a) shall be deemed delivered
upon personal delivery or two business days after deposit in the mail.
8
<PAGE>
b. This Agreement embodies the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter, which shall be of no further force or effect.
c. Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holders of at least 50% of the Registrable Shares; provided,
--------
however, that this Agreement may be amended with the consent of the holders of
- -------
less than all Registrable Shares only in a manner which affects all Registrable
Shares in the same fashion. No waivers of or exceptions to any term, condition
or provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
d. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which shall be one and
the same document.
e. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
f. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
9
<PAGE>
Executed as of the date first written above.
INSPIRE PHARMACEUTICALS, INC.
By: /s/ David J. Drutz
---------------------------
David J. Drutz, M.D.
Vice Chairman
SANTEN PHARMACEUTICAL CO., LTD.
By: /s/ Takakazu Morita
---------------------------
Takakazu Morita
Chief Executive Officer and President
10
<PAGE>
Exhibit 10.17
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
SIMBEC
CLINICAL RESEARCH AGREEMENT
This Clinical Research Agreement is made by and between SIMBEC RESEARCH LIMITED
("Simbec"),
A United Kingdom corporation and INSPIRE PHARMACEUTICALS INC. ("Company").
Whereas, Simbec is engaged in the business of performing clinical research
studies;
Whereas, Company is engaged in the development, manufacture, distribution and/or
sale of pharmaceutical
and medical products and desires to retain Simbec's services in conducting the
study entitled [CONFIDENTIAL TREATMENT REQUESTED], in accordance with the terms
and conditions herein;
Now, therefore, in consideration of the mutual covenants herein contained, the
parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Protocol" - A plan which governs how the study will proceed for a
particular project. A protocol
includes, but is no limited to, a description of how many subjects will be
evaluated and how and what information will be obtained from subjects. A
protocol is identified by the specific protocol or project number.
1.2 "Facilities" -Clinical facility designated in a protocol where subjects
involved in the study receive treatment and where data are collected.
1.3 "Case Report Form (CRF)" - A collection of documents designed specifically
for recording data as required under a protocol. A CRF is created and completed
for each subject involved in the study.
ARTICLE II - ENGAGEMENT OF SIMBEC TO MANAGE THE STUDY; TRANSFER OF
OBLIGATIONS
2.1 Study Protocol
Simbec will review the clinical protocol.
2.2 CRF Development
Simbec will provide Company with paper Case Report Forms (CRFs) for this study.
The CRFs will be printed on NCR paper and the Company will review all drafts and
approve the final version of the CRFs before printing. Similarly, Informed
Consent Forms will be prepared by Simbec and are subject to the Company's
approval.
2.3 Program Database
Simbec agrees to determine necessary requirements, prepare database
specifications, program the database, validate the database prior to data entry,
verify database output after data entry is complete and store the database by
archiving it according to Simbec's business practices. Simbec agrees to provide
Company with a complete copy of the final electronic database in PC SAS (R)
and/or Excel (R) format promptly at the conclusion of the study. Simbec will
perform coding of adverse events using COSTART dictionary.
<PAGE>
2.4 Perform Double Data Entry
Simbec agrees to enter manually all information contained in each CRF twice, by
two (2) different individuals, into the study database to compare the two (2)
data sets to ensure that the data entered are identical and to identify and
correct any data entry discrepancies. If the central laboratory does not
provide validated electronic data, Simbec agrees to enter manually data received
on hard copy for the central laboratory twice, by two (2)different individuals,
into a database for the laboratory data, to compare the two (2) data sets to
ensure that the data entered are identical; and to identify and correct any data
entry discrepancies. If any data entry discrepancies require resolution by the
clinical facility, Simbec will prepare and submit data queries to the clinical
facility. Simbec agrees to complete data entry and issue all necessary data
queries to the clinical facility within four (4) weeks of receipt of the final
case report form. Simbec will ensure that database edits are completed and the
database is closed and declared clean within one (1) week after receipt of the
final completed data query from the clinical facility.
2.5 Biostatistical Analysis and Reporting
Simbec will produce a study safety summary within one week of completion of each
study cohort. The safety summary will include:
- Listings of all adverse events recorded for each cohort.
- Listings of all ocular assessments recorded for each cohort.
- A tolerance assessment by the investigating physician.
Simbec will conduct the final analysis of study data according to the
statistical analysis plan based on the protocol developed using SAS and Excel
programs and formulae used in all statistical analysis. Preliminary tables for
Company's review of format and data listings will be provided before the
database has been closed.
2.6 Data Management
Simbec will provide Company with Data Handling Manual or equivalent which will
include computer programming for appropriate data edit checks. Simbec will also
provide Company with CRFs annotated with SAS variable names used in data
management and statistical analysis.
2.7 Communication with the Company
Simbec agrees to conduct liberal, routine communications with Company by
telephone, facsimile, e-mail, or correspondence and will promptly inform Company
of any unusual occurrences in the conduct of the study. In person visits to
Company's facilities are not included in the price estimate for the study and,
if required, will be billed separately at Simbec's hourly rate, plus travel
expenses.
2.8 Laboratory Analysis
Laboratory analysis, subject assessments and reports thereof will be provided as
detailed in the Protocol.
1) Simbec agrees to provide data associated with subject screening; and
2) Simbec agrees to provide the physical examinations of the subjects and
reports thereof as described in the Protocol
2.9 Provide Quality Control
Simbec agrees to perform quality control during the study by conducting quality
reviews according to Simbec's SOPS.
2.10 Additional Reporting, Reports or Audits
If Company requests any additional reporting, reports or audits by Simbec,
Company agrees to pay Simbec its hourly rate for these additional reports,
reporting or audits.
2.11 Regulatory Compliance
The Study will performed by Simbec to Good Laboratory Practice (GLP) and Good
Clinical Practice (GCP) regulations and guidelines as appropriate.
It is understood that Simbec is responsible for obtaining ethics committee
approval, this approval is a pre-requisite to proceeding with the Study.
<PAGE>
2.12 Conduct of Study
Simbec agrees to conduct the study in strict accordance with the study protocol
and in compliance with the applicable International Committee of Harmonization
guidelines, United Kingdom Medicines Control Agency guidelines, Good Clinical
Practice and the United States Food and Drug Administration's Code of Federal
Regulations section 21, parts 50 and 56. Simbec agrees to maintain complete
records of the disposition of study drug, including dates and quantities used by
the subjects. Simbec agrees to prepare and maintain complete and accurate case
histories to record all observations and other data pertinent to the study on
each study subject.
2.13 Study Monitoring
During the study period, Simbec will monitor the progress of the Study to
determine whether the study is being conducted in accordance with the provisions
specified herein under Section 2.12 (Conduct of Study). Simbec will conduct a
100%audit of case report form data and communicate changes necessary to correct
and reduce discrepancies and errors. Upon completion of each monitoring visit,
Simbec will provide to Company a written report of the observations of the visit
and the progress of the study.
ARTICLE III - COMPANY'S OBLIGATIONS
3.1 Regulatory Compliance
Company will obtain regulatory approval for the study under the laws of the
United Kingdom.
3.2 CRF Development
Company agrees to consult with and provide any needed information to assist
Simbec with the preparation of a template CRF. Company also agrees to notify
Simbec of its approval of the final CRF template and identify which version of
the, CRF template it has approved.
3.3 CRF Printing
Company agrees to consult with and provide any needed information to assist
Simbec with the preparation of a template CRF. Company also agrees to notify
Simbec of its approval of the final CRF template and identify which version of
the, CRF template it has approved.
3.4 Communication with Simbec
Company agrees to conduct routine communications with Simbec by telephone,
facsimile, email, or correspondence.
3.5 Notify FDA of Serious and Unexpected Adverse Events
The Company agrees that the reporting of all "serious and unexpected adverse
events" to the FDA, as required by the laws of the United States, will be the
sole responsibility of the Company. Simbec will notify Company of each serious
or unexpected adverse event within 24 hours of its knowledge of the event using
the Serious Adverse Event Report form provided by the Company.
3.6 Study Monitoring and/or Site Audits
During the study period, Company may monitor the progress of the Study to
determine whether the study is being conducted in accordance with the provisions
specified herein under Section 2.12 (Conduct of Study). Access to subject
medical records and study documentation will be necessary for monitoring and/or
site auditing purposes. Simbec's records and medical information gathered
during this study will be reviewed by representatives of Company and may also be
disclosed to the appropriate regulatory authorities, including the United States
Food and Drug Association and the Local Research Ethics Committee.
3.7 Pay Simbec for its Services and Total Costs of the Study
Company agrees to pay Simbec for all of Simbec's work on and services for the
study and to pay all of the total costs for the study as specified in this
agreement and according to the provisions below:
<PAGE>
3.7.a Price Estimate for the Study
Company understands and hereby acknowledges that Exhibit 1 attached to this
agreement is a list of specific activities for the study and a price estimate
for each phase of the study which has been created by Simbec. Company
acknowledges that Exhibit 1 is an estimate of the total price of the study.
Simbec agrees that the total cost, as set forth in Exhibit 1, shall not exceed
[CONFIDENTIAL TREATMENT REQUESTED] (excluding VAT and additional charges
detailed in Exhibit 1). Simbec agrees that the invoices submitted to the
Company for the work performed for the study will be fully itemized. In the
event that the study costs exceed the budget set forth in Exhibit 1, Simbec will
notify Company, in writing, to request approval of additional costs.
3.7.b Payment Schedule
Company agrees to pay for actual work on and services for the study as outlined
in Exhibit I attached hereto in the following manner:
[CONFIDENTIAL TREATMENT REQUESTED]
All payments will be made by Company to Simbec within 30 days of receipt of
invoice.
ARTICLE IV - CONFIDENTIALITY
In consideration for each others' promises and obligations herein, Simbec agrees
that they will not disclose to third parties any non-public information relating
to the study, Company's involvement in the study, any non-public information
about the pharmaceutical products in the study, unless they are required to do
so under the law. Simbec may disclose need-to-know information to a third party
only if they have signed a confidentiality agreement with Simbec that is
equivalent to the agreement that was signed between Simbec and the Company.
Simbec will not publish any information related to the study without prior
written authorization from Company. Simbec will notify company in writing of
any such disclosure at least fifteen (15) days in advance of making such
disclosure.
Exceptions to Confidentiality Provisions
Except as otherwise expressly provided in this agreement, the preceding
paragraph shall not apply to any Confidential Information that Simbec can prove
conclusively (a) has been published in writing and has become, prior to the time
of use or disclosure by Simbec, a part of the public domain other than by reason
of any acts or omissions by possession or knowledge, prior to the time of
Simbec's use or disclosure, by any third party (other than those acting for or
on behalf of Inspire) as a matter of legal right and without restriction on use
or disclosure, (b) was in Simbec's possession or actually known by Simbec prior
to commencement of Simbec's engagement with Inspire, as a matter of legal right
and without restriction on use and disclosure and was not acquired by Simbec or
any of Simbec's employees representatives or
<PAGE>
contractors directly or indirectly from Inspire, or (c) was required to be
disclosed by Simbec to comply with applicable laws or regulations or with a
court or administrative order final beyond the possibility of appeal or other
review, provided that Inspire received prior written notice of such disclosure
and that Simbec takes all reasonable and lawful actions to obtain confidential
treatment for such disclosure and, if possible, to minimize the extent of such
disclosure. For purposes of this Agreement, no information shall be deemed to
be in the public domain or in Simbec's possession or knowledge or in the
possession or knowledge of any of Simbec's employees, representatives or
contractors merely because such information is embraced by more general
information in the public domain or in the possession or knowledge of any of the
foregoing.
ARTICLE V - ASSIGNMENT
This Agreement is for the benefit of and shall bind the parties hereto and their
respective successors and assigns provided, however, that neither this Agreement
nor any benefit hereunder may be assigned or otherwise transferred by either
party to any third party without the prior written consent of the other party.
ARTICLE VI - NOTICES
Written communications and any notice which is required to be given hereunder
may be sent by facsimile, e-mail, delivered by courier services or mailed by
prepaid registered post, addressed as follows:
TO: Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
United States of America
Attention: Ben Yerxa Ph. D.
Facsimile: (919) 941-9797
TO: Simbec Research Limited
Merthyr Tydfil Industrial Park
Merthyr Tydfil
Mid Glamorgan CF48 4DR
United Kingdom
Attention: Mark Cooper
Facsimile: 011-44-1443-692494
Any written communication or notice so delivered shall be deemed to have been
received by the addressee at the time and date when actually delivered, or in
any event within ten (10) days after posting in the manner provided herein,
provided no postal disruption shall exist. Written documents or notices sent by
wire communications (i.e., facsimile transmission, etc.) shall be deemed to have
been received by the addressee at the time and date when actually sent with
evidence of transmission. The above addresses may be changed at any time by
giving prior written notice.
ARTICLE VII - INTELLECTUAL PROPERTY OWNERHSIP
All Study data collected during the conduct of the Study Protocol shall be and
remain the exclusive property of company. Further, any ideas, know-how,
inventions, processes or other intellectual property which are generated under
or in connection with the Study shall belong to and shall be the sole and
exclusive property of the Company and that Simbec will take all reasonable steps
required to protect such ownership rights for the Company.
ARTICLE VIII - IDEMNIFICATION
8.1 Simbec carries "No Fault" insurance to compensate for injury, accident, ill
health or death caused by participation in clinical trials without regard to
proof of negligence and without delay. Where there is any doubt over causation
the benefit of doubt will be given to the claimant.
<PAGE>
8.2 Simbec is indemnified under this policy against professional negligence in
the form of injuries or damages caused by failure to exercise all proper and
reasonable care and skill in the conduct of the Project.
8.3 the Company undertakes to provide product liability cover against injury and
damages arising from the use of products in the Project.
8.4 Simbec shall inform the Company of any claims or legal actions arising out
the Project without delay.
8.5 The obligations of Simbec and the Company under these Indemnity clauses
shall commence at the commencement of the Project and continue in perpetuity.
8.6 Provisions for arbitration in the event of disagreement must be agreed with
Simbec who shall arrange for a Barrister of at least ten years standing to be
appointed by the Royal College of Physicians as arbiter.
8.7 The Company agrees to indemnify and hold harmless Simbec from and against
any loss, damage, cost or expense (including reasonable legal fees) suffered or
incurred by Simbec arising out of any claim or proceedings in respect of death
or bodily injury to Subjects recruited to the Project caused by participation in
the Project unless such loss, damage, cost or expense is due either to the
failure of Simbec to conduct the Project in accordance with the Protocol or is
as a result of Simbec's negligence, willful default, failure or omission whether
by itself, its employees, servants or agents.
8.8 The Company agrees to indemnify and hold harmless the Principal Investigator
from and against any loss, damage, costs or expenses (including reasonable
legal fees) suffered or incurred by the Principal Investigator arising our
of any claims or proceedings in respect of death or bodily injury to Subjects
recruited to the Project caused by participation in the Project unless such
loss, damage, cost or expense is due either to the failure of the Principal
Investigator to conduct the Project in accordance with the Protocol or is as a
result of the Principal Investigator's negligence, willful default, failure or
omission whether by itself, its employees, servants or agents.
8.9 Simbec agrees to indemnify and hold harmless the company from and against
any loss, damage, cost or expense (including reasonable legal fees) suffered or
incurred by the Company arising out of any claims or proceedings in respect of
death or bodily injury to Subjects recruited to the Project caused by Simbec's
negligence, willful default, failure or omission in the conduct of the Project
whether by itself, its employees, servants or agents.
8.10 The foregoing clauses, 8.1-8.9, are in accordance with The Clinical Trial
Compensation Guidelines of The Association of the British Pharmaceutical
Industry.
ARTICLE IX - REFUND PAYMENT FOR ITS SERVICES FOR ERROR AND OMISSION CLAIMS
In the event of errors or omissions caused by the negligence or intentional
misconduct of Simbec that render a study unacceptable to the United States Food
and Drug Administration, the parties agree that Simbec's sole obligation to
Company is to promptly refund all payments Company made to Simbec for Simbec's
work on or services for the study, exclusive of reasonable costs that may have
been paid to Simbec for travel expenses, copying, study supplies and other
similar variable costs not related to the conduct of the study. If FDA rejects
the study for any reason other than the negligence or intentional misconduct of
Simbec or the violation of any law, rule or regulation of applicable
governmental authority, the parties agree that Simbec has no obligation to
Company to refund any payments. The parties also agree that Simbec is not
liable or responsible for consequential, indirect, or economic damages, however
caused, including but not limited to lost profits. Company hereby acknowledges
that consequential, indirect and economic losses are contingent and hypothetical
and therefore the parties agree that as liquidated damages, Simbec shall be
liable only for an amount of money equal to the payments it has received for its
work on and services for the Study.
<PAGE>
ARTICLE X - BINDING AND FINAL ARBITRATION
In consideration for each others `promises and obligations herein, the parties
agree that if at any time any question, dispute, or difference arises between
Company and Simbec or Company and Simbec regarding the study agreement, the
matter will be submitted to binding and final arbitration in North Carolina,
United States. Such Arbitration shall be held pursuant to the rules of the
American Arbitration Association.
ARTICLE XI - EFFECTIVE DATES
This agreement is effective the day it has become signed by each of the parties.
The agreement remains effective until the study is completed, terminated, or
after ninety (90) days from the submission of the final data for the study. The
proposed time schedule for the study is shown in Appendix 2.
ARTICLE XII - FORCE MAJEURE
No party shall be in breach of this agreement because of an act of God, fire,
storm, explosion, government legislation or regulation, war, civil commotion,
strike, insurrection, embargo, energy shortage or failure or any other reason
beyond the control of either party. The parties agree to notify each other
promptly of any force majeure that will effect the party's ability to perform as
required under this agreement.
ARTICLE XIII - WAIVER
No breach of any provision of this agreement by the parties can be waived unless
the waiver is in writing. Waiver of one breach shall not be deemed a waiver of
any other breach of the same or any other provision.
ARTICLE XIV - POSTPONEMENT, CUBTAILMENT/EARLY TERMINATION
In the event of postponement of the Project by the Company after scheduled dates
for commencement have been agreed by both parties, Simbec shall be reimbursed
for all reasonable additional costs incurred, including subject screening costs,
etc. Further, [CONFIDENTIAL TREATMENT REQUESTED].
The company shall have the privilege of curtailing or terminating the study
immediately upon written notice to Simbec. Simbec reserves the right to
terminate without notice or penalty the study where Simbec deems necessary:
a. in the interest of subject safety;
b. in order to comply with the requirements of any governmental agency, board or
department; and
c. in order to comply with the decision of any judicial authority.
In the event of termination, the Company shall pay Simbec for that proportion of
the price of the project represented by the work Simbec have completed or is
irrevocably obligated to complete. Further, additional costs associated with
loss of revenue are payable, [CONFIDENTIAL TREATMENT REQUESTED].
The termination or curtailment of this Agreement shall not relieve either party
of its obligation to the other in respect of (i.) maintaining confidentiality,
(ii) obtaining consent for advertising and publication. (iii) indemnification.
(iv.) compensation for services performed and, (v.) appropriate reporting of any
data obtained.
ARTICLE XV - ENTIRE AGREEMENT
The provisions of this agreement and the attachments hereto constitute the final
and entire agreement between the parties. All prior negotiations, statements,
agreements and understandings between the parties are hereby canceled and
superseded by this agreement.
<PAGE>
ARTICLE XVI - ACKNOWLEDGEMENT OF REVIEW AND UNDERSTANDING
Each party acknowledges and represents that it has read and fully understands
and agrees to all provisions contained in this agreement and has had the
opportunity to review and revise this agreement and the exhibits attached
hereto.
ARTICLE XVII - EXECUTION
The parties agree that this agreement and its exhibits may be executed in two or
more counterparts, each of which is deemed to be one and the same instrument.
Signed: /s/ Mark Cooper /s/ Christy L. Shaffer
--------------- ----------------------
Name: Mark Cooper Christy L. Shaffer, PhD
Title: Research Manager President and CEO
Date: 26 Aug 99 8/30/99
------------------- ---------------------------
For: Simbec Research Ltd Inspire Pharmaceuticals Ltd
<PAGE>
APPENDIX 1
Exhibit 1: Cost Quotation
<PAGE>
QUOTATION
Dr Ben Yerxa SIMBEC LOGO
To: Inspire Pharmaceuticals Inc
4222 Emperor Boulevard SIMBEC
Suite 470
Durham
NC 27703
USA
DATE: 09 JULY 1999
QUOTATION NO: RD580/22385 (Issue 2)
COSTS OF A DOUBLE-MASKED, RANDOMISED, PLACEBO-CONTROLLED, RISING DOSE
STUDY OF MULTIPLE OCULAR INSTILLATIONS OF INS 365 OPTHALMIC SOLUTION IN
PATIENTS WITH MILD TO MODERATE DRY EYE DISEASE
<TABLE>
<CAPTION>
Item Hours Events Unit Per Number Total
Price/ ((Pounds)
Hr Rate Sterling)
- -----------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C>
1 Protocol Design * Study
Protocol Review 1 *
sub-Total *
- -----------------------------------------------------------------------------------------------------------
2 Case Record Forms
CRF Design * Page 24 *
CRF Review * CRF 62 *
CRF Binding & Printing - Triplicate * Page 1488 *
sub-Total *
- -----------------------------------------------------------------------------------------------------------
3 Ethics/Regulatory
Presentation to LRECs * Per LREC 2 *
Presentation to Simbec Ethics * Study 1 *
Committee sub-Total *
- -----------------------------------------------------------------------------------------------------------
4 Patients
Patient Recruitment * Subject 62 *
Patient Screening: pre Study * Subject 62 *
Opthalmic/Slit Lamp/IO Pressure * Subject 62 *
Examinations * Subject 62 *
Patient Screening: post Study * Subject 62 *
Patient Payments sub-Total *
- -----------------------------------------------------------------------------------------------------------
5 Pharmacy
Trial Supplies Administration * Study 1 *
Dosing * Study Phase 4 *
sub-Total *
- -----------------------------------------------------------------------------------------------------------
Carried forward *
-------------------------------------
</TABLE>
* [CONFIDENTIAL TREATMENT REQUESTED]
SIMBEC RESEARCH LIMITED
Merthyr Tydfil CF48 4DR United Kingdom
Tel: +(0) 1443 690977 Fax +(0) 1443 692494
Protocol No. 03-102 10/14
<PAGE>
Simbec [Logo]
SIMBEC
Page 2
RD580/22385 (Issue 2)
COSTS OF A DOUBLE-MASKED, RANDOMISED, PLACEBO-CONTROLLED, RISING DOSE
STUDY OF MULTIPLE OCULAR INSTILLATIONS OF INS 365 OPTHALMIC SOLUTION IN
PATIENTS WITH MILD TO MODERATE DRY EYE DISEASE
<TABLE>
<CAPTION>
Item Hours Events Unit Price/ Per Number Total
Hr Rate ((Pounds)
Sterling)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Brought forward *
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6 Study Conduct, Supervision, etc
(1) Per Group of 8 Subjects (Cohorts 1-4)
In-House Overnight Pre Dosing 4 * Days 1 *
Main Study Days 48 * Days 1 *
Minor Study Days 8 * Days 1 *
Medical Supervision 8 * Days 1 *
Opthalmic/Slit Lamp/IO Pressure Examinations * Patient/Event 40 *
Bed occupancy 8 * Patient/Day 2 *
Catering 8 * Patient/Day 2 *
sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
Per Cohorts 1-4 sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
Study Conduct, Supervision, etc
(II) Per Group of 6 Subjects (Cohort 5)
In-House Overnight Pre Dosing 4 * Days 1 *
Main Study Days 40 * Days 1 *
Minor Study Days 8 * Days 1 *
Medical Supervision 8 * Days 1 *
Ophthalmic/Slit Lamp/IO Pressure Examinations * Patient/Event 30 *
Schirmar test * Patient/Event 120 *
Bed occupancy 6 * Patient/Day 2 *
Catering 6 * Patient/Day 2 *
sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
Per Cohort 5 sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
Principal Investigator fees * Study 1 *
- -----------------------------------------------------------------------------------------------------------------------
Per Study sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
7 Pre-Study Laboratory Testing
Biochemistry/Haematology/Urinalysis/DoA * Specimen 45.00 *
Virology * Specimen 22.00 *
sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
8 Post Study Laboratory Testing
Biochemistry/Haematology/Urinalysis * Samples @ 30.00 *
sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
9 Meetings with Sponsor
Meetings/Monitoring attendance * Meeting 4 *
sub-Total *
- -----------------------------------------------------------------------------------------------------------------------
Carried forward *
------------------------------------------
</TABLE>
* [CONFIDENTIAL TREATMENT REQUESTED]
SIMBEC RESEARCH LIMITED
Merthyr Tydfil CF48 4DR United Kingdom
Tel: +(0) 1443 690977 Fax +(0) 1443 692494
Protocol No. 03-102 11/14
<PAGE>
Simbec [Logo]
SIMBEC
Page 3
RD580/22385 (Issue 1)
COSTS OF A DOUBLE-MASKED, RANDOMISED, PLACEBO-CONTROLLED, RISING DOSE
STUDY OF MULTIPLE OCULAR INSTILLATIONS OF INS 365 OPTHALMIC SOLUTION IN
PATIENTS WITH MILD TO MODERATE DRY EYE DISEASE
<TABLE>
<CAPTION>
Item Hours Events Unit Price/ Per Number Total
Hr Rate ((Pounds)
Sterling)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Brought forward *
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Data Management
Database and Data Entry Screen design 16 * Study 1 *
CRF Page Double Data Entry * CRF Page 1488 *
Data Validation, queries & resolution * CRF 62 *
Study Close out * Subject 62 *
Database lock * Study 1 *
Statistical Analysis 30 * Study 1 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------
11 Quality Assurance
Protocol, CRF and Reports 12 * Study 1 *
Study Monitoring 16 * Study 1 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------
12 Reports
Final Study Report Writing 35 * Study 1 *
Final Study Report production 20 * Study 1 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------
13 Project Management
80 * Study 1 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------
TOTAL ((Pounds) Sterling) *
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* [CONFIDENTIAL TREATMENT REQUESTED]
Additional: 1. Patient referral Costs and Screening Payments @
(Pounds)250.00 per patient eligible for screening
2. Packaging and Shipment of Samples/Trial Supplies - at cost
plus * handling charge.
QUOTATION ACCEPTANCE
I/We accept this quotation and wish the study to proceed subject to contract
Signed: /S/ Christy L. Shaffer Position in Company: Pres & CEO
---------------------- -----------
Date: 8/30/99
----------
SIMBEC RESEARCH LIMITED
Merthyr Tydfil CF48 4DR United Kingdom
Tel: +(0) 1443 690977 Fax +(0) 1443 692494
VAT No.: GB 289 0833 21 Registered in England No. 1191772
Protocol No. 03-102 10/14
<PAGE>
APPENDIX 2
Study Schedule
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
EXHIBIT 10.18
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
- --------------------------------------------------------------------------
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
- -------------------------------------------------------------------------
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
- --------------------------------------------------------------------------------
AND EXCHANGE COMMISSION.]
- -------------------------
Clin Sites Logo
SERVICES AGREEMENT
------------------
THIS SERVICES AGREEMENT (this "Agreement") made and entered into as
November 1, 1999, by and between PHARMACEUTICAL DEVELOPMENT ASSOCIATES INC.
("CLINSITES/PDA") a North Carolina corporation, wholly owned subsidiary of
Clinical Site Services Corp. d.b.a. ClinSites, a Tennessee corporation (the
"Company"), and INSPIRE PHARMACEUTICALS, INC. a North Carolina corporation
("Sponsor").
WITNESSETH:
- ----------
WHEREAS, the Company is engaged in the business of managing the pre-
clinical, clinical and/or regulatory testing and development ("Product
Development") required in the process of obtaining Food and Drug Administration
("FDA") approval to market or provide post-market support for Products (as
defined herein);
WHEREAS, Sponsor has need for such Product Development services in order to
obtain FDA approval and to market such Products;
WHEREAS, Sponsor desires to engage the Company to perform certain Product
Development services of its Products and the Company desires to perform such
Product Development services for Sponsor, all upon the terms and conditions
hereinafter set forth; and
AGREEMENT
- ---------
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Sponsor and the Company hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
------------
following meanings:
1.1 Products. Products shall mean any proprietary drug, device, or
--------
cosmetic product, which is owned by, or to be developed by Sponsor or
its assignees, licensees or licensors, and which has not currently
been placed on the market in the United States (or any other
applicable country) by Sponsor. It shall also include products
currently on the market if such development is being conducted for an
indication or application not currently approved by the appropriate
federal agency(ies), or if the product is a generic drug.
1.2 Development Plan and Exhibit. Development Plan shall mean an outline
----------------------------
of the Product Development services to be performed, the timetable in
which it is estimated to be performed, the standards of quality that
shall apply, the budget within which it is estimated to be
accomplished and a payment schedule and fees, all set forth on the
exhibits appended hereto as Exhibits(s) A, B, C or D, etc. for each
additional Development Plan agreed upon for each project. Each exhibit
and this Agreement shall collectively and independent from each other
exhibit, constitute the entire agreement for each Development Plan. To
the extent any terms set forth in an exhibit shall conflict with the
terms set forth in this Agreement, the terms of the exhibit shall
control unless otherwise specifically set forth in the exhibit.
-1-
<PAGE>
1.3 Protocol. Protocol shall mean the detailed plan for the
--------
accomplishment of an investigational study, including the forms on
which all data will be recorded.
2. Scope of Services.
-----------------
2.1 Scope of Services. The Company shall provide such Product Development
--- -----------------
services in support of Sponsor Products, as shall be more fully
described on the Development Plan(s) set forth on Exhibits A, B, etc.
as attached or appended hereto. Such Development Plans will be based
on the applicable Protocols, which Protocols shall be considered an
integral part each respective Development Plan and will be attached as
Attachment 1 of each Exhibit A, B, etc., as attached and made a part
hereof. In addition, the Company will use commercially reasonable
efforts to perform such other services, not included in any
Development Plan or Protocol, which may be reasonably requested by
Sponsor in writing.
2.2 Conduct of Services. The Company shall use its best efforts to
-------------------
prepare, perform and complete the Development Plan in accordance with
the timetable agreed upon between the parties. The Company shall
conduct Product Development strictly in accordance with the formats
and procedure set forth in the Company's Standard Operating Procedures
("SOP"). The current SOPs, as they apply to this protocol, shall not
be changed without the prior notification and consent of the Sponsor
and shall be available for review upon request by the Sponsor. All
work shall be performed in a workmanlike and professional manner by
the Company strictly in accordance with the Development Plan,
Protocols and any applicable federal and state laws and regulations
and guidelines provided by the FDA to include, but not to be limited
to, Title 21 of the Code of Federal Regulations, International
Congress of Harmonization Good Clinical Practice Guidelines as
reported in the Federal Register on May 9, 1997, Good Laboratory
Practices, and Good Manufacturing Practices if, and as applicable. The
Company shall cooperate with any reasonable internal review or audit
including GCP auditing by the Sponsor or Sponsor's appointee and make
available to them for examination during normal business hours all
documentation, data and information relating to Services.
2.3 Obligation of Contractors and Sub-Contractors. The Company may,
---------------------------------------------
subject to sponsor's prior written consent, sub-contract part of the
Services with a third party. The Company shall ensure that
sub-contractor assumes obligations equivalent to those assumed by the
Company under this Agreement in particular as regards Sections 2.2
(Conduct of Services), 5 (Record Storage), 6 (Publications), 8
(Confidentiality) and 9 (Invention and Discoveries). The Company
acknowledges and confirms that by sub-contracting its rights and
obligation hereunder it shall not be released from any of its
contractual obligation under this Agreement and that it shall remain
fully responsible for the complete performance of such obligations
under this Agreement.
3. Fee, Expenses and Payment.
-------------------------
Fees and expenses will be in accordance with the terms of each appended
Exhibit (A,B, etc.). However, should work be requested which is not
specifically covered by an appended Exhibit, the following rates shall
apply.
-2-
<PAGE>
3.1 Fees. In consideration of the services to be performed by the
----
Company, Sponsor shall pay to the Company the following fees:
(a) For senior management, a rate of * per hour or a daily rate equal
to *;
(b) For project manager, a rate of * per hour or a daily rate of *;
(c) For technical, clinical research associate, or clinical
coordinator's time, a rate of * per hour or a rate equal to * per
day; or
(d) For clerical or secretarial time, a rate of * per hour or a rate
of * per day.
3.2 Reimbursement of Expenses. In addition to the foregoing, Sponsor
-------------------------
shall pay the Company its actual out-of-pocket expenses as reasonably
incurred by the Company in furtherance of its performance hereunder.
The Company agrees to provide Sponsor with access to such receipts,
ledgers, and other records as may be reasonably necessary in order for
Sponsor or its accountants to verify the amount and nature of any such
expenses.
3.3 Additional Work. The fees and charges for any follow-on or additional
---------------
work not described in this Agreement or the Development Plan shall be
performed pursuant to written authorization from Sponsor at the
Company's then-current rates for such work.
3.4 Business Travel. All out-of-town business travel will be construed to
---------------
require a minimum of one (1) full day's time.
3.5 Payment. Sponsor shall pay all fees and expenses owing to the Company
-------
hereunder within thirty (30) days after the Company has submitted to
Sponsor an itemized invoice therfor.
4. Term and Termination.
--------------------
4.1 Term. The term of this Agreement shall commence on the date set forth on
----
the first page hereof and shall continue through November 1, 2001 (the
"Termination Date"), unless terminated earlier by either party in
accordance with the terms of this Agreement. Exhibit shall become effective
upon the date of complete execution by the parties and shall terminate upon
the completion of the services unless earlier terminated in accordance with
this Section.
4.2 Termination. This Agreement or Exhibit may be terminated for any reason or
-----------
for no reason by either party upon sixty (60) day's written notice, or if a
party breaches any material representation, warranty or obligation provided
hereunder and the breaching party fails to cure such breach within ten (10)
days of receipt of such notice, the non-breaching party shall be entitled
to terminate this agreement immediately upon expiration of such ten (10)
day period; provided that the cure period for any failure of Sponsor to pay
fees and charges due hereunder shall be fifteen (15) days from the date of
receipt by Sponsor of notice of such failure.
* [CONFIDENTIAL TREATMENT REQUESTED]
-3-
<PAGE>
4.3 Remaining Payments. Within sixty (60) days of termination of this Agreement
------------------
or Exhibit for any reason, except in case of the breach caused by either
party, the Company shall submit to Sponsor an itemized invoice for any fees
or expenses theretofore accrued and unpaid by the Sponsor under this
Agreement or Exhibit. Sponsor, upon payment of accrued amounts so invoiced,
shall thereafter have no further liability or obligation to the Company
whatsoever for any further fees or expenses arising hereunder. In the event
the Company terminates this Agreement or Exhibit because of the breach of
Sponsor, the Company shall be entitled to reimbursement of all incurred
expenses, a pro rata payment for work in progress based on the percentage
of work then completed, plus the full amount of payment attributable to
studies and testing already furnished by the Company. In the event this
Agreement or Exhibit is terminated because of a material breach of the
Agreement or Exhibit by the Company, the Company shall refund to the
Sponsor all fees and expenses the Sponsor theretofore paid to the Company.
4.4 Renewals. This Agreement may be renewed for successive one (1) year terms
--------
(each an "Additional Term") by both parties agreeing in writing to the
terms and conditions of such renewal sixty (60) days prior to the
Termination Date or the termination of any Additional Term.
5. Record Storage. The Company shall retain in its archive all original data
--------------
and other materials arising out of the conduct of the Service by the
Company for a period of two (2) years after the date of marketing approval
by the US FDA for the Product. At the end of the two (2) year period
referred to above, the Company shall contact the Sponsor for instruction on
the transfer, retention or disposal of materials.
6. Publications. The Company and its employees, contractors, consultants
------------
(specifically excluding clinical investigators) and all other contracted
parties shall not make any publication related to Product Development
services hereunder without the express written permission of Sponsor. The
Company's agreements with all clinical investigators shall be constructed
so as to require an opportunity for review and comment by Sponsor prior to
any such publication. All data of a confidential or trade secret nature
will be specifically excluded from such right to publish; provided, that
Sponsor shall specify in writing to the Company what data it considers
confidential pursuant to Section 8.1.
7. Disclaimer of Benefits. It is expressly agreed that all services provided
----------------------
by the Company and its employees, agents, or representatives pursuant to
this Agreement are performed in the Company's capacity as an independent
contractor and its employees, agents, or representatives are not employees
of Sponsor. The Company retains the sole right to hire, discipline,
evaluate, and terminate its own employees and to set their hours, wages,
and terms and conditions of employment in accordance with the law and its
obligations hereunder. Consequently, the Company's employees, agents, or
representatives are not entitled to and will not receive from Sponsor in
connection with the services hereunder any insurance coverage, pension,
profit-sharing, paid vacation, disability or similar benefits normally
provided by Sponsor to its employees.
8. Confidentiality.
---------------
8.1 Confidential Information. The Company hereby agrees to treat any
------------------------
confidential or proprietary information obtained from Sponsor and
generated or created by the Company as a direct and sole result of
performing the services under this Agreement, including but not
-4-
<PAGE>
limited to, data, materials, equipment, experience (whether of a
scientific, technical, engineering, operational or commercial nature),
designs, specifications, know-how, product uses, processes, formulae,
costs, financial data, marketing plans and direct selling systems,
customer lists and technical and commercial information relating to
customers or business projections used by Sponsor in its business
(referred to hereinafter collectively as "Confidential Information"),
whether or not the subject of any patent or patent application. The
company recognizes that Confidential Information is the exclusive
property of Sponsor.
All such Confidential Information shall be in writing and marked
"Confidential" or if orally disclosed reduced to writing within thirty
(30) days of such disclosure and marked accordingly. Consequently,
during the term of this Agreement and for 10 years thereafter, the
Company shall not disclose to any unauthorized person or use in any
unauthorized manner the Confidential Information. Notwithstanding the
foregoing, the Company may disclose Confidential Information to its
directors, officials, employees and sub-contractors to the extent
necessary for the performance of the Services under this Agreement,
provided, however, the Company shall impose upon them the same
confidentiality obligation the Company has under this Agreement.
In the event of a breach or a threatened breach by the Company of the
provisions of this Section 8, Sponsor shall be entitled to seek an
injunction restraining the Company from disclosing, in whole or in
part, said Confidential Information and the Company agrees it will not
oppose the grant of such injunction on the grounds that monetary
damages are an adequate remedy. Nothing herein shall be construed as
prohibiting Sponsor from pursuing any other remedies available to
Sponsor at law or equity for any such breach or threatened breach.
8.2 Exceptions to Confidential Information. This obligation of
--------------------------------------
confidentiality shall not apply to information which:
(a) at the time of disclosure is in the public domain;
(b) after disclosure becomes part of the public domain by publication
or otherwise, other than by an unauthorized act or omission by
the Company, its agents, employees, or subcontractors;
(c) was in the possession of the Company at the time of disclosure
and Company promptly notifies Sponsor in writing of such
possession and the circumstances relating to the possession, and
was not acquired directly or indirectly from Sponsor;
(d) becomes known to the Company from a third party which has lawful
access to such information and which may disclose the information
without any obligation to Sponsor;
(e) with Sponsors written permission may be required for obtaining
essential or desirable authorizations or rights relating to the
Products from governmental authorities or as otherwise required
by law.
8.3 The parties agree to keep confidential and not to disclose to any
other person, firm or entity this Agreement and discussions hereunder
unless the other party gives its prior written consent to such
disclosure.
-5-
<PAGE>
9. Inventions and Discoveries.
--------------------------
9.1 All rights to any and all data, inventions, discoveries, improvements,
designs, ideas, materials, machines, devices, and the like
(hereinafter, the "Inventions") developed by the Company under this
Agreement shall be considered proprietary and confidential and to be
owned by Sponsor. The Company agrees to promptly disclose all such
Inventions made by the Company under this Agreement to Sponsor. The
Company agrees not to disclose the Inventions to a third party or to
use the Inventions for its own benefit without the prior express
written consent of Sponsor.
9.2 The Company agrees to provide Sponsor with all information, know-how
and materials necessary for Sponsor to obtain and maintain patents or
other rights in the Inventions in all and all countries designated by
Sponsor. The writing, designation of countries and filing will be done
by Sponsor and shall be attached or appended hereto as Appendix A, B,
C or D, etc. Prosecution of applications and maintenance of patent or
other rights will be done by Sponsor. All costs and expenses related
to prosecution of applications or maintenance of patents or other
rights will be paid by Sponsor.
10. Change in Circumstances. The Company and Sponsor agree that medical
-----------------------
device, drug, and cosmetic research and development are not exact
sciences and therefore may be subject to unplanned changes when
dictated by preliminary data findings, FDA directives, supply and
logistics problems or any other reason outside of the control of
either party. If necessitated, the Company and Sponsor agree to
evaluate the necessity to amend and Development Plans if required by
any of the factors set forth above or if amendment is not agreed to by
Sponsor to terminate this Agreement. In such limited circumstances,
Sponsor's liability for any existing Development Plan will be limited
solely to costs already incurred, paid or committed to the Company and
any additional penalties or damages between the parties must be
specifically set forth in the respective Development Plan (Exhibit).
11. General.
11.1 Notice. Any notice, request, consent or communication under this
------
Agreement shall be effective only if it is in writing and
personally delivered, sent by certified mail return receipt
requested, postage prepaid, nationally recognized express
delivery service with delivery confirmed or telexed or telecopied
with receipt confirmed, addressed as follows:
If to Sponsor:
INSPIRE Pharmaceuticals Inc.
4222 Emperor Boulevard
Suite 470
Durham, NC 27703
Attention: Dr. Don Kellerman, Vice President for Development
-6-
<PAGE>
If to The Company:
8701 Mallard Creek Road
Charlotte, North Carolina 28262
Fax No.: 704-593-1805
Attention: D. Scott Davis, President
or at such subsequent address as either party may designate to the
other in writing, and shall be deemed to have been given as of the
date when properly set in accordance with the terms hereof.
11.2 Indemnification; Limited Liability. Sponsor hereby indemnifies and
----------------------------------
agrees to defend and hold harmless the Company, its directors,
officers, agents, representatives, employees, shareholders, successors
and assigns, from and against any and all losses, claims, damages,
expenses or fees (including attorney's fees) arising out of or related
to any injury, disability or death caused or alleged to have been
caused as a direct and/or indirect result of the development or
investigation of any Product on behalf of Sponsor, and any other costs
and expenses incurred in connection therewith which the Company, or
any of them, may sustain or incur in any actions by any person,
organization or governmental entity or agency or otherwise as a result
of the performance, breach or nonperformance by Sponsor, its agents,
employees, representatives or assigns of any of Sponsor's obligations
or duties under this Agreement. However, any such liability, loss or
damage resulting from negligence, willful malfeasance or failure by
Company to perform the study in strict compliance with the Protocol,
SOPs, FDA guidelines and regulations, including, but not limited to
International Congress of Harmonization-Good Clinical Practices
(ICH-GCPs), or such failure is by the Company's investigators,
contractors, or employees, there shall be excluded from this agreement
any obligation to indemnify or to hold harmless Company, its
directors, officers, agents, representatives, employees, shareholders,
successors and assigns. Sponsor agrees to maintain in full force, at
its sole expense, adequate product liability insurance coverage
covering Sponsor, Company and its contractors and subcontractors when
engaged in the development and investigation of Sponsor products.
SPONSOR AGREES THAT IN NO EVENT SHALL THE COMPANY BE LIABLE FOR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE SALE OF THE
PRODUCTS, ANY BREACH OF THE TERMS AND CONDITIONS OF THIS AGREEMENT,
ANY SALES ORDER OR AGREEMENT FOR THE SALE OF PRODUCTS OR ANY BREACH OF
ANY DIRECT OR INDIRECT OR EXPRESS OR IMPLIED WARRANTY OR
REPRESENTATION BY THE COMPANY.
11.3 Binding Agreement. This Agreement shall inure to the benefit of and be
-----------------
binding on Sponsor, its successors, transferees and assigns, and on
the Company, its successors, tranferees and assigns.
11.4 Waiver of Breach. The waiver by either party of a default or breach or
----------------
the failure by either party to claim a default or breach of any
provision of this Agreement by the other party shall not be or be held
to be a waiver of any subsequent default or breach of the same
provision or of any other provision of this Agreement11.5 Amendment.
This Agreement cannot be amended, changed, ---- --------- modified or
supplemented in any manner whatsoever, except by another agreement in
writing executed by the parties hereto.
-7-
<PAGE>
11.6 Assignment. Neither this Agreement, nor any of the rights, duties or
----------
obligations of Sponsor or the Company hereunder, may be assigned or
otherwise delegated by Sponsor or the Company, respectively, without
the prior written consent of Sponsor or the Company, respectively.
11.7 Headings. The headings of the various sections of this Agreement are
--------
inserted merely for the purpose of convenience of the parties and do
not expressly or by implication limit, define or extend the specific
terms of the section so designated.
11.8 Entire Agreement. This Agreement cancels, merges and supersedes all
----------------
prior and contemporaneous understandings and agreements relating to
the subject matter of this Agreement, written or oral, between the
parties hereto and contains the entire agreement of the parties
hereto, and the parties hereto have no agreements, representations or
warranties relating to the subject matter of this Agreement which are
not set forth herein. This Agreement shall not be amended, modified
or supplemented in any manner whatsoever except as otherwise provided
herein or in writing signed by each of the parties hereto.
11.9 Severability. Except as otherwise expressly provided herein, if any
------------
provisions of this Agreement shall be adjudicated to be invalid or
unenforceable in any action or proceeding, whether in its entirety or
in any portion, then such part shall be deemed amended, if possible,
or deleted, as the case may be, from the Agreement in order to render
the remainder of the Agreement and any provision thereof both valid
and enforceable. Any such deletion or amendment shall apply only
where the court rendering the same has jurisdiction.
11.10 Effect of Termination. Termination of this Agreement for any or no
---------------------
reason shall not release either party form liability to the other
party which at the time of termination shall have already occurred or
which thereafter may occur in respect of any act or omission prior to
such termination; nor shall any such termination hereof affect in any
way the survival of any right, duty or obligation of either party
hereto which is to survive termination.
11.11 Survival. The obligations, rights and duties of the parties under
--------
Sections 6, 8, and 9 hereof shall survive the termination of this
Agreement.
11.12 Governing Law. This Agreement and the rights and obligations of the
-------------
parties hereunder shall be subject to, governed by and construed and
interpreted in accordance with, the laws of the State of North
Carolina without regard to conflicts of laws principles of such
State.
11.13 Arbitration. In the event of any dispute, the senior management of
-----------
Sponsor and Company will attempt in good faith to negotiate a
mutually acceptable resolution. Any dispute arising out of or in
connection with this Agreement, if not settled amicably between the
parties hereto, shall be finally settled in accordance with the
Rules of the American Arbitration Association by one (1) arbitrator
selected mutually by the parties. If the parties are unable to agree
on an arbitrator, then each party will select one (1) arbitrator and
such arbitrators will then select one (1) arbitrator to hear the
dispute. The arbitrator shall have the power to rule on his own
competence and to give an award having force of law for the parties.
The award shall be made in writing and shall be final and binding on
the parties. The parties shall
-8-
<PAGE>
undertake to carry out the award without delay. The award may be
made public only with the consent of both parties. The applicable
law shall be the law of the United States and the State of North
Carolina and the place of arbitration shall be, unless otherwise
agreed between the parties, Charlotte, North Carolina.
11.14 Compliance with Laws. Sponsor and the Company agree that in the
--------------------
performance of their duties under this Agreement they will not,
directly or indirectly, violate or assist or cooperate with any
other party in violating any of the provisions of any applicable
health, safety, environmental, export, import, tax, antiboycott,
corrupt practices or other laws of the United States, any state of
subdivision thereof. Sponsor shall be responsible for obtaining all
approvals, permits and licenses requisite under the laws of any
jurisdiction for the sale of the Products, and for registering this
Agreement where required and obtaining any approvals necessary for
this Agreement to be effective in accordance with its terms.
11.15 Integration. This Agreement, to include all appended Exhibits
-----------
entered into as of this date constitutes the entire agreement
between the parties hereto relating to the subject matter hereof and
no terms or provisions of this Agreement shall be varied or modified
by any prior or subsequent statement, conduct, or act of either of
the parties, except that hereafter the parties hereto may, subject
to Section 10.
(a) amend this Agreement by written instruments specifically
referring to and executed in the same manner as this Agreement,
or
(b) supplement this Agreement as provided herein by written
instruments executed by both parties.
11.16 Force Majeure. Neither party shall be in default hereunder by reason
-------------
of its delay in the performance of or failure to perform any of its
obligations hereunder if such delay or failure is caused by strikes,
acts of God or the public enemy, riots, incendiaries, interference
by civil or military authorities, compliance with applicable laws,
rules or regulations, inability to secure necessary governmental
priorities for materials, or for any circumstances beyond each
respective party's reasonable control and without its fault or
negligence.
11.17 Conflicts with Other Laws. If any of the terms or provisions of this
-------------------------
Agreement are in conflict with any applicable statue or rule of law,
then such terms or provisions shall be deemed inoperative to the
extent that they may conflict therewith and shall be modified to
conform with such statute or rule of law in such forms which most
closely reflect the commercial and mutual intent of the parties
under this Agreement.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have cause this Agreement to be duly
executed as of the day and year first above written.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION, WHICH MAY BE
ENFORCED BY THE PARTIES.
CLINSITES / PHARMACEUTICAL
DEVELOPMENT ASSOCIATES INC.
By: /s/ D. Scott Davis
-------------------------------------------
D. Scott Davis
President
INSPIRE PHARMACEUTICALS, INC.
By: /s/ Donald J. Kellerman
-------------------------------------------
Name: Donald J. Kellerman
-------------------------------------------
Title: Vice President, Development
-------------------------------------------
-10-
<PAGE>
EXHIBIT A-99
11/22/99
I. INTRODUCTION
Per letter from Robin Sylvester dated October 8, 1999, Inspire Pharmaceuticals,
Inc. (INSPIRE) has requested that Pharmaceutical Development Associates, Inc.
(PDA) submit a proposal for the conduct of a Phase II Dry Eye study in patients
with kcratoconjunctivitis sicca (Project/Protocol Number INS365 - Ophthalmic
(03)). This study is to be conducted at approximately twelve investigative
sites and enroll up to 200 patients to complete 150 evaluable patients.
II. RESPONSIBILITIES
A. Under the terms of this agreement, INSPIRE's responsibilities would be as
follows:
1. Approval of this Development Plan, and signing of the appropriate
support documentation
2. Final approval of all potential investigators
3. Providing for the production & shipment (to the investigator) of all
clinical supplies
4. Providing for all regulatory submissions of FDA documentation
regarding the study*
5. Generation and coordination of collection of regulatory documents*
6. Negotiating final grants and budgets with investigators*
7. Providing pre-study site evaluation*
8. Planning and conduct of the investigator's meeting*
9. Providing the medical monitor*
10. Providing an in-house project manager for coordination and support
11. Payment for site costs as required (i.e. investigator's fees, patient
stipends, advertising, IRB fees,
etc.) as needed.*
12. Payment of 20% of the estimated budget to PDA upon signing of the
contract and payment of
monthly and/or bi-monthly invoices within 30 days of receipt
* These services can be provided by PDA if needed, however, they are not
included in the current budget.
B. Under the terms of this agreement, PDA responsibilities would be as
follows:
1. Provision of a Lead CRA/Manager for study supervision and
coordination with sponsor
2. Provision of a appropriate clerical support person
3. Providing consultation regarding site/investigator identification and
evaluation/qualification
4. Assisting/advising with protocol design and assisting in completion
of appendices, study manuals, etc.
5. Design and production of a study Case Report Form (CRF)
6. Performing site initiation, periodic, and close-out monitoring
visits for all centers
7. Assuring that all data obtained from investigators is accurate and
complete and that discrepancies are properly resolved and addressed
8. Assuring that site investigator binders, IRB and regulatory
compliance meet guidelines
9. Assuring proper test article accountability is maintained by all
investigators
10. Assuring that the study is conducted under ICH/FDA guidelines, PDA
and/or INSPIRE SOPs, study protocol requirements and INSPIRE
guidelines
11. Provision of weekly enrollment update and monthly summary of study
progress throughout the study
12. Design of data entry screens
13. QA/QC and query resolution of clinical data
14. Double-key entry of all clinical data
-1-
<PAGE>
EXHIBIT A-99 (continued)
III. ESTIMATED TIMETABLE*
[CONFIDENTIAL TREATMENT REQUESTED]
*This timetable may be modified pending agreement between both INSPIRE
and PDA
IV. ASSUMPTIONS
It is assumed that the study design, timetables, numbers of sites, numbers of
patients and other key elements of the proposed study will not change
significantly and that investigator budgets are adequate to motivate clinical
investigators. Since PDA is not choosing clinical investigators we cannot
guarantee investigator site quality and/or enrollment speed. Should the study
duration be extended through no fault of PDA, monitoring, lead CRA and clerical
time, and other time related costs will increase accordingly.
V. BUDGET ESTIMATES*
A. CRO Management, Monitoring, Administrative (Non-Passthrough) Costs*
Item Basis Cost
1. Protocol review/ supplemental material development
2. Case report form development
3. Investigator meeting preparation (presentation of CRF)
4. Personnel time to attend investigator/planning meetings
5. Personnel time for prestudy/initiation visits
6. Personnel time for periodic and close-out visits
7. Site contact and phone reports
8. CRA report writing (2.5 hours/visit) [CONFIDENTIAL
9. Study oversight/management (Lead CRA / manager) TREATMENT
10.Study clerical/administrative support REQUESTED]
11.Data validation: completed patients
12.Data validation: screen failure & dropouts
13.Database data-screen design & logic check
programming/testing
14.Double-key data entry/query resolution
15.Report writing Assistance with integrated report
16.Statistical Services: creation of statistical output for
final report
Subtotal
-2-
<PAGE>
EXHIBIT A-99 (continued)
IV. BUDGET ESTIMATE (Continued)*
B. CRO Support Service (Passthrough) Costs*
Item Basis Cost
1. Travel expenses investigator/planning meetings
2. Travel expenses monitoring
3. Support services (phone, fax, copying, shipping, etc.) [CONFIDENTIAL
4. Printing/binding of case report form TREATMENT
Subtotal REQUESTED]
TOTAL ESTIMATED CRO COSTS
* These totals are based on initiation of a total of 12 sites. Additional
sites and/or patients will increase the final budget figures
proportionally. Actual CRO final costs may be increased or decreased in
the following ways:
1) Travel expenses, support services and printing/binding costs as listed
above are estimates only. Actual expenses will be invoiced to INSPIRE
as incurred. PDA will use its best efforts to travel and perform study
overhead functions as cost effectively as possible.
2) Personnel costs will vary according to the actual number of monitoring
visits conducted and day/hours spent at the site. The total number of
monitoring visits and days spent at the site will not exceed what is
described above except at the specific request of designated INSPIRE
personnel.
3) Study oversight and administration costs are fixed rate expenses and
will vary only if the duration of the study changes (terminated early
or extended), or if the scope of responsibilities is significantly
changed. This will only occur at the specific request of designated
INSPIRE personnel.
VI. MISCELLANEOUS
NOTE: Once this development plan is signed, subsequent modifications shall be
renegotiated as indicated in paragraph 4.4 and 4.5 of the general contractual
"AGREEMENT." INSPIRE may terminate (cancel) this agreement in its entirety as
described in the "Services Agreement" Section 4, upon payment to PDA of all non-
reimbursed costs incurred/committed which cannot be renegotiated. Additionally,
if this agreement is terminated without cause, a penalty of 5% of the remaining
unpaid balance will be applied to the contract.
Unless otherwise specified in attached Addenda to this EXHIBIT, the conditions,
rights and obligations of the parties shall be as set forth in the General
Agreement between the parties dated November 1, 1999.
By: /s/ D. Scott Davis, President By: /s/ Donald J. Kellerman
------------------------------- -------------------------------
D. Scott Davis, President Inspire
-3-
<PAGE>
Exhibit 10.19
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
QUOTATION
[Simbec Logo]
Dr. Richard Evans
To: Inspire Pharmaceuticals Inc
4222 Emperor Boulevard
Suite 470
Durham
NC 27703
USA
DATE: 17 DECEMBER 1999
QUOTATION NO: RD580/22535 (Issue 1)
COSTS OF A GAMMA SCINTIGRAPHIC AND PHARMACODYNAMIC STUDY TO
EVALUATE THE DEPOSITION AND EFFECT OF INS 365 ON MUCOCILIARY
CLEARANCE IN HEALTHY SMOKERS FOLLOWING INHALATION FROM AN
* PULMONARY DELIVERY SYSTEM OR A * NEBULISER
<TABLE>
<CAPTION>
Item Hours Events Unit Cost Per Number Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Protocol Design
Protocol Preparation * Study 0 *
Protocol Review * Study 1 *
sub-Total *
- --------------------------------------------------------------------------------------------------------------------------
2 Case Record Forms
CRF Design & Preparation * Page 48 *
CRF Review * CRF 12 *
CRF Binding & Printing - Triplicate * Page 576 *
sub-Total *
- --------------------------------------------------------------------------------------------------------------------------
3 Ethics/Regulatory
Presentation to SEC (Ethics Committee) * Study 1 *
ARSAC Submission and Review * Study 1 *
sub-Total *
- --------------------------------------------------------------------------------------------------------------------------
4 Volunteers
Volunteer Selection * Subject 12 *
Volunteer Recruitment * Subject 12 *
Volunteer Screening: pre Study * Subject 12 *
Volunteer Screening: post Study * Subject 12 *
Volunteer Payments * Subject 12 *
sub-Total *
- --------------------------------------------------------------------------------------------------------------------------
5 Study Conduct, Supervision, etc
Per Visit Per Group of Subjects
Main Study Days 24 * Days 1 *
Medical Supervision 8 * Days 1 *
Bed occupancy 6 * Subject/Day 1 *
Catering 6 * Subject/Day 1 *
Per Visit Per Group of Subjects sub-Total *
Per Study sub-Total *
- --------------------------------------------------------------------------------------------------------------------------
6 Pharmacy
Validation Work * Study 1 *
Laboratory Preparation and supplies * Study 1 *
Dosing * Study Phase 7 *
sub-Total *
- --------------------------------------------------------------------------------------------------------------------------
Carried forward *
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* [CONFIDENTIAL TREATMENT REQUESTED]
SIMEC RESEARCH LIMITED
Merthyr Tydfil CF48 4DR United Kingdom
Tel: +(0) 1443 690977 Fax +(0) 1443 692494
VAT No.: GB 289 0833 21 Registered in England No. 1191772
<PAGE>
Simbec
Page 2
RD580/22535 (Issue1)
<TABLE>
<CAPTION>
Item Hours Events Unit Cost Per Number Total (E)
- -------------------------------------------------------------------------------------------------------------------------------
Brought forward
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
7 Pre -Study Laboratory Testing
Biochemistry/Haematology/Urinalysis/DoA * Specimen 12 *
Virology * Specimen 12 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------------------
8 Other Procedures
Spirometry (FEV1 and PEFR) * Procedure 24 *
Haemoglobin Saturation * Procedure 288 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------------------
9 Post Study Laboratory Testing
Biochemistry/Haematology/Urinalysis * Samples @ 12 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------------------
10 Data Management
Database and Data Entry Screen design 16 * Study 1 *
CRF Page Double Data Entry * CRF Page 576 *
Data Validation, queries & resolution * CRF 12 *
Study Close out * Subject 12 *
Database Lock * Study 1 *
Scintigraphic Imaging and Analysis * Study 1 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------------------
11 Quality Assurance
Protocol, CRF and Reports 12 * Study 1 *
Study Monitoring 32 * Study 1 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------------------
12 Reports
Final Clinical Report Writing 24 * Study 1 *
Final Clinical Report production 12 * Study 1 *
Scintigraphic Report Generation * Study 1 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------------------
13 Administrative
Meetings/Monitoring attendance * Meeting 3 *
Project Management 60 * Study 1 *
sub-Total *
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ((Pounds) Sterling) *
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Additional: Packaging and Shipment of Samples/Trial Supplies - at cost plus *
handling charge
* [CONFIDENTIAL TREATMENT REQUESTED]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
QUOTATION ACCEPTANCE
I/We accept this quotation and wish the study to proceed subject to contract
with stipulation of 10 weeks from end of closing to acceptance of draft report agreed to in e-mail dated 20 Dec 99
<S> <C> <C>
Signed: /s/ Position in Company: Senior Director Pharm Dev Date: 10 JAN 2000
--------------------- --------------------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SIMEC RESEARCH LIMITED
Merthyr Tydfil CF48 4DR United Kingdom
Tel: +(0) 1443 690977 Fax +(0) 1443 692494
VAT No.: GB 289 0833 21 Registered in England No. 1191772
<PAGE>
SIMBEC RESEARCH LIMITED
STANDARD TERMS AND CONDITIONS
Projects undertaken by Simbec Research Limited (hereinafter referred to as
Simbec) on behalf of Sponsors are subject to the following terms and conditions.
DEFINITION OF THE PROJECT
1. The project is defined as the work agreed to be undertaken by Simbec on
behalf of the Sponsor, as strictly defined in a Protocol which originates
from either Simbec or the Sponsor and is agreed by both parties.
CONFIDENTIALITY
2. Simbec shall keep confidential and shall not disclose to any third party at
anytime without the written consent of the Sponsor any information received
in confidence from the Sponsor or any information arising from the conduct
of the project by Simbec unless such disclosures are required by law, in
which event Simbec shall immediately notify the Sponsor in writing.
REGULATORY REQUIREMENTS
3. The Project will be performed by Simbec to Good Laboratory Practice (GLP)
and Good Clinical Practice (GCP) regulations and guidelines as appropriate.
Simbec agrees that the Sponsor's scientific and quality assurance personnel
may visit Simbec at any mutually convenient times to monitor the Project.
VARIATIONS
4. Simbec will give written notification to the Sponsor in advance of any
anticipated changes in the implementation of the Project. No changes shall
be implemented before the written consent of the Sponsor has been received.
5. Should Minor changes to the Protocol be advisable during the course of the
Project, Simbec will obtain the written consent of the Sponsor prior to
implementing any variations, which will be documented in the form of
Protocol amendments.
<PAGE>
6. Any increased charges consequent to variations in the Project as described
in paragraphs 4 and 5 shall be agreed in writing with the Sponsor prior to
implementation, and will become payable at the conclusion of the Project.
7. REPORTS
Upon completion of the Project Simbec will provide a Draft Final Report of
the Project. Comments and queries on the Draft Final Report shall be
submitted to Simbec within thirty days of receipt.
8. DATA QUERIES
In the first year after study completion, data queries will be addressed
free of charge. Simbec reserves the right to levy a charge when data
queries are raised more than one year after the clinical completion of the
project. As this will inevitably involve extracting data from the archive,
a charge will be made to cover the Archivist's and Study Manager's time at
the rate of [CONFIDENTIAL TREATMENT REQUESTED] per hour.
TERMINATION
9. In the event it becomes necessary for the Sponsor to terminate the Project
prior to completion, the Sponsor will reimburse Simbec with all reasonable
costs associated with the work carried out to date of termination and other
costs associated with the termination.
10. In the event of discussions over Project termination for medical reasons
the clinical decision of Simbec's Principal Investigator must be final.
The Principal Investigator may refer to the Simbec Independent Ethics
Committee for advice and guidance in such circumstances.
FORCE MAJEURE
11. In the event of fire, storm, explosion, war, revolution, civil commotion,
strikes, disease, Acts of God, governmental prohibition or legislation or
any other contingency beyond the control of either party, which prevents
Simbec from completing the Project, Simbec will not be held liable by the
Sponsor. Simbec shall be reimbursed with all reasonable costs as described
in paragraph 9 above.
INDEMNITY
12. Simbec carries "No Fault" insurance to compensate for injury, accident, ill
health or death caused by participation in clinical trials without regard
to proof of negligence and without delay. Where there is any doubt over
causation the benefit of doubt will be given to the claimant.
<PAGE>
13. Simbec is indemnified under this policy against professional negligence in
the form of injuries or damages caused by failure to exercise all proper
and reasonable care and skill in the conduct of the Project.
14. The Sponsor undertakes to provide product liability cover against injury
and damages arising from the use of products in the Project.
15. Simbec shall inform the Sponsor of any claims or legal actions arising out
of the Project without delay.
16. The obligations of Simbec and Sponsor under these Indemnity clauses shall
commence at the commencement of the Project and continue in perpetuity.
17. Provisions for arbitration in the event of disagreement must be agreed with
Simbec who shall arrange for a Barrister of at least ten years standing to
be appointed by the Royal College of Physicians as arbiter.
18. The Sponsor agrees to indemnify and hold harmless Simbec from and against
any loss, damage, cost or expense (including reasonable legal fees)
suffered or incurred by Simbec arising out of any claims or proceedings in
respect of death or bodily injury to Volunteers recruited to the Project
caused by participation in the Project unless such loss, damage, cost or
expense is due either to the failure of Simbec to conduct the Project in
accordance with the Protocol or is as a result of Simbec's negligence,
wilful default, failure or omission whether by itself, its employees,
servants or agents.
19. The Sponsor agrees to indemnify and hold harmless the Principal
Investigator from and against any loss, damage, cost or expense (including
reasonable legal fees) suffered or incurred by the Principal Investigator
arising our of any claims or proceedings in respect of death or bodily
injury to Volunteers recruited to the Project caused by participation in
the Project unless such loss, damage, cost or expense is due either to the
failure of the Principal Investigator to conduct the Project in accordance
with the Protocol or is as a result of the Principal Investigator's
negligence, wilful default, failure or omission whether by itself, its
employees, servants or agents.
20. Simbec agrees to indemnify and hold harmless the Sponsor from and against
any loss, damage, cost or expense (including reasonable legal fees)
suffered or incurred by the Sponsor arising out of any claims or
proceedings in respect of death or bodily injury to Volunteers recruited to
the Project caused by Simbec's negligence, wilful default, failure or
omission in the conduct of the Project whether by itself, its employees,
servants or agents.
21. Paragraphs 11 to 16 are in accordance with the spirit of Pages 11-13 of the
Report of the Royal College of Physicians entitled "Research in Healthy
Volunteers" published in the College Journal Vol 20 No 4 October 1986.
<PAGE>
PAYMENT
22. Other than by separate prior agreement of both parties the schedule of
payments shall be:
[CONFIDENTIAL TREATMENT REQUESTED]
Invoices are payable upon receipt.
23. The Sponsor shall provide Simbec with the name and address of the person
authorised to receive invoices and make remittances.
24. Quotations are valid for sixty days from the date of issue. Projects which
are continuing obligations over a long time period may be subject to cost
review annually and price increases will be notified to the Sponsor prior
to implementation.
25. Should payment(s) not be received under the terms of the agreement Simbec
reserves the right to suspend the Project after due notice in writing to
the Sponsor.
COSTS OF POSTPONEMENT AND CANCELLATION
26. In the event of postponement of the Project by the Sponsor after scheduled
dates for commencement have been agreed by both parties, Simbec shall be
reimbursed for all reasonable additional costs incurred, including
volunteer screening costs, etc. [CONFIDENTIAL TREATMENT REQUESTED].
27. In the event of cancellation of the Project by the Sponsor after scheduled
dates for commencement have been agreed by both parties, Simbec shall be
reimbursed for all reasonable costs incurred for the Project to date and
additional costs associated with loss of revenue,. [CONFIDENTIAL TREATMENT
REQUESTED].
NOTICE
28. Any notice required to be given by either party shall be deemed to be
sufficiently given if sent to the other party by pre-paid post at addresses
shown on the Quotation.
<PAGE>
ARBITRATION
29. In the event of a dispute arising between the parties such differences
shall be referred to a mutually acceptable arbitrator.
30. The Terms and Conditions are issued subject to the Laws of England and any
legal proceedings are subject to the jurisdiction of the English Courts.
S t r i v i n g f o r E x c e l l e n c e
<PAGE>
Exhibit 10.20
EXECUTION COPY
--------------
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
DEVELOPMENT,
LICENSE AND SUPPLY AGREEMENT
BETWEEN
INSPIRE PHARMACEUTICALS, INC.
AND
GENENTECH, INC.
DATED AS OF
DECEMBER 17, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS.................................................................................................2
2. REPRESENTATIONS AND WARRANTIES..............................................................................7
2.1 Representations and Warranties of Both Parties.....................................................7
2.2 Representations and Warranties of Inspire..........................................................7
3. JOINT STEERING COMMITTEE....................................................................................8
3.1 Members............................................................................................8
3.2 Responsibilities...................................................................................8
3.3 Officers..........................................................................................10
3.4 Meetings..........................................................................................10
3.5 Decision-making...................................................................................10
3.6 Minutes...........................................................................................11
3.7 Term..............................................................................................11
3.8 Expenses..........................................................................................11
4. JOINT PROJECT TEAMS........................................................................................12
4.1 Joint Project Teams; Members......................................................................12
4.2 Responsibilities..................................................................................12
4.3 Meetings..........................................................................................13
4.4 Decision-making...................................................................................13
4.5 Term..............................................................................................13
5. DEVELOPMENT AND JOINT DEVELOPMENT PROGRAMS.................................................................14
5.1 Scope of Development and Joint Development Programs...............................................14
5.2 Genentech Responsibilities under the Joint Development Program....................................14
5.3 Genentech Responsibilities under the Development Program..........................................15
5.4 Inspire Responsibilities under the Joint Development Program......................................16
5.5 Inspire Responsibilities under the Development Program............................................16
5.6 Option to Co-Fund Products in Field B.............................................................17
5.7 Funding of Development Program....................................................................18
5.8 Conduct of Development Program....................................................................19
5.9 Liability.........................................................................................20
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6. GRANT OF RIGHTS; COMMERCIALIZATION; MARKETING..............................................................20
6.1 License Grant to Genentech........................................................................20
6.2 License Grant to Inspire..........................................................................21
6.3 Sublicensing......................................................................................21
6.4 Strategic Partners of Inspire.....................................................................22
6.5 Commercialization Obligations, Rights.............................................................22
6.6 Right of First Offer..............................................................................22
6.7 Future Generation Compounds.......................................................................24
6.8 Adverse Reaction Reporting........................................................................25
6.9 Discussions Regarding Genentech Improvements......................................................26
7. FEES, MILESTONES AND ROYALTIES.............................................................................27
7.1 Up-front Payments.................................................................................27
7.2 Milestone Payments................................................................................27
7.3 Royalties.........................................................................................29
7.4 Obligation to Pay Royalties.......................................................................29
7.5 Sharing of U.S. Operating Profit or Loss..........................................................30
8. PAYMENTS AND REPORTS.......................................................................................30
8.1 Payments..........................................................................................30
8.2 Mode of Payment...................................................................................31
8.3 Records Retention.................................................................................31
8.4 Audits............................................................................................31
8.5 Taxes.............................................................................................31
8.6 Bartering Prohibited..............................................................................32
9. OWNERSHIP; PATENTS.........................................................................................32
9.1 Ownership.........................................................................................32
9.2 Patent Prosecution and Maintenance................................................................32
9.3 Patent Enforcement................................................................................34
9.4 Infringement Action by Third Parties..............................................................34
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10. PUBLICATION; CONFIDENTIALITY...............................................................................35
10.1 Notification and Review with Respect to Inspire and Genentech.....................................35
10.2 Notification and Review with Respect to Inspire's Strategic Partners..............................36
10.3 Confidentiality; Exceptions.......................................................................37
10.4 Exceptions to Obligation..........................................................................37
10.5 Limitations on Use................................................................................37
10.6 Remedies..........................................................................................37
11. INDEMNIFICATION............................................................................................38
11.1 By Genentech......................................................................................38
11.2 By Inspire........................................................................................38
11.3 Notice............................................................................................39
11.4 Complete Indemnification..........................................................................39
12. TERM; TERMINATION..........................................................................................39
12.1 Term..............................................................................................39
12.2 Termination for Cause.............................................................................39
12.3 Termination Without Cause.........................................................................40
12.4 Effect of Expiration or Termination...............................................................40
12.5 Accrued Rights; Surviving Obligations.............................................................42
13. FORCE MAJEURE..............................................................................................42
14. MISCELLANEOUS..............................................................................................42
14.1 Relationship of Parties...........................................................................42
14.2 Assignment........................................................................................42
14.3 Books and Records.................................................................................43
14.4 Further Actions...................................................................................43
14.5 Notice............................................................................................43
14.6 Use of Name.......................................................................................44
14.7 Public Announcements..............................................................................44
14.8 Waiver............................................................................................44
14.9 Compliance with Law...............................................................................44
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14.10 Severability......................................................................................44
14.11 Amendment.........................................................................................44
14.12 Governing Law.....................................................................................44
14.13 Arbitration.......................................................................................44
14.14 Entire Agreement..................................................................................45
14.15 Parties in Interest...............................................................................46
14.16 Descriptive Headings..............................................................................46
14.17 Counterparts......................................................................................46
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TABLE OF CONTENTS
EXHIBITS
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EXHIBIT A EXISTING COMPOUNDS
EXHIBIT B FINANCIAL APPENDIX
EXHIBIT C INITIAL PATENTS
EXHIBIT D INITIAL MEMBERS OF JOINT STEERING COMMITTEE
EXHIBIT E FORM OF NOTE AGREEMENT
EXHIBIT F PROVISIONS REQUIRED FOR AGREEMENTS
WITH SUBLICENSEES
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EXECUTION COPY
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DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT
December 17, 1999
THIS DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (this "Agreement"), dated as
of the date first written above (the "Effective Date"), is entered into by and
between Inspire Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware, having offices located at 4222 Emperor
Boulevard, Suite 470, Durham, North Carolina 27703 ("Inspire"), and Genentech,
Inc., a corporation organized and existing under the laws of the State of
Delaware, having offices located at 1 DNA Way, South San Francisco, California
94080 ("Genentech").
PRELIMINARY STATEMENTS
----------------------
A. Inspire is the owner of and has all right, title and interest in, or
has acquired the exclusive rights to, certain technology, including, without
limitation, Know-how and Patents or patent applications, relating to the
Compounds in the Fields in each of the Territories (as such capitalized terms
are defined below).
B. Inspire and Genentech wish to collaborate on the further development of
the Compounds for applications in the Fields.
C. Genentech is interested in obtaining an exclusive license to and under
Inspire's technology, to develop, make, have made, use, sell, have sold, offer
to sell, import, distribute and otherwise exploit products containing the
Compounds, and Inspire wishes to grant such license to Genentech, pursuant to
the terms and conditions of this Agreement.
D. Genentech wishes to purchase from Inspire, and Inspire wishes to
provide to Genentech, bulk active material for Compounds to meet Genentech's
requirements for its use to complete clinical and pre-clinical trials through
the end of Phase II clinical trials of each Compound.
E. Simultaneously with the execution of this Agreement, the Parties are
entering in that certain Series G Stock and Warrant Purchase Agreement (together
with the Schedules and Exhibits thereto, the "Stock Purchase Agreement") and
documents ancillary thereto, all dated of even date herewith, pursuant to which
Genentech has agreed to purchase, and Inspire has agreed to issue and sell,
shares of Series G Preferred Stock and Warrants for shares of Common Stock (as
such capitalized terms are defined in the Stock Purchase Agreement).
NOW, THEREFORE, in consideration of the foregoing Preliminary Statements
and the mutual agreements and covenants set forth herein, the Parties hereby
agree as follows:
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1. DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set
forth in this Section 1 unless context clearly and unambiguously dictates
otherwise:
1.1 "Additional Applications" shall have the meaning assigned to such term
in Section 6.6.
1.2 "Additional Product" shall have the meaning assigned to such term in
Section 6.6.
1.3 "Affiliate," with respect to any Party, shall mean any entity
controlled by such Party. For these purposes, "control" shall refer to (i) the
possession, directly or indirectly, of the power to direct the management or
policies of an entity, whether through the ownership of voting securities, by
contract or otherwise, or (ii) the ownership, directly or indirectly, of at
least 50% of the voting securities or other ownership interest of an entity.
With respect to Genentech, "Affiliate" shall not include Roche.
1.4 "Annual Development Plan" shall have the meaning assigned to such term
in Section 5.1.
1.5 "Audited Party" shall have the meaning assigned to such term in
Section 8.4.
1.6 "Auditing Party" shall have the meaning assigned to such term in
Section 8.4.
1.7 "Auditor" shall have the meaning assigned to such term in Section
6.3(c).
1.8 "Bulk Materials" shall mean the Compounds, in bulk form.
1.9 "Cannibalization" shall have the meaning assigned to such term in
Section 6.6.
1.10 "cGMP" shall mean current Good Manufacturing Practice as defined in
Parts 210 and 211 of Title 21 of the Code of Federal Regulations, as may be
amended from time to time, or any successor thereto.
1.11 "Co-Development Option" shall mean Inspire's option to co-fund a
Product in Field B pursuant to Section 5.6.
1.12 "Co-Promotion Option" shall mean Inspire's option to co-promote a
Product in Field B pursuant to Section 6.5(b).
1.13 "Compete", "Competing" and "Competition" shall have the meanings
assigned to such terms in Section 7.4(d).
1.14 "Commercial Sale" shall mean, with respect to any Product, a sale for
which payment has been received for use or consumption by the general public of
such Product in the Field in the applicable Territory after all required
Registrations, including pricing approvals (if applicable), have been granted by
the Regulatory Authority in such Territory.
1.15 "Compounds" shall mean, collectively, (i) INS365, (ii) INS37217 (iii)
Existing Compounds, and (iv) Future Generation Compounds.
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1.16 "Confidential Information" shall have the meaning assigned to such
term in Section 10.3.
1.17 "Cost of Bulk Materials" shall have the meaning assigned to such term
in the Financial Appendix.
1.18 "Development Costs" shall have the meaning assigned to such term in
the Financial Appendix.
1.19 "Development Program" shall mean the Joint Development Program and
the other research and development activities of either or both Parties for
developing Products from the Compounds. The Development Program commences on the
Effective Date and expires with expiration or termination of this Agreement, as
a whole or with respect to any Product, pursuant to Section 12.
1.20 "[CONFIDENTIAL TREATMENT REQUESTED] P2Y2 Agonist" shall mean
[CONFIDENTIAL TREATMENT REQUESTED]
1.21 "Effective Date" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
1.22 "Executive Officers" shall have the meaning assigned to such term in
Section 3.5(b).
1.23 "Existing Compounds" shall mean any [CONFIDENTIAL TREATMENT
REQUESTED] P2Y2 Agonists that are owned or controlled or synthesized by Inspire
prior to the Effective Date. Such Existing Compounds are listed on Exhibit A
---------
1.24 "FDA" shall mean the United States Food and Drug Administration.
1.25 "Field A" shall mean all human therapeutic uses for the treatment
(but not the diagnosis) of chronic bronchitis.
1.26 "Field B" shall mean all human therapeutic uses for the treatment
(but not the diagnosis) of cystic fibrosis.
1.27 "Field C" shall mean all human therapeutic uses for the treatment
(but not the diagnosis) of respiratory tract disorders, collectively, not
included in any of Field A, Field B, Field D and Field E.
1.28 "Field D" shall mean all human therapeutic uses for the treatment
(but not the diagnosis) of sinusitis.
1.29 "Field E" shall mean all human therapeutic uses for the treatment
(but not the diagnosis) of otitis media.
1.30 "Fields" shall mean Field A, Field B, Field C, Field D and Field E,
collectively.
1.31 "Financial Appendix" shall mean Exhibit B hereto.
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1.32 "First Commercial Sale" shall mean, with respect to any Product, the
first sale for which payment has been received for use or consumption by the
general public of such Product in the Field in the applicable Territory after
all required Registrations, including pricing approvals (if applicable), have
been granted by the Regulatory Authority in the Territory.
1.33 "First-Filed Patent Application" shall have the meaning assigned to
such
term in Section 7.4(b).
1.34 "Fully Burdened Manufacturing Costs" shall have the meaning assigned
to such term in the Financial Appendix.
1.35 "Future Generation Compounds" shall mean any [CONFIDENTIAL TREATMENT
REQUESTED] P2Y2 Agonists synthesized or patented or otherwise acquired by
Inspire during the term of this Agreement.
1.36 "GAAP" shall mean generally accepted accounting principles in the
United States, consistently applied by the Party at issue.
1.37 "Genentech" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
1.38 "Genentech Improvements" shall have the meaning assigned to such term
in Section 6.9.
1.39 "IND" shall mean an effective Notice of a Claimed Investigational New
Drug Exemption, as defined in Title 21 of the Code of Federal Regulations, on
file with the FDA before the commencement of clinical trials of a Product in
humans.
1.40 "INS365" shall mean [CONFIDENTIAL TREATMENT REQUESTED].
1.41 "INS37217" shall mean [CONFIDENTIAL TREATMENT REQUESTED].
1.42 "Inspire" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
1.43 "Invention" shall mean any new or useful process, compound or
composition of matter relating to the Compounds or the Products (including,
without limitation, the formulation, delivery, manufacture or use thereof) in
the Fields, whether patentable or unpatentable, or any improvement thereof, that
is conceived or first reduced to practice or demonstrated to have utility during
the term of, and in connection with, the Development Program.
1.44 "Joint Development Program" shall mean the research and development
program for developing Products from the Compounds that includes only the
activities of either or both Parties set forth in the Annual Development Plans
approved by the Joint Steering Committee and the activities of the Joint Project
Teams to implement such Annual Develoment Plans. The Joint Development Program
commences on the Effective Date and expires with respect to each Field with the
expiration of the term of the Joint Project Team with responsibility for such
Field, as set forth in Section 4.5.
1.45 "Joint Project Team" shall have the meaning that is assigned to such
term in Section 4.1.
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1.46 "Joint Steering Committee" and "JSC" shall have the meanings assigned
to such terms in Section 3.1.
1.47 "Know-how" shall mean any and all Inventions, improvements,
discoveries, claims, formulae, processes, trade secrets, technologies and
know-how (including confidential data and Confidential Information) in the
Fields, whether or not patentable, that is generated, owned or controlled by
Inspire or to which Inspire has the power to grant licenses at any time before
or during the term of this Agreement relating to, derived from or useful for the
development, manufacture, use, sale or distribution of any of the Compounds or
any of the Products in either Territory, including, without limitation,
synthesis, preparation, recovery and purification processes and techniques,
control methods and assays, chemical data, toxicological and pharmacological
data and techniques, clinical data, medical uses, product forms and product
formulations and specifications.
1.48 "Licensed Claim" shall mean any unexpired claim of any patent or
patent application within the Patents issued or pending in a country within a
Territory that, unless licensed, would be infringed by the manufacture, use,
importation or sale of any of the Compounds or any of the Products in such
country within such Territory, which claim has not been held invalid or
unenforceable by decision of a court or other governmental agency of competent
jurisdiction, which decision is unappealable or unappealed within the time
allowed for appeal, and which claim is not lost in an interference proceeding or
through disclaimer or otherwise not admitted by Inspire to be invalid.
1.49 "Licensed Technology" shall mean the Licensed Claims and Know-how,
collectively.
1.50 "Marketing Costs" shall have the meaning assigned to such term in the
Financial Appendix.
1.51 "Net Sales" shall have the meaning assigned to such term in the
Financial Appendix.
1.52 "Operating Profit or Loss" shall have the meaning assigned to such
term in the Financial Appendix.
1.53 "Original Product" shall have the meaning assigned to such term in
Section 7.2(e).
1.54 "Party" shall mean, as applicable, Inspire or Genentech and, when
used in the plural, shall mean Inspire and Genentech.
1.55 "Patents" shall mean the patents and patent applications set forth on
Exhibit C, and any other patents or patent applications in any country in the
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relevant Territory owned or controlled by Inspire during the term of this
Agreement that relate to any of the Compounds or any of the Products in any of
the Fields, together with any patents that may issue therefor in any country in
the relevant Territory, including any and all extensions, renewals,
continuations, continuations-in-part, divisions, patents-of-additions, reissues,
supplementary protection certificates or foreign counterparts of any of the
foregoing and any patents based on applications that claim priority from any of
the foregoing.
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1.56 "Product" shall mean any pharmaceutical formulation that contains as
the sole active ingredient or as one of its active ingredients a Compound for
use in the Fields, and the manufacture, use, sale or importation of which is
covered by one or more of the Patents and, but for the license granted under
this Agreement, infringes a Licensed Claim thereof in the relevant Territory.
1.57 "Promissory Note" shall have the meaning assigned to such term in
Section 5.6.
1.58 "Proposed Terms" shall have the meaning assigned to such term in
Section 6.5(b).
1.59 "Registration" shall mean, with respect to each country in the
relevant Territory, approval of the Registration Application for a Product filed
in such country, including pricing or reimbursement approvals, where applicable,
by the Regulatory Authority in such country.
1.60 "Registration Application" shall mean any filing(s) made with the
Regulatory Authority in any country in the relevant Territory for regulatory
approval of the manufacture and sale, and pricing when applicable, of a Product
in such country.
1.61 "Regulatory Authority" shall mean, collectively, the FDA and the
authority(ies) in each country in the relevant Territory that are comparable to
the FDA and have responsibility for granting regulatory approval for the
manufacture, use and sale of a Product in such country, including but not
limited to pricing and reimbursement approvals.
1.62 "Replacement Product" shall have the meaning assigned to such term in
Section 7.2(e).
1.63 "Reporting Company" shall have the meaning assigned to such term in
Section 7.4(c).
1.64 "Roche" shall mean, individually and collectively, F. Hoffmann-La
Roche Ltd and each organization, other than Genentech, (a) fifty percent (50%)
or more of the voting stock of which is owned and/or controlled directly or
indirectly by F. Hoffmann-La Roche Ltd; (b) which directly or indirectly owns
and/or controls fifty percent (50%) or more of the voting stock of F.
Hoffmann-La Roche Ltd; or (c) which is directly or indirectly under common
control of F. Hoffmann-La Roche Ltd through common share holdings.
1.65 "Sales Costs" shall have the meaning assigned to such term in the
Financial Appendix.
1.66 "Specifications" shall mean the specifications for the Bulk Materials
approved by the Joint Steering Committee with respect to Genentech's
requirements through the end of Phase II in the relevant Territory, as may be
amended (as approved by the Joint Steering Committee) from time to time.
1.67 "Stock Purchase Agreement" shall have the meaning assigned to such
term in the Preliminary Statements.
1.68 "Strategic Partners" shall have the meaning that is assigned to such
term in Section 5.5(b).
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1.69 "Sublicensee" shall mean a Third Party to which Genentech has granted
a sublicense to make, have made, use, sell, have sold, offer to sell, import,
distribute or otherwise exploit any of the Products in any country in the
Territory.
1.70 "Territory" shall mean Territory ABC and/or Territory DE, depending
upon the context of its use.
1.71 "Territory ABC" shall mean the entire world except Japan and shall
apply to Products in Field A, Field B and Field C, but not including Products in
Field D or Field E.
1.72 "Territory DE" shall mean the entire world and shall apply to
Products in Field D and Field E, but not including Products in Field A, Field B
or Field C. 1.73 "Third Party" shall mean any person who or which is neither a
Party nor an Affiliate of a Party.
1.74 "Third Party Agreement" shall have the meaning assigned to such term
in Section 6.6(c).
1.75 "Third Party Letter of Intent" shall have the meaning assigned to
such term in Section 6.6(c).
1.76 "Third Party License" means a license granted by a Third Party to
Genentech under such Third Party's patents, technology or know-how to develop,
manufacture, have manufactured, use, sell, have sold, import, distribute or
otherwise exploit a Product.
1.77 "UNC Agreement" shall have the meaning assigned to such term in
Section 2.2(d).
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of Both Parties. Each Party represents
and warrants to the other Party, as of the Effective Date, that:
(a) such Party is duly organized and validly existing under the laws of
the jurisdiction of its incorporation and has full corporate power and authority
to enter into this Agreement and to carry out the provisions hereof;
(b) such Party is free to enter into this Agreement;
(c) in so doing, such Party will not violate any other agreement to
which it is a party; and
(d) such Party has taken all corporate action necessary to authorize
the execution and delivery of this Agreement and the performance of its
obligations under this Agreement.
2.2 Representations and Warranties of Inspire. In addition to the
representations and warranties set forth in Section 2.1, Inspire represents and
warrants to Genentech, as of the Effective Date, that:
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(a) Inspire is the owner of, or has exclusive rights to, all of the
Patents (including, without limitation, the Patents set forth on Exhibit C), and
has the exclusive right to grant the licenses granted under this Agreement
therefor;
(b) to the best of Inspire's knowledge, after diligent inquiry,
Inspire is the owner of or has exclusive rights to all of the Know-how in
existence on the Effective Date and, with respect to Know-how that first comes
into existence after the Effective Date, Inspire will own, or have rights to,
all such Know-how, and has the exclusive right to grant the licenses granted
under this Agreement with respect thereto;
(c) Inspire shall not provide to Genentech any know-how, materials,
data or information that infringe any rights of any third party;\
(d) Inspire agrees to use its diligent efforts to promptly amend
Section 6.6 of the Exclusive License Agreement between Inspire and University of
North Carolina at Chapel Hill, dated as of September 1, 1998, ("UNC Agreement")
to provide that in the event of any cancellation or termination of the UNC
Agreement, Genentech shall continue to have the rights and license under this
Agreement to the Patents and Know-how owned by UNC and sublicensed to Genentech
under this Agreement;
(e) Inspire shall not materially breach the UNC Agreement and fail to
cure such breach within the cure period provided thereunder;
(f) Inspire has not entered into, and hereby agrees that it shall not
enter into, any agreement with any Third Party that is or with the passage of
time or otherwise could be in conflict with the rights granted to Genentech
pursuant to this Agreement; and
(g) the Existing Compounds listed on Exhibit A are all of the
[CONFIDENTIAL TREATMENT REQUESTED] P2Y2 Agonists owned or controlled or
synthesized by Inspire prior to the Effective Date.
3. JOINT STEERING COMMITTEE.
3.1 Members. The Parties shall establish one joint steering committee (the
"Joint Steering Committee" or "JSC"), which shall consist of six (6) members,
three (3) members from each Party. The initial members of the JSC are set forth
on Exhibit D. Each Party may replace any or all of its representatives on the
---------
JSC at any time upon written notice to the other Party in accordance with
Section 14.5 of this Agreement. Such representatives shall include individuals
within the senior management of each Party, and those representatives of each
Party shall, individually or collectively, have expertise in business and
biopharmaceutical drug development and commercialization. Any member of the JSC
may designate a substitute to attend and perform the functions of that member at
any meeting of the JSC. Each Party may, in its discretion, invite non-member
representatives of such Party to attend meetings of the JSC.
3.2 Responsibilities. The JSC shall perform the following functions:
(a) Approve the overall strategy for the Joint Development Program
and provide direction to the Joint Project Teams as provided in this Agreement;
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(b) review and approve Annual Development Plans created by the Joint
Project Teams pursuant to Section 4, the division of responsibilities of each
Party as allocated by the Joint Project Teams, the annual budgets and multiyear
expense forecasts formulated by the Joint Project Teams, and the financial
results of the Joint Development Program;
(c) review and approve activities related to manufacturing and the
identification of manufacturer(s) in connection with the Joint Development
Program;
(d) for Field B, only if Inspire exercises its Co-Development Option,
review and approve any manufacturer(s), annual marketing and sales budgets,
annual forecasts of sales and production requirements, annual marketing plans,
broad product positioning and campaign strategies, pricing of any co- promoted
Products, managed care contract strategies, and Phase IV clinical support
(including scope and strategic direction) in such Field B; provided that, except
as set forth in Section 6.5(b), Genentech, either itself and/or by and through
its Affiliates and Sublicensees, shall be responsible for, and shall have the
exclusive right to engage in, all marketing, advertising, promotional, launch
and sales activities in connection with such efforts;
(e) for Field B, only if Inspire exercises its Co-Promotion Option,
review and approve the appropriate role for each of Genentech and Inspire to
play in commercialization activities in Territory ABC with respect to any co-
promoted Products, provided that, except as set forth in Section 6.5(b),
Genentech, either itself and/or by and through its Affiliates and Sublicensees,
shall be responsible for, and shall have the exclusive right to engage in, all
marketing, advertising, promotional, launch and sales activities in connection
with such efforts.
(f) review and evaluate progress of the Joint Project Teams under the
Joint Development Program, provided that the JSC shall not have authority to
make any determination that either Party is in breach of this Agreement;
(g) review Inspire's discovery programs outside of the Joint
Development Program or otherwise outside of the collaboration under this
Agreement relating to any Additional Applications to determine if such
Additional Applications may result in off-label usage of products in any of the
Fields in which Genentech plans to develop, is developing or has developed a
Product;
(h) designate a team, which may include members of the JSC or any
Joint Project Team, to review reports regarding Additional Applications
delivered to the JSC pursuant to Section 6.6;
(i) review and approve "go/no-go" decisions and recommendations made
by each Joint Project Team;
(j) in accordance with Section 3.5, resolve disputes or disagreements
unresolved by any Joint Project Team and any other disputes or disagreements
between the Parties with respect to the Development Program; and
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(k) have such other responsibilities as may be assigned to the JSC
pursuant to this Agreement or as may be mutually agreed upon by the Parties from
time to time.
3.3 Officers.
(a) The chairperson and secretary of the JSC shall serve co-terminous
one (1)- year terms, each commencing on the Effective Date or an anniversary
thereof, as the case may be. The right to name the chairperson and the secretary
of the JSC shall alternate between the Parties, and each chairperson and
secretary shall be named no later than ten (10) days after the commencement of
his or her term. The initial chairperson shall be selected by Genentech within
thirty (30) days after the Effective Date. The initial secretary shall be
selected by Inspire within thirty (30) days after the Effective Date.
(b) The chairperson shall, if practicable, send written notice of all
meetings to all members of the JSC no less than thirty (30) days before the date
of each meeting.
3.4 Meetings. During the term of the Joint Development Program, the
JSC shall meet in person at least once during every calendar year, and more
frequently as the Parties deem appropriate, on such dates, and at such places
and times, as the Parties shall agree. Thereafter, the JSC shall meet, in
person or otherwise, only on an ad hoc basis as needed to perform the
responsibilities assigned to it under this Agreement. Meetings of the JSC that
are held in person shall alternate between the offices of the Parties, or such
other place as the Parties may agree. The members of the JSC also may convene
or be polled or consulted from time to time by means of telecommunications,
video conferences, electronic mail or correspondence, as deemed necessary or
appropriate.
3.5 Decision-making.
(a) The JSC may make decisions with respect to any subject matter
that is subject to the JSC's decision-making authority. Except as provided in
Section 3.5(b), each Party shall have collectively one (1) vote in all
decisions.
(b) In the event that Inspire exercises its Co-Development Option,
then [CONFIDENTIAL TREATMENT REQUESTED].
(c) Except as specifically provided in Section 3.5(b), if, with
respect to a matter that is subject to the JSC's decision-making authority, the
JSC cannot reach consensus within fifteen (15) days after it has met and
attempted to reach such consensus, the matter shall be referred on the sixteenth
(16th) day to the Chief Executive Officer of Inspire, or such other person
holding a similar position designated by Inspire from time to time, and an
Executive Vice President or Chief Executive Officer of Genentech, or such other
person holding a similar position designated by Genentech from time to time
(such officers collectively, the "Executive Officers"), for resolution. The
Executive Officers shall use reasonable efforts to resolve the matter referred
to them. If the Executive Officers cannot reach a mutually acceptable decision
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within fifteen (15) days after the matter was referred to them, then the
Executive Officer of Genentech shall have the final authority to make decisions
in good faith that are binding on both Parties.
(d) For all purposes under this Agreement, any decision made pursuant
to Section 3.5(b) or 3.5(c) shall be deemed to be the decision of the JSC.
3.6 Minutes.
(a) With the sole exception of specific items of the meeting minutes to
which the chairperson and the secretary cannot agree and which are escalated as
provided in Section 3.5(c), definitive minutes of all JSC meetings shall be
finalized no later than thirty (30) days after the meeting to which the minutes
pertain, as follows:
(i) Within ten (10) days after each JSC meeting, the secretary
shall prepare and distribute to all members of the JSC draft minutes of the
meeting. Such minutes shall provide a description, in reasonable detail,
of the discussions at the meeting and a list of any actions, decisions or
determinations approved by the JSC and a list of any issues to be resolved
by the Executive Officers.
(ii) The chairperson shall then have ten (10) days after
receiving such draft minutes to collect comments thereon from the members
of its Party and provide them to the secretary.
(iii) Upon the expiration of such second ten (10)-day period,
the chairperson and the secretary of the JSC shall have an additional ten
(10) days to discuss each other's comments and finalize the minutes. The
secretary and chairperson shall each sign and date the final minutes. The
signature of the chairperson and the secretary upon the final minutes shall
indicate each Party's assent to the minutes.
(b) If at any time during the preparation and finalization of the JSC
meeting minutes, the secretary and the chairperson do not agree on any issue
with respect to the minutes, such issue shall be resolved by the escalation
process as provided in Section 3.5(c). The decision resulting from the
escalation process shall be recorded by the secretary in amended finalized
minutes for said meeting. All other issues in the minutes that are not subject
to such escalation shall be finalized within a thirty (30)-day period as
provided in Section 3.6(a).
3.7 Term. The JSC shall exist until the termination or expiration of the
Joint Development Program and for such longer period as necessary to perform the
remaining responsibilities assigned to it under this Agreement.
3.8 Expenses. Each Party shall be responsible for all travel and related
costs and expenses for its members and approved invitees to attend meetings of,
and otherwise participate on, the JSC.
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<PAGE>
4. JOINT PROJECT TEAMS.
4.1 Joint Project Teams; Members. The Parties shall create, at the times
set forth in this Agreement or as otherwise determined by the JSC, a joint
project team for each of Field A, Field B and Field D, and such other joint
project teams as deemed necessary by the JSC (each, a "Joint Project Team").
Each Joint Project Team shall consist of such number of members as the JSC
determines is appropriate from time to time. Such members shall be individuals
with expertise and responsibilities in the areas of preclinical development,
clinical development, process sciences, manufacturing, regulatory affairs or
product development and marketing, as applicable to the stage of development or
commercialization of the Product. At the creation of each Joint Project Team,
each Party shall designate one member of each Joint Project Team as that Party's
primary contact by written notice to the other Party, and such primary contact
shall coordinate communications to and from that Party. Each Party may replace
any or all of its members on any Joint Project Team at any time upon written
notice to the other Party. Any member of a Joint Project Team may designate a
substitute to attend and perform the functions of that member at any meeting of
the Joint Project Team.
4.2 Responsibilities. With respect to the Field(s) that constitute its
area of responsibility, each Joint Project Team shall:
(a) oversee and coordinate the development of Products under this
Agreement, in a manner reasonably consistent with the Annual Development Plans
and during the Joint Development Program;
(b) evaluate data from the Joint Development Program;
(c) manage the day-to-day activities being conducted under the Joint
Development Program, allocate responsibilities between the Parties and
coordinate the activities of the Parties;
(d) provide a mechanism for the exchange of information between the
Parties with regard to Know-how and Inventions;
(e) provide a mechanism for the review of data and results from any
discovery efforts Inspire may conduct from time to time with respect to Future
Generation Compounds, and recommend to Genentech the inclusion of any such
Future Generation Compounds in the Joint Development Program pursuant to Section
5.2(a) if the Joint Project Team determines that such Future Generation
Compounds show promise in any of the Fields;
(f) review all relevant proposed publications and presentations of any
of the Parties or their respective Affiliates pursuant to Section 10;
(g) design clinical study protocols and review and determine whether
to approve clinical study protocols, the selection of clinical investigators,
clinical study write-ups, regulatory submissions, Registration Applications and
the like relating to the Joint Development Program;
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<PAGE>
(h) prepare the Annual Development Plans, as needed, and refer them to
the JSC for approval;
(i) keep the JSC informed on the status of the Joint Development
Program and the activities conducted by the Parties thereunder;
(j) resolve disputes and disagreements between the Parties with
respect to this Section 4.2, and refer unresolved disputes and disagreements to
the JSC for resolution in accordance with Section 3.5; and
(k) have such other responsibilities as may be assigned to the Joint
Project Team pursuant to this Agreement or by the JSC, or as may be mutually
agreed upon by the Parties from time to time.
4.3 Meetings. During its term, each Joint Project Team shall meet at least
once each calendar quarter, and more frequently as agreed by the Joint Project
Team, on such dates, and at such places and times, as the Joint Project Team
shall agree. Such meetings may be held in person, or the members of the Joint
Project Team may convene or be polled or consulted from time to time by means of
telecommunications, video conferences, electronic mail or correspondence, as
deemed necessary or appropriate.
4.4 Decision-making. Each Joint Project Team shall operate by consensus,
and each Party shall have collectively one (1) vote in all decisions. If, with
respect to a matter that is subject to a Joint Project Team's decision-making
authority, the Joint Project Team cannot reach consensus within fifteen (15)
days after it has met and attempted to reach such consensus, the matter shall be
referred on the sixteenth day to the JSC, which shall resolve such matter in
accordance with Section 3.5.
4.5 Term. Within thirty (30) days after the Effective Date, the Parties
shall create one Joint Project Team for each of Field A, Field B and Field D.
Unless otherwise determined by the JSC, the term of each Joint Project Team
shall be from its creation through the time indicated below:
Field A.............. The completion of Phase II clinical trials with
respect to the first Product in Field A.
Field B.............. The completion of Phase II clinical trials with
respect to the first Product in Field B if
Inspire does not exercise its Co-Development
Option and, if Inspire does exercise its
Co-Development Option, for as long as a Product
in Field B is marketed and sold in the United
States.
Field C.............. The completion of joint responsibilities as
determined by the JSC.
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<PAGE>
Field D.............. The earlier of the first filing of an IND with
respect to, or the first dosing of a patient
with, a Product in Field D.
Field E.............. The completion of joint responsibilities as
determined by the JSC.
5. DEVELOPMENT AND JOINT DEVELOPMENT PROGRAMS.
5.1 Scope of Development and Joint Development Programs. The Development
Program begins at the Effective Date and includes the research and development
activities of either or both of the Parties to, under this Agreement, develop
Products from the Compounds. The Joint Development Program begins at the
Effective Date and includes a subset of Development Program activities, which
are those activities of the Parties pursuant to Section 5.2, Section 5.4 and, if
Inspire exercises its Co-Development Option, Section 5.6, and such other
activities under Sections 5.3 and 5.5 as necessary to implement the activities
approved by the JSC in the Annual Development Plans. Each Joint Project Team,
under the oversight of the Joint Steering Committee, shall manage the Joint
Development Program in its area of responsibility. Annually, during each Joint
Project Team's term as set forth in Section 4.5, each Joint Project Team shall
prepare a report of the development and regulatory actions to be taken during
the upcoming year with respect to the Field(s) in its area of responsibility
under the Joint Development Program, which shall include a description of the
goals and scope of such actions and the allocation of responsibilities to the
respective Parties (each, an "Annual Development Plan"). Each Joint Project Team
shall:
(a) Commencing with the creation of the Joint Project Team, discuss
and prepare an Annual Development Plan for the first year of the term of the
Joint Development Program (or such other period as instructed by the JSC) and,
not later than ninety (90) days thereafter, submit to the JSC for approval such
Annual Development Plan for such period; and
(b) not later than October 17 of each year during the term of the
Joint Development Program, discuss and prepare the next year's Annual
Development Plan and, at least thirty (30) days prior to each anniversary of the
Effective Date during the term of the Joint Development Program, submit to the
JSC for approval such Annual Development Plan.
5.2 Genentech Responsibilities under the Joint Development Program.
Subject to the funding obligations of the Parties set forth in Section 5.7, as
part of the Joint Development Program, Genentech shall:
(a) Review and approve the selection by the Joint Project Teams of
development candidate Compounds, of development decision criteria, and of
indications for which each Compound is developed.
(b) Provide consulting services for Inspire regarding Phase IIa
clinical trials for INS365 for application in Field A.
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<PAGE>
(c) Conduct all Phase IIb clinical trials, and any related long-term
toxicology studies, for INS365 for application in Field A as deemed necessary or
desirable by Genentech to, in accordance with the Annual Development Plans, as
applicable, meet the requirements of the Regulatory Authorities in Territory ABC
for Registration.
(d) Conduct formulation development of Products consistent with the
Annual Development Plans.
(e) Perform such other obligations with respect to the Joint
Development Program and the Annual Development Plans as the JSC may assign from
time to time.
5.3 Genentech Responsibilities under the Development Program. Subject to
the funding obligations of the Parties set forth in Section 5.7, as part of the
Development Program, and pursuant to the Annual Development Plans under the
Joint Development Program where applicable, Genentech shall:
(a) Conduct all Phase IIb and Phase III clinical trials and long-term
toxicology studies for INS365 to be developed for application in Field A as
deemed necessary or desirable by Genentech to, in accordance with the Annual
Development Plans, as applicable, meet the requirements of the Regulatory
Authorities in Territory ABC for Registration.
(b) Conduct all Phase III clinical trials and long-term toxicology
studies for any Compounds approved by the JSC to be developed for application in
Field B as deemed necessary or desirable by Genentech to, in accordance with the
Annual Development Plans, as applicable, meet the requirements of the Regulatory
Authorities in Territory ABC for Registration.
(c) Conduct all clinical trials and post-IND pre-clinical studies for
any Compounds selected by Genentech to be developed for application in Field D
as deemed necessary or desirable by Genentech to, in accordance with the Annual
Development Plans, as applicable, meet the requirements of the Regulatory
Authorities in Territory DE for Registration.
(d) Conduct all development of any other Compounds for any indications
in the Fields as required by the Regulatory Authorities in the Territory for
Registration.
(e) Regularly review data on all Compounds.
(f) Use commercially reasonable efforts to proceed with the
development, Registration, marketing and sale in the relevant Territory of
Products in the Fields, in accordance with the Development Program for such
Products and the Compounds comprising such Products.
(g) Use commercially reasonable efforts to prepare and file those
regulatory filings deemed necessary or desirable by Genentech and for which
Genentech is responsible with the appropriate Regulatory Authorities in the
applicable Territory and obtain all Registrations that Genentech deems necessary
or desirable to market and sell in such Territory Products in the Fields.
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<PAGE>
(h) After the end of Phase II clinical trials with respect to any
Compound, as between Genentech and Inspire, Genentech shall assume all
responsibilities for the manufacture and supply of Bulk Materials of such
Compound for its use and that of its Affiliates and Sublicensees for all
clinical trials thereafter.
(i) During the term of the Development Program, keep Inspire
informed, through regular, periodic written reports, which shall be brief
summaries, at least once in each calendar year, of all development progress
being made by Genentech with respect to all Compounds, provided that such
reports need not include any information with respect to any Compound(s) that
are within the area of responsibility of an established Joint Project Team.
(j) Genentech shall own all Registration Applications, Registrations
and other regulatory filings and approvals (except INDs as provided in this
Agreement) for the Products in the Territories. (k) Except as set forth in
Section 5.4(d), Genentech shall be responsible for preparing and filing
regulatory filings for the Compounds as determined by the JSC up to and
including Registration, and thereafter shall be responsible for maintaining such
Registrations. All such filings shall be in Genentech's name.
5.4 Inspire Responsibilities under the Joint Development Program. Subject
to the funding obligations of the Parties set forth in Section 5.7, as part of
the Joint Development Program, Inspire shall:
(a) Conduct all Phase IIa clinical trials for INS365, in consultation
with Genentech, for application in Field A pursuant to the applicable Annual
Development Plans.
(b) Conduct, in consultation with Genentech and in accordance with the
applicable Annual Development Plans, all preclinical and clinical trials through
the end of Phase II for the first Compound selected by Genentech for development
in Field B.
(c) Conduct all research and preclinical trials for one (1) Compound
selected by Genentech for application in Field D through the filing of an IND in
accordance with the applicable Annual Development Plans.
(d) Prepare and file INDs for the first Compound selected by Genentech
for development in each of Field B in Territory ABC and Field D in Territory DE
and provide Genentech with all information necessary or desirable to cross-
reference and/or assume responsibility for each of Inspire's INDs in the Fields.
5.5 Inspire Responsibilities under the Development Program. As part
of the Development Program, and pursuant to the Annual Development Plans under
the Joint Development Program where applicable, Inspire shall:
(a) Immediately after the Effective Date with respect to INS365 and
INS37217, and at the time requested by the relevant Joint Project Team (or by
Genentech if no such Joint Project Team exists), transfer to Genentech copies of
all pre-clinical and clinical data and studies
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<PAGE>
and information relevant to the Fields generated by or on behalf of Inspire
(including primary and secondary pharmacology, toxicology, formulation,
stability studies, and portable delivery device feasibility study results)
relating to the development and commercialization of Compounds, provided,
however, that Inspire shall not be required to transfer such information
generated by a Strategic Partner (as defined below in Section 5.5(b)) that
Inspire does not have the right to transfer.
(b) Facilitate discussions between Inspire's other strategic partners
and/or licensees with respect to any of the Compounds (collectively, "Strategic
Partners") and Genentech for Genentech to obtain pre-clinical and clinical data,
INDs, Registration Applications, Registrations and other regulatory filings,
studies, information and materials relating to the development and
commercialization of Compounds.
(c) Supply Genentech and its designee(s), if any, with Genentech's
requirements of all Bulk Materials to complete all pre-clinical and clinical
trials until the completion of Phase II clinical trials of each Compound. Such
Bulk Materials shall be supplied in accordance with the Specifications, in
accordance with cGMP, and in accordance with quarterly forecasts therefor
provided by Genentech at least ninety (90) days for INS365, and one hundred and
fifty (150) days for all other Compounds, prior to the anticipated delivery date
for each shipment thereof, provided, however, in the event that Genentech
requires Bulk Materials in fewer than ninety (90) days for INS365, and one
hundred and fifty (150) days for all other Compounds, Genentech shall notify
Inspire of such need, which notice need not be in writing, and Inspire shall use
all diligent efforts to meet Genentech's delivery request.
(d) Provide the appropriate Joint Project Team (or provide Genentech
if the term of such Joint Project Team has expired) with data and results from
any discovery efforts Inspire may conduct from time to time with respect to each
Future Generation Compound.
(e) At all times during the term of this Agreement, keep Genentech
informed, through regular, periodic written reports, which may be brief
summaries, at least once in each calendar year, of all development progress
being made by Inspire with respect to all Compounds, both in and outside the
Fields.
(f) In order to assist Genentech in the performance of its obligations
under this Section 5.5, Inspire, to the extent its rights to do so are not
limited by contractual obligations, shall provide Genentech or its designee(s)
with complete copies (or copies of relevant portions) of, and shall grant
Genentech or its designee(s), free of charge, the right to cross-reference any
INDs, Registration Applications, Registrations or other regulatory filings made
or held in any country outside the Fields and/or the relevant Territory for the
Products. Inspire shall execute, acknowledge and deliver such further
instruments, and shall do all such other acts, all as promptly as possible after
Genentech's request therefor, that may be necessary or appropriate to effectuate
such right in each such country.
5.6 Option to Co-Fund Products in Field B. (a) Within ninety (90)
days after the completion of Phase II clinical trials (including the receipt of
all results therefrom) relating to the first Compound selected by Genentech for
application in Field B, Inspire shall notify Genentech in writing if Inspire
elects to exercise its Co-Development Option [CONFIDENTIAL TREATMENT REQUESTED].
In the event that Inspire
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<PAGE>
makes such election, Inspire shall reimburse Genentech for [CONFIDENTIAL
TREATMENT REQUESTED] as provided in the Financial Appendix; provided, however,
that in the event [CONFIDENTIAL TREATMENT REQUESTED].
5.7 Funding of Development Program.
(a) Pursuant to the Financial Appendix, each of the Parties shall pay
those Development Costs listed below its name in the following table:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Field Inspire Genentech
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Field A Development Costs for INS365 through Development Costs for INS365 beginning with the
the completion of Phase IIa clinical Phase IIb clinical trials for such Product, plus
trials for such Product, as provided any Phase IIa development costs in excess of
in Section 5.7(b). [CONFIDENTIAL TREATMENT REQUESTED] pursuant to
Section 5.7(b).
- --------------------------------------------------------------------------------------------------------
Field B Development Costs through the Development Costs for all Products beginning with
completion of Phase II clinical the Phase III clinical trials for the first
trials for the first Product. If Product; provided, however, that if Inspire
Inspire exercises its Co-Development exercises its Co-Development Option, Genentech
Option, Inspire shall also pay shall pay[CONFIDENTIAL TREATMENT REQUESTED] for
[CONFIDENTIAL TREATMENT REQUESTED] the first Product beginning with Phase III
for the first Product beginning with clinical trials for that Product and [CONFIDENTIAL
Phase III clinical trials for that TREATMENT REQUESTED] for each subsequent Product;
Product and [CONFIDENTIAL TREATMENT and, provided further, Genentech shall pay
REQUESTED]for each subsequent Product. [CONFIDENTIAL TREATMENT REQUESTED] for all
Products.
- --------------------------------------------------------------------------------------------------------
Field C None. All.
- --------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Field D Development Costs for one Product Development Costs for all Products after the
through the filing of the first IND filing of the first IND for the first such Product.
for the first such Product.
- --------------------------------------------------------------------------------------------------------
Field E None. All.
- --------------------------------------------------------------------------------------------------------
</TABLE>
(b) Pursuant to the Financial Appendix, Inspire shall apply
[CONFIDENTIAL TREATMENT REQUIRED] in proceeds from the issuance and sale to
Genentech of Inspire's Series G Preferred Stock as provided in Section 7.1(a) as
follows:
(i) Inspire shall pay [CONFIDENTIAL TREATMENT REQUESTED]
including but not limited to Phase IIa clinical trials for the first
Product in Field A. [CONFIDENTIAL TREATMENT REQUESTED].
(ii) After the completion of the first Phase IIa clinical trials
in Field A, Inspire shall apply any portion of the [CONFIDENTIAL TREATMENT
REQUESTED] not yet invoiced and paid or spent on internal Inspire resources
pursuant to Section 5.7(b)(i) toward additional development costs in the
Fields as determined by the JSC.
(iii) Any amounts payable to Genentech under this Section 5.7(b)
shall be paid by Inspire to Genentech within forty-five (45) days after
Inspire receives an invoice therefor from Genentech.
(c) Pursuant to the Financial Appendix, Genentech shall pay
[CONFIDENTIAL TREATMENT REQUESTED] for the manufacture and supply of Bulk
Materials for development programs that are funded by Genentech pursuant to
Section 5.7(a) through the end of Phase II. Inspire shall be entitled to invoice
Genentech therefor following shipment of such Bulk Materials from time to time.
Payment shall be made by Genentech as provided in the Financial Appendix.
5.8 Conduct of Development Program. The Parties, acting in accordance with
this Section 5 and the relevant Annual Development Plans, when applicable, shall
use commercially reasonable efforts to develop the Products in the Fields.
Genentech, acting in accordance with this Section 5 and the relevant Annual
Development Plans, when applicable, shall use commercially reasonable efforts to
obtain Registrations that Genentech deems necessary to market and sell the
Products in the applicable Territory. Without limiting the generality of the
foregoing, during the term of the Development Program, each Party shall:
(a) cooperate with the other Party to implement the Annual Development
Plans, and such other activities that, from time to time, the JSC decides are
necessary for the commercial success of the Joint Development Program;
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<PAGE>
(b) use commercially reasonable efforts to perform the work set out
for such Party to perform in the Annual Development Plans;
(c) conduct the Development Program in good scientific manner, and in
compliance in all material respects with all requirements of applicable laws,
rules and regulations, and all other requirements of any applicable cGMP, good
laboratory practice and current good clinical practice to attempt to achieve the
objectives of the Development Program efficiently and expeditiously;
(d) maintain records, in sufficient detail and in good scientific
manner, which shall be complete and accurate and shall fully and properly
reflect all work done and results achieved in connection with the Joint
Development Program in the form required under all applicable laws and
regulations. The other Party shall have the right, during normal business hours
and upon reasonable prior written notice, to inspect and copy all such records
at its own expense, so long as doing so is not unreasonably disruptive. The
other Party shall maintain such records and information contained therein in
confidence in accordance with Section 10 and shall not use such records or
information except to the extent otherwise permitted by this Agreement; and
(e) allow representatives of the other Party, upon reasonable prior
written notice and during normal business hours, to visit such Party's
facilities where the Joint Development Program is being conducted, and consult,
during such visits and by telephone, with such Party's personnel performing work
on the Joint Development Program, so long as such visits and consultations are
not unreasonably disruptive. The other Party shall maintain any information
received (whether by observation or otherwise) during such visit in confidence
in accordance with Section 10 and shall not use such information except to the
extent otherwise permitted by this Agreement.
5.9 Liability. Each Party shall be responsible for, and hereby assumes,
any and all risks of personal injury or property damage attributable to the
negligent or willful acts or omissions, during the term of the Development
Program, of such Party or its Affiliates, and their respective directors,
officers, employees and agents.
6. GRANT OF RIGHTS; COMMERCIALIZATION; MARKETING.
6.1 License Grant to Genentech.
(a) Subject to the terms and conditions of this Agreement, Inspire
hereby grants to Genentech during the term of this Agreement an exclusive (even
as to Inspire except as expressly set forth in Section 6.1(b)) license, with the
right to grant sublicenses, under the Licensed Technology to develop, make, have
made, use, market, sell, have sold, offer to sell, import, distribute and
otherwise exploit Products in the Fields throughout the relevant Territory.
(b) Inspire shall retain the right to practice or use the Licensed
Technology itself solely as necessary to (i) perform its research and
development obligations under the Joint Development Program and (ii) to
co-promote certain Products in Field B in Territory ABC, as expressly described
in Section 6.5(b), if Inspire exercises its Co-Promotion Option.
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<PAGE>
6.2 License Grant to Inspire.
(a) Subject to the terms and conditions of this Agreement, Genentech
hereby grants to Inspire during the term of the Joint Development Program a non-
exclusive, non-transferable, paid-up license, with no right to grant
sublicenses, under Genentech's rights in any Inventions solely to perform its
research and development obligations under the Joint Development Program in the
Fields in the relevant Territory.
(b) Notwithstanding anything else in this Agreement, no license is
granted by Genentech under its rights in any patents or know-how whatsoever for
any activities by Inspire that are outside the Fields or outside the applicable
Territory or outside the scope of Inspire's responsibilities under the Joint
Development Program and, if Inspire has exercised its Co-Promotion Option,
Inspire's co-promotion rights as expressly described in Section 6.5(b).
6.3 Sublicensing.
(a) Genentech shall have the right to grant sublicenses of the license
granted to Genentech under Section 6.1 for any purposes.
(b) Inspire shall have the right to grant sublicenses of the license
granted to it under Section 6.2 only to the extent necessary as approved in
writing in advance by Genentech.
(c) Each of Genentech and Inspire agrees that if either of them
sublicenses any rights hereunder to a Third Party, and if at any time either of
them conducts or engages a certified public accountant or other person (an
"Auditor") to conduct an audit or other examination of the books and records of
any such Sublicensee in order to determine the correctness of any royalty
payments made pursuant to such sublicense, then it will instruct such Auditor
to, as soon as reasonably practicable after the conclusion of such audit or
other examination, prepare and provide to the other Party (at such other Party's
expense) a brief, summary report of the results thereof; provided, however, that
such Auditor, in its summary report or otherwise, shall not disclose to the
other Party any information, including but not limited to the royalty percentage
payable under such sublicense and any other financial terms of such sublicense,
except that such Auditor may disclose to the other Party the fact of a
deficiency in royalty payments, and the degree thereof, including the dollar
amount. Except as provided under this Section 6.3(c), each Party agrees that
nothing in the terms of this Agreement entitles it to review or receive a copy
of any sublicense agreement that sublicenses rights hereunder.
(d) In addition, each of Genentech and Inspire agree that neither of
them will sublicense to any Third Party any rights covered by this Agreement
except pursuant to a sublicense agreement that includes provisions substantially
similar, taking into account the facts and circumstances of the particular
sublicense, as those set forth on Exhibit F hereto.
---------
(e) Each Party agrees to make the other Party a third-party
beneficiary of each sublicense agreement regarding any rights covered by this
Agreement; provided, however, that the Party shall be a third-party beneficiary
only with respect to those provisions enumerated on Exhibit F.
---------
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<PAGE>
(f) Sections 6.3(c), 6.3(d) and 6.3(e) shall not apply to any
sublicenses by Genentech to Roche.
6.4 Strategic Partners of Inspire.
(a) Inspire hereby covenants and agrees that each of its future
Strategic Partners, upon becoming a Strategic Partner, shall be bound by an
agreement with Inspire, enforceable in accordance with its terms, that includes
provisions substantially similar, taking into account the facts and
circumstances of the particular transaction, as Sections 6.8 (Adverse Reaction
Reporting) and 10 (Publication; Confidentiality). In addition, Inspire hereby
covenants and agrees that it shall not amend or modify any of its agreements
existing as of the Effective Date with any Strategic Partner with respect to
adverse reaction reporting, publication or confidentiality without Genentech's
prior written consent.
(b) Inspire agrees to make Genentech a third-party beneficiary of its
agreements with future Strategic Partners and will use its diligent efforts to
make Genentech a third-party beneficiary of all of its agreements with Strategic
Partners existing as of the Effective Date; provided, however, that Genentech
shall be a third-party beneficiary only with respect to those provisions
enumerated above in Section 6.4(a).
6.5 Commercialization Obligations, Rights.
(a) Genentech shall use commercially reasonable efforts to develop
Products, obtain Registrations as deemed necessary by Genentech to market and
sell Products in the Fields in the relevant Territory, and market and sell the
Products in the relevant Territory. Except as provided in Section 6.5(b),
Genentech, either itself and/or by and through its Affiliates and Sublicensees,
shall be responsible for, and shall have the exclusive right to engage in, all
marketing, advertising, promotional, launch and sales activities in connection
with such efforts. All Products shall be marketed and sold in the relevant
Territory under trademarks, trade names and logos, if any, selected and solely
owned by Genentech.
(b) In the event that Inspire exercises its Co-Development Option,
Inspire shall have the right, at its election and at its sole expense (which
expense shall not be included in the calculation of Operating Profit or Loss),
to exercise its Co-Promotion Option to co-promote Products in Field B throughout
the United States with [CONFIDENTIAL TREATMENT REQUESTED]. Genentech shall have
sole discretion to determine the size, structure and configuration of the sales
force that will be responsible for such Products, and the roles and assignments
of Inspire's sales representatives within such sales force. In order to exercise
its Co-Promotion Option, Inspire must give Genentech written notice of such
exercise before Genentech initiates pre-launch activities for the first Product
in Field B.
6.6 Right of First Offer. The Parties recognize that Inspire may conduct
research from time to time resulting in the discovery that certain Compounds
demonstrate utility outside the Fields ("Additional Applications"). Inspire
shall provide a written report of any such Additional Application to the JSC
from time to time, but at least once each calendar year; provided, however, that
such report for any particular Additional Application shall in any event be
provided to the JSC prior to the commencement of the first Phase II clinical
trial with respect
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<PAGE>
to such Additional Application. Such report may be a brief or detailed summary,
at Inspire's election, but in any event such report shall not fail to include
all material facts necessary for the JSC to make each determination set forth in
the following sentence. The JSC shall review each such report and determine,
within sixty (60) days after its receipt of such report, whether (i) any such
Additional Application could lead to development of a product comprised of a
Compound as an active ingredient (an "Additional Product"), and (ii) there could
be a reasonable risk of off-label usage of such Additional Product in the Fields
in which Genentech is developing, or has developed, a Product
("Cannibalization"). If the JSC determines in good faith that such Additional
Application could lead to an Additional Product and that there is a reasonable
risk of Cannibalization, then Genentech shall have a right of first offer to
obtain the exclusive rights and license to such Additional Application, as
follows:
(a) At such time as Inspire is interested in developing and/or
commercializing any such Additional Application for such Compounds (whether
itself or by granting a license or other rights to a Third Party), but in no
event later than the completion of Phase II clinical trials with respect to any
such Additional Application, Inspire shall give written notice thereof to
Genentech, together with any and all additional relevant information and data
regarding such Additional Application that Inspire has in its possession or
control. Genentech shall have forty-five (45) days after receipt of such written
notice and all such information and data to decide whether or not it is
interested in obtaining an exclusive license from Inspire for any such
Additional Application.
(b) If Genentech notifies Inspire in writing within such forty-five
(45)-day period that it is interested in obtaining such exclusive license,
Inspire shall promptly provide Genentech with written notice of its proposed
material terms and conditions of such exclusive license ("Proposed Terms"). The
Proposed Terms shall include all material terms and conditions of such exclusive
license, including, without limitation, the scope of the proposed license and
the financial terms. The Parties shall promptly commence good faith
negotiations, for a period of up to one hundred twenty (120) days after
Genentech receives such Proposed Terms from Inspire, in an effort to reach
mutually acceptable material terms and conditions for such exclusive license,
which material terms and conditions shall be set forth in a written letter of
intent ("Letter of Intent"). During such one hundred twenty (120)-day period,
Inspire shall not negotiate or discuss with any Third Party, or make any Third
Party aware of, the existence or availability of such Additional Application.
(c) If, despite each Party's good faith efforts, Inspire and Genentech
are not able to agree on such material terms and conditions and do not execute a
Letter of Intent within such one hundred twenty (120)-day period, Inspire may
enter into negotiations with any Third Party regarding any such Additional
Application, provided, however, that (i) Inspire shall have a period of two
hundred and seventy (270) days, commencing at the end of the such one hundered
twenty (120)-day period, to negotiate the material terms and conditions of such
excluisve license with any such Third Party and enter into a binding letter of
intent containing such material terms and conditions signed by Inpsire and such
Third Party ("Third Party Letter of Intent"), (ii) if a Third Party Letter of
Intent is entered into by Inspire and such Third Party within such two hundred
and seventy (270) day period, Inspire and such Third Party shall have a period
of three hundred sixty- five (365) days, commencing at the end the 120-day
period and inclusive of the 270-day period, within which to complete and enter
into a definitive agreement for such exclusive license signed by Inspire and
such Third Party ("Third Party Agreement"), and (iii) the terms and conditions
of any Third Party Term Sheet and/or Third Party Agreement shall be no
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more favorable to such Third Party than the terms and conditions of such
exclusive license for the same Additional Application that were last offered by
Genentech to Inspire in writing, and declined by Inspire, under this Section
6.6.
(d) If Inspire has not entered into a Third Party Letter of Intent
within the two hundred seventy (270)-day period set forth in Section 6.6(c) or
has not entered into a Third Party Agreement within the three hundred sixty-five
(365)-day period set forth in Section 6.6(c), then Inspire shall promptly give
written notice thereof to Genentech, together with any and all additional
relevant information and data regarding such Additional Application that Inspire
has in its possession or control that Inspire did not previously provide to
Genentech, and the Parties shall enter into a subsequent round of good faith
negotiations with respect to such Additional Application on a non-exclusive
basis, provided, however, that Inspire shall not enter into any term sheet,
letter of intent, definitive agreement or other commitment with any Third Party
for such Additional Application on terms and conditions more favorable to such
Third Party than the terms and conditions for such Additional Application last
offered by Genentech to Inspire in writing and declined by Inspire.
(e) Inspire acknowledges and agrees that, notwithstanding any
confidentiality obligations Inspire may have to such Third Party, any Third
Party Letter of Intent, Third Party Agreement or other commitment with such
Third Party regarding any such Additional Application will be subject to the
audit provisions set forth as follows to enable Genentech to verify Inspire's
compliance with this Section 6.6. At the request and expense of Genentech,
Inspire shall permit legal counsel or an independent, certified public
accountant appointed by Genentech and reasonably acceptable to Inspire, at
reasonable times and upon reasonable written notice, to examine such records as
may be necessary to verify Inspire's compliance with this Section 6.6; provided,
however, that such an examination shall not be permitted more than once with
respect to any particular Third Party Letter of Intent or Third Party Agreement.
Inspire shall reimburse Genentech for the reasonable cost of such examination if
such legal counsel or accountant determines that Inspire has not complied with
this Section 6.6. Said legal counsel or accountant shall not disclose to
Genentech any information other than the fact of such compliance (or the lack
thereof) and the material discrepancies in the case of noncompliance.
6.7 Future Generation Compounds. Inspire shall not develop internally or
license any rights to any Third Party for any Future Generation Compound for use
in the Fields within the relevant Territory during the term of this Agreement.
(a) At Genentech's request, Inspire will provide to Genentech
documentation, to Genentech's reasonable satisfaction, regarding Inspire's
discovery and development costs (including allocable overhead) calculated in
good faith by Inspire using its best efforts to estimate the actual resources
required [CONFIDENTIAL TREATMENT REQUESTED] for any Future Generation Compound.
(b) Genentech agrees that it shall not exercise the license rights
granted by Inspire to Genentech under Section 6.1 with respect to any Future
Generation Compound unless and until such time that Genentech reimburses Inspire
for such discovery and development costs in an amount mutually agreed upon by
both Parties in writing after conferring with each other in good faith and
reviewing the relevant discovery and development cost documentation provided by
Inspire, such agreement not to be unreasonably withheld or delayed by either
Party.
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6.8 Adverse Reaction Reporting.
(a) Each Party responsible for clinical trials shall, with respect to
such trials, record, evaluate, summarize and review all adverse drug experiences
associated with the Compounds and the Products. In addition, supplemental
information must be provided regarding Compounds at periodic intervals and
adverse drug experiences must be reported at more frequent intervals depending
upon the severity of the experience. Consequently, each Party agrees to:
(i) in a timely manner, provide to the other Party for initial
and/or periodic submission to government agencies significant information
on the drug from preclinical laboratory, animal toxicology and pharmacology
studies, as well as adverse drug experience reports from clinical trials
and commercial experiences with each Compounds;
(ii) in connection with investigational drugs, promptly report to
the other Party the receipt of a report of any unexpected serious adverse
experience with the drug, if required for either Party to comply with
regulatory requirements; and
(iii) in connection with marketed drugs, promptly report to the
other Party any serious adverse experience with the drug that is
unexpected.
(b) For purposes of this Agreement, "serious adverse drug experience"
means any adverse drug experience occurring at any dose that results in any of
the following outcomes: death, a life-threatening adverse drug experience,
inpatient hospitalization or prolongation of existing hospitalization, a
persistent or significant disability/incapacity, or a congenital anomaly/birth
defect. Important medical events that may not result in death, be
life-threatening, or require hospitalization may be considered a serious adverse
drug experience when, based upon appropriate medical judgment, they may
jeopardize the patient or subject and may require medical or surgical
intervention to prevent one of the outcomes listed in this definition. An
unexpected adverse drug experience is one that is not listed in the current
labeling for the drug product. This includes events that may be symptomatically
and pathophysiologically related to an event listed in the labeling, but differ
from the event because of greater severity or specificity.
(c) Each Party shall promptly report to the other Party the
information set forth above affecting any of the Compounds or any of the
Products in any country, whether or not in the applicable Territory.
(d) Each Party agrees that it if contracts with a Third Party,
including but not limited to any Strategic Partner of Inspire, for research to
be performed by such Third Party on the drug, that Party agrees to require such
Third Party to report to the contracting Party the information set forth above.
(e) The details of adverse reaction reporting during development stage
and thereafter, including all Strategic Partners of Inspire, shall be stipulated
in separate agreements to be entered into by the Parties, and such Strategic
Partners as appropriate, in due course.
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(f) Any information required pursuant to this Section 6.8 shall be
deemed to have been sufficiently given if in writing and personally delivered or
sent by certified mail (return receipt requested), facsimile transmission
(receipt verified), or overnight express courier service (signature required),
prepaid, to the Party for which such notice is intended, at the address set
forth for such Party below:
(i) In the case of Inspire, to:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
Attention: Regulatory Affairs
Facsimile No.: (919) 941-9798
Telephone No.: (919) 941-9777
(ii) In the case of Genentech, to:
Genentech Inc.
1 DNA Way
South San Francisco, California 94080
Attention: Jim Nickas, Drug Safety Department
Facsimile No.: (650) 225-4683
Telephone No.: (650) 225-5591
or to such other address for such Party as it shall have specified by like
notice to the other Party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery shall be deemed to be the next business day after such notice
or request was deposited with such service. If sent by certified mail, the date
of delivery shall be deemed to be the third (3rd) business day after such notice
or request was deposited with the U.S. Postal Service.
6.9 Discussions Regarding Genentech Improvements. If Inspire provides
written notice to Genentech that Inspire is interested in licensing from
Genentech any unpatented know-how that embodies or relates to, or any patents or
patent applications that embody or relate to, Inventions that are owned or
controlled by Genentech or its Affiliates ("Genentech Improvements"), which
written notice includes a summary of the terms and conditions (including royalty
payments and/or other financial terms) pursuant to which Inspire would be
interested in obtaining such a license, then Genentech agrees to enter into good
faith discussions with Inspire regarding Inspire's interest; provided, however,
that notwithstanding the foregoing, nothing in this Section 6.9 shall (i) in any
way obligate Genentech to enter into any license or other agreement with
Inspire, (ii) at any time prevent Genentech from negotiating with, or entering
into any license or other agreement with, any Third Party regarding any or all
Genentech Improvements, or (iii) in any way obligate Genentech to disclose to
Inspire the existence of any discussions or negotiations between Genentech and
any Third Party or the substance thereof.
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7. FEES, MILESTONES AND ROYALTIES.
7.1 Up-front Payments.
(a) As partial consideration to Inspire for the license and other
rights granted to Genentech under this Agreement, pursuant to the Stock Purchase
Agreement and simultaneously with the execution of this Agreement, Genentech is
purchasing one million (1,000,000) shares of Series G Preferred Stock for $10.00
per share, or an aggregate purchase price of $10,000,000, and Inspire shall
apply [CONFIDENTIAL TREATMENT REQUESTED] of such proceeds as set forth in
Section 5.7(b).
(b) Pursuant to the Stock Purchase Agreement, Genentech will also
purchase Warrants as provided in the Stock Purchase Agreement.
(c) Genentech shall pay a non-refundable, non-creditable up-front
payment of $5,000,000 to Inspire upon the execution of this Agreement by both
Parties as reimbursement for prior amounts expensed by Inspire for certain
development efforts with respect to the Compounds.
7.2 Milestone Payments. As further consideration to Inspire for the
license and other rights granted to Genentech under this Agreement, and subject
to Section 7.2(e), Genentech shall, upon the first occurrence of each event set
forth below with respect to the first Product in the specified Field, (i) pay to
Inspire the following milestone payments or (ii) within three (3) business days
after the date of the milestone event, with respect to those items in this
Section 7.2 marked with an asterisk (*), purchase from Inspire, and Inspire
shall issue and sell to Genentech equity of Inspire as provided in the Stock
Purchase Agreement:
(a) With respect to Field A:
------------------------
Milestone Event Milestone Payment
--------------- -----------------
[CONFIDENTIAL TREATMENT REQUESTED]
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(b) With respect to Field B:
-----------------------
Milestone Event Milestone Payment
--------------- -----------------
[CONFIDENTIAL TREATMENT REQUESTED]
(c) With respect to Field D:
-----------------------
Milestone Event Milestone Payment
--------------- -----------------
[CONFIDENTIAL TREATMENT REQUESTED]
(d) With respect to Future Generation Compounds, if Genentech decides
to undertake the development of a Product that is a Future Generation Compound,
and if Genentech has not yet contributed to the funding of Inspire's discovery
efforts for generating such Future Generation Compound either through a separate
research agreement agreed upon by both Parties or by retroactively reimbursing
Inspire for its fully-allocated discovery costs relating to such
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Future Generation Compound, then at the time Genentech begins the development of
such Product, it shall make such reimbursement. Such reimbursement shall be
made only once, regardless of how many indications such Product may be suited
for. Notwithstanding this Section 7.2(d), all other milestone payments required
by Sections 7.2(a), 7.2(b) and 7.2(c) shall remain payable as provided in such
sections. Such reimbursement shall be made in accordance with the Financial
Appendix.
(e) In the event that Genentech's development of a Product in a
particular Field (an "Original Product") terminates and, at or after the time of
such termination, Genentech is engaged, or subsequently becomes engaged in
clinical development of any other Product in such Field (a "Replacement
Product"), then Genentech shall be entitled to a credit against milestone
payments due pursuant to Section 7.2 with respect to the Replacement Product in
the amount equal to all milestone payments actually paid by Genentech to Inspire
with respect to the Original Product.
7.3 Royalties.
(a) Subject to Sections 7.4 and 7.5, Genentech shall pay Inspire a
royalty for each Product in the Fields equal to [CONFIDENTIAL TREATMENT
REQUESTED] of Net Sales on a country-by-country basis, of all Products, the
manufacture, use, sale, offer for sale or importation of which would, but for
this Agreement, constitute an infringement of a Licensed Claim.
(b) Genentech may offset royalties paid to any Third Party for any
Products under any Third Party Licenses against the royalties due to Inspire on
such Product in such country; provided that such royalties to Inspire shall not
be reduced to less than [CONFIDENTIAL TREATMENT REQUESTED]. This Section 7.3(b)
shall not apply to any Third Party Licenses for delivery technology to be used
in any Product.
7.4 Obligation to Pay Royalties.
(a) The obligation to pay royalties to Inspire under this Section 7 is
imposed only once with respect to the same unit of Product regardless of the
number of Patents pertaining thereto. There shall be no obligation to pay
royalties to Inspire under this Section 7 on sales of Products between Genentech
and its Affiliates or Sublicensees, but only in such instances the obligation to
pay royalties shall arise upon the sale by Genentech or its Affiliates or
Sublicensees to unrelated Third Parties. Payments due under this Section 7 shall
be deemed to accrue when Products are billed.
(b) The obligation to pay royalties to Inspire under this Section 7
with respect to any Licensed Claim of a patent application within the Patents
shall be as follows. Genentech shall pay royalties to Inspire as set forth in
this Section 7 only on the first patent application filed by Inspire in a
country within the Territory covering a Compound in the Fields ("First- Filed
Patent Application") for a period of three (3) years. After such three (3) year
period, Genentech shall have no obligation to pay any royalties under
this Agreement with respect to such First-Filed Patent Application unless and
until such time that a patent is actually issued on such First-Filed Patent
Application. In the event such a patent is actually issued on such First-Filed
Patent Application, Genentech's obligation to pay royalties under this Section 7
shall resume as of the date of issuance of such patent. Genentech shall have no
obligation to pay any royalties under
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this Agreement for any Licensed Claim of any patent application filed subsequent
to a First-Filed Patent Application in the same country covering the same
Compound in the Fields as such First-Filed Patent Application; provided,
however, that the foregoing shall not limit Genentech's obligation to pay
royalties under this Agreement for a Licensed Claim of an issued Patent as
provided in this Agreement.
(c) With respect to each Product, in the event that Genentech, any of
its Affiliates or any Sublicensee shall fail to enjoy de facto exclusivity for
sales of such Product in any country in the applicable Territory for any
calendar quarter, the royalty rates otherwise applicable to sales of such
Product in such country with respect to a patent application within the Patents,
shall be reduced by [CONFIDENTIAL TREATMENT REQUESTED]. Genentech, any of its
Affiliates or any Sublicensee shall be deemed to have failed to enjoy de facto
exclusivity with respect to a Product if:
[CONFIDENTIAL TREATMENT REQUESTED]
(d) For purposes of Section 7.4(c), a product will be deemed to
"Compete," be "Competing" or be "Competitive" with a Product if its primary use
is to treat the same patient population for a given disease and that is a
[CONFIDENTIAL TREATMENT REQUESTED] P2Y2 Agonist.
7.5 Sharing of U.S. Operating Profit or Loss. In the event that Inspire
elects to co-fund the U.S. Development Costs pursuant to Section 5.6, in lieu of
receiving the royalties provided in Section 7.3 on Net Sales of Products in
Field B in the United States, Inspire and Genentech shall share, in accordance
with the Financial Appendix, the U.S. Operating Profit or Loss associated with
commercial sales of such Products in the United States.
8. PAYMENTS AND REPORTS.
8.1 Payments. Payments between the Parties shall be made in accordance
with the Financial Appendix.
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8.2 Mode of Payment. Each Party shall make all payments required under
this Agreement in U.S. dollars, via wire transfer of immediately available funds
as directed by the other Party from time to time, net of any out-of-pocket
transfer costs or fees, in accordance with the Financial Appendix.
8.3 Records Retention. Genentech and Inspire, if it exercises its Co-
Development Option, shall keep complete and accurate records pertaining to the
development or the sale of Products and, if relevant to the calculation of U.S.
Operating Profit or Loss, for a period of three (3) calendar years after the
year in which such sales or costs occurred, and in sufficient detail to permit
the other Party to confirm the accuracy of the aggregate royalty and/or U.S.
Operating Profit or Loss calculations hereunder.
8.4 Audits.
(a) At the request and expense of either Party ("Auditing Party"), the
other Party ("Audited Party") shall permit an independent, certified public
accountant appointed by the Auditing Party and reasonably acceptable to the
Audited Party, at reasonable times and upon reasonable written notice, to
examine such records as may be necessary to: (i) determine the correctness of
any report or payment made under this Agreement; (ii) obtain information as to
the aggregate U.S. Operating Profit or Loss and/or royalties payable for any
calendar quarter in the case of either Party's failure to report or pay pursuant
to this Agreement; or (iii) determine the correctness of the application of the
proceeds under Section 5.7(b); provided, however, that such accountant shall
sign a confidentiality agreement in a form reasonably satisfactory to the
Audited Party, and, provided further, that such examination shall not be
permitted more than once in any twelve (12)-month period. Said accountant shall
not disclose to the Auditing Party or any other person any information, except
that such accountant may disclose to the Auditing Party the fact of a
deficiency, the lack of a deficiency or any overpayment, and the degree thereof,
including the dollar amount. All results of any such examination shall be made
available to the Audited Party.
(b) In the event that any audit reveals a deficiency in the amount
that should have been paid by Genentech to Inspire, then Genentech shall pay the
underpaid amount to Inspire within forty-five (45) days after Inspire makes a
demand therefor, plus interest thereon if such deficiency is in excess of the
greater of $100,000 or five percent (5%) of the amount that actually should have
been paid by Genentech. Such interest shall be calculated from the date such
underpaid amount was due until the date such underpaid amount is actually paid,
at the rate of one percent (1%) over the prime rate of interest reported in The
Wall Street Journal for the date such amount was due. In addition, if such
underpaid amount is in excess of the greater of $100,000 or five percent (5%) of
the amount that actually should have been paid by Genentech, then Genentech
shall reimburse Inspire for the reasonable cost of such audit. In the event of
an overpayment, such amounts shall be deducted from Inspire's royalties. If such
overpaid amounts have not been settled by such royalty deductions three (3)
years from the date originally overpaid, Genentech shall invoice Inspire for
such amounts.
8.5 Taxes. In the event that Genentech is required to withhold any tax
to the tax or revenue authorities in any country in the Territories regarding
any payment to Inspire due to the laws of such country, such amount shall be
deducted from the payment to be made by Genentech, and Genentech shall notify
Inspire in writing and promptly furnish Inspire with copies of any tax
certificate or other documentation evidencing such withholding as necessary to
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satisfy the requirements of the United States Internal Revenue Service related
to any application by Inspire for foreign tax credit for such payment. Each
Party agrees to cooperate with the other Party in claiming exemptions from such
deductions or withholdings under any agreement or treaty from time to time in
effect.
8.6 Bartering Prohibited. Without the prior written consent of
Inspire, Genentech and its Affiliates and Sublicensees shall not accept or
solicit any bartered goods or services for the sale of the Products.
9. OWNERSHIP; PATENTS.
9.1 Ownership.
(a) Subject to the license granted to Genentech pursuant to Section
6.1, Inspire shall retain all right, title and interest in and to all Patents
and Know-how that exist as of the Effective Date, regardless of which Party may
prepare or prosecute the patent applications associated therewith, or maintain
the patents or other intellectual property rights related thereto.
(b) Subject to the license granted to Inspire pursuant to Section 6.2,
Genentech shall retain all right, title and interest in and to all patent
applications, patents, inventions, improvements, discoveries, claims, ideas,
formulae, processes, trade secrets, technologies and know-how, whether or not
patentable, that are owned or controlled by Genentech as of the Effective Date,
regardless of which Party may prepare or prosecute the patent applications
associated therewith, or maintain the patents or other intellectual property
rights related thereto.
(c) Inventions made solely by employees or contractors of Inspire, or
acquired solely by Inspire, shall be owned solely by Inspire. Inventions made
solely by employees or contractors of Genentech, or acquired solely by
Genentech, shall be owned solely by Genentech. Inventions made jointly by
employees or contractors of Inspire and by employees or contractors of Genentech
shall be owned jointly by Inspire and Genentech. All of Inspire's interest in
and to such joint Inventions shall be deemed Licensed Technology and shall be
subject to the terms and conditions of this Agreement.
(d) Inspire shall not own any right, title or interest in any
trademark, trade name or logo selected by Genentech or the JSC for or in
connection with any Product or component part thereof.
9.2 Patent Prosecution and Maintenance.
(a) Inspire shall have full responsibility for, and shall control the
preparation and prosecution of, all patent applications and the maintenance of
all patents relating to the Licensed Technology (including the Patents)
throughout the Territory. Inspire shall pay all costs and expenses of filing,
prosecuting and maintaining such patent applications and patents relating to
Licensed Technology.
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(b) Each Party agrees promptly to provide to the other Party with a
complete written disclosure of any Invention made by such Party. Inspire shall
determine whether any Invention owned solely by Inspire or owned jointly by
Inspire and Genentech is patentable, and if so, shall proceed with the
preparation and prosecution of a patent application covering any such Invention.
Genentech shall determine whether any Invention owned solely by Genentech is
patentable, and if so, shall proceed with the preparation and prosecution of a
patent application covering any such Invention.
(c) Inspire shall have full responsibility for, and shall control the
preparation and prosecution of, all patent applications and the maintenance of
all patents relating to Inventions that are owned solely by Inspire or owned
jointly by Inspire and Genentech, throughout the Territory.
(d) Inspire shall select Howry & Simon or such other qualified
independent patent counsel reasonably acceptable to Genentech to prepare and
file and prosecute all patent applications pursuant to Sections 9.2(a) and
9.2(c). Inspire shall promptly provide copies to Genentech of any filings made
to, and any written communications received from, any patent office relating, in
whole or in part, to such patent applications or patents granted thereon
reasonably in advance of the relevant proposed filing or response date. Inspire
and the independent patent counsel shall give reasonable consideration to any
comments that may be made by Genentech reasonably in advance of the relevant
proposed filing or response date relating to the filing and prosecution of such
patent applications or the maintenance of patents granted thereon.
(e) Inspire shall pay all costs and expenses of filing, prosecuting
and maintaining patent applications and patents relating to Inventions that are
owned solely by Inspire.
(f) Inspire and Genentech shall together determine whether any
Invention jointly owned by Inspire and Genentech is patentable. Inspire and
Genentech shall share equally all costs and expenses of preparing, filing,
prosecuting and maintaining patent applications and patents relating to
Inventions that are owned jointly by Genentech and Inspire. If either Party
elects not to pay for: (i) the filing of a patent application in any country in
the Territory on any Invention that the other Party reasonably believes is
patentable, or (ii) the further prosecution or maintenance of any patent
application or patent on any Invention in any country in the Territory, or (iii)
the filing of any divisional or continuing patent application (based on a prior
patent application or patent) on an Invention in any country in the Territory,
such Party shall notify the other Party in writing in a timely manner and the
other Party may do so at its own expense. In the event that the other Party
elects to proceed with any such filing or further prosecution or maintenance,
the Party electing not to pay shall assign its rights in and to such patent or
patent application in such country to the other Party, and all of such assigning
Party's rights in such patent or patent application in such country shall cease.
In the case where Genentech is the assigning Party, the license granted to
Genentech under Section 6.1 with respect to such assigned patent or patent
application (and any associated sublicense(s)) shall terminate. In the case
where Inspire is the assigning Party, the license granted to Inspire under
Section 6.2 with respect to such assigned patent or patent application (and any
associated sublicense(s)) shall terminate.
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(g) Genentech shall have full responsibility for, and shall control
the preparation and prosecution of, all patent applications and the maintenance
of all patents relating to Inventions that are owned solely by Genentech,
throughout the Territory.
(h) Genentech shall pay all costs and expenses of filing, prosecuting
and maintaining patent applications and patents relating to Inventions that are
owned solely by Genentech.
(i) Each Party agrees to cooperate with the other Party to execute all
lawful papers and instruments, to make all rightful oaths and declarations, and
to provide consultation and assistance as may be necessary in the preparation,
prosecution, maintenance and enforcement of all such patents.
9.3 Patent Enforcement.
(a) If either Party learns of an infringement, unauthorized use,
misappropriation or ownership claim or threatened infringement or other such
claim (an "infringement") by a Third Party with respect to any Licensed
Technology within the Territory, such Party shall promptly notify the other
Party in writing and shall promptly provide such other Party with available
evidence of such infringement. In addition, Inspire shall promptly notify
Genentech in writing when Inspire becomes aware of any infringement action
involving any Product in any country outside the Territory.
(b) Genentech shall have the first right, but not the duty, to
institute patent infringement actions against Third Parties based on any
Licensed Technology in the Territory. If Genentech does not secure actual
cessation of such infringement or institute an infringement proceeding against
an offending Third Party within one hundred eighty (180) days of learning of
such infringement, Inspire shall have the right, but not the duty, to institute
such an action with respect to any infringement by such Third Party. The costs
and expenses of any such action (including fees of attorneys and other
professionals) shall be borne by the Party instituting the action, or, if the
Parties elect to cooperate in instituting and maintaining such action, such
costs and expenses shall be borne by the Parties in such proportions as they may
agree in writing. Each Party shall execute all necessary and proper documents
and take such actions as shall be appropriate to allow the other Party to
institute and prosecute such infringement actions. Any award paid by Third
Parties as a result of such an infringement action (whether by way of settlement
or otherwise) shall be applied first to reimburse both Parties for all costs and
expenses incurred by the Parties with respect to such action on a pro rata basis
and, if after such reimbursement any funds shall remain from such award,
[CONFIDENTIAL TREATMENT REQUESTED].
9.4 Infringement Action by Third Parties. In the event of the institution
or threatened institution of any suit by a Third Party against Genentech for
patent infringement involving the sale, distribution or marketing of any
Products in the Territory where such infringement claim is a result of the use
of the Licensed Technology, Genentech shall promptly notify Inspire in writing
of such suit. Unless otherwise covered by Section 11.2(c), Genentech shall have
the right to defend such suit at its own expense, and Inspire hereby agrees to
assist and cooperate
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with Genentech, at Inspire's own expense, to the extent necessary in the defense
of such suit. During the pendency of such action and thereafter, Genentech
shall continue to make all payments due under this Agreement. If Genentech
finally prevails and receives an award from such Third Party as a result of such
action (whether by way of judgment, award, decree, settlement or otherwise),
such award [CONFIDENTIAL TREATMENT REQUESTED]
10. PUBLICATION; CONFIDENTIALITY.
10.1 Notification and Review with Respect to Inspire and Genentech.
(a) Both Parties recognize that each may wish to publish the results
of their work relating to the subject matter of this Agreement. However, both
Parties also recognize the importance of acquiring patent protection.
Consequently, any proposed publication, by either Party (including its
Affiliates), that includes information related to the Compounds or Products, or
which otherwise includes proprietary information of the other Party or
Confidential Information, shall comply with this Section 10. At least forty-five
(45) days before a manuscript is to be submitted to a publisher, the publishing
Party shall provide the nonpublishing Party with a copy of the manuscript. If
the publishing Party wishes to make an oral presentation, it shall provide the
nonpublishing Party with a summary of such presentation at least fifteen (15)
business days before such oral presentation and, if an abstract is to be
published, three (3) business days before such abstract is to be submitted. Any
oral presentation, including any question period, shall not include any
Confidential Information unless both Parties otherwise mutually agree in writing
in advance of such oral presentation.
(b) The nonpublishing Party shall review the manuscript, abstract,
text or any other material provided under Section 10.1(a) to determine whether
patentable subject matter is or may be disclosed. The nonpublishing Party shall
notify the publishing Party in writing within thirty (30) days (or two (2)
business days in the case of abstracts) of receipt of the proposed publication
if it, in good faith, determines that patentable subject matter is or may be
disclosed, or if the Joint Project Team, in good faith, believes Confidential
Information (as defined in Section 10.3) is or may be disclosed. To the extent
solely determined by the JSC, after consulting with the nonpublishing Party,
that patent applications should be filed, the publishing Party shall delay its
publication or presentation for a period not to exceed one hundred twenty (120)
days from the nonpublishing Party's receipt of the proposed publication or
presentation to allow time for the filing of patent applications covering
patentable subject matter. In the event that the delay needed to complete the
filing of any necessary patent application will exceed the one hundred twenty
(120)-day period, the nonpublishing Party will discuss with the publishing Party
the need for obtaining an extension of the publication delay beyond the one
hundred twenty (120)-day period. If the nonpublishing Party determines in good
faith that Confidential Information or proprietary information is or may be
disclosed, the Parties will consult in good faith to arrive at an agreement on
mutually acceptable modifications to the proposed publication or presentation to
avoid such disclosure.
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(c) In the case where Genentech is the nonpublishing Party, any
failure by Genentech to prevent the publication by Inspire of any Confidential
Information shall not relieve Inspire of its obligations under Section 9.2.
(d) Except as expressly provided in this Section 10, each Party agrees
not to make any public announcement or disclosure (including, without
limitation, any press release, summary or Q&A) of the terms of this Agreement,
the Stock Purchase Agreement or the documents ancillary thereto, or the identity
or potential applications of any Compound, without first obtaining the written
approval of the other Party and agreement upon the nature and text of such
public announcement or disclosure. On and after the Effective Date, either Party
may issue a press release, the content of which will be agreed upon in advance
by the Parties, with respect to the execution of this Agreement, the Stock
Purchase Agreement and the documents ancillary thereto. The Party desiring to
make any such public announcement shall provide the other Party with a copy of
the proposed announcement for review and comment in reasonably sufficient time
prior to public release.
(e) Each Party agrees that it shall cooperate fully with the other
with respect to all disclosures regarding this Agreement, the Stock Purchase
Agreement and the documents ancillary thereto required under applicable laws and
regulations to the United States Securities and Exchange Commission (the "SEC")
and any other governmental or regulatory agencies, including by way of example
only but not limited to, (i) disclosures relating to the filing of a
registration statement by Inspire regarding an initial public offering of its
common stock and (ii) requests for confidential treatment of proprietary
information of either Party included in any such governmental disclosure.
(f) In addition, each Party agrees not to disclose, under any
circumstances except as set forth in this Section 10 or as otherwise required by
law, the terms of this Agreement, the Stock Purchase Agreement or the documents
ancillary thereto, or the identity or potential applications of any Compound, to
any Third Party other than to professional advisors and financing sources, and
in that case, only under confidentiality terms at least as stringent in material
respects as this Section 10. Genentech shall have the right to review and
comment on registration statements and applications for confidential treatment
insofar as they pertain to this Agreement, the Stock Purchase Agreement and the
documents ancillary thereto, prior to being filed with the SEC, and Inspire
shall not unreasonably refuse to accommodate such comments. Genentech shall
provide its comments, if any, on such registration statement or application as
soon as practicable, and in no event later than the fourth (4th) business day
after the day such registration statement or application is received by
Genentech.
10.2 Notification and Review with Respect to Inspire's Strategic Partners.
(a) Inspire shall review every proposed publication of any of its
Strategic Partners that includes information related to the Compounds or
Products, or which otherwise includes Confidential Information, to determine
whether patentable subject matter is or may be disclosed, and Inspire shall
cause the publication of such information to be delayed for a period of time
sufficient to allow for the filing of patent applications covering patentable
subject matter. In addition, Inspire will consult in good faith with the
publishing Strategic Partner to arrive at an agreement on mutually acceptable
modifications to the proposed publication or presentation to avoid disclosure of
such proprietary information or Confidential Information.
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(b) Inspire shall provide Genentech with a copy of any publications
relating to any of the Compounds or Products published by any of Inspire's
Strategic Partners promptly after such publication.
10.3 Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, during the term of this Agreement and for five (5) years thereafter, the
receiving Party shall keep, and shall ensure that its employees, officers and
directors keep, completely confidential and shall not publish or otherwise
disclose and shall not use for any purpose any information furnished to it by
the other Party or developed under or in connection with this Agreement or the
Stock Purchase Agreement, except to the extent that it can be established by the
receiving Party by competent proof that such information: (i) was already known
to the receiving Party, other than under an obligation of confidentiality, at
the time of disclosure by the other Party; (ii) was generally available to the
public or otherwise part of the public domain at the time of its disclosure to
the receiving Party; (iii) became generally available to the public or was
otherwise part of the public domain after its disclosure and other than through
any act or omission of the receiving Party in breach of this Agreement; or (iv)
was disclosed to the receiving Party, other than under an obligation of
confidentiality, by a Third Party who had no obligation to the disclosing Party
not to disclose such information to others (all such information to which none
of the foregoing exceptions applies, "Confidential Information").
10.4 Exceptions to Obligation. The restrictions contained in Section 10.3
shall not apply to Confidential Information that: (i) is submitted by the
recipient to governmental authorities to facilitate the issuance of
Registrations for the Products, provided that reasonable measures shall be taken
to assure confidential treatment of such information; (ii) is provided by the
recipient to Third Parties under confidentiality agreements having provisions at
least as stringent as those in this Agreement, for consulting, manufacturing
development, manufacturing, external testing, marketing trials and, with respect
to Genentech, to Third Parties who are Sublicensees or other
development/marketing partners of Genentech with respect to any of the subject
matter of this Agreement; (iii) is otherwise required to be disclosed in
compliance with applicable laws or regulations or order by a court or other
regulatory body having competent jurisdiction; provided that if a Party is
required to make any such disclosure of the other Party's Confidential
Information such Party will give reasonable advance written notice to the other
Party of such disclosure requirement and, except to the extent inappropriate in
the case of patent applications, will use its best efforts to secure
confidential treatment of such Confidential Information required to be
disclosed; or (iv) was developed by the receiving Party independent of any
disclosure received under this Agreement.
10.5 Limitations on Use. Each Party shall use any Confidential Information
obtained by such Party from the other Party, its Affiliates, its licensees or
its sublicensees, pursuant to this Agreement or otherwise, solely in connection
with the activities or transactions contemplated hereby.
10.6 Remedies. Each Party shall be entitled, in addition to any other
right or remedy it may have, at law or in equity, to an injunction, without the
posting of any bond or other security, enjoining or restraining the other Party
from any violation or threatened violation of this Section 10.
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11. INDEMNIFICATION.
11.1 By Genentech. Genentech shall indemnify, defend and hold harmless
Inspire and its Affiliates, and their respective directors, officers, employees
and agents, from and against any and all liabilities, damages, losses, costs and
expenses (including the reasonable fees of attorneys and other professionals)
arising out of or resulting from:
(a) gross negligence, recklessness or wrongful intentional acts or
omissions of Genentech, and its directors, officers, employees and agents, in
connection with the work performed by Genentech under the Development Program;
(b) any warranty claims, Products recalls or any tort claims of
personal injury (including death) or property damage relating to or arising out
of any manufacture, use, sale, offer for sale or importation of any Products by
Genentech due to any negligence, recklessness or wrongful intentional acts or
omissions by, or strict liability of, Genentech, and its directors, officers,
employees and agents, except, in each case, to the comparative extent such claim
arose out of or resulted from the gross negligence, recklessness or wrongful
intentional acts or omissions of Inspire and its Affiliates, and its directors,
officers, employees and agents; or
(c) any breach of any representation or warranty made by Genentech
pursuant to Section 2.
11.2 By Inspire. Inspire shall indemnify, defend and hold harmless
Genentech, its Affiliates and its Sublicensees, and their respective directors,
officers, employees and agents, from and against any and all liabilities,
damages, losses, costs and expenses (including the reasonable fees of attorneys
and other professionals) arising out of or resulting from:
(a) gross negligence, recklessness or wrongful intentional acts or
omissions of Inspire or its Affiliates or Strategic Partners, and their
respective directors, officers, employees and agents, in connection with the
work performed by Inspire under the Development Program;
(b) any warranty claims, Products recalls or any tort claims of
personal injury (including death) or property damage relating to or arising out
of any manufacture, use, distribution or sale of any Products by Inspire or
Genentech or any of their respective Affiliates or Inspire's Strategic Partners
or Genentech's Sublicensees due to any gross negligence, recklessness or
wrongful intentional acts or omissions by, or strict liability of, Inspire or
its Affiliates or Strategic Partners, and their respective directors, officers,
employees and agents, except, in each case, to the comparative extent such claim
arose out of or resulted from the gross negligence, recklessness or wrongful
intentional acts or omissions of Genentech, its Affiliates or its Sublicensees,
and their respective directors, officers, employees and agents; or
(c) any breach of any representation or warranty made by Inspire
pursuant to Section 2.
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11.3 Notice. In the event that any person (an "Indemnitee") entitled to
indemnification under Section 11.1 or 11.2 is seeking such indemnification, such
Indemnitee shall inform the indemnifying Party of the claim as soon as
reasonably practicable after such Indemnitee receives notice of such claim,
shall permit the indemnifying Party to assume direction and control of the
defense of the claim (including the sole right to settle it at the sole
discretion of the indemnifying Party, provided that such settlement does not
impose any obligation on the Indemnitee or the other Party) and shall cooperate
as requested (at the expense of the indemnifying Party) in the defense of the
claim.
11.4 Complete Indemnification. As the Parties intend complete
indemnification, all costs and expenses, including without limitation, legal
fees and expenses, incurred by an Indemnitee in connection with enforcement of
this Section 11 shall also be reimbursed by the indemnifying Party.
12. TERM; TERMINATION.
12.1 Term. This Agreement shall become effective as of the Effective Date
and, unless earlier terminated pursuant to the other provisions of this Section
12, shall expire as follows:
(a) With respect to the Products in Field B in the United States:
(i) if Inspire has exercised its Co-Development Option, when no
such Products continue to be marketed by either or both of the Parties; or
(ii) if Inspire has not exercised its Co-Development Option, as
to each Product on a Product-by-Product basis, upon the expiration of the
last to expire of all Licensed Claims covering such Product in the United
States.
(b) With respect to Fields A, C, D and E, and Field B outside the
United States, as to each Product in each country in the Territory, on a Product
by Product and country-by-country basis, upon the expiration of the last to
expire of all Licensed Claims covering such Product in such country.
(c) In any event, this Agreement shall expire in its entirety upon the
expiration of all Licensed Claims with respect to all Products in all countries
in Territory ABC and Territory DE.
12.2 Termination for Cause. Either Party (the "Non-breaching Party") may,
without prejudice to any other remedies available to it at law or in equity,
terminate this Agreement in its entirety or with respect to any Product, in the
event the other Party (the "Breaching Party") shall have materially breached or
defaulted in the performance of any of its material obligations hereunder or,
with respect to such Product, so materially breached or defaulted with respect
to that Product, and such default shall have continued for sixty (60) days after
written notice thereof was provided to the Breaching Party by the Non-breaching
Party (or, if such default cannot be cured within such sixty (60)-day period, if
the Breaching Party does not commence and diligently continue actions to cure
such default during such sixty (60)-day period). Any such termination shall
become effective at the end of such sixty (60)-day period unless the Breaching
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Party has cured any such breach or default prior to the expiration of such sixty
(60)-day period (or, if such default cannot be cured within such sixty (60)-day
period, if the Breaching Party has commenced and diligently continued actions to
cure such default). The right of either party to terminate this Agreement as
provided in this Section 12.2 shall not be affected in any way by its waiver or
failure to take action with respect to any previous default.
12.3 Termination Without Cause. Genentech may terminate this Agreement in
its entirety or with respect to any Product upon one hundred fifty (150) days
prior written notice to Inspire. Genentech shall not be liable for any costs or
other payments incurred after the date on which notice of such termination is
given, except for reasonable noncancelable costs to which Inspire already became
obligated prior to delivery of such notice that were included in the budget
approved by the JSC as part of the current Annual Development Plan, and, as
provided in the Financial Appendix, the allocation of Profit and Loss and any
royalties for sales made during the one hundred fifty (150) day period.
12.4 Effect of Expiration or Termination.
(a) Following the expiration of the term of this Agreement with
respect to a Product in any country in a Territory pursuant to Section 12.1(a)
or 12.1(b), Genentech shall have a royalty-free, paid-up, perpetual, irrevocable
and sublicenseable right and license, exclusive for [CONFIDENTIAL TREATMENT
REQUESTED] and nonexclusive thereafter, to continue to develop, make, have made,
use, market, sell, have sold, offer to sell, import, distribute and otherwise
exploit such Product in such country, and the exclusive, perpetual, irrevocable,
sublicenseable, royalty-free and paid-up right and license to use the Licensed
Technology in connection therewith. To that end, Genentech may continue to hold
and use all data, reports, records, information and materials that relate to or
are prepared in the course of the Development Program, and may hold all INDs,
Registration Applications, Registrations and other regulatory filings made or
filed by Genentech for such Products pursuant to this Agreement, and may in its
sole discretion continue any sublicense granted by Genentech under this
Agreement.
(b) Following expiration of the term of this Agreement in its entirety
pursuant to Section 12.1(c), Genentech shall have a royalty-free, paid-up,
perpetual, irrevocable and sublicenseable right and license, exclusive for
[CONFIDENTIAL TREATMENT REQUESTED] and nonexclusive thereafter, to continue to
develop, make, have made, use, market, sell, have sold, offer to sell, import,
distribute and otherwise exploit all Products in the Territory, and the
exclusive, perpetual, irrevocable, sublicenseable, royalty-free and paid-up
right and license to use the Licensed Technology in connection therewith. To
that end, Genentech may continue to hold and use all data, reports, records and
materials that relate to or are prepared in the course of the Development
Program, and may hold all INDs, Registration Applications, Registrations and
other regulatory filings made or filed by Genentech for all Products, pursuant
to this Agreement, and may in its sole discretion continue any sublicense
granted by Genentech under this Agreement.
(c) If this Agreement is terminated by Inspire with respect to a
particular Product pursuant to Section 12.2 by reason of a material breach or
default by Genentech, or terminated by Genentech with respect to a particular
Product pursuant to Section 12.3, in addition to any other remedies available to
the Parties at law or in equity: (i) at Genentech's expense, Genentech shall
promptly transfer to Inspire copies of all relevant data, reports, records and
materials in Genentech's possession or control that relate to the Product and
return to Inspire all relevant
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records and materials in Genentech's possession or control containing
Confidential Information of Inspire with respect to such Product (provided that
Genentech may keep one (1) copy of such Confidential Information of Inspire for
archival purposes only); (ii) Genentech shall, upon Inspire's request and at
Genentech's expense, provide Inspire with all information necessary or desirable
to cross-reference and/or assume responsibility for any of Genentech's INDs,
Registrations Applications, Registrations and other regulatory filings in the
Fields with respect to such Product; (iii) the license granted by Inspire to
Genentech under Section 6.1 shall terminate; and (iv) all sublicenses granted by
Genentech under this Agreement shall continue in full force and effect in
accordance with the terms and conditions of the respective sublicense
agreements, and Genentech will assign such sublicense agreements to Inspire;
provided, however, that this Section 12.4(c) shall not apply to any Confidential
Information, licenses and sublicenses relating to any Products for which there
has not been a termination.
(d) If this Agreement is terminated by Inspire pursuant to Section
12.2 by reason of a material breach or default by Genentech, or terminated by
Genentech pursuant to Section 12.3, in addition to any other remedies available
to the Parties at law or in equity: (i) Genentech shall promptly transfer to
Inspire copies of all data, reports, records and materials in Genentech's
possession or control that relate to the Development Program and return to
Inspire all relevant records and materials in Genentech's possession or control
containing Confidential Information of Inspire (provided that Genentech may keep
one (1) copy of such Confidential Information of Inspire for archival purposes
only); (ii) Genentech shall, upon Inspire's request and at Genentech's expense,
provide Inspire with all information necessary or desirable to cross-reference
and/or assume responsibility for any of Genentech's INDs, Registrations
Applications, Registrations and other regulatory filings in the Fields with
respect to all Products; (iii) the license granted by Inspire to Genentech under
Section 6.1 shall terminate; and (iv) all sublicenses granted by Genentech under
this Agreement shall continue in full force and effect in accordance with the
terms and conditions of the respective sublicense agreements, and Genentech
shall assign such sublicense agreements to Inspire.
(e) If this Agreement is terminated by Genentech pursuant to Section
12.2 by reason of a material breach or default by Inspire, in addition to any
other remedies available to Genentech at law or in equity: (i) the license
granted to Inspire by Genentech under Section 6.2 shall terminate; (ii)
Genentech shall have an exclusive, royalty-free, paid-up, perpetual, irrevocable
and sublicenseable right to continue to develop, make, have made, use, market,
sell, have sold, offer to sell, import, distribute and otherwise exploit any
Products in the Territory, and the exclusive, perpetual, irrevocable,
sublicenseable, royalty-free and paid-up right and license to use the Licensed
Technology in connection therewith. To that end, Genentech may continue to hold
and use all data, reports, records, information and materials that relate to or
are prepared in the course of the Development Program, and may hold all INDs,
Registration Applications, Registrations and other regulatory filings made or
filed by Genentech for the Products, pursuant to this Agreement, and may in its
sole discretion continue any sublicenses granted by Genentech under this
Agreement.
(f) At the expiration or any termination of this Agreement, all of
Genentech's payment obligations under this Agreement shall terminate as of the
effective date of such expiration or termination, except for payments to Inspire
for any royalties or Operating Profit or Loss percentage under Section 7 that
accrued prior to the effective date of such expiration or termination and are
due and payable by Genentech to Inspire pursuant to this Agreement.
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12.5 Accrued Rights; Surviving Obligations.
(a) Termination, relinquishment or expiration of this Agreement for
any reason shall be without prejudice to any rights that shall have accrued to
the benefit of either Party prior to such termination, relinquishment or
expiration. Such termination, relinquishment or expiration shall not relieve
either Party from obligations that are expressly indicated to survive
termination or expiration of this Agreement.
(b) All of the Parties' rights and obligations under Sections 1
(Definitions), 2 (Representations and Warranties), 3.8 (Expenses) (solely with
respect to actions commenced before the effective date of termination of this
Agreement), 5.9 (Liability), 6.2(b) (Limitation on License Grants to Inspire),
6.6 (Right of First Offer), 8.3 (Records Retention), 8.4 (Audits), 9 (Ownership;
Patents), 10 (Publication; Confidentiality), 11 (Indemnification), 12.4 (Effect
of Expiration or Termination), this 12.5 (Accrued Rights; Surviving
Obligations), 13 (Force Majeure), and 14 (Miscellaneous) shall survive
termination, relinquishment or expiration of this Agreement.
13. FORCE MAJEURE.
Neither Party shall be held liable or responsible to the other Party nor
be deemed to be in default under, or in breach of any provision of, this
Agreement for failure or delay in fulfilling or performing any obligation of
this Agreement when such failure or delay is due to force majeure, and without
the fault or negligence of the Party so failing or delaying. For purposes of
this Agreement, force majeure is defined as causes beyond the control of the
Party, including, without limitation, acts of God; acts, regulations, or laws of
any government; war; civil commotion; destruction of production facilities or
materials by fire, flood, earthquake, explosion or storm; labor disturbances;
epidemic; and failure of public utilities or common carriers. In such event
Inspire or Genentech, as the case may be, shall immediately notify the other
Party, with written notice to follow, of such inability and of the period for
which such inability is expected to continue. The Party giving such notice shall
thereupon be excused from such of its obligations under this Agreement as it is
thereby disabled from performing for so long as it is so disabled and for
forty-five (45) days thereafter. To the extent possible, each Party shall use
reasonable efforts to minimize the duration of any force majeure.
14. MISCELLANEOUS.
14.1 Relationship of Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the Parties. No Party shall incur any debts or make
any commitments for the other, except to the extent, if at all, specifically
provided herein.
14.2 Assignment. Except pursuant to a sublicense permitted under this
Agreement and as provided in Section 12.4(c), neither Party shall be entitled to
assign its rights or delegate its obligations hereunder without the express
written consent of the other Party hereto, except that each Party may assign its
rights and transfer its duties hereunder to any assignee of all or substantially
all of its business (or that portion thereof to which this Agreement relates) or
in the event of such Party's merger, consolidation or involvement in a similar
transaction. No assignment and transfer shall be valid or effective unless done
in accordance with this Section
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14.2 and unless and until the assignee/transferee shall agree in writing to be
bound by the provisions of this Agreement.
14.3 Books and Records. Any books and records to be maintained under this
Agreement by a Party shall be maintained in accordance with GAAP.
14.4 Further Actions. Each Party shall execute, acknowledge and deliver
such further instruments, and do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
14.5 Notice.
(a) Except for notices given pursuant to Section 6.8, any notice or
request required or permitted to be given under or in connection with this
Agreement shall be deemed to have been sufficiently given if in writing and
personally delivered or sent by certified mail (return receipt requested),
facsimile transmission (receipt verified), or overnight express courier service
(signature required), prepaid, to the Party for which such notice is intended,
at the address set forth for such Party below:
in the case of Inspire, to:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
Attention: Christy L. Shaffer, Ph.D.
Facsimile No.: (919) 941-9797
in the case of Genentech, to:
Genentech, Inc.
1 DNA Way, Mailstop 49
South San Francisco, California 94080
Attention: Corporate Secretary
Facsimile No.: (650) 952-9882
or to such other address for such Party as it shall have specified by like
notice to the other Party, provided that notices of a change of address shall be
effective only upon receipt thereof. With respect to notices given pursuant to
Section 6.8 or this Section 14.5, (i) if delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given; (ii) if sent by overnight express courier service,
the date of delivery shall be deemed to be the next business day after such
notice or request was deposited with such service; and (iii) if sent by
certified mail, the date of delivery shall be deemed to be the third (3rd)
business day after such notice or request was deposited with the U.S. Postal
Service.
(b) All correspondence, notices and other communications shall be
promptly provided to the other Party.
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14.6 Use of Name. Except as otherwise provided herein, neither Party shall
have any right, express or implied, to use in any manner the name or other
designation of the other Party or any other trade name, trademark or logo of the
other Party for any purpose in connection with the performance of this
Agreement.
14.7 Public Announcements. Except as required by law (including, without
limitation, disclosure requirements of the U.S. Securities and Exchange
Commission, Nasdaq or any other stock exchange on which securities issued by a
Party are traded) and as permitted by Section 10.3 or 10.4, neither Party shall
make any public announcement concerning this Agreement or the subject matter
hereof without the prior written consent of the other, which shall not be
unreasonably withheld, provided that it shall not be unreasonable for a Party to
withhold consent with respect to any public announcement containing any
financial terms or any of such Party's Confidential Information. In the event of
a required public announcement, to the extent practicable under the
circumstances, the Party making such announcement shall provide the other Party
with a copy of the proposed text prior to such announcement and with financial
terms sufficiently in advance of the scheduled release of such announcement to
afford such other Party a reasonable opportunity to review and comment upon the
proposed text.
14.8 Waiver. A waiver by either Party of any of the terms and conditions
of this Agreement in any instance shall not be deemed or construed to be a
waiver of such term or condition for the future, or of any subsequent breach
hereof. All rights, remedies, undertakings, obligations and agreements contained
in this Agreement shall be cumulative and none of them shall be in limitation of
any other remedy, right, undertaking, obligation or agreement of either Party.
14.9 Compliance with Law. Nothing in this Agreement shall be deemed to
permit a Party to export, reexport or otherwise transfer any Products sold under
this Agreement without compliance with applicable laws.
14.10 Severability. When possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
14.11 Amendment. No amendment, modification or supplement of any
provisions of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each Party.
14.12 Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of Delaware without regard to its choice of law
principles.
14.13 Arbitration.
(a) All disputes between the Parties arising from or relating to this
Agreement or the breach hereof, other than alleged patent infringement or as set
forth in Section 10.6 or otherwise expressly provided in this Agreement, that
are not subject to Section 3.5 or cannot otherwise be resolved informally, shall
be finally resolved by arbitration in accordance with the then existing Rules of
the American Arbitration Association (the "AAA"), as supplemented by the further
requirements of this Section 14.13. Such arbitration shall be conducted by three
(3)
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arbitrators, one appointed by each of Genentech and Inspire and the third
selected by the first two appointed arbitrators.
(b) Within thirty (30) days after filing its request for arbitration
with the AAA, the Party requesting arbitration of a dispute (the "claimant")
shall provide the other Party (the "respondent") with a statement explaining the
basis of its request for arbitration, including a listing all of the specific
facts the claimant contends support its claims, all acts or omissions by the
respondent that the claimant believes constitute a breach of this Agreement, all
of the terms and provisions of this Agreement that the claimant believes have
been breached, the names and addresses of each person the claimant believes has
knowledge supporting its claim, and a concise statement of damages, including
the means by which the claimed damages were calculated and the facts upon which
the calculation(s) were based. The claimant also shall provide with such
statement a copy of all documents in its possession or control that it contends
support its claim.
(c) Within one hundred twenty (120) days of receipt of the above
statement, the respondent shall provide a written reply statement to the
claimant, setting forth a brief description of each of the defenses known to it
at that time and the facts upon which the defenses are based, and the names and
last known addresses of each witness supporting any such defenses. The
respondent also shall provide with such reply statement a copy of all documents
in its possession or control that it contends support its defenses.
(d) The requirements of paragraphs (b) and (c) of this Section 14.13
are intended to supplement, and therefore are in addition to, the Rules and
procedural requirements of the AAA. In particular, the exchanges of documents
and information required by such paragraphs shall be in addition to any
discovery that is permitted under the Rules of the AAA or that the arbitrators
may otherwise authorize in the arbitration.
(e) The arbitrators shall be required to render a reasoned written
opinion in support of their final decision, setting forth findings of fact,
legal analysis and award. The decision rendered by the arbitrators shall be
final and binding upon the Parties. Judgment upon the decision and any award
made by the arbitrators may be entered in any court of competent jurisdiction.
Each Party shall pay its own expenses of arbitration and shall share equally in
the fees and expenses of the arbitrators, unless the arbitrators assess against
one Party the expenses of the other Party (including the other Party's
reasonable attorneys' fees and expenses) in their award.
(f) To the extent permitted by law, the Parties agree to keep
confidential any documents exchanged between them pursuant to the arbitration
and, the content of any testimony or written documents submitted pursuant to the
arbitration.
(g) The place of arbitration of any dispute (i) initiated by Inspire
shall be San Francisco, California and (ii) initiated by Genentech shall be
Boston, Massachusetts.
14.14 Entire Agreement. This Agreement, together with the Exhibits hereto and
every Annual Development Plan approved by the Joint Steering Committee, sets
forth the entire agreement and understanding between the Parties as to the
subject matter hereof and merges all prior discussions and negotiations between
them, and neither of the Parties shall be bound by any conditions, definitions,
warranties, understandings or representations with respect to such subject
-45-
<PAGE>
matter other than as expressly provided herein or as duly set forth on or
subsequent to the date hereof in writing and signed by a proper and duly
authorized officer or representative of the Party to be bound thereby.
14.15 Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties hereto and their respective permitted successors and assigns.
14.16 Descriptive Headings. The descriptive headings of this Agreement are
for convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.
14.17 Counterparts. This Agreement may be executed simultaneously in any
number of identical counterparts, any one of which need not contain the
signature of more than one Party, but all such counterparts taken together shall
constitute one and the same agreement.
* * *
[ signature page follows ]
-46-
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed by its duly authorized representative as of the date first above
written.
INSPIRE PHARMACEUTICALS, INC.
By: /s/ Christy L. Shaffer
----------------------
Christy L. Shaffer, Ph.D.,
President and Chief Executive Officer
GENENTECH, INC.
By: /s/ Arthur D. Levinson
----------------------
Arthur D. Levinson, Ph.D.
President and Chairman of the Board
-47-
<PAGE>
EXHIBIT A
---------
EXISTING COMPOUNDS
[CONFIDENTIAL TREATMENT REQUESTED]
A-1
<PAGE>
EXHIBIT B
---------
Financial Appendix
This Exhibit B covers financial planning, accounting policies and
---------
procedures to be followed in determining Development Costs, Fully Burdened
Manufacturing Costs and Operating Profit or Loss and related sharing of revenue
and expenses pursuant to the Agreement.
For such purpose, this Exhibit B sets forth the principles for reporting
---------
actual results and budgeted plans of the combined operations in the Territories,
the frequency of reporting, the use of a single "Functional Currency" (as
defined below) and the methods of determining payments to the Parties, auditing
of accounts and other matters.
For purposes of this Exhibit B only, the consolidated accounting of
---------
operations for the Territories shall be referred to as "GenSpire." GenSpire is
not a legal entity and has been defined for identification purposes only.
This Exhibit B also provides the definitions of certain financial terms
---------
applicable to the Parties for purposes of the Agreement; provided, however, that
the definition of "Fully Burdened Manufacturing Costs" shall apply to Genentech
or Inspire to the extent it manufactures any Product (or component thereof)
under the Agreement and the definition of "Development Costs" shall apply to the
development work by both Parties under the Agreement. All capitalized terms
used herein without definition shall have the meanings ascribed thereto in the
Agreement, unless otherwise expressly provided herein. References in this
Exhibit B to a "Party" or "Parties" shall be construed to mean Genentech or
- ---------
Inspire, as the case may be, and in every case shall be deemed to include the
Party's Affiliates under the Agreement.
B-1
<PAGE>
B.1. Principles of Reporting
The presentation of results of operations of the Parties in the
Territories will be based on each Party's respective financial information
presented separately and on a consolidated basis in the reporting format
depicted as follows:
Genentech Inspire Total
--------- ------- -----
[CONFIDENTIAL TREATMENT REQUESTED]
It is the intention of the Parties that the interpretation of these
definitions will be consistent with GAAP in the United States.
If necessary, a Party will make the appropriate adjustments to the
financial information it supplies under the Agreement to conform to the above
format of reporting results of operation.
B.2. Frequency of Reporting
The fiscal year of GenSpire will be a calendar year.
Reporting by each Party for GenSpire revenues and expenses will be
performed as follows, with submissions due on the date indicated or the next
business day if such date is a weekend or U.S. holiday:
B-2
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Reporting Event Frequency Timing of Submission
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuals Quarterly
-----------------------------------------------
Forecasts Approximately
Quarterly
----------------------------------------------- [CONFIDENTIAL TREATMENT REQUESTED]
Preliminary Budgets Annually
-----------------------------------------------
Final Budgets Annually
-----------------------------------------------
Long-Range Plan Annually
-----------------------------------------------
</TABLE>
Reports of actual results compared to budget shall be made to the relevant Joint
Project Team on a * basis. After approval by the Joint Project Team as to
amounts, such Joint Project Team shall forward the report to the JSC for its
approval. Variances from the total overall budgets, and significant variances in
budget line items, shall only be included in calculation of Operating Profit or
Loss when approved by the JSC after referral by the Joint Project Team.
Genentech will be responsible for the preparation of consolidated reporting of
GenSpire (including Operating Profit or Loss), calculation of the profit/loss
sharing and determination of the cash settlement. Genentech will provide the
financial representatives from each Party within fifteen (15) working days of
the submission date shown above, a statement showing the consolidated results
and calculations of the Operating Profit or Loss sharing and cash settlement
required in a format agreed to by the Parties.
Inspire shall promptly provide all orders received by its sales people, if any,
to Genentech for processing and distribution.
On a * basis, Genentech will supply Inspire with each * Gross Sales and Net
Sales of Products in units, local currency and U.S. dollars (using the * rate
for conversion for such * as shown in The Wall Street Journal) by country in the
Territories according to Genentech's sales reporting system, which shall be
consistent with the definitions herein. Each such report shall be provided as
early as possible, but no later than fifteen (15) days after the last day of the
* in question, and shall provide * and * cumulative figures.
* [CONFIDENTIAL TREATMENT REQUESTED]
B-3
<PAGE>
The financial representatives from the Parties will meet as appropriate but
at least quarterly to review and approve the following:
. actual results
. forecasts
. budgets
. inventory levels
. Sales Returns and Allowances
. other financial matters, including Genentech's (and Inspire's, if
applicable) methodologies for charging costs and allocating sales
representatives to GenSpire for determination of actuals, forecasts,
budgets and long-range plans and the results of applying such
methodologies.
B.3. Budget and Long-Range Plan
Responsibility for the budget and long-range plan in each Field will rest with
the relevant Joint Project Team, which will develop budgets for development and
commercialization for the term of the Joint Project Team, subject to final
approval by the JSC.
Budgets will be prepared annually. In addition, headcount chargeable to
GenSpire will be agreed to annually by the JSC.
Budgets will be supplemented with detailed business plans for clinical trials,
Registration Applications, and detailed plans for product introduction, sales
efforts and promotion as determined by each Joint Project Team. Budgets, once
approved by the JSC, can only be changed with the written approval of the JSC.
The Joint Project Team, with the assistance of the financial representatives
from Genentech and Inspire, will be responsible for identifying, analyzing and
reporting all significant line item budget variances and all overall, total
budget variances. Only the JSC may approve materially unfavorable line item
budget variations, as defined by the Joint Project Team, and all overall, total
budget variations, chargeable to GenSpire during the course of any year during
the term of the Agreement.
A [CONFIDENTIAL TREATMENT REQUESTED] long-range plan for GenSpire shall be
established on a yearly basis under the direction of the JSC and submitted to
Genentech and Inspire by [CONFIDENTIAL TREATMENT REQUESTED] of each year.
B-4
<PAGE>
B.4. Definitions
B.4.1 "Allocable Overhead" means costs incurred by a Party or for its
account which are attributable to a Party's supervisory services, occupancy
costs, corporate bonus (to the extent not charged directly to department), and
its payroll, information systems, human relations or purchasing functions and
which are allocated to company departments based on space occupied or headcount
or other activity-based method consistently applied by a Party, or a standard
rate if agreed to by the Parties. Allocable Overhead shall not include any costs
attributable to general corporate activities including, by way of example,
executive management, investor relations, business development, legal affairs
and finance.
B.4.2. "Cost of Sales" means Fully Burdened Manufacturing Costs (as
defined below).
B.4.3. "Development Costs"
(a) "Development Costs" means the development costs actually incurred by
Genentech or Inspire from the Effective Date of the Agreement through the later
of (i) the date of Registration (including thereafter costs to maintain or
expand such Registration) of the final Product in the Field in the Territory, or
(ii) the date of termination of development efforts of the final Product in the
Field for which Registration is sought in the Territory. Such costs shall
comprise those costs required to obtain, maintain and/or expand the relevant
authorization and/or ability to manufacture, formulate, fill, use, ship, sell
and/or distribute a Product in commercial quantities to Third Parties in the
Territory.
"Development Costs" shall include, without limitation, costs of research
or development including costs of studies on the toxicological,
pharmacokinetical, metabolical or clinical aspects of a Product conducted
internally or by individual investigators or consultants necessary for the
purpose of obtaining, maintaining and/or expanding marketing approval of a
Product, process development, process improvement and scale-up and recovery
costs, qualification lots, costs for preparing, submitting, reviewing or
developing data or information for the purpose of submission to a governmental
authority to obtain, maintain and/or expand marketing approval of a Product, and
applicable Allocable Overhead.
"Development Costs" shall also include, without limitation, expenses for
data management, statistical designs and studies, document preparation, and
other administration expenses associated with the clinical testing program or
post-marketing studies required to maintain product approvals.
(b) "U.S. Development Costs" means (i) Development Costs through the end
of Phase II plus (ii) fifty percent (50%) of Development Costs in the United
States and Europe, beginning in Phase III through the date of termination of
development efforts of the final Product in the Field for which Registration is
sought in the Territory.
B-5
<PAGE>
(c) In determining Development Costs chargeable under the Agreement, each
Party will use its respective project accounting systems and will review and
approve its respective project accounting systems and methodologies with the
other Party.
B.4.4. "Distribution Costs" means the costs, including applicable
Allocable Overhead, specifically identifiable to the distribution of a Product
by a Party including customer services, collection of data about sales to
hospitals and other end users, order entry, billing, shipping, credit and
collection and other such activities. For the purpose of the Agreement,
Genentech will charge GenSpire for Distribution Costs an amount equal to
[CONFIDENTIAL TREATMENT REQUESTED] of Net Sales in a lump sum.
B.4.5. "Fully Burdened Manufacturing Costs" of an item or items,
including, without limitation, a Compound, Bulk Materials or a Product (in bulk,
vialed or finished product form, as the case may be) means one hundred percent
(100%) of a Party's fully burdened manufacturing cost (as defined in the Party's
generally accepted accounting policies consistently applied) which shall
comprise the sum of:
(a) The cost of goods produced, as determined by the Party(ies)
performing (or having performed by a Third Party) each stage of the
manufacturing process in accordance with GAAP consistently applied by such
Party(ies), including, but not limited to, direct labor and material costs and
product quality assurance/control costs as well as applicable Allocable
Overhead;
(b) All of the Party's allocable intellectual property acquisition and
licensing costs (including, without limitation, any royalties) paid to Third
Parties as such costs relate to Products; and
B.4.6. "General and Administrative Costs" means costs chargeable to
GenSpire equal to [CONFIDENTIAL TREATMENT REQUESTED] after approval by the
applicable Regulatory Authority in any country, of Genentech and of Inspire, in
the aggregate, but only to the extent these costs are chargeable to GenSpire.
B.4.7. "Gross Profit" means Net Sales less Cost of Sales for sales of a
Product by a Party to Third Parties in the Territory.
B.4.8. "Gross Sales" means the gross amount invoiced by either Party or
their Affiliates or Sublicensees for sales of a Product to Third Parties in the
Territory.
B.4.9. "Marketing Costs" means the direct costs of marketing, promotion,
advertising, Product promotional materials, professional education, product
related public relations, relationships with opinion leaders and professional
societies, market research (before and after product approval), healthcare
economics studies, post-marketing studies not required to maintain product
approvals, and other similar activities related to the Products and approved by
the Joint Project Team. Such costs will include both internal costs (e.g.,
without limitation, salaries, benefits, supplies and materials, etc.),
applicable Allocable Overhead, and outside
B-6
<PAGE>
services and expenses (e.g., without limitation, consultants, agency fees,
meeting costs, etc.). "Marketing Costs" shall also include, without limitation,
activities related to obtaining reimbursement from payers and costs of sales and
marketing data. "Marketing Costs" will specifically exclude the costs of
activities which promote either Party's business as a whole without being
product specific (such as corporate image advertising).
B.4.10. "Net Sales" means Gross Sales of a Product less applicable Sales
Returns and Allowances.
B.4.11. "Operating Profit or Loss" means Net Sales of all Products less the
following items with respect to each Product, all for a given period: Cost of
Sales, Marketing Costs, Sales Costs, Development Costs (to the extent chargeable
to GenSpire), General and Administrative Costs, Distribution Costs, and Other
Operating Income/Expense.
B.4.12. "Other Operating Income/Expense" means other operating income or
expense from or to Third Parties which is not part of the primary business
activity of GenSpire, but is considered and approved by the Joint Project Team
and JSC as income or expense for purposes of GenSpire and is limited to the
following:
. actual inventory write-offs of any Product
. patent and trademark costs
. product liability insurance to the extent the Parties obtain a joint
policy
. indemnification costs (as described in Section 11 of the Agreement)
. other (to be approved by JSC)
B.4.13. "Sales Costs" means Genentech's costs, including Allocable
Overhead, approved by the Joint Project Team with the annual budget, incurred by
the Parties or for their account and specifically identifiable to the sales
efforts of Products to all markets in the Territory including the managed care
market. "Sales Costs" shall include, without limitation, costs associated with
sales representatives for Products, including compensation, benefits and travel,
supervision and training of such sales representatives, sales meetings, and
other sales related expenses. "Sales Costs" will not include the start-up costs
associated with either Party's sales force, including recruiting, relocation and
other similar costs. Inspire's sales costs shall not be included in profit/loss
calculations.
B.4.14. "Sales Returns and Allowances" means the sum of (a), (b), and (c),
where: (a) is a provision, determined by a Party under GAAP for sales of
Products in the Territory for (i) trade, cash and quantity discounts or rebates
on Products (other than price discounts granted at the time of invoicing and
which are included in the determination of Gross Sales), (ii) credits or
allowances given or made for rejection or return of, and for uncorrectable
amounts on, previously sold Products or for retroactive price reductions
(including Medicare and similar types of rebates and chargebacks), (iii) taxes,
duties or other governmental charges levied on or measured by the billing amount
for Products, as adjusted for rebates and refunds, (iv)
B-7
<PAGE>
charges for freight and insurance directly related to the distribution of
Products, to the extent included in Gross Sales, and (v) credits for allowances
given or made for wastage replacement, indigent patient and any other sales
programs agreed to by the Parties for Products; (b) is a quarterly adjustment of
the provision determined in (a) to reflect amounts actually incurred by a Party
in the Territory for items (i), (ii), (iii), (iv) and (v) in clause (a); and (c)
is an adjustment for combination products (if any) under the Agreement. The
provision allowed in clause (a) and adjustments made in clauses (b) and (c) (if
any) will be reviewed by the Joint Project Team.
B.5 Foreign Exchange
The "Functional Currency" for accounting for Operating Profit or Loss will be
U.S. dollars. For billing and reporting, the statement of operations and sales
will be translated into U.S. dollars at the average rate of exchange listed in
The Wall Street Journal on each business day of the applicable calendar quarter.
B.6. Audits and Interim Reviews
Either Party shall have the right to request that the other Party's independent,
certified accounting firm perform an audit or interim review of the other
Party's books in order to express an opinion regarding such Party's compliance
with GAAP. Such audits or review will be conducted at the expense of the
requesting Party.
At the request and expense of either Party ("Auditing Party"), the other Party
("Audited Party") shall permit an independent, certified public accountant
appointed by the Auditing Party and reasonably acceptable to the Audited Party,
at reasonable times and upon reasonable written notice, to examine such records
as may be necessary to: (i) determine the correctness of any report or payment
made under this Agreement; (ii) obtain information as to the aggregate U.S.
Operating Profit or Loss and/or royalties payable for any calendar quarter in
the case of Genentech's failure to report or pay pursuant to this Agreement; or
(iii) determine the correctness of any discovery or development costs related to
Future Generation Compounds or the application of the proceeds under Section
5.7(b); provided, however, that such accountant shall sign a confidentiality
agreement in a form reasonably satisfactory to the Audited Party, and, provided
further, that such examination shall not be permitted more than once in any
twelve (12)-month period. Said accountant shall not disclose to the Auditing
Party or any other person any information, except that such accountant may
disclose to the Auditing Party the fact of a deficiency, the lack of a
deficiency or any overpayment, and the degree thereof, including the dollar
amount. All results of any such examination shall be made available to the
Audited Party.
In the event that any audit reveals a deficiency in the amount that should have
been paid by Genentech to Inspire, then Genentech shall pay the underpaid amount
to Inspire within forty-five (45) days after Inspire makes a demand therefor,
plus interest thereon if such deficiency is in excess of the greater of $100,000
or five percent (5%) of the amount that actually should have been paid by
Genentech. Such interest shall be calculated from the date such underpaid
amount was due until the date such underpaid amount is actually paid, at the
rate of one percent (1%) over the prime rate of interest reported in The Wall
Street Journal for the date such amount was
B-8
<PAGE>
due. In addition, if such underpaid amount is in excess of the greater of
$100,000 or five percent (5%) of the amount that actually should have been paid
by Genentech, then Genentech shall reimburse Inspire for the reasonable cost of
such audit. In the event of an overpayment, such amounts shall be deducted from
Inspire's royalties. If such overpaid amounts have not been settled by such
royalty deductions three (3) years from the date originally overpaid, Genentech
shall invoice Inspire for such amounts.
At the request and expense of Genentech, Inspire shall permit legal counsel or
an independent, certified public accountant (at Genentech's option) appointed by
Genentech and reasonably acceptable to Inspire, at reasonable times and upon
reasonable notice, to examine such records as may be necessary to verify
Inspire's compliance with Section 6.6 of the Agreement; provided, however, that
such an examination shall not be permitted more than once in any twelve (12)-
month period with respect to any particular Third Party. Said legal counsel or
accountant shall not disclose to Genentech any information other than the fact
of such compliance (or the lack thereof) and the material discrepancies in the
case of noncompliance. All results of any such examination shall be made
available to Inspire.
B.7. Payments between the Parties
Royalty payments by Genentech to Inspire pursuant to Section 7.3 of the
Agreement and, subject to Section B.13 below, payments to each Party of the
agreed upon percentages of Operating Profit or Loss as provided under Section
B.10 below will be made quarterly, based on actual results within forty-five
(45) days after the end of each quarter, adjusted for reimbursement of the net
expenses or income incurred or received by each Party. A report specifying how
each payment was calculated shall also be submitted with each payment to the
non-paying Party. Balancing payments by one (1) Party to reimburse the other
Party's Development Costs for purposes of the sharing of such costs under the
Agreement will be approved by the JSC. Within forty-five (45) days of the end
of each calendar quarter, there shall be reconciliation of the Development Costs
that are to be shared and that are incurred during that year by Genentech and
Inspire, with a payment by one (1) Party to the other to the extent necessary so
that each Party bears its appropriate percentage of such shared Development
Costs. In the event any payment is made after the date specified herein, the
paying Party shall increase the amount otherwise due and payable by adding
interest thereon, computed at the rate of one percent (1%) over the prime rate
of interest reported in The Wall Street Journal on the date so specified.
Genentech will perform the consolidation and settlement calculations for
submission to the JSC for its information.
B.8. Responsibility for Reporting
The responsibility for the consolidated reporting of GenSpire to the Joint
Project Team and JSC shall be with Genentech in close cooperation with Inspire.
This will be the basis for the GenSpire accounting and determining of payments
to the Parties. Genentech shall provide Inspire with a copy of the GenSpire
consolidated reporting and the calculation serving as the basis of determining
payments to the Parties. Inspire will provide Genentech with financial
B-9
<PAGE>
statements for its activities in the Territory, prepared in accordance with the
terms contained in this Exhibit B in order for Genentech to prepare the
---------
consolidated reports.
B.9. Accounting for Development Costs, Marketing Costs and Sales Costs
All Development Costs, Marketing Costs and Sales Costs will be based on the
appropriate costs definition stated in Section B.4 of this Exhibit B.
---------
Each Party shall report Development Costs in a manner consistent with its
project cost system. In general, these project cost systems report actual time
spent on specific projects, apply the actual labor costs, capture actual costs
of specific projects and allocate other expenses to projects. For Marketing
Costs, the Parties will report costs based on spending in marketing departments.
The Parties acknowledge that the methodologies used will be based on systems in
place in the applicable departments.
B.10. Operating Profit and Loss Sharing
In the event Inspire exercises its Co-Development Option pursuant to Section 5.6
of the Agreement, Genentech and Inspire agree to share the Operating Profit or
Loss from the sale of Products in Field B in the United States in the following
manner:
[CONFIDENTIAL TREATMENT REQUESTED]
The Party supplying commercial supplies of Product shall finance the cost of
building inventory necessary for product launch, other pre-launch marketing
activities approved by the Joint Project Team, and commercial sales of Product.
Subject to Section B.13 below, the non-supplying Party shall repay to the
supplying Party its share of such costs, as allocated in Section B.10(a) or (b)
above, as applicable, following first Registration of such Products from the
Operating Profit or Loss allocated to the non-supplying Party in any calendar
quarter. If such repayment is not complete three (3) years following such first
Registration, the non-supplying Party will complete such repayment in a lump sum
paid at the end of the next calendar quarter following such first Registration.
Interest on any such repayment will be charged at a rate equal to one percent
(1%) over the prime rate of interest as published in The Wall Street Journal on
the first business day of such calendar quarter.
B.11. Development Cost Sharing
In the event Inspire exercises its Co-Development Option for Products in Field B
in the United States pursuant to Section 5.6 of the Agreement, Genentech and
Inspire agree to share the U.S. Development Costs as follows and as further
provided in Section 5.6 of the Agreement and in
B-10
<PAGE>
this Exhibit B: [CONFIDENTIAL TREATMENT REQUESTED].
---------
B.12. Start of Operations and Effective Accounting Date Termination
Operation of GenSpire will be deemed to have commenced, retroactively, as of the
commencement of Phase III clinical trials for a Product in Field B if Inspire
has exercised its Co-Development Option. Costs and expenses incurred prior to
such date are not chargeable to GenSpire.
For reporting and accounting purposes with respect to GenSpire, the effective
termination date of the Agreement with regard to the last detailing year in the
Territory will be the nearest month end to which such termination takes place.
B.13. Promissory Note Offset
In accordance with Section 5.6 of the Agreement, any amounts that would
otherwise be due and payable by Genentech to Inspire for Operating Profit and
Loss allocation hereunder shall first be applied to repay any outstanding
amounts owed by Inspire to Genentech under the Promissory Note, in accordance
with the terms of the Promissory Note, as of the date such payments by Genentech
to Inspire for Operating Profit and Loss allocation are due under the Agreement.
B-11
<PAGE>
EXHIBIT C
---------
INITIAL PATENTS
---------------
1. Dinucleotides Useful for the Treatment of Lung Disease
Licensed from The University of North Carolina-Chapel Hill
Inventors: R. Boucher, et al.
U.S. Patent No. 5,635,160 filed 7 Jun 1995; Issued 3 Jun 1997
PCT filed 6 Jun 1996 designating all member countries; Published WO96/40059
Dec 1996
Foreign National Filings entered in EPO, Australia, Brazil, Canada, China,
Japan, Mexico, Norway, New Zealand and S. Korea
Hong Kong designated Oct. 1998
2. Dinucleotides Useful for the Treatment of Lung Disease
Licensed from The University of North Carolina-Chapel Hill
Inventors: R. Boucher, et al.
U.S. Patent No. 5,935,555 filed 8 May 1997; Issued 10 Aug. 1999
CIP of above
3. Method of Preventing or Treating Pneumonia in Immobilized Patients Using
UTP and Related Compounds
Inventors: K. Jacobus and J. Leighton
U.S. Patent No. 5,763,447; Filed 23 Jul 1996, U.S. Patent Issued 9 Jun 1998
S. Africa application filed July 23, 1997 as 97/6538
PCT Filed Jul 23, 1997; Serial No. PCT/US 97/12938
Publication WO98/03182 on 29 Jan. 1998
National Phase filing due 23 January 1999 with Australia, Canada, China,
EP, Japan, Korea, Mexico and New Zealand to be designated
4. Method of Treating Sinusitis with UTP and Related Compounds
Inventors: K. Jacobus, et al.
U.S. Patent No. 5,789,391; Filed 3 Jul 1996, U.S. Patent Issued 4 Aug 1998
PCT filed 3 Jul 1997
National Phase Filing due 3 Jan 1999 with Australia, Canada, China, EP,
Japan, Korea, Mexico and New Zealand to be designated
5. Method of Treating Sinusitis with UTP and Related Compounds
Inventors: K. Jacobus, et al.
U.S. Patent No. 5,958,897; Filed 9 Jan 1998, U. S. Patent Issued 28 Sep
1999
PCT Filed 3 Jul 1997
National Phase Filing due 3 Jan 1999 with Australia, Canada, China, EP,
Japan, Korea, Mexico and New Zealand to be designated
C-1
<PAGE>
6. Method of Treating Sinusitis with UTP and Related Compounds
Inventors: K. Jacobus, et al.
U.S. Patent No. 5,972,904; Filed 9 Jan 1998, U. S. Patent Issued 26 Oct
1999
PCT Filed 3 Jul 1997
National Phase Filing due 3 Jan 1999 with Australia, Canada, China, EP,
Japan, Korea, Mexico and New Zealand to be designated
7. Method of Treating Sinusitis with UTP and Related Compounds
Inventors: K. Jacobus, et al.
U.S. Patent No. 5,981,506; Filed 9 Jan 1998 U. S. Patent Issued 9 Nov 1999
PCT Filed 3 Jul 1997
National Phase Filing due 3 Jan 1999 with Australia, Canada, China, EP,
Japan, Korea, Mexico and New Zealand to be designated
8. Certain Dinucleotides and Their Use as Modulators of Mucociliary Clearance
and Ciliary Beat Frequency
Inventors: W. Pendergast, et al.
U.S. Patent No. 5,837,861; issued 17 Nov. 1998
PCT filed 6 Feb 1998
Non-convention Foreign Filings conducted in Argentina, Malaysia, S. Africa
10 Feb 1998
Claims for compounds (NCEs) and also formulations, methods of treatment
National Phase filings entered in Australia, Brazil, Canada, China, EPO,
Japan, S. Korea, Mexico, Norway, New Zealand
9. Method of Treating Ciliary Dyskinesia with UTP and Related Compounds
Licensed from The University of North Carolina-Chapel Hill
Inventors: K. Jacobus, et al.
U.S. filed 27 Mar 1996
PCT filed 27 Mar 1997 designating all member countries
Publication as WO97/35591 on 2 Oct 1997
Foreign National Phase entered in Australia, Canada, China, EP, Japan,
Korea, Mexico and New Zealand and Taiwan on 27 Sep 1998
10. Method of Treating Bronchitis with UTP and Related Compounds
Licensed from The University of North Carolina-Chapel Hill
Inventors: C. Shaffer, et al.
U.S. Filed 7 Nov 1996
PCT Filed 21 Oct 1997
CIP filed 26 July 1999
Publication as WO98/19685 on 14 May 1998
National Phase filings entered in Australia, Brazil, Canada, China, EPO,
Japan, Korea, Mexico, Norway, New Zealand
C-2
<PAGE>
11. Method For Large-Scale Production of Di(Uridine 5'-)Tetraphosphate
Inventors: B. Yerxa, et al.
Provisional US Filing 25 Jul 1997
US CIP and PCT filed 24 Jul 1998
Non-convention countries S. Africa, Argentina, and Indonesia designated 25
Jul 1998
And Malaysia, Philippines, Thailand, and Taiwan requested 3 Nov. 1998
Published as WO99/05155
National Phase filing due 25 Jan. 2000 with Australia, Brazil, Canada,
China, EPO, Japan, Mexico, Norway, S. Korea, and New Zealand designated
C-3
<PAGE>
EXHIBIT D
---------
INITIAL MEMBERS OF
------------------
JOINT STEERING COMMITTEE
------------------------
A. Initial Designees of Inspire:
1. Christy Shaffer, Ph.D., President and Chief Executive Officer
2. Benjamin Yerxa, Ph.D., Senior Director, Preclinical Programs
3. Gregory Mossinghoff, Chief Business Officer
B. Initial Designees of Genentech:
Genentech's designees shall be determined as soon as practicable after the
Effective Date.
D-1
<PAGE>
EXHIBIT E
---------
FORM OF NOTE AGREEMENT
----------------------
UNSECURED PROMISSORY NOTE
$______________ ________, ________
______, North Carolina
FOR VALUE RECEIVED, Inspire Pharmaceuticals, Inc., a Delaware corporation
("Company") promises to pay to Genentech, Inc., a Delaware corporation, or its
registered assigns ("Holder"), the principal sum of _____________ Dollars and
________ Cents ($__________), or such lesser amount as shall equal the
outstanding principal amount hereof, together with interest from the date of
this Note on the unpaid principal balance at a rate equal to prime rate plus one
percent (1%) per annum, computed on the basis of the actual number of days
elapsed and a year of 365 days. All unpaid principal, together with any then
unpaid and accrued interest and other amounts payable hereunder, shall be due
and payable on the earlier of (i) five years from the date hereof, and (ii) the
merger or consolidation of the Company with or into any other corporation or
corporations (except where a majority of the outstanding equity securities of
the surviving corporation immediately after the merger or consolidation is held
by persons who were shareholders of the Company immediately prior to the merger
or consolidation), or a sale or other transfer of all or substantially all of
the assets of the Company (or any series of related transactions resulting in
the same). Company shall make quarterly payments of 1/20th of the original
principal amount of this Note, plus accrued interest thereon, beginning on
________, _________ and each third monthly anniversary thereafter.
The following is a statement of the rights of Holder and the conditions to
which this Note is subject, and to which Holder, by the acceptance of this Note,
agrees:
1. Definitions. As used in this Note, the following capitalized terms
-----------
have the following meanings:
(a) "Company" includes the corporation initially executing this Note
and any Person which shall succeed to or assume the obligations of Company under
this Note in accordance with and subject to the terms of this Note.
(b) "Holder" shall mean the Person specified in the introductory
paragraph of this Note or any other Person(s) who shall at the time be the
registered holder of this Note.
(c) "Lien" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or
on such property or the income therefrom, including, without limitation, the
interest of a vendor or lessor under a conditional sale agreement, capital lease
or other title retention agreement, or any agreement to
E-1
<PAGE>
provide any of the foregoing, and the filing of any financing statement or
similar instrument under the Uniform Commercial Code or comparable law of any
jurisdiction.
(d) "License Agreement" means the Development, License and Supply
Agreement between Genentech, Inc. and the Company dated December 15, 1999, as
amended from time to time.
(e) "Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
2. Prepayment. Upon five (5) days prior written notice to Holder,
----------
Company may prepay this Note in whole or in part; provided, however, that any
such prepayment will be applied first to the payment of expenses due under this
Note, second to interest accrued on this Note and third, if the amount of
prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
3. Certain Covenants. While any amount is outstanding under the Note:
-----------------
(a) Liens. Without the prior written consent of Holder, Company shall
-----
not create, incur, assume or permit to exist any Lien on or with respect to the
License Agreement or any intellectual property or other assets of Holder
licensed to the Holder by the Company thereunder.
(b) Asset Dispositions. Without the prior written consent of Holder,
------------------
Company shall not sell, lease, transfer, license or otherwise dispose of the
License Agreement or any intellectual property or other assets of Holder
licensed or sublicensed to the Holder by the Company thereunder, other than as
permitted under the License Agreement.
(c) Dividends, Redemptions, Etc. Without the prior written consent of
---------------------------
Holder, Company shall not (i) pay any dividends or make any distributions on its
equity securities; (ii) purchase, redeem, retire, defease or otherwise acquire
for value any of its equity securities, other than in respect to stock purchases
from departing employees; (iii) return any capital to any holder of its equity
securities; (iv) make any distribution of assets, equity securities, obligations
or other securities to any holder of its equity securities; or (v) set apart any
sum for any such purpose.
4. Events of Default. The occurrence of any of the following shall
-----------------
constitute an "Event of Default" under this Note and the other Transaction
Documents:
(a) Failure to Pay. Company shall fail to pay (i) when due any
--------------
principal payment under this Note or the License Agreement or (ii) any interest
or other payment required under the terms of this Note or the License Agreement
and such payment shall not have been made within five (5) days of Company's
receipt of Holder's written notice to Company of such failure to pay; or
E-2
<PAGE>
(b) Breaches of Certain Covenants. Company shall fail to observe or
-----------------------------
perform any covenant, obligation, condition or agreement set forth in Section 3
of this Note; or
(c) Breaches of Other Covenants. Company shall fail to observe or
---------------------------
perform any other covenant, obligation, condition or agreement contained in this
Note (other than those specified in Sections 4(a) and 4(b)) or fail to observe
or perform any material covenant, obligation, condition or agreement contained
in the License Agreement and such failure shall continue for fifteen (15) days;
or
(d) Representations and Warranties. Any representation, warranty,
------------------------------
certificate, or other statement (financial or otherwise) made or furnished by or
on behalf of Company to Holder in writing in connection with this Note or the
License Agreement, or as an inducement to Holder to enter into this Note or the
License Agreement, shall be false, incorrect, incomplete or misleading in any
material respect when made or furnished; or
(e) Voluntary Bankruptcy or Insolvency Proceedings. Company shall (i)
----------------------------------------------
apply for or consent to the appointment of a receiver, trustee, liquidator or
custodian of itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term
may be defined or interpreted under applicable statute), (vi) commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief or to
the appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vi) take any
action for the purpose of effecting any of the foregoing; or
(f) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for
------------------------------------------------
the appointment of a receiver, trustee, liquidator or custodian of Company or of
all or a substantial part of the property thereof, or an involuntary case or
other proceedings seeking liquidation, reorganization or other relief with
respect to Company or the debts thereof under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement; or
(g) License Agreement. The License Agreement terminates or is declared
-----------------
void.
5. Rights of Holder upon Default. Upon the occurrence or existence of
-----------------------------
any Event of Default (other than an Event of Default, referred to in Sections
4(e) and 4(f)) and at any time thereafter during the continuance of such Event
of Default, Holder may, by written notice to Company, declare all outstanding
obligations payable by Company under this Note to be immediately due and payable
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the License
Agreement to the contrary notwithstanding. Upon the occurrence or existence of
any Event of
E-3
<PAGE>
Default described in Sections 4(e) and 4(f), immediately and without notice, all
outstanding Obligations payable by Company under this Note shall automatically
become immediately due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the License Agreement to the contrary notwithstanding. In
addition to the foregoing remedies, upon the occurrence or existence of any
Event of Default, Holder may exercise any other right, power or remedy granted
to it by this Note or otherwise permitted to it by law, either by suit in equity
or by action at law, or both.
6. Right of Offset. Notwithstanding anything contained herein to the
---------------
contrary, in the event that Company is owed any amounts in the form of Operating
Profit or Loss (as defined in the License Agreement) by Holder under the License
Agreement, such amounts owed by Holder to Company shall be credited as
prepayments, in accordance with Section 2 above, against this Note effective as
of the date such payments are due under the License Agreement.
7. Surrender and Cancellation of Note. Upon payment in full of all
----------------------------------
principal, expenses and interest payable under this Note, Holder agrees to
surrender this Note to Company for cancellation.
8. Successors and Assigns. Subject to the restrictions on transfer
----------------------
described in Section 10 below, the rights and obligations of Company and Holder
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.
9. Waiver and Amendment. Any provision of this Note may be amended,
--------------------
waived or modified upon the written consent of Company and Holder.
10. Assignment by Company. Neither this Note nor any of the rights,
---------------------
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
Holder.
11. Notices. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery (a) if to
Company, at 4222 Emperor Boulevard, Suite 470, Durham, North Carolina 27703,
attention Christy L. Shaffer, Ph.D., and (b) if to Holder, to Genentech, Inc. 1
DNA Way, South San Francisco, CA 94080-4990, attention Corporate Secretary. Any
party hereto may by notice so given change its address for future notice
hereunder. Notice shall conclusively be deemed to have been given when
received.
12. Payment. Payment shall be made in lawful tender of the United States.
-------
13. Default Rate; Usury. In the event that any payment of principal or
-------------------
interest provided for herein is not paid by Company when due (including the
entire unpaid balance of this Note in the event such amount is made immediately
due and payable pursuant to the terms hereof), then Company shall pay interest
on the such amounts not paid when due at a rate per
E-4
<PAGE>
annum equal to the rate otherwise applicable hereunder plus two percent (2%). In
the event any interest is paid on this Note which is deemed to be in excess of
the then legal maximum rate, then that portion of the interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and applied against the principal of this Note.
14. Entire Agreement. This Note and the License Agreement, taken
----------------
together, constitute and contain the entire agreement of Company and Holder, and
supersede any and all prior agreements, negotiations, correspondence,
understandings and communications among the parties, whether written or oral,
respecting the subject matter hereof.
15. Expenses; Waivers. If action is instituted to collect this Note,
-----------------
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
16. Governing Law. This Note and all actions arising out of or in
-------------
connection with this Note shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflicts of law
provisions of the State of Delaware, or of any other state.
IN WITNESS WHEREOF, Company has caused this Note to be issued as of the
date first written above.
INSPIRE PHARMACEUTICALS, INC.
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
E-5
<PAGE>
EXHIBIT F
---------
PROVISIONS REQUIRED FOR AGREEMENTS
WITH SUBLICENSEES
6.8. Adverse Reaction Reporting
8.3. Records Retention
8.4. Audits
8.6. Bartering Prohibited
10. Publication; Confidentiality (provided, however, that in lieu of
including a confidentiality provision in the sublicense agreement
between a Party and a Third Party sublicensee under this Agreement,
such Third Party sublicensee may enter into a confidentiality or
nondisclosure agreement directly with the other Party that includes
provisions substantially similar, taking into account the facts and
circumstances of the particular sublicense, as set forth in Section
10).
11. Indemnification
F-1
<PAGE>
EXHIBIT 10.21
EXECUTION COPY
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
SERIES G PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
BETWEEN
INSPIRE PHARMACEUTICALS, INC.
AND
GENENTECH, INC.
DATED AS OF DECEMBER 17, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SERIES G PREFERRED STOCK.............................. 1
1. SALE AND PURCHASE OF SHARES; CLOSING.............. 1
1.1 Authorization of Shares......................... 1
1.2 Sale and Purchase of Shares..................... 1
1.3 Closing......................................... 2
1.4 Delivery........................................ 3
1.5 Conversion Prior to Occurrence of All Closings.. 3
1.6 Use of Proceeds................................. 3
2. REPRESENTATIONS AND WARRANTIES OF COMPANY......... 4
2.1 Organization; Good Standing and Qualification... 4
2.2 Authorization................................... 4
2.3 Valid Issuance of Shares........................ 4
2.4 Governmental Consents........................... 4
2.5 Capitalization.................................. 5
2.6 Subsidiaries.................................... 6
2.7 Environmental and Safety Laws................... 6
2.8 Litigation...................................... 6
2.9 Intellectual Property........................... 6
2.10 Compliance with Other Instruments............... 6
2.11 Contracts and Commitments....................... 7
2.12 Related-Party Transactions...................... 7
2.13 Permits, etc.................................... 7
2.14 Information Supplied to Purchasers.............. 8
2.15 Corporate Documents............................. 8
2.16 Title to Property and Assets.................... 8
2.17 Financial Statements............................ 8
2.18 Undisclosed Liabilities......................... 8
2.19 Absence of Certain Developments................. 8
2.20 Employee Benefit Plans.......................... 9
2.21 Tax Returns; Payments and Elections............. 9
2.22 Qualified Small Business Stock.................. 9
2.23 Securities Laws................................. 9
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER....... 10
3.1 Authorization................................... 10
3.2 Purchase Entirely for Own Account............... 10
3.3 Disclosure of Information....................... 10
3.4 Investment Experience........................... 10
3.5 Accredited Purchaser............................ 10
3.6 Restricted Securities........................... 11
4. CONDITIONS TO OBLIGATIONS OF PURCHASER............ 11
4.1 Representations and Warranties.................. 11
4.2 Performance..................................... 12
4.3 Opinion of Counsel.............................. 12
4.4 Securities Law Approvals........................ 12
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4.5 Investors' Rights Agreement..................... 12
4.6 License Agreement............................... 12
4.7 Certificates and Documents...................... 12
4.8 Compliance Certificate.......................... 12
4.9 Absence of Litigation........................... 12
4.10 Other Matters................................... 12
5. CONDITIONS TO OBLIGATIONS OF COMPANY.............. 13
5.1 Representations and Warranties.................. 13
5.2 Performance..................................... 13
5.3 Payment of Purchase Price....................... 13
5.4 Stockholders Agreement.......................... 13
5.5 Investors' Rights Agreement..................... 13
5.6 License Agreement............................... 13
5.7 Absence of Litigation........................... 13
5.8 Other Matters................................... 13
6. COVENANTS......................................... 14
6.1 Financial Statements............................ 14
6.2 Employee Agreements............................. 14
7. RESTRICTIONS ON TRANSFER; LEGENDS................. 14
7.1 Legend.......................................... 14
7.2 Restrictions on Transfer........................ 15
8. MISCELLANEOUS..................................... 15
8.1 Survival of Representations and Warranties...... 15
8.2 Assignment; Binding Effect...................... 15
8.3 Governing Law................................... 16
8.4 Counterparts.................................... 16
8.5 Captions........................................ 16
8.6 Indemnification................................. 16
8.7 Notices......................................... 16
8.8 Amendments and Waivers.......................... 17
8.9 Severability.................................... 17
8.10 Entire Agreement................................ 17
</TABLE>
LIST OF SCHEDULES AND EXHIBITS
==============================
SCHEDULE 1 COMPANY DISCLOSURE SCHEDULE
EXHIBIT A AMENDMENT
EXHIBIT B FORM OF WARRANT
EXHIBIT C INVESTORS' RIGHTS AGREEMENT
EXHIBIT D FORMS OF PROPRIETARY INFORMATION AGREEMENTS
EXHIBIT E OPINION OF COUNSEL
(ii)
<PAGE>
SERIES G PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
THIS SERIES G PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this
"Agreement"), dated as of December 16, 1999 (the "Effective Date"), is entered
into by and between Inspire Pharmaceuticals, Inc. (the "Company"), a corporation
organized and existing under the laws of the State of Delaware, and Genentech,
Inc. (the "Purchaser"), a corporation organized and existing under the laws of
the State of Delaware.
PRELIMINARY STATEMENTS
----------------------
A. The Company and the Purchaser are entering into that certain
Development, License and Supply Agreement (the "License Agreement"), of even
date herewith, pursuant to which, inter alia, the Company has granted to the
Purchaser certain license rights with respect to the technology identified
therein.
B. The Company has authorized the sale and issuance of an aggregate
of up to 1,200,000 shares (the "Shares") of the Series G Non Voting Convertible
Preferred Stock of the Company, par value $0.001 per share (the "Series G
Stock"), and the sale and issuance of warrants (the "Warrants") to purchase an
aggregate of up to 533,333 shares (the "Warrant Shares") of common stock of the
Company, par value $0.001 per share (the "Common Stock").
C. The Company wishes to issue and sell to the Purchaser, and the
Purchaser wishes to purchase from the Company, the Shares and the Warrants on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing statements and the
mutual covenants and agreements of the parties contained in this Agreement, the
parties hereto agree as follows:
1. SALE AND PURCHASE OF SHARES; CLOSING.
1.1 Authorization of Shares. Prior to the First Closing (as defined
in Section 1.3), the Company shall have: (i) adopted and filed with the
Secretary of State of Delaware an Amended and Restated Certificate of
Incorporation in the form attached hereto as Exhibit A (the "Amendment"), which
sets forth the relative terms of the Series G Stock to be purchased under this
Agreement; (ii) authorized the sale and issuance to the Purchaser of the Shares
and the Warrants; and (iii) authorized the sale and issuance to the Purchaser of
the Warrant Shares upon the exercise of the Warrants.
1.2 Sale and Purchase of Shares. Subject to the terms and conditions
of this Agreement, at each Closing the Company shall sell and issue, and the
Purchaser shall purchase:
<PAGE>
(a) Upon the Effective Date: (i) an aggregate of 1,000,000 shares of
Series G Stock at a purchase price of $10.00 per share, for an aggregate
purchase price of $10,000,000; and (ii) Warrants for an aggregate of 444,444
shares of Common Stock at a purchase price of $0.001 per underlying Warrant
Share, for an aggregate purchase price of $444.44.
(b) Upon the achievement of the first milestone described in Section
7.2(a) of the License Agreement: (i) an aggregate of 100,000 shares of Series G
Stock at a purchase price of $10.00 per share, for an aggregate purchase price
of $1,000,000; and (ii) Warrants for an aggregate of 44,444 shares of Common
Stock at a purchase price of $0.001 per underlying Warrant Share, for an
aggregate purchase price of $44.44.
(c) Upon the achievement of the first milestone described in Section
7.2(b) of the License Agreement: (i) an aggregate of 100,000 shares of Series G
Stock at a purchase price of $10.00 per share, for an aggregate purchase price
of $1,000,000; and (ii) Warrants for an aggregate of 44,444 shares of Common
Stock at a purchase price of $0.001 per underlying Warrant Share, for an
aggregate purchase price of $44.44.
The Purchaser shall promptly provide the Company with notice of the
occurrence of the events set forth in Sections 1.2(b) and (c).
The aggregate purchase price to be paid for the shares of Series G
Stock and the Warrants to be paid at each Closing shall be referred to,
collectively, as the "Purchase Price".
1.3 Closing.
(a) The closing of the sale and purchase of the Shares and the
Warrants as provided in Section 1.2(a) (such closing, the "First Closing") shall
take place on the Effective Date (the "First Closing Date").
(b) The closing of the sale and purchase of the Shares and the
Warrants upon the occurrence of the event set forth in Section 1.2(b) (such
closing, the "Second Closing") shall take place 3 business days following the
date on which such event occurs (the "Second Closing Date").
(c) The closing of the sale and purchase of the Shares and Warrants
upon the occurrence of the event set forth in Section 1.2(c) (such closing, the
"Third Closing") shall take place 3 business days following the date on which
such event occurs (the "Third Closing Date").
(d) The First Closing shall take place at 10:00 a.m. at the offices of
the Purchaser on December 15, 1999, or such other time, date and place as are
mutually agreeable to the Company and the Purchaser. Each of the other Closings
shall take place at such time, date and place as are mutually agreeable to the
Company and the Purchaser;
-2-
<PAGE>
provided that if any such Closing has not occurred prior to the end of the 30
day period provided in Section 1.3(b) or (c), as the case may be, then such
Closing shall take place at 10:00 a.m. at the offices of the Purchaser on such
third day (or if such day is not a business day, on the business day next
following such day).
1.4 Delivery. At each Closing, subject to the terms and conditions of this
Agreement, the Company shall deliver to the Purchaser a certificate representing
the Shares being purchased at such Closing, and a certificate, substantially in
the form attached hereto as Exhibit B, evidencing the Warrants being purchased
by the Purchaser, against payment to the Company of the Purchase Price, by wire
transfer, certified check or other method acceptable to the Company.
1.5 Conversion Prior to Occurrence of All Closings. In the event that the
Company affects a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
prior to the occurrence of all of the Closings, the Company will issue, and the
Purchaser will purchase, that number of shares of Common Stock which is equal to
the quotient obtained by dividing the Purchase Price by the average of the Fair
Market Value of the Common Stock for the twenty (20) Business Days (as such term
is hereinafter defined) immediately preceding the Closing Date (such average
being hereinafter referred to as the "Conversion Value"). For purposes of this
Agreement, the term "Business Day" shall mean a day on which the Nasdaq National
Market or, if the Common Stock is not then listed on the Nasdaq National Market,
any other established exchange or national system on which the Common Stock is
listed, is open for any trading; and "Fair Market Value" shall mean, for any
Business Day, the closing sales price of the Common Stock (or the closing bid,
if no sales were reported) as quoted on the Nasdaq National Market, on any
established stock exchange or national market system on which the Common Stock
is listed for such Business Day. For purposes of this Agreement, following any
such conversion, except where context dictates otherwise: the term "Shares"
shall mean the aggregate number of shares of Common Stock issuable pursuant to
clause (i) above; the term "Warrants" shall mean the warrants to purchase Common
Stock issuable pursuant to clause (ii) above; and the term "Warrants Shares"
shall mean the aggregate number of shares of Common Stock issuable pursuant to
the exercise of the warrants issuable pursuant to clause (ii) above.
1.6 Use of Proceeds. The Company shall use [CONFIDENTIAL TREATMENT
REQUESTED] of the proceeds from the sale of the Shares and Warrants to fund the
Phase IIa clinical trials, as contemplated by Section 5.7(b)(i) of the License
Agreement. The remaining balance of such proceeds shall be used to fund other
studies, as contemplated by Section 5.7(b)(ii) of the License Agreement.
-3-
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF COMPANY.
Except as set forth in the Disclosure Schedule attached as Schedule 1, the
Company hereby represents, warrants and agrees to and with the Purchasers, as of
the date of this Agreement and each Closing Date, as follows:
2.1 Organization; Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted and to
execute, deliver and perform its obligations under this Agreement, the Amended
and Restated Investors' Rights Agreement in the form attached hereto as Exhibit
C (the "Investors' Rights Agreement") and the other agreements and documents
contemplated hereby and thereby (collectively, the "Closing Documents") and the
consummation of the transactions contemplated by the Closing Documents. The
Company is duly qualified to transact business and is in good standing in the
State of North Carolina and in each other foreign jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or
properties.
2.2 Authorization. This Agreement and the Investors' Rights Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, subject to and limited by: (i)
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
generally applicable to creditors' rights; and (ii) judicial discretion in the
availability of equitable relief. The Company's execution, delivery and
performance of its obligations under the Closing Documents have been duly
authorized by all necessary corporate, stockholder or other action of the
Company. The Company has full power and authority to enter into this Agreement.
2.3 Valid Issuance of Shares. The Shares and the Warrants, when issued,
sold and delivered in accordance with this Agreement in exchange for the
Purchase Price, will be duly and validly issued, fully paid and nonassessable
and free of restrictions on transfer other than those contained in this
Agreement and, based in part upon the representations of the Purchaser in this
Agreement, will be issued in compliance with all applicable federal and state
securities laws. As of the Closing Date, the Common Stock, issuable upon
conversion of the Shares (such Common Stock, the "Conversion Shares") shall have
been duly and validly reserved for issuance, and the Common Stock issuable upon
exercise of the Warrants shall have been duly and validly reserved for issuance.
Upon the issuance of the Conversion Shares in accordance with the terms of the
Amendment, the Conversion Shares shall be duly and validly issued, fully paid
and nonassessable and will be issued in compliance with all currently applicable
federal and state securities laws. Upon the issuance of the Warrant Shares in
accordance with the terms of the Warrant, the Warrant Shares shall be duly and
validly issued, fully paid and nonassessable and will be issued in compliance
with all currently applicable federal and state securities laws.
2.4 Governmental Consents. The Company is not required to obtain the
consent, approval, order, or authorization of, or complete any registration,
qualification, designation,
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declaration or filing with, any federal, state, local, or provincial
governmental authority in connection with the execution, delivery and
performance of the Closing Documents and the consummation of the transactions
contemplated thereby, except for (i) filing the Amendment with the Secretary of
State of the State of Delaware, and (ii) certain federal and state securities
law notice filings which the Company agrees to make in a timely fashion.
2.5 Capitalization. As of the Closing Date, the authorized capital of the
Company shall consist of the following:
(a) 56,000,000 shares of Common Stock and 52,000,000 shares of
preferred stock, $0.001 par value per share, of which: (i) 9,365,000 shares
shall have been designated Series A Convertible Preferred Stock (the "Series A
Stock"); (ii) 9,365,000 shares shall have been designated Series AA Convertible
Preferred Stock; (iii) 10,881,014 shares shall have been designated Series B
Convertible Preferred Stock (the "Series B Stock"); (iv) 10,881,014 shares shall
have been designated Series BB Convertible Preferred Stock; (v) 375,000 shares
have been designated Series C Convertible Preferred Stock (the "Series C
Stock"); (vi) 416,667 shares have been designated Series D Convertible Preferred
Stock (the "Series D Stock"); (vii) 8,000,000 shares shall have been designated
Series E Convertible Preferred Stock (the "Series E Stock"); (viii) 28,170
shares have been designated Series F Convertible Preferred Stock (the "Series F
Stock"); and (ix) 1,200,000 share have been designated Series G Stock.
(b) The issued and outstanding shares of Common Stock and Preferred
Stock are set forth in Section 2.5(b) of the Disclosure Schedule. Sufficient
shares of Common Stock have been reserved for issuance upon conversion of all
outstanding shares of Preferred Stock. Sufficient shares of Common Stock have
been duly reserved for issuance upon conversion of the Series G Stock to be
issued hereunder and 533,333 shares of Common Stock have been reserved for
issuance upon exercise of the Warrants to be issued hereunder. In addition,
4,000,000 shares of Common Stock have been reserved for issuance under the
Company's 1995 Stock Plan, as amended from time to time (the "Stock Plan"), of
which options for 1,231,250 shares have been exercised and options for 2,590,406
shares are issued and remain outstanding.
(c) Except as set forth in this Section 2 and on Schedule 1, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock, other than options issued and outstanding under the
Stock Plan.
(d) Except as disclosed on Schedule 1 and except as set forth in this
Agreement and the Amendment, there are no agreements, written or oral, between
the Company and any holder of its capital stock, or, to the knowledge of the
Company, between or among any holders of its capital stock, relating to the
acquisition (including the redemption by the Company), disposition, or voting of
the capital stock of the Company. The issuance of the Shares sold hereunder is
not, and the issuance of the Conversion Shares, if any, will not be, subject to
any preemptive rights or rights of first refusal.
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2.6 Subsidiaries. The Company does not own or control, directly or
indirectly, any interest in any other corporation, association or other business
entity.
2.7 Environmental and Safety Laws. To its knowledge, the Company is not
in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.8 Litigation. There is no action, suit, proceeding, or investigation
currently pending or, to the knowledge of the Company, currently threatened
against the Company or any of its officers or directors that: (i) might result
in any material adverse change in the assets, condition, affairs, or prospects
of the Company, financially or otherwise; or (ii) might result in any material
change in the current equity ownership of the Company, nor is the Company aware
of any basis for the foregoing. There is no action, suit, proceeding, or
investigation by the Company currently pending or that the Company intends to
initiate.
2.9 Intellectual Property. The Company has sufficient rights in, or owns,
all licenses, patents, trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights and processes necessary for its
business as proposed to be conducted without, to the Company's knowledge, any
material conflict with or infringement of the intellectual property rights of
any third party. A list of: (i) the material intellectual property rights owned
by, or licensed to, the Company, and (ii) agreements relating to outstanding
options or agreements of any kind relating to the foregoing, is set forth on
Schedule 1. The Company has not received any communications alleging that the
Company has infringed or misappropriated or, by conducting its business as
proposed, would infringe or misappropriate any patent, trademark, service mark,
trade name, copyright, trade secret or other proprietary right of any third
party. The Company has no knowledge that any of its employees or consultants is
obligated under any contract (including licenses, covenants, or commitments of
any nature) or other agreement, or is subject to any judgment, decree or order
of any court or administrative agency, that would interfere with his or her
ability to perform his or her intended duties for the Company or that would
conflict with the intended business of the Company. Except as disclosed on
Schedule 1, the Company does not intend to utilize any inventions made by its
current employees or consultants prior to their association with the Company.
Except as set forth on Schedule 1, each employee of and consultant to the
Company has entered into a proprietary information agreement substantially
similar to one of the forms attached hereto as Exhibit D, and each employee and
consultant has made no material exceptions thereto.
2.10 Compliance with Other Instruments. The Company is not in violation
or default of (i) any provision of its Certificate of Incorporation or By-laws,
(ii) any instrument, judgment, order, writ, decree or contract legally binding
upon the Company, or (iii) to the knowledge of the Company, any material
provision of any federal or state statute, rule or regulation applicable to the
Company. The execution, delivery and performance of the Closing Documents and
the consummation of the transactions contemplated therein by the
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Company will not: (x) conflict with, nor result in any violation of or default
under any such instrument, judgment, order, writ, decree, contract or provision;
or (y) give rise to any event that results in the creation of any lien, charge
or encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture or non-renewal of any material permit, license,
authorization or approval that applies to the Company, its business or
operations or any of its assets or properties.
2.11 Contracts and Commitments. Schedule 1 lists all agreements,
contracts, obligations or commitments to which the Company is a party or by
which it or any of its properties are bound that are material to the conduct and
operations of the Company's business and properties, including, but not limited
to any employment contracts; stock redemption or purchase agreements; loan
agreements, security agreements and guaranties; licenses, distributor or sales
representative agreements; agreements with officers, directors, employees or
stockholders of the Company or persons or organizations related to or affiliated
with any such persons; leases; agreements relating to product development; or
pension, profit sharing, retirement or stock option plans (collectively,
"Material Contracts"). Each such Material Contract constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with its
respective terms, and is in full force and effect. The Company has not received
any notice of default under any Material Contract, and there is no state of
facts which upon notice or lapse of time or both would constitute such a
default. To the knowledge of the Company, no other party to a Material Contract
is in default thereunder and there is no state of facts which upon notice or
lapse of time or both would constitute such a default. Neither the Company nor,
to its knowledge, any of its employees, officers or directors is a party to any
contract or agreement that prohibits them from freely engaging in the business
of the Company.
2.12 Related-Party Transactions. No employee, officer, consultant,
director or principal stockholder of the Company, and no member of any such
person's immediate family, is indebted to the Company, nor is the Company
indebted (or committed to make loans or extend or guarantee credit) to any such
person. To the knowledge of the Company, none of the officers or directors of
the Company has a business relationship (other than as a director, officer or
employee) with the Company or has any direct or indirect ownership interest in
any firm or corporation with which the Company has a business relationship;
provided, however, that direct or indirect ownership of less than a one percent
interest in any entity shall not constitute an "ownership interest" for purposes
of this Section 2.12. To the knowledge of the Company, no member of the
immediate family of any officer or director of the Company is directly or
indirectly interested in any Material Contract with the Company.
2.13 Permits, etc. The Company has obtained all franchises, permits,
licenses and any similar authority necessary for the conduct of its current
operations, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company. The
Company has not received notice that it is in violation in any material respect
under any of such franchises, permits, licenses or other similar authority.
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2.14 Information Supplied to Purchasers. Neither this Agreement, nor the
Schedules and Exhibits attached, nor any document, certificate, projection or
statement furnished to the Purchasers by or on behalf of the Company in
connection with the transaction contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no material fact relating to the business, prospects, operations, affairs or
conditions of the Company which adversely affects or in the future may (to the
extent reasonably foreseeable) adversely affect the same that has not been set
forth in this Agreement or in the Schedules or Exhibits attached.
2.15 Corporate Documents. As of the Closing, the Certificate of
Incorporation of the Company shall be in the form of the Amendment.
2.16 Title to Property and Assets. The property and assets of the
Company that it owns are free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which have arisen in the
ordinary course of business and which, either singly or the aggregate, do not
materially impair the Company's ownership or use of such property or assets.
2.17 Financial Statements. The Company has delivered to the Purchasers
its audited financial statements at December 31, 1998 and for the fiscal year
then ended and its unaudited financial statements at October 31, 1999 and for
the month then ended and year-to-date (collectively, the "Financial
Statements"). The statements are true, complete and correct in all material
respects subject (in the case of the unaudited statements) to normal year-end
adjustments, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the period and
are consistent with each other. The Financial Statements accurately set out,
describe and fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein subject (in the
case of the unaudited statements) to normal year-end adjustments.
2.18 Undisclosed Liabilities. Except as set forth in Schedule 1, the
Company has no liability (fixed, accrued or contingent, including any
liabilities for taxes due) that is not fully reflected or provided for on the
Financial Statements as defined in Section 2.17, except liabilities incurred in
the ordinary course of business since October 31, 1999, none of which,
individually or in the aggregate, has been or is materially adverse to the
condition, financial or otherwise, of the Company or its assets, properties or
business.
2.19 Absence of Certain Developments. Since October 31, 1999, except as
contemplated by this Agreement, there has been (i) no material adverse change in
the condition (financial or otherwise) of the Company or in the assets,
liabilities, properties, or business of the Company, (ii) no declaration,
setting aside, or payment of any dividend or other distribution with respect to,
or any direct or indirect redemption or acquisition of, any of the capital stock
of the Company and no undertaking by the Company to do any of the foregoing,
(iii) no waiver of any valuable right of the Company or cancellation of any debt
or claim held by the Company, (iv) no loan by the Company to any officer,
director,
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employee or stockholder of the Company, or any agreement or commitment therefor,
(v) no extraordinary increase, direct or indirect, in the compensation paid or
payable to any officer, director, employee or agent of the Company (other than
in connection with a change of position or duties), (vi) no material loss,
destruction or damage to any property of the Company, whether or not insured,
(vii) no labor dispute involving the Company and no material change in the
personnel of the Company or the terms and conditions of their employment, and
(viii) no acquisition or disposition of any assets (or any contract or
arrangement therefor), nor any other transaction, by the Company other than for
fair value in the ordinary course of business.
2.20 Employee Benefit Plans. Except as set forth in Schedule 1, the
Company does not have any Employee Benefit Plan as defined in the Employee
Retirement Income Security Act of 1974, as amended.
2.21 Tax Returns; Payments and Elections. The Company has duly and timely
filed all tax returns and reports as required by applicable law. Such returns
and reports are true and correct in all material respects, including without
limitation the amount shown as due from the Company. The Company has paid all
taxes and other assessments due. The provision for taxes of the Company as shown
in the Financial Statements is adequate for taxes due or accrued as of the date
thereof. The Company's tax returns have not been audited by the United States
Internal Revenue Service or by any state taxing authority and, to the knowledge
of the Company, no such audit has been threatened by any such federal or state
authority.
2.22 Qualified Small Business Stock. The Company is a "qualified small
business," as defined in Section 1202(d) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the Shares constitute "qualified small business
stock" as defined in Section 1202(c) of the Code. The Company covenants and
agrees to comply with the reporting and recordkeeping requirements of Section
1202 of the Code and any regulations promulgated thereunder and to execute and
deliver to the Purchasers and the Internal Revenue Service, from time to time,
such forms, documents, schedules and other instruments as may be reasonably
requested thereby to cause the Shares and the Conversion Shares to qualify as
"qualified small business stock," as defined in Section 1202(c) of the Code.
2.23 Securities Laws. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, issuance and
sale of the Shares, the Warrants, the Warrant Shares and the Conversion Shares
in accordance with this Agreement is, and will be, in compliance with applicable
federal and state securities laws.
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<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
The Purchaser hereby represents, warrants and agrees to and with the
Company, as of the date of this Agreement and each Closing Date, as follows:
3.1 Authorization. The Closing Documents constitute valid and legally
binding obligations of the Purchaser, enforceable in accordance with their
terms, subject to and limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws generally applicable to creditors
rights, and (ii) judicial discretion in the availability of equitable relief.
The Purchaser's execution and delivery of, and performance of its obligations
under, the Closing Documents have been duly authorized by all necessary
corporate, stockholder or other action of the Purchaser. The Purchaser has full
power and authority to enter into this Agreement.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
Purchaser in reliance upon the Purchaser's representation to the Company, which
the Purchaser hereby confirms by execution of this Agreement, that the Shares,
the Warrants, the Warrant Shares and the Conversion Shares (collectively, the
"Securities") will be acquired for investment for the Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that the Purchaser has no present intention of selling,
granting any participation in or otherwise distributing the same. By executing
this Agreement, the Purchaser further represents that the Purchaser is not a
party to and is not bound by any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participation to such person or to
any third person, with respect to any of the Securities.
3.3 Disclosure of Information. The Purchaser has received all the
information that it considers necessary or appropriate for deciding whether to
purchase the Shares and the Warrants. The Purchaser further represents that it
has had sufficient opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and the
Warrants. Notwithstanding the foregoing, this Section 3.3 in no way limits the
Company's representations and warranties made to the Purchaser under Section 2.
3.4 Investment Experience. The Purchaser acknowledges that it is able
to protect its own interests, can bear the economic risk of its investment, and
has such knowledge and such experience in financial or business matters that the
Purchaser is capable of evaluating the merits and risks of the investment in the
Shares and the Warrants. The Purchaser also represents it has not been
organized for the purpose of acquiring the Shares and the Warrants.
3.5 Accredited Purchaser. The Purchaser is an "accredited investor"
within the meaning of Rule 501 promulgated pursuant to the Securities Act of
1933, as amended (the "Securities Act").
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3.6 Restricted Securities.
(a) The Purchaser understands that: (i) the Shares and the Warrants
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon the Purchaser's representations
contained in this Agreement and that the Shares and the Warrants are, and upon
issuance of the Conversion Shares and/or exercise of the Warrant Shares, will
be, "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving registration
under the Securities Act; (ii) the Purchaser must bear the economic risk of this
investment indefinitely unless the Shares, the Warrants, the Warrant Shares or
the Conversion Shares, as the case may be are registered pursuant to the
Securities Act or an exemption from such registration is available; (iii) the
Company has no present intention of registering the Securities or any shares of
its capital stock; and (iv) there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow the Purchaser to transfer all or any
portion of the Securities under the circumstances, in the amounts or at the
times the Purchaser might propose.
(b) The Purchaser acknowledges and agrees that the Shares and the
Warrants and, if issued, the Conversion Shares and the Warrants Shares, must be
held indefinitely unless they are subsequently registered under the Securities
Act, an exemption from such registration is available or as otherwise permitted
by applicable federal or state law. The Purchaser has been advised or is aware
of the provisions of Rule 144 promulgated under the Securities Act, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the United States Securities Exchange Act of 1934, as amended) and
the number of shares being sold during any three-month period not exceeding
specified limitations.
4. CONDITIONS TO OBLIGATIONS OF PURCHASER.
The obligations of the Purchaser under this Agreement are subject to the
fulfillment, or waiver by the Purchaser, of each of the following conditions of
the Company on or before each Closing:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
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4.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by the Company as of the Closing.
4.3 Opinion of Counsel. The Purchaser shall have received an opinion
from Smith, Stratton, Wise, Heher & Brennan, counsel to the Company, dated as of
the Closing, addressed to the Purchaser, and substantially in the form attached
hereto as Exhibit E.
4.4 Securities Law Approvals. The Company shall have received all
requisite approvals, if any, of the securities authorities of each jurisdiction
in which such approval is required, and such approvals shall be in full force
and effect as of the Closing.
4.5 Investors' Rights Agreement. The Company, the requisite number of
stockholders of the Company who are parties to the Investors' Rights Agreement
and the Purchaser shall have entered into the Investors' Rights Agreement.
4.6 License Agreement. The Company and the Purchaser shall have entered
into the License Agreement.
4.7 Certificates and Documents. The Company shall have delivered to
counsel for the Purchaser a copy of the Certificate of Incorporation of the
Company, as in effect immediately prior to the Closing, certified by the
Secretary of State of the State of Delaware and a certificate, as of the most
recent practicable date, of the Secretary of State of the State of Delaware and
of the Secretary of State of the State of North Carolina as to the Company's
corporate good standing.
4.8 Compliance Certificate. The President of the Company shall deliver
to the Purchaser at the Closing a certificate certifying that the conditions
specified in Sections 4.1, 4.2 and 4.9 have been fulfilled and stating that
there shall have been no materially adverse change in the business, affairs,
prospectus, operations, properties, assets or condition of the Company since
October 31, 1999.
4.9 Absence of Litigation. No action, suit or proceeding shall have
been instituted before any court or governmental or regulatory body or
instituted or threatened by any governmental or regulatory body, to restrain,
modify or prevent the carrying out of the Closing or of the transactions
contemplated hereby, or to seek damages or a discovery order in connection with
such transactions.
4.10 Other Matters. All corporate and other proceedings in connection
with the transactions contemplated at the Closing by this Agreement, and all
documents and instruments incident to such transactions, shall be reasonably
satisfactory in substance and form to the Purchaser and their counsel, and the
Purchaser and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
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5. CONDITIONS TO OBLIGATIONS OF COMPANY.
The obligations of the Company under this Agreement are subject to the
fulfillment, or waiver by the Company, of each of the following conditions of
the Purchaser on or before each Closing.
5.1 Representations and Warranties. The representations and warranties of
the Purchaser contained in this Agreement shall be true as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
5.2 Performance. The Purchaser shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by the Purchaser as of the Closing.
5.3 Payment of Purchase Price. The Purchaser shall have delivered the
Purchase Price.
5.4 Stockholders Agreement. The Purchaser shall have become a party to
that certain Second Amended and Restated Stockholders' Agreement dated as of
April 8, 1997, as amended, among the Company and certain stockholders of the
Company (the "Stockholders' Agreement").
5.5 Investors' Rights Agreement. The Company and the Purchaser shall have
entered into the Investors' Rights Agreement.
5.6 License Agreement. The Company and the Purchaser shall have entered
into the License Agreement.
5.7 Absence of Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or instituted or
threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Closing or of the transactions contemplated
hereby, or to seek damages or a discovery order in connection with such
transactions.
5.8 Other Matters. All corporate and other proceedings in connection with
the transactions contemplated at the Closing by this Agreement, and all
documents and instruments incident to such transactions, shall be reasonably
satisfactory in substance and form to the Company and its counsel, and the
Company and its counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
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6. COVENANTS.
The Company covenants and agrees that the Company will perform and observe
the following covenants and provisions:
6.1 Financial Statements. The Company will maintain books of account in
accordance with generally accepted accounting principles applied on a consistent
basis, keep full and complete financial records, and the Company shall furnish
the following reports to the Purchaser:
(a) As soon as practicable, but in any event within 90 days after the
end of each fiscal year of the Company, an income statement for such fiscal
year, a balance sheet of the Company and statement of stockholders' equity as of
the end of such year, and a schedule as to the sources and applications of funds
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles and audited
and certified by such independent public accountants of nationally recognized
standing selected by the Company; and
(b) As soon as practicable, but in any event within 30 days after the
end of each quarter, an unaudited income statement and schedule as to the
sources and application of funds and the balance sheet as of the end of such
quarter.
6.2 Employee Agreements. The Company shall require all its employees and
consultants to enter into suitable agreements with provisions governing, among
other things, the protection of confidential information, assignment of
intellectual property and competition with the Company. The Board of Directors
shall approve the form of such agreements in advance.
Notwithstanding the foregoing, this Section 6 will terminate upon
conversion of the Shares into Conversion Shares or if the company registers any
of its stock in connection with an initial public offering at a price of at
least $3.00 per share and having gross proceeds to the Company of not less than
$10,000,000.
7. RESTRICTIONS ON TRANSFER; LEGENDS.
7.1 Legend. The certificate evidencing the Securities that the Purchaser
has agreed to purchase, and each certificate issued in transfer therefor, will
bear a legend substantially as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES ACT OF ANY
STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED
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UNDER THE ACT AND APPLICABLE STATE SECURITIES ACTS OR, IN THE OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE, OR TRANSFER, PLEDGE OR HYPOTHECATION IS
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION OR IS IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION D UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
The certificate representing the Securities, and each certificate issued in
transfer thereof, will also bear any additional legend required under any
applicable securities law.
7.2 Restrictions on Transfer. Absent an effective registration statement
under the Act covering the disposition of the Securities, the Purchaser will not
sell, transfer, assign, pledge, hypothecate or otherwise dispose of any or all
of the Securities, and the Company shall refuse to register the transfer of the
Securities to the extent permissible by applicable law, unless such sale,
transfer, assignment, pledge, hypothecation or other disposition is made in
accordance with the provisions of Regulation D under the Act or is otherwise
exempt from the registration and the prospectus delivery requirements of the Act
and the registration or qualification requirements of any other applicable
securities laws and the Purchaser provides the Company with an opinion of
counsel (which may be counsel for the Company) which is satisfactory to the
Company (both as to the issuer of the opinion and the form and substance
thereof) to such effect. The Company agrees that an opinion of counsel will not
be required for sales made in accordance with Rule 144, except in unusual
circumstances.
8. MISCELLANEOUS.
8.1 Survival of Representations and Warranties. The warranties,
representations and covenants of the Company and the Purchaser contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing.
8.2 Assignment; Binding Effect.
(a) Neither party may assign this Agreement without the prior written
consent of the other party. Any attempted assignment not made in accordance
with this Section 8.2(a) shall be void and of no effect.
(b) Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties (including transferees of any
Securities). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations,
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or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
8.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Captions. The captions used in this Agreement are for convenience only
and are not to be considered in construing or interpreting this Agreement.
8.6 Indemnification. The Company shall indemnify, defend and hold harmless
the Purchaser and its directors, officers, employees, agents and affiliates, and
the directors, officers, employees and agents of such affiliates, against any
and all liabilities, losses, costs or damages, together with all reasonable
costs and expenses related thereto (including reasonable attorney's fees and
expenses), arising from third party suits relating to or connected with the
untruth, inaccuracy or breach of any statement, representation, warranty or
covenant of the Company contained in this Agreement, including claims brought by
other shareholders of the Company, except to the extent that any such
liabilities, losses, costs or damages are a result of a misrepresentation made
by the Purchaser.
8.7 Notices. Any notice or request required or permitted to be given under
or in connection with this Agreement shall be deemed to have been sufficiently
given if in writing and personally delivered or sent by certified mail (return
receipt requested), facsimile transmission (receipt verified), or overnight
express courier service (signature required), prepaid, to the party for which
such notice is intended, at the address set forth for such party below:
(i) In the case of the Company, to:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
Attention: Christy L. Shaffer, Ph.D.
Facsimile No.: (919) 941-9797
-16-
<PAGE>
(ii) In the case of the Purchaser, to:
Genentech, Inc.
1 DNA Way, Mailstop 49
South San Francisco, California 94080
Attention: Corporate Secretary
Facsimile No.: (650) 952-9881
or to such other address for such party as it shall have specified by like
notice to the other party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery shall be deemed to be the next business day after such notice
or request was deposited with such service. If sent by certified mail, the date
of delivery shall be deemed to be the fifth business day after such notice or
request was deposited with the U.S. Postal Service.
8.8 Amendments and Waivers. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the Purchaser. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
8.9 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
8.10 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement among the parties and no party shall be liable
or bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein.
* * *
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed as of the date first written above.
COMPANY
-------
INSPIRE PHARMACEUTICALS, INC.
By: /s/ Christy L. Shaffer
_______________________________________
Christy L. Shaffer, Ph.D.
President and Chief Executive Officer
PURCHASER
---------
GENENTECH, INC.
By: /s/ Arthur D. Levinson
-------------------------------------
Name: Arthur D. Levinson, PH.D.
-------------------------------------
Title: President and Chairman of the Board
-------------------------------------
<PAGE>
SCHEDULE 1
----------
COMPANY DISCLOSURE SCHEDULE
---------------------------
The inclusion of any agreement or other matter as part of this
Schedule or any other Exhibit or Schedule to this Agreement should not be
interpreted as indicating that the Company has determined that such
agreement or other matter is necessarily material to the Purchasers.
Section 2.5(b)
The issued and outstanding shares of capital stock of the Company as of the
date of the Agreement are:
<TABLE>
<CAPTION>
==============================================================================================
Class or Series Outstanding Shares
----------------------------------------------------------------------------------------------
<S> <C>
Common Stock 4,315,250
----------------------------------------------------------------------------------------------
Series A Convertible Preferred Stock 9,200,000
----------------------------------------------------------------------------------------------
Series AA Convertible Preferred Stock 0
----------------------------------------------------------------------------------------------
Series B Convertible Preferred Stock 10,866,014
----------------------------------------------------------------------------------------------
Series BB Convertible Preferred Stock 0
----------------------------------------------------------------------------------------------
Series C Convertible Preferred Stock 375,000
----------------------------------------------------------------------------------------------
Series D Convertible Preferred Stock 416,667
----------------------------------------------------------------------------------------------
Series E Convertible Preferred Stock 6,201,985
----------------------------------------------------------------------------------------------
Series F Convertible Preferred Stock 0
----------------------------------------------------------------------------------------------
Series G Non Voting Convertible Preferred Stock 0
==============================================================================================
</TABLE>
Section 2.5(c)
1. The Company has entered into the following Warrant Agreements with
Comdisco, Inc. ("Comdisco"):
- S1 -
<PAGE>
(a) whereby the Company granted Comdisco the right to purchase
up to an aggregate of 165,000 shares of Series A Stock at a purchase price
of $1.00 per share subject to the terms and conditions of such Agreements,
of which Comdisco transferred the right to purchase up to 16,500 shares of
the Series A Stock at a purchase price of $1.00 to Gregory Stento,
(b) whereby the Company granted Comdisco the right to purchase
up to an aggregate of 15,000 shares of Series B Stock at a purchase price
of $1.20 per share subject to the terms and conditions of such Agreements,
and
(c) whereby the Company granted Comdisco the right to purchase
up to an aggregate of 28,170 shares of Series F Stock at a purchase price
of $2.40 per share subject to the terms and conditions of such Agreements.
2. The Company has entered into a Warrant Agreement with PharmaLogic
Development, Inc. ("PharmaLogic") whereby the Company granted
PharmaLogic the right to purchase up to an aggregate of 20,000 shares
of Common Stock at a purchase price of $2.40 per share subject to the
terms and conditions of such Agreement.
Section 2.5(d)
1. The Company and each of H. Jefferson Leighton, Richard Boucher,
Michael Knowles, T. Kendall Harden and M. Jackson Stutts are parties
to Restricted Stock Purchase Agreements, each dated March 9, 1995 with
respect to the shares of Common Stock held by such holders.
2. The Company and the holders of the Series A Stock, the Series B Stock
and the Series E Stock are parties to that certain Amended and
Restated Investors' Rights Agreement, dated as of October 29, 1999,
which provides, inter alia, for such holders' participation in certain
equity offerings by the Company and the registration of the Common
Stock and other securities issued upon the conversion of such holders'
Series A Stock, Series B Stock and Series E Stock. (In addition, the
holders of Series A Stock, Series B Stock and Series E Stock have
certain rights and obligations under the Certificate of Incorporation
in connection with certain issuances of securities by the Company.)
3. The Company, the holders of the Series A Stock, Series B Stock, Series
E Stock and certain holders of Common Stock are parties to that
certain Second Amended and Restated Stockholders' Agreement, dated as
of April 8, 1997, as amended, that pertains to the size of the
Company's Board of Directors and the election of the directors of the
Company and provides the Company and certain holders with a right of
first refusal in connection with any such holder's disposition of any
shares of Common Stock.
- S2 -
<PAGE>
4. The Company and Kissei Pharmaceuticals Co., Ltd. are parties to that
certain Registration Rights Agreement, dated as of September 10, 1998,
that pertains to the registration of the Common Stock issued upon the
conversion of Kissei's Series C Stock.
5. The Company and Santen Pharmaceutical Co., Ltd. are parties to that
certain Registration Rights Agreement, dated as of December 16, 1998,
that pertains to the registration of the Common Stock issued upon the
conversion of Santen's Series D Stock and the stock of such other
holders who become parties to such Agreement.
6. The Company maintains that certain 1995 Stock Plan, that governs the
issuance of Incentive Stock Options and Non-Qualified Stock Options to
select employees and consultants of the Company.
7. Also see Section 2.5(c) of this Schedule 1.
Section 2.9
The following is a list of the Company's intellectual property describing
the current status:
Issued Patents.
---------------
1. Method of Treating Lung Disease with Uridine Triphosphates
Licensed from The University of North Carolina-Chapel Hill
Inventor: R. Boucher
U.S. Patent Issued 8 Mar 1994--U.S. Patent No. 5,292,498
Non-convention PCT application claiming UTPgamma-S, etc. (but not UTP)
was filed 9 Oct 1992 with Foreign National Phase entered in Australia,
Japan, Norway, and the EPO.
Australia, Notice of Allowance, Jan 1998
2. DNA Encoding the Human P2u Receptor and Null Cells Expressing P2u
Receptor Licensed from The University of North Carolina-Chapel Hill
Inventors: R. Boucher, et al.
U.S. Patent No. 5,691,156; Filed 19 May 1995; Issued 25 Nov 1997
PCT filed 4 Oct 1994; Serial No. PCT/US94/11260; Abandoned 11 Apr 1996
3. Methods of Detecting Compounds Which Bind to the P2u Receptor
Licensed from The University of North Carolina-Chapel Hill
Inventors: R. Boucher, et al.
U.S. Filed 19 May 1995 (Divisional Application)
U.S. Patent No. 5,607,836; Issued 4 Mar 1997
- S3 -
<PAGE>
4. DNA Encoding the Human P\\2u\\ Receptor and Null Cells Expressing
P\\2u\\ Receptor Licensed from The University of North Carolina-Chapel
Hill
Inventors: R. Boucher, et al.
U.S. Patent No. 5,596,088; Issued 21 Jan 1997
Publication WO95/10538 on 20 Apr 1995
5. Method of Detecting Lung Disease
Licensed from The University of North Carolina-Chapel Hill
Inventors: R. Boucher
U.S. Patent No. 5,628,984; Issued 13 May 1997
PCT filed 31 Jul 1996 designating all member countries
South African national application filed 31 Jul 1996; Issued 30
Apr 1997 as No. 96/6425
Foreign National filings entered in EPO, Australia, Brazil, Canada,
China, Israel, Japan, Mexico, New Zealand, Norway and Korea
Japan and Korea examinations requested
Publication WO97/05195 on 13 Feb 1997
6. Method of Detecting Lung Disease
Licensed from The University of North Carolina-Chapel Hill
Inventors: R. Boucher
U.S. Patent No. 5,902,567; Issued 11 May 1999
Div. of above
7. Dinucleotides Useful for the Treatment of Lung Disease
Licensed from The University of North Carolina-Chapel Hill
Inventors: R. Boucher, et al.
U.S. Patent No. 5,635,160 filed 7 Jun 1995; Issued 3 Jun 1997
PCT filed 6 Jun 1996 designating all member countries; Published
WO96/40059 Dec 1996
Foreign National Filings entered in EPO, Australia, Brazil, Canada,
China, Japan, Mexico, Norway, New Zealand and S. Korea
Hong Kong designated Oct. 1998
8. Dinucleotides Useful for the Treatment of Lung Disease
Licensed from The University of North Carolina-Chapel Hill
Inventors: R. Boucher, et al.
U.S. Patent No. 5,935,555 filed 8 May 1997; Issued 10 Aug. 1999
CIP of above.
9. Method of Preventing or Treating Pneumonia in Immobilized Patients
Using UTP and Related Compounds
Inventors: K. Jacobus and J. Leighton
U.S. Patent No. 5,763,447; Filed 23 Jul 1996, U.S. Patent Issued 9 Jun
1998 S. Africa application filed July 23, 1997 as 97/6538
- S4 -
<PAGE>
PCT Filed Jul 23, 1997; Serial No. PCT/US 97/12938
Publication WO98/03182 on 29 Jan. 1998
National Phase filing due 23 January 1999 with Australia, Canada,
China, EP, Japan, Korea, Mexico and New Zealand to be designated
10. a. Method of Treating Sinusitis with UTP and Related Compounds
Inventors: K. Jacobus, et al.
U.S. Patent No. 5,789,391; Filed 3 Jul 1996, U.S. Patent Issued 4 Aug
1998 PCT filed 3 Jul 1997
b-d. Three U.S. Divisionals: Each Allowed and U.S. Patent No.
5,958,897 issued 28 Sept. 1999; U.S. Patent No. 5,972,904 issued 26
Oct. 1999; U.S. Patent No. 5,981,506 issued 9 Nov. 1999
National Phase due 3 Jan 1999 with Australia, Canada, China, EP,
Japan, Korea, Mexico and New Zealand to be designated
11. Certain Dinucleotides and Their Use as Modulators of Mucociliary
Clearance and Ciliary Beat Frequency
Inventors: W. Pendergast, et al.
U.S. Patent No. 5,837,861; issued 17 Nov. 1998
PCT filed 6 Feb 1998
Non-convention Foreign Filings conducted in Argentina, Malaysia, S.
Africa 10 Feb 1998
Claims for compounds (NCEs) and also formulations, methods of
treatment National Phase filings entered in Australia, Brazil, Canada,
China, EPO, Japan, S. Korea, Mexico, Norway, New Zealand
12. Method of Treating Dry Eye Disease with Purinergic Receptor Agonists
Inventors: B. Yerxa, et al.
U.S. Patent No. 5,900,407; issued 4 May 1999
PCT Filed 6 Feb 1998
Non-convention countries S. Africa and Malaysia designated 6 Feb 1998
National Phase filings entered in Australia, Brazil, Canada, China,
EPO, Indonesia, Japan, S. Korea, Mexico, New Zealand, Norway,
Singapore and Viet Nam
13. A Sterilized Isotonic and pH-Adjusted Pharmaceutical Formulation of
Uridine Triphosphate
Inventors: K. LaCroix, et al.
U.S. Patent No. 5,962,432 filed 3 Jul 1996 issued 5 Aug. 1999
US CIP filed 23 Dec 1997; PCT filing 23 Dec. 1998
14. Novel Pharmaceutical Compositions of Uridine Triphosphate
Inventors: K. LaCroix, et al.
U.S. CIP of US Patent No. 5,962,432 filed 23 Dec 1997
- S5 -
<PAGE>
U.S. Patent No. 5,968,913 issued 19 Oct. 1999
Non-convention countries S. Africa, Argentina, and Taiwan designated
23 Dec. 1998
National Phase due 23 June, 2000
Other Patent Filings.
15. Method of Treating Otitis Media with UTP and Related Compounds
Inventors: D. Drutz, et al.
U.S. Filed 15 Feb 1996
PCT filed 14 Feb 1997 designating all member countries
Published WO97/29756 on 21 Aug 1997
Non-convention countries S. Africa and Argentina designated
Foreign National Phase entered in EPO, Canada, Mexico, Australia, New
Zealand, Japan, China, and Korea
16. Method of Treating Ciliary Dyskinesia with UTP and Related Compounds *
Licensed from The University of North Carolina-Chapel Hill
Inventors: K. Jacobus, et al.
U.S. filed 27 Mar 1996
PCT filed 27 Mar 1997 designating all member countries
Publication as WO97/35591 on 2 Oct 1997
Foreign National Phase entered in Australia, Canada, China, EP, Japan,
Korea, Mexico and New Zealand and Taiwan on 27 Sep 1998
17. Method of Early Lung Cancer Detection Via Sputum Induction and
Analysis of Sputum to Detect Cancer Associated Substances
Inventors: K. LaCroix , et al.
U.S. Filed 8 Oct. 1996; PCT Filed 8 Oct. 1997 was not pursued.
U.S. filed 10 April 1998 based on above.
Publication as WO98/15835 on 16 Apr 1998
18. Method of Treating Bronchitis with UTP and Related Compounds *
Licensed from The University of North Carolina-Chapel Hill
Inventors: C. Shaffer, et al.
U.S. Filed 7 Nov 1996
PCT Filed 21 Oct 1997
CPA filed 26 July 1999
Publication as WO98/19685 on 14 May 1998
National Phase filings entered in Australia, Brazil, Canada, China,
EPO, Japan, Korea, Mexico, Norway, New Zealand
- S6 -
<PAGE>
19. a. Method For Large-Scale Production of Di(Uridine 5'-)Tetraphosphate
Inventors: B. Yerxa, et al.
Provisional US Filing 25 Jul 1997
US CIP and PCT filed 24 Jul 1998
Non-convention countries S. Africa, Argentina, and Indonesia
designated 25 Jul 1998
And Malaysia, Philippines, Thailand, and Taiwan requested 3 Nov. 1998
Published as WO99/05155
National Phase filing due 25 Jan. 2000 with Australia, Brazil, Canada,
China, EPO, Japan, Mexico, Norway, S. Korea, and New Zealand
designated
b. US CIP filed 25 Nov. 1998 "Method of Promoting Cervical and
Vaginal Secretions"
Notice of Allowance 15 Nov. 1999
-------------------
National Phase due 25 Nov. 1999 with Argentina, Australia, Brazil,
Canada, EPO, Japan, Mexico, Norway, S. Africa, S. Korea, and New
Zealand designated
20. Therapeutic Dinucleotide and Derivatives *
Method of Use Patent
Inventors: B. Yerxa, et al.
Provisional US Filing 22 May 1998
US and PCT filing 22 May 1999
National phase due 22 Nov. 2000
21. Method of Treating Lung Diseases with 5'-Diphosphate and Analogs
Thereof*
Inventors: R. Boucher, et al.
Provisional Filed Aug 1997 by UNC
a. U.S. Composition of Matter filing 28 Aug. 1998; patent pending
b. US Div. Method of Use filed 13 July 1999; Notice of Allowance 27
Sept. 1999
PCT filing 28 Aug 1998
Published as WO99/09998 4 March 1999
National phase due 28 Feb. 2000 with Australia, Brazil, Canada, China,
Indonesia, Japan, Mexico, S. Korea, and New Zealand designated
Non-convention countries S. Africa and Argentina designated Aug 1998
22. A Co-Invention Patent [UNC and Inspire] for Treating Lung Disease*
Inventors: R. Boucher, et. al., US application filed Dec. 1998
Confidential matter
- S7 -
<PAGE>
23.
[CONFIDENTIAL TREATMENT REQUESTED]
24.
[CONFIDENTIAL TREATMENT REQUESTED]
25. Non-patent intellectual property, including without limitation,
unpatented inventions, trade secrets, service marks, know-how,
clinical data and technical data, either developed by the Company or
licensed from other entities, including The University of North
Carolina at Chapel Hill.
* Inspire and UNC Joint Inventorship and/or Ownership
Section 2.11
The Company is a party to the following Material Contracts:
1. Consultation and Scientific Advisory Board Agreements, dated March 10,
1995, between the Company and each of Drs. Richard Boucher and T.
Kendall Harden (as amended).
2. Consulting Agreements, dated March 10, 1995, between the Company and
each of Drs. Michael Knowles (as amended) and M. Jackson Stutts (as
amended).
3. The following agreements, each dated March 10, 1995, between the
Company and the University of North Carolina:
(a) Sponsored Research Agreement, as amended;
(b) Sole License Agreement regarding certain "P2U" technology;
(c) Clinical Trial Agreement, as amended, including an amendment which
provides for new clinical studies of INS316 and INS365 not specified
in detail in the original agreement. Each specific clinical protocol
is submitted and reviewed by UNC as an amendment to the master
agreement. There is currently one ongoing study at UNC (mucociliary
clearance study in nonsmokers and smokers).
4. Lease, dated May 17, 1995, between the Company and Imperial Center
Limited Partnership, as amended, for office and laboratory space
located at Royal Center, Durham, North Carolina.
- S8 -
<PAGE>
5. Agreement between the Company and Lineberry Associates, dated August
16, 1995, concerning data management and statistical analysis
consulting services in connection with clinical trials.
6. Confidentiality Agreement, dated August 16, 1995, between the Company
and Susan Skinner relating to consulting services with respect to
regulatory, chemistry and manufacturing issues.
7. Master Lease Agreement, dated October 13, 1995, between the Company
and Comdisco.
8. Loan Agreement, dated October 13, 1995, between the Company and
Comdisco in the original principal amount of $400,000.
9. Consulting Agreement, dated January 15, 1996, between the Company and
Dr. Jose L. Boyer, as amended.
10. License Agreement, dated February 1, 1996, between the Company and the
University of North Carolina for the use of the P2Y1 receptor.
11. License Agreement, dated March 25, 1996, between the Company and the
University of North Carolina for the use of the P2Y4 and P2Y5
receptors.
12. Clinical Product Development Agreement, dated June 7, 1996, between
the Company and Cook Imaging, Inc. concerning the formulation of
clinical trial supplies.
13. Confidential Disclosure Agreement between the Company and Beckloff &
Associates, dated September 16, 1996, concerning cGMP audits.
14. Sponsored Research Agreement, dated October 31, 1996, between the
Company and the University of North Carolina.
15. Confidential Disclosure Agreement, dated January 11, 1996, between the
Company and Simirex relating to the packaging and labeling of the
Company's potential products.
16. Software License Agreement, dated January 14, 1997, between the
Company and Tripos, Inc. whereby the Company licenses certain software
from Tripos.
17. Agreement between the Company and Pro Bio Sint, through the U.S. agent
Davos, dated April 14, 1997, for clinical and pre-NDA development
quantities of INS365.
18. Clinical Trial Research Agreement, dated June 9, 1997, between the
Company and Children's Hospital and Medical Center, for a clinical
study in CF patients.
- S9 -
<PAGE>
19. Agreement between the Company and Cirrus Pharmaceuticals, Inc., dated
July 1, 1997, concerning analytical or development work to be provided
by Cirrus.
20. Supply Agreement between the Company and Yamasa Corporation, through
the U.S. agent Summit Pharmaceuticals Corporation and Sumitomo
Corporation, dated July 30, 1997, for clinical and clinical
development quantities of UTP.
21. Agreement between the Company and The Technology Partnership, dated
September 17, 1997, concerning development of novel delivery system
technology for the administration of UTP and/or INS365.
22. Lease, dated December 30, 1997, between the Company and Petula
Associates, Ltd. for office and laboratory space located at Royal
Center, Durham, North Carolina.
23. Confidential Disclosure Agreement, dated November 29, 1995, between
the Company and Magellan Laboratories, Inc., Morrisville, North
Carolina, related to various testing protocols (e.g. stability
studies) ranging from 6 months to 2 years.
24. Confidential Disclosure Agreement between the Company and McCrone
Associates, dated January 7, 1998, concerning analytical work to be
provided by McCrone
25. Sponsored Research Agreement, dated January 12, 1998, between the
Company and the University of North Carolina at Chapel Hill and
amended March 1999 for research by Jose Boyer, entitled "Drug
Discovery for p2t receptor and [human] ATP diphosphohydrolase."
Isolation characterization of biologic targets and compound screening.
26. Materials Transfer Agreement, dated February 4, 1998, between the
Company and NeoGenesis Incorporated, Cambridge, Massachusetts relating
to the transfer, screening and identification of compounds.
27. Agreements, dated May 30, 1997 and December 6, 1996, between the
Company and Mount Sinai Medical Center of Greater Miami concerning
preclinical studies.
28. Sublease Agreement, dated August 15, 1998, between the Company and
SciQuest, Inc. concerning the Company's sublease to SciQuest of office
and laboratory space located at Royal Center, Durham, North Carolina.
29. Exclusive License Agreement, dated September 1, 1998, between the
Company and the University of North Carolina concerning U.S. Patent
No. 5,635,160 covering INS365 and related compounds and U.S. Patent
Application Nos. 08/624,914 and 08/744,267 and all corresponding
foreign applications.
- S10 -
<PAGE>
30. Joint Development, License and Supply Agreement, dated as of September
10, 1998, between the Company and Kissei Pharmaceuticals Co., Ltd. for
the development, commercialization and marketing of INS365 for the
treatment of respiratory diseases in humans (excluding otitis media
and sinusitis) in Japan.
31. Sublease Agreement, dated September 22, 1998, between the Company and
ICAgen, Inc. concerning ICAgen's sublease to the Company of office and
laboratory space located at Royal Center, Durham, North Carolina.
32. Ownership Agreement, dated September 28, 1998, between the Company and
Suhaib M. Siddiqi concerning the allocation of revenues generated from
the molecular software product referred to as "What If for Windows."
33. Marketing and Distribution Agreement, dated October 22, 1998, between
the Company, G. Vriend and European Molecular Biology Laboratories for
the rights to market and distribute the molecular software product
referred to as "What If for Windows."
34. Joint Development, License and Supply Agreement, dated as of December
16, 1998, between the Company and Santen Pharmaceutical Co., Ltd. for
the development, commercialization and marketing of INS365 for the
therapeutic treatment of ocular surface diseases, i.e. dry eye disease
regardless of how caused, in humans, in Japan and 9 other Asian
countries.
35. The Company has established a Scientific Advisory Board ("SAB"), as
well as several Clinical Trial Boards: Cystic Fibrosis Advisory Board,
Critical Care Advisory Board and Chronic Bronchitis Advisory Board.
The members of each Advisory Board are compensated. The Company has
entered into a Scientific Advisory Board Agreement with each of the
eight members of the SAB and has granted each SAB member a non-
qualified stock option to purchase up to 10,000 shares of Common
Stock. None of the Clinical Trial Board members have stock in Inspire,
other than Dr. Michael Knowles, founder of Inspire.
36. Sponsored Research Agreements, dated January 15, 1998, between the
Company and The Trustees of Columbia University in the City of New
York, concerning research in accordance with its proposals entitled
"Culture of Meibomian gland cells on permeable supports."
37. Agreement between the Company and Tony Fox, M.D., Ph.D. dated January
20, 1999, concerning the Company's retention of Dr. Fox as a medical
safety consultant.
38. Agreement between the Company and Gary Novack, Ph.D. of PharmaLogic
Development Inc. dated January 8, 1999, concerning consulting services
to evaluate proposed ophthalmology business relationships.
- S11 -
<PAGE>
39. Agreement between the Company and Simbec Research Limited dated
February 10, 1999, concerning the conduct of a clinical trial of
INS365 ophthalmic solution in normal subjects.
40. Sponsored Research Agreement, dated March 15, 1999, between the
Company and The Regents of the University of California, Berkeley,
concerning research in accordance with its proposal entitled
"Treatment of Macular Edema in Diabetes and in Age Related Macular
Degeneration: Manipulation of Retinal Pigment Epithelial Fluid
Transport."
41. Agreement between the Company and Lineberry Research Associates dated
March 26, 1999, concerning INS365, Data Management and Statistics
services connected with a clinical trial of mucociliary clearance in
non-smokers and smokers.
42. Agreement with Cirrus Pharmaceuticals, Inc., Chapel Hill, North
Carolina for formulation development work for a preclinical program
dated March 30, 1999.
43. Agreement between the Company and Pacific Rim Ventures Co., Ltd.,
dated April 1, 1999 concerning the consulting services pertaining to
assisting with the business development activities leading to securing
a corporate partnership for UTP (INS316) as an acute sputum induction
agent in Japan and for Japan/Asia.
44. Agreements between the Company and Quintiles Simirex dated June 30,
1999, August 10, 1998 and May 26, 1998, concerning the labeling,
packaging, and shipment of INS365 for use in a clinical trial of
mucociliary clearance in non-smokers and smokers.
45. Agreement between the Company and North Carolina State University,
College of Veterinary Medicine dated July 12, 1999, concerning
activities relating to P2Y Receptor Agonist on Fresh and Extended Boar
Semen.
46. Agreement between the Company and Associates in Transformational
Oncology Management (ATOM) dated July 15, 1999, concerning validation
of market size and commercial value of INS316 (UTP).
47. Agreement between the Company and Yamasa Corporation dated July 21,
1999, concerning the manufacturing of INS365 by Summit Pharmaceuticals
Corporation for use in clinical trials.
48. Confidential Disclosure Agreement between the Company and Pathology
Associates International, dated July 1, 1998, and Agreement for
Studies, dated July 1, 1998, concerning pathology consulting services
and studies.
- S12 -
<PAGE>
49. Agreement between the Company and Simbec Research Limited dated August
5, 1999, concerning the conduction of clinical trial of the lung
deposition INS365 with three delivery devices.
50. Sponsored Research between the Company and University of Southern
California dated August 1, 1999, concerning the transport and
metabolism of topically applied purinergic analogs.
51. Sponsored Research Agreement between the Company and Schepens Eye
Research Institute, dated August 1, 1999, concerning the development
of human conjunctival, endocervical, and tracheal epithelial cell
lines expressing mucins 4, 5AC, and 5B for testing agents that affect
mucin secretion, and an Option Agreement, dated August 15, 1999, for
an exclusive license by Inspire for any or all Inventions coming out
of the work.
52. Agreement between the Company and P.C.H. Integrated Regulatory
Services dated August 3, 1999 for regulatory consulting services.
53. Mutual Non-Disclosure Agreement, dated January 14, 1999, between the
Company and Automatic Liquid Packaging, Woodstock, Illinois related to
the manufacture of blow/fill/seal packaging for (INS365) and placebo.
54. Sponsored Research Agreement between the Company and The Brigham and
Women's Hospital, Inc., dated October 5, 1999, concerning the
development of human conjunctival, endocervical, and tracheal
epithelial cell lines expressing mucins 4, 5AC, and 5B for testing
agents that affect mucin secretion.
55. Agreement between the Company and JoAnn Gorden, dated October 1, 1999
for regulatory consulting services.
56. Sponsored Research Agreement between the Company and Columbia
University dated October 15, 1999, concerning research entitled "An
Evaluation of the Effects of P2Y2 Purinergic Receptor Agonists on the
Fluid Secretion of Excised Rabbit Conjunctival Epithelium."
57. Sponsored Research Agreement between the Company and The Duke Eye
Research Institute dated October 18, 1999, concerning research in
accordance with its proposal entitled "The Effect of INS37217 on
Subretinal Fluid Reabsorption in the Rabbit."
58. Confidential Disclosure Agreement, dated September 24, 1999, between
the Company and ClinSites Pharmaceutical Development Associates, and
Agreement dated October 30, 1999, for monitoring, data management, and
biostatistics for an ophthalmic clinical trial.
- S13 -
<PAGE>
59. Agreement between the Company and Quintiles Laboratories Limited dated
October 27, 1999 for clinical chemistry, hematology, and urinalysis
for an ophthalmic clinical trial.
60. Agreements, dated December 14, 1998 and November 22, 1999, between the
Company and Aradigm Corporation related to feasibility testing of
INS365 using the AERx system.
61. Also see Item 1 under Section 2.5(c) of this Schedule 1.
62. Also see Items 1, 2, 3, 4, 5 and 6 under Section 2.5(d) of this
Schedule 1.
Section 2.18
None.
Section 2.20
The Company maintains a non-contributory 401(k) plan.
- S14 -
<PAGE>
EXHIBIT 10.22
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACTTHESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FROM TIME TO TIME (THE "1933 ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE 1933 ACT OR IN COMPLIANCE WITH RULE 144 UNDER THE 1933 ACT.
WARRANT AGREEMENT
To Purchase Shares of the Common Stock of
INSPIRE PHARMACEUTICALS, INC.
Dated as of December 17, 1999 (the "Effective Date")
WHEREAS, Inspire Pharmaceuticals, Inc., a Delaware corporation (the
"Company") has entered into a Series G Preferred Stock and Warrant Purchase
Agreement dated as of December 17, 1999 (the "Agreement"), with Genentech, Inc.,
a Delaware corporation, or its successors or assigns (the "Warrantholder"); and
WHEREAS, pursuant to the terms of the Agreement, the Company is required to
grant to Warrantholder the right to purchase certain shares of its Common Stock
(the "Warrant");
NOW, THEREFORE, in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.
-------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions set forth in this Warrant
Agreement, to subscribe to and purchase, from the Company, 444,444 fully paid
and non-assessable shares of the Company's Common Stock ("Common Stock") at a
purchase price of $4.50 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section
8.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for in this Warrant Agreement, the term of
this Warrant Agreement and the right to purchase Common Stock as granted in this
Warrant Agreement shall commence on the Effective Date and shall be exercisable
for a period of five (5) years.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
(a) Exercise. The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time, prior to the expiration of the term set forth in Section 2, by
tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and
executed. Promptly upon receipt of the Notice of Exercise, the payment of the
purchase price in accordance with the terms set
<PAGE>
forth below and execution of the Agreement to be Bound as provided in Section
3(c), and in no event later than ten (10) business days thereafter, the Company
shall issue to the Warrantholder a certificate for the number of shares of
Common Stock purchased and shall execute the Notice of Exercise indicating the
number of shares which remain subject to future purchases, if any.
(b) Payment of Exercise Price. The Exercise Price may be paid at the
Warrantholder's election either (i) by cash or check, or (ii) by surrender of
Warrants ("Net Issuance") as determined below. If the Warrantholder elects the
Net Issuance method, the Company will issue Common Stock in accordance with the
following formula:
X = Y(A-B)
------
A
Where:X = the number of shares of Common Stock to be issued to the
Warrantholder.
Y = the number of shares of Common Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used in this Section 2, current fair market value of Common Stock shall
mean with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public
offering, and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial "Price to
Public" specified in the final prospectus with respect to the offering;
(ii) if this Warrant is exercised after, and not in connection
with, the Company's initial public offering, and:
(A) if traded on a securities exchange or the Nasdaq National
Market System ("NASDAQ SYSTEM"), the fair market value shall be deemed to be the
average of the closing or last reported sale prices on such exchange or market
over a twenty-one (21) day period ending three days before the day the current
fair market value of the securities is being determined; or
(B) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked prices quoted on
the NASDAQ System (or similar system) over the twenty-one (21) day period ending
three days before the day the current fair market value of the securities is
being determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Common Stock shall be the highest price per share
which the Company could obtain from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by its Board of Directors, unless
the Company shall become subject to a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in which case the fair
market value of Common Stock shall be
2
<PAGE>
deemed to be the value received by the holders of the Company's Common Stock on
a common equivalent basis pursuant to such merger or acquisition.
(c) Agreement to be Bound to Stockholders' Agreement and Investors' Rights
Agreement. It shall be a condition to the Warrantholder's right to purchase
shares under this Warrant Agreement that the Warrantholder shall have executed
and delivered to the Company a counterpart of the Second Amended and Restated
Stockholders Agreement among the Company and certain of its stockholders dated
April 8, 1997, as amended (the "Stockholders' Agreement") pursuant to which the
Warrantholder shall be subject to all provisions therein applicable to holders
of Common Stock of the Company except Section 4 thereof relating to rights of
first refusal and co-sale, and a counterpart of the Investors' Rights Agreement,
as amended, among the Company and certain of its preferred stockholders dated
October 29, 1999 (the "Investors' Rights Agreement") pursuant to which the
Warrantholder shall be subject to all provisions therein applicable to holders
of Registrable Securities (as defined therein) that convert from the Series G
Stock.
(d) Reissue of Warrant After Partial Exercise. Upon partial exercise by
either cash or Net Issuance, the Company shall promptly issue an amended Warrant
Agreement representing the remaining number of shares purchasable hereunder. All
other terms and conditions of such amended Warrant Agreement shall be identical
to those contained herein, including, but not limited to the Effective Date
hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights to purchase Common Stock as provided for in this Warrant Agreement.
(b) Registration or Listing. If any shares of Common Stock required to be
reserved hereunder require registration with or approval of any governmental
authority under any Federal or state law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon exercise, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
3
<PAGE>
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Common Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's Common Stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation when the Company is not the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person (hereinafter referred to as a "Merger Event"), then, as part of
such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of Common Stock or other securities of the successor
corporation resulting from such Merger Event, equivalent in value to that which
would have been issuable if Warrantholder had exercised this Warrant immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Common Stock purchasable) shall be applicable to
the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Common Stock, the Exercise Price and number of
shares subject to purchase hereunder shall be proportionately decreased in the
case of a subdivision, or proportionately increased in the case of a
combination. Any adjustment under this Section 8(c) shall become effective at
the close of business on the date the subdivision or combination becomes
effective.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution of capital stock (except any
distribution specifically provided for in the foregoing subsections (a) or (b))
on the Company's Common Stock, then the Exercise Price shall be adjusted, from
and after the record date of such dividend or distribution, to that price
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction (i) the numerator of which shall be the total number
of all shares of the Company's Common Stock outstanding immediately prior to
such dividend or distribution, and (ii) the denominator of which shall be the
total number of all shares of the Company's Common Stock outstanding immediately
after such dividend or distribution. The Warrantholder shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock (calculated to the nearest whole share)
obtained by
4
<PAGE>
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock subject to this Warrant immediately prior
to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment. Any adjustment under this Section 8(d) shall
become effective at the close of business on the record date of such dividend,
or in the event that no record date is fixed, upon the making of such dividend.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) there shall be any Merger Event; or (iii) there shall be any
voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in connection with each such event, the Company shall send to the
Warrantholder: (A) at least twenty (20) days' prior written notice of the date
on which the books of the Company shall close or a record shall be taken for
such dividend, distribution, subscription rights (specifying the date on which
the holders of Common Stock shall be entitled thereto) or for determining rights
to vote in respect of such Merger Event, dissolution, liquidation or winding up;
and (B) in the case of any such Merger Event, dissolution, liquidation or
winding up, at least twenty (20) days' prior written notice of the date when the
same shall take place (and specifying the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such Merger Event, dissolution, liquidation or winding
up). In the case of a public offering, the Company shall give Warrantholder at
least twenty (20) days' written notice prior to the effective date of such
offering.
Each such written notice shall set forth, in reasonable detail: (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(f) Timely Notice. Failure to timely provide such notice required by
Section 8(e) shall entitle Warrantholder to retain the benefit of the applicable
notice period notwithstanding anything to the contrary contained in any
insufficient notice received by Warrantholder. The notice period shall begin on
the date Warrantholder actually receives a written notice containing all the
information specified above.
9. MISCELLANEOUS.
-------------
(a) Assignment; Binding Effect.
(i) This Warrant Agreement and all rights hereunder are
transferable in whole or in part by the Warrantholder to any person or entity
upon written notice to the Company. The transfer shall be recorded on the books
of the Company upon the surrender of this Warrant Agreement, with the Transfer
Notice attached as Exhibit III hereto duly executed, to the Company at its
principal offices. In the event of a partial transfer, the Company shall issue
to the Warrantholders one or more appropriate new Warrant Agreements.
(ii) Except as otherwise provided herein, the terms and conditions
of this Warrant Agreement shall inure to the benefit of and be binding upon the
respective successors and permitted assigns of the parties (including
transferees of the warrant). Nothing in this Warrant Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective
5
<PAGE>
successors and permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Warrant Agreement, except as expressly
provided in this Warrant Agreement.
(b) Governing Law. This Warrant Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of law.
(c) Counterparts. This Warrant Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Captions. The captions used in this Warrant Agreement are for
convenience only and are not to be considered in construing or interpreting this
Warrant Agreement.
(e) Notices. Any notice or request required or permitted to be
given under or in connection with this Warrant Agreement shall be deemed to have
been sufficiently given if in writing and personally delivered or sent by
certified mail (return receipt requested), facsimile transmission (receipt
verified), or overnight express courier service (signature required), prepaid,
to the party for which such notice is intended, at the address set forth for
such party below:
(i) In the case of the Company, to:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703
Attention: Christy L. Shaffer, Ph.D.
Facsimile No.: (919) 941-9797
(ii) In the case of the Warrantholder, to:
Genentech, Inc.
1 DNA Way, Mailstop 49
South San Francisco, California 94080
Attention: Corporate Secretary
Facsimile No.: (650) 952-9881
or to such other address for such party as it shall have specified by like
notice to the other party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery shall be deemed to be the next business day after such notice
or request was deposited with such service. If sent by certified mail, the date
of delivery shall be deemed to be the fifth business day after such notice or
request was deposited with the U.S. Postal Service.
(f) Remedies. In the event of any default under this Warrant Agreement,
the non-defaulting party may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including but not limited to an action
for damages as a result of any such default, and/or an action for specific
performance for any default where Warrantholder will not have an adequate remedy
at law and where damages will not be readily ascertainable. The Company
expressly agrees that it shall not oppose an application by the Warrantholder or
any other person entitled to the benefit of this Warrant Agreement
6
<PAGE>
requiring specific performance of any or all provisions hereof or enjoining the
Company from continuing to commit any such breach of this Warrant Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Certificate of Incorporation or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant Agreement, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate in order to
protect the rights of the Warrantholder against impairment.
(h) Amendments and Waivers. Except as otherwise expressly set forth in
this Warrant Agreement, any term of this Warrant Agreement may be amended and
the observance of any term of this Warrant Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Warrantholder.
No waivers of or exceptions to any term, condition or provision of this Warrant
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
(i) Severability. If one or more provisions of this Warrant Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant Agreement and the balance of the Warrant Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
(j) Entire Agreement. This Warrant Agreement and the documents referred
to herein constitute the entire agreement among the parties and no party shall
be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
* * *
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: INSPIRE PHARMACEUTICALS, INC.
By: /s/ Christy L. Shaffer
-----------------------------------
Name: Christy L. Shaffer, Ph.D.
----------------------------------
Title: President and CEO
---------------------------------
Warrantholder: GENENTECH, INC.
By: /s/ Arthur D. Levinson
------------------------------------
Name: Arthur D. Levinson, Ph.D.
Title: President and Chairman of the Board
8
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: Inspire Pharmaceuticals, Inc.:
(1) The undersigned Warrantholder hereby elects to purchase _____ shares of the
Common Stock of Inspire Pharmaceuticals, Inc. pursuant to the terms of the
Warrant Agreement dated December 17, 1999 (the "Warrant Agreement") between
Inspire Pharmaceuticals, Inc. and the Warrantholder, and tenders herewith
payment of the purchase price for such shares in full, together with all
applicable transfer taxes, if any.
(2) In connection with the exercise of its rights to purchase the Common Stock
of Inspire Pharmaceuticals, Inc., the undersigned hereby makes the
following representations and warranties:
(a) Investment Purpose. The right to acquire Common Stock or the Common
Stock issuable upon exercise of the Warrantholder's rights contained
in the Warrant Agreement will be acquired for investment and not with
a view to the sale or distribution of any part thereof, and the
Warrantholder has no present intention of selling or engaging in any
public distribution of the same except pursuant to a registration or
exemption.
(b) Private Issue. The Warrantholder understands (i) that the Common
Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on
the ground that the issuance contemplated by this Warrant Agreement
will be exempt from the registration and qualifications requirements
thereof, and (ii) that the Company's reliance on such exemption is
predicated on the representations set forth in this Section.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire
Common Stock or Common Stock issuable upon exercise of such rights
unless and until (i) it shall have notified the Company of the
proposed disposition, and (ii) if requested by the Company, it shall
have furnished the Company with an opinion of counsel (which counsel
may either be inside or outside counsel to the Warrantholder)
satisfactory to the Company and its counsel to the effect that (A)
appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the
1933 Act has been taken, or (B) an exemption from the registration
requirements of the 1933 Act is available. The Company agrees that an
opinion of counsel will not be required for sales made in accordance
with Rule 144, except in unusual circumstances. Notwithstanding the
foregoing, the restrictions imposed upon the transferability of any of
its rights to acquire Common Stock or Common Stock issuable on the
exercise of such rights do not apply to transfers from the beneficial
owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any
particular share of Common Stock when (1) such security shall have
been effectively registered under the 1933 Act and sold by the holder
thereof in accordance with such registration or (2) such security
shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the
Warrantholder at its request by the staff of the Securities and
Exchange Commission or a
9
<PAGE>
ruling shall have been issued to the Warrantholders at its request by
such Commission stating that no action shall be recommended by such
staff or taken by such Commission, as the case may be, if such
security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and
such letter or ruling specifies that no subsequent restrictions on
transfer are required. Whenever the restrictions imposed hereunder
shall terminate, as provided in this Section, the Warrantholder or
holder of a share of Common Stock then outstanding as to which such
restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates
for the Warrant or for such shares of Common Stock not bearing any
restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the
economic risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to
Section 15(d) of the Securities Exchange Act of 1934, as amended from
time to time, or if a registration statement covering the securities
under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Common Stock pursuant to this Warrant Agreement, or
(ii) the Common Stock issuable upon exercise of the right to purchase,
it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Common Stock in reliance upon Rule 144 under
the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(3) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below.
Name:________________________________________
Address: ____________________________________
_____________________________________________
Warrantholder: GENENTECH, INC.
By: _____________________________________________
Name: ___________________________________________
Title: __________________________________________
Date: ___________________________________________
10
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ________, _________, hereby acknowledge receipt of the
"Notice of Exercise" from to purchase _____ shares of the Common Stock of
Inspire Pharmaceuticals, Inc. pursuant to the terms of the Warrant Agreement,
and further acknowledges that _____ shares remain subject to purchase under the
terms of the Warrant Agreement.
INSPIRE PHARMACEUTICALS, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
11
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to:
Print Name: ______________________________________
Address: _________________________________________
__________________________________________________
Dated: ___________________________________________
Holder's Signature: ______________________________
Holder's Address: ________________________________
__________________________________________________
Signature Guaranteed: ____________________________
NOTE: The signature to this transfer notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
12
<PAGE>
EXHIBIT 10.23
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
INSPIRE PHARMACEUTICALS, INC.
December 17, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Participation Rights............................................................................... 2
1.1 Definitions............................................................................... 2
1.2 Participation Right....................................................................... 2
1.3 Exercise of Right......................................................................... 3
1.4 Overallotment............................................................................. 3
1.5 Closing................................................................................... 3
1.6 Failure to Exercise Right................................................................. 4
2. Registration Rights................................................................................ 4
2.1 Definitions............................................................................... 4
2.2 Demand Registration....................................................................... 5
2.3 "Piggy-Back" Registration................................................................. 7
2.4 Form S-3 Registration..................................................................... 9
2.5 Obligations of the Company................................................................ 10
2.6 Furnish Information....................................................................... 11
2.7 Expenses of Demand and S-3 Registrations.................................................. 11
2.8 Expenses of "Piggy-Back" Registration..................................................... 12
2.9 Delay of Registration..................................................................... 12
2.10 Indemnification........................................................................... 12
2.11 Reports Under Securities Exchange Act of 1934............................................. 14
2.12 "Market Stand-Off" Agreement.............................................................. 15
2.13 Termination of Registration Rights........................................................ 16
3. Transfers of Certain Rights........................................................................ 16
3.1 Transfer Restriction...................................................................... 16
3.2 Re-transfers.............................................................................. 16
3.3 Legend.................................................................................... 16
4. General............................................................................................ 16
4.1 Notices................................................................................... 16
4.2 Termination of this Agreement............................................................. 17
4.3 Entire Agreement.......................................................................... 17
4.4 Amendments and Waivers.................................................................... 17
4.5 Counterparts.............................................................................. 18
4.6 Captions.................................................................................. 18
4.7 Severability.............................................................................. 18
4.8 Governing Law............................................................................. 18
</TABLE>
<PAGE>
AMENDED AND RESTATED
--------------------
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT made as of December
17, 1999, is entered into by and among Inspire Pharmaceuticals, Inc. (the
"Company"), a Delaware corporation, and those investors identified on Schedule 1
----------
attached hereto (and any subsequent amendment thereto) (individually, an
"Investor" and collectively, the "Investors").
PRELIMINARY STATEMENTS
----------------------
A. The Company and the Investors who acquired Series A Preferred Stock,
$0.001 par value, of the Company (the "Series A Stock"), and/or warrants
therefor (the "Series A Warrants"), and are identified as "Series A Investors"
on Schedule 1 attached hereto (the "Series A Investors"), and the Investors who
----------
acquired Series B Preferred Stock, $0.001 par value, of the Company (the "Series
B Stock"), and/or warrants therefor (the "Series B Warrants"), and are
identified as "Series B Investors" on Schedule 1 attached hereto (the "Series B
----------
Investors"), and the Investors who acquired Series E Preferred Stock, $0.001 par
value, of the Company (the "Series E Stock") and are identified as "Series E
Investors" on Schedule 1 attached hereto (the "Series E Investors") are parties
----------
to that certain Amended and Restated Investors' Rights Agreement dated as of
October 29, 1999 (the "Existing Investors' Rights Agreement").
B. The Company and the Investor identified as the "Series G Investor" on
Schedule 1 attached hereto (the "Series G Investor") are parties to that certain
- ----------
Series G Stock and Warrant Purchase Agreement dated December __, 1999 (the
"Series G Agreement") pursuant to which such Investor has purchased shares of
Series G Preferred Stock, $0.001 par value, of the Company (the "Series G
Stock") and warrants (the "Common Stock Warrants") exercisable for the
acquisition of shares of Common Stock.
C. In order to induce the Series G Investor to enter into and consummate
the transactions contemplated under the Series G Agreement, the Company and the
Series A Investors, Series B Investors and Series E Investors have agreed to
amend certain rights granted to such Investors pursuant to the Existing
Investors' Rights Agreement, and have agreed to amend and restate the Existing
Investors Rights Agreement to include the granting of certain rights to the
Series G Investor.
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth and other good and valuable consideration, the
parties hereto hereby agree as follows:
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<PAGE>
1. Participation Rights.
--------------------
1.1 Definitions.
-----------
(a) "New Securities" shall mean (i) any capital stock of the Company
--------------
whether or not currently authorized, (ii) all rights, options, or warrants to
purchase capital stock, and (iii) all securities of any type whatsoever that
are, or may become, convertible into capital stock; provided, however, that the
-------- -------
term "New Securities" shall not include (a) the Series A Stock or shares of
preferred stock, par value $0.001 per share, of the Company ("Preferred Stock")
or Common Stock, par value $0.001 per share of the Company ("Common Stock")
directly or indirectly issuable upon the conversion of the Series A Stock; (b)
the Series B Stock or shares of Common Stock or shares of Preferred Stock or
Common Stock directly or indirectly issuable upon conversion of the Series B
Stock; (c) the Series E Stock or shares of Common Stock directly or indirectly
issuable upon conversion of the Series E Stock; (d) shares of Common Stock
designated by vote of the Board of Directors of the Company, or options to
purchase such shares, that are issued or granted to employees or consultants of
the Company; (e) securities offered to the public pursuant to a registration
statement filed with the Securities and Exchange Commission; (f) securities
issued as a result of any stock split, stock dividend, or reclassification of
Common Stock, distributable on a pro rata basis to all holders of Common Stock;
(g) securities reissued to employees or consultants of the Company following the
Company's acquisition of such securities pursuant to restricted stock
arrangements with individuals who have terminated their relationship with the
Company or shares subject to options which are not exercised; and (h) securities
issued in connection with strategic alliances, joint ventures or partnerships,
or in connection with the licensing or acquisition by the Corporation of
technology or intellectual property, each as approved by the Board of Directors
of the Company.
(b) "Participation Rights Holder" shall include, for the purposes of
---------------------------
this Section 1, the Series A Investors, Series B Investors and Series E
Investors, as well as the general partners, officers, or other affiliates of
such Series A Investor, Series B Investor and Series E Investor, and a
Participation Rights Holder may apportion its pro rata share among itself and
such general partners, officers, and other affiliates in such proportions as it
deems appropriate.
1.2 Participation Right. Each Participation Rights Holder shall be
-------------------
entitled to a right to purchase, on a pro rata basis, all or any part of New
Securities which the Company may, from time to time, propose to sell and issue,
subject to the terms and conditions set forth below. Such Participation Rights
Holder's pro rata share shall equal a fraction of the New Securities being
issued, the numerator of which is the number of shares of Common Stock issued or
issuable upon conversion of the Series A Stock, Series B Stock, Series E Stock
or other Preferred Stock issued on conversion of Series A Stock, Series B Stock
or Series E Stock then held by a holder of Series A Stock, Series B Stock,
Series E Stock or other Preferred Stock issued on conversion of Series A Stock,
Series B Stock or Series E Stock, and the denominator of which is the total
number of shares of Common Stock then outstanding plus the number of shares of
Common Stock issuable
-2-
<PAGE>
upon conversion of then outstanding Series A Stock, Series B Stock, Series E
Stock, Preferred Stock, or other convertible securities or on exercise of then
outstanding options, rights or warrants.
1.3 Exercise of Right. In the event the Company intends to issue New
-----------------
Securities, it shall give each Participation Rights Holder written notice of
such intention, describing the type of New Securities to be issued, the price
thereof, and the general terms upon which the Company proposes to effect such
issuance (the "Sale Notice"). Each Participation Rights Holder shall have twenty
(20) days from the date of any Sale Notice to agree to purchase all or part of
its pro rata share of such New Securities for the price and upon the general
terms and conditions specified in the Sale Notice by giving written notice to
the Company stating the quantity of New Securities to be so purchased ("Exercise
Notice"), provided, however, that in the event that the transaction described in
-------- -------
a Sale Notice involves in whole or in part the payment of non-cash
consideration, or the payment of consideration over time, the Participation
Rights Holders shall have the right to elect, upon exercise of their rights set
forth in this Section 1, to pay to the Company in full consideration for the New
Securities the market price of such securities which shall be the present cash
value of the consideration described in the Sale Notice as determined by the
Board of Directors of the Company in good faith.
1.4 Overallotment. In the event any Participation Rights Holder fails to
-------------
exercise its right to purchase its pro rata share of New Securities, each
Participation Rights Holder who delivered an Exercise Notice for such
Participation Rights Holder's total pro rata share of New Securities (an
"Overallotment Participation Rights Holder") shall have a right to purchase such
Overallotment Participation Rights Holder's pro rata share of the New Securities
with respect to which Participation Rights Holders have failed to exercise their
rights hereunder ("Remaining New Securities"). In such case, within twenty five
(25) days after the delivery of the Sale Notice, the Company shall provide
written notice ("Overallotment Notice") to each Overallotment Participation
Rights Holder, which shall state the total amount of Remaining New Securities,
and the pro rata portion of such Remaining New Securities which each
Overallotment Participation Rights Holder is entitled to purchase. Each
Overallotment Participation Rights Holder wishing to purchase such Remaining
Securities shall amend such Overallotment Participation Rights Holder's Exercise
Notice in writing within five (5) days from the date of delivery of the
Overallotment Notice. For the purpose of this Section 1.4, an Overallotment
Participation Rights Holder's pro rata share of the Remaining New Securities
shall be calculated as provided in Section 1.2, except that the denominator of
the fraction shall be the total number of shares of Common Stock issued or
issuable upon conversion of Series A Stock, Series B Stock or Series E Stock
held by all of the Overallotment Participation Rights Holders but shall exclude
shares of Common Stock issuable on conversion of other Preferred Stock or other
convertible securities or on exercise of options, rights or warrants.
1.5 Closing. The closing of the purchase of New Securities by the
-------
Participation Rights Holders exercising their rights hereunder ("Participating
Participation Rights Holders") shall take place at such location, date and time
as the
-3-
<PAGE>
parties shall agree but not later than the later of (i) forty (40) days
following the delivery of the Sale Notice, or (ii) ten (10) days following the
delivery of the Overallotment Notice. At the closing, the Company shall deliver
to the Participating Participation Rights Holders (i) certificates representing
all of the New Securities to be purchased, and (ii) such other agreements
executed by the Company which grant any rights or privileges to the
Participating Participation Rights Holders as are being granted to the other
purchasers in such issuance, and in any event, at the request of the
Participating Participation Rights Holders, a duly executed certificate
reasonably satisfactory to the Participating Participation Rights Holders
containing a representation and warranty that, upon issuance or transfer of such
securities to the Participating Participation Rights Holders that the
Participating Participation Rights Holders will be the legal and beneficial
owners of such securities with good title thereto, free and clear of all
mortgages, liens, charges, security interests, adverse claims, pledges,
encumbrances and demands whatsoever, and that the Company has the absolute right
to issue or transfer such securities to the Participating Participation Rights
Holders without the consent or approval of any other person. At the closing, the
Participating Participation Rights Holders shall deliver to the Company (i)
payment for the New Securities, and (ii) such other agreements executed by the
other purchasers in such issuance which include representations by such
purchasers to the Company or restrict such purchaser's rights with respect to
the New Securities, and in any event, at the request of the Company, a duly
executed certificate reasonably satisfactory to the Company containing such
representations and warranties of the Participating Participation Rights Holders
with respect to federal and state securities laws. The certificates representing
the equity securities may contain a legend stating that they are issued subject
to the registration requirements of the Act, as amended, and applicable state
securities laws.
1.6 Failure to Exercise Right. In the event the Participation Rights
-------------------------
Holders fail to exercise the foregoing participation right with respect to any
New Securities within the periods specified by Sections 1.3 and 1.4 above, the
Company may within one hundred and twenty (120) days after the delivery of the
Sale Notice sell any or all of such New Securities not agreed to be purchased by
the Participation Rights Holders, at a price and upon general terms no more
favorable to the Participation Rights Holders thereof than specified in the Sale
Notice. In the event the Company has not sold such New Securities within such
120-day period, the Company shall not thereafter issue or sell any New
Securities without first offering such New Securities to the Participation
Rights Holders in the manner provided in Section 1.3
2. Registration Rights. The Company covenants and agrees as follows:
-------------------
2.1 Definitions. As used in this Section 2, the following terms
-----------
shall have the following meanings:
(a) "Act" means the Securities Act of 1933, as amended.
---
(b) "Form S-1" means such form under the Act as in effect on the
date hereof, or any registration form under the Act subsequently adopted by the
SEC which
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<PAGE>
permits the registration of securities under the Act for which no other form is
authorized or prescribed.
(c) "Form S-3" means such form under the Act as in effect on
--------
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC, including but
not limited to Form A and Form B, as proposed to be adopted by the SEC and as
described in Securities Act Release No. 33-7606.
(d) "Holder" means (i) an Investor and any persons or entities
------
to whom the rights granted under this Section 2 are transferred by the Investor
and (ii) their successors or assigns as permitted under Section 3 below.
(e) "Investor" shall include those investors listed on the
--------
Schedule of Investors, annexed hereto as Schedule 1.
- ---------------------
(f) "1934 Act" shall mean the Securities Exchange Act of 1934,
--------
as amended.
(g) The terms "register," "registered," and "registration"
-------- ---------- ------------
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(h) "Registrable Securities" means (i) the Common Stock issuable
----------------------
or issued upon conversion of the Series A Stock, Series B Stock, Series E Stock,
Series G Stock or other Preferred Stock issued upon conversion of the Series A
Stock, Series B Stock, Series E Stock or Series G Stock, including the Common
Stock issuable or issued upon conversion of the Series A Stock and Series B
Stock issued upon exercise of the Series A Warrants and the Series B Warrants,
(ii) any Common Stock issued upon exercise of the Common Stock Warrants which
shall be deemed to be included as Registrable Securities issued upon conversion
of the Series G Stock for purposes of calculating the holders of Registrable
Securities issued from the Series G Stock, (iii) any Common Stock issued
pursuant to the Series G Agreement and (iv) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right, or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the shares referenced in (i), (ii)
or (iii) above, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which the rights under this Section 2 are not
properly assigned.
(i) "Outstanding Registrable Securities" shall mean the number
----------------------------------
of shares of Common Stock outstanding that are, and the number of shares of
Common Stock issuable pursuant to then exercisable or convertible securities
which are, Registrable Securities.
-5-
<PAGE>
(j) "SEC" shall mean the Securities and Exchange Commission.
---
2.2 Demand Registration.
-------------------
(a) If the Company shall receive (i) at any time after March 10,
2000, a written notice from the Holders of at least fifty percent (50%) of the
Outstanding Registrable Securities issued or issuable upon the conversion of the
Series A Stock or other Preferred Stock issued upon conversion of the Series A
Stock, or issued as a dividend or distribution with respect thereto, or (ii) at
any time after April 8, 2002, a written notice from the holders of at least
fifty percent (50%) of the Outstanding Registrable Securities issued or issuable
upon the conversion of the Series A Stock or Series B Stock or other Preferred
Stock issued upon conversion of the Series A Stock or Series B Stock, or issued
as a dividend or distribution with respect thereto, or (iii) at any time after
December 31, 2002, a written notice from the Holders of at least fifty percent
(50%) of the Outstanding Registrable Securities issued upon conversion of any
two of the following series of Preferred Stock: the Series A Stock, Series B
Stock, Series E Stock, Series G Stock or other Preferred Stock issued or
issuable upon conversion of the Series A Stock, Series B Stock, Series E Stock
or Series G Stock, or issued as a dividend or distribution with respect thereto,
requesting that the Company effect a registration statement under the Act
covering the registration of all or part of the Registrable Securities having an
aggregate offering price to the public of not less than $5,000,000, then the
Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event within
ninety (90) days of the receipt of such request, the registration under the Act
of all Registrable Securities which the Holders request to be registered,
subject to the limitations of Section 2.2(b), by notice to the Company within
thirty (30) days of the mailing of such notice by the Company in accordance with
Section 2.2(a)(i).
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request pursuant to Section 2.2(a) and the Company shall
include such information in the written notice referred to in Section 2.2(a).
The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include Registrable Securities in such registration
shall be conditioned upon such Holder's participating in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 2.5(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this
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<PAGE>
Section 2.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated first amongst all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
-------- -------
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting registration pursuant to this Section 2.2, a certificate
signed by the Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for a registration statement to
be filed and it is therefore essential to defer the filing of such registration
statement, the Company shall have the right to defer taking action with respect
to such filing for a period of not more than one hundred twenty (120) days after
receipt of the request of the Initiating Holders.
(d) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 2.2
after the Company has effected two (2) registrations on Form S-1 or its then
equivalent pursuant to this Section 2.2 and such registration statement has been
declared or ordered effective and the sales of Registrable Securities under such
registration statement have closed.
(e) The company shall not be obligated to effect, or to take any
action to effect, any registration pursuant to this Section 2.2 during the one
hundred eighty (180) day period commencing with the date of the Company's
initial public offering.
(f) No incidental right under this Section 2.2 shall be
construed to limit any registration required under Section 2.3 or Section 2.4
herein.
2.3 "Piggy-Back" Registration.
------------------------
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its stock or other
securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a stock plan, a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities, or a registration on Form S-4 (or any successor form) relating
solely to a transaction pursuant to the SEC's Rule 145), the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the
-7-
<PAGE>
Company in accordance with Section 4.2, the Company shall, subject to the
provisions of Section 2.3(b), cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
(b) In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required under
this Section 2.3 to include any of the Holders' securities in such underwriting
unless they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities to be sold (other than by the Company)
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering; provided, however, there shall first be excluded
-------- -------
from such registration statement all shares of Common Stock sought to be
included therein by (i) any director, consultant, officer, or employee of the
Company or any subsidiary, and (ii) stockholders exercising any contractual or
incidental registration rights subordinate and junior to the rights of the
Holders of Registrable Securities. If after such shares are excluded, the
underwriters shall determine in their sole discretion that the number of
securities which remain to be included in the offering exceeds the amount of
securities to be sold that the underwriters determine is compatible with the
success of the offering, then the Registrable Securities to be included, if any,
shall be apportioned pro rata among the Holders providing notice of their desire
to participate in the offering according to the total amount of securities
entitled to be included therein owned by each selling Holder or in such other
proportions as shall mutually be agreed to by such Holders; provided, however,
-------- -------
there shall first be excluded from such registration statement all shares of
Common Stock sought to be included therein which are issued or issuable upon
conversion of the Series D Stock; provided, further there shall next be excluded
-------- -------
from such registration all shares of Common Stock sought to be included therein
which are issued or issuable upon conversion of the Series C Stock; and
provided, further, only after all shares of Common Stock issued or issuable upon
- -------- -------
conversion of the Series C Stock and Series D Stock have been excluded from such
registration shall any shares of Common Stock sought to be included therein
which are issued or issuable upon conversion of the Series A Stock, Series B
Stock, Series E Stock or Series G Stock be excluded. For purposes of the
preceding sentence concerning apportionment, for any selling Holder which is a
partnership, limited liability company or corporation, the partners, retired
partners, members, former members, stockholders, parent or subsidiary of such
Holder, or the estates and family members of any such partners, retired
partners, members, former members and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling Holder," and any pro-
rata reduction with respect to such "selling Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "selling Holder," as defined in this sentence.
-8-
<PAGE>
(c) No incidental right under this Section 2.3 shall be
construed to limit any registration required under Section 2.2 or Section 2.4
herein.
2.4 Form S-3 Registration. In case the Company shall receive from any
---------------------
Holder or Holders of (i) at least fifty percent (50%) of the Common Stock issued
or issuable upon conversion of the Series A Stock; (ii) at least fifty percent
(50%) of the Common Stock issued or issuable upon conversion of the Series B
Stock; (iii) at least fifty percent (50%) of the Common Stock issued or issuable
upon conversion of the Series E Stock; or (iv) at least fifty percent (50%) of
the Common Stock issued or issuable upon conversion of the Series G Stock, a
written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company agrees:
(a) to promptly give written notice of the proposed registration
and any related qualification or compliance, to all other Holders;
(b) as soon as practicable after receiving such a request, to
effect such registration and all such qualifications and compliances as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as are
specified in a written request given within fifteen (15) days after receipt of
such written notice from the Company; provided, however, that the Company shall
-------- -------
not be obligated to effect any such registration, qualification, or compliance
pursuant to this Section 2.4: (i) if Form S-3 is not available for such offering
by the Holders; (ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $500,000; (iii) if the Company shall furnish to
the Holders making a request a certificate signed by the Chief Executive Officer
of the Company stating that in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than ninety (90) days after
receipt of the request of the Holder or Holders under this Section 2.4;
provided, however, that the Company shall not utilize this right with respect to
- -------- -------
any one request more than once in any six (6) month period and provided further
-------- -------
that no Holder or Holders shall be entitled to make a request for registration
pursuant to this Section 2.4 during any such period of deferment; or (iv) until
the next calendar year if the Company has effected two (2) registrations on Form
S-3 (or its then equivalent) pursuant to this Section 2.4 in a calendar year and
such registrations have been declared or ordered effective and the sales of
Registrable Securities under such registration statement have closed.
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<PAGE>
(c) Registrations effected pursuant to this Section 2.4 shall
not be counted as demands for registration or registrations effected pursuant to
Sections 2.2 or 2.3, respectively.
2.5 Obligations of the Company. Whenever required under this Section
--------------------------
2 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible (but subject to providing counsel to the
Holders with a reasonable opportunity to review and comment on all documents):
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such
-------- -------
120-day period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company,
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (i) includes any prospectus required by
Section 10(a)(3) of the Act, or (ii) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (i) and (ii) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement in accordance with each Holder's intended method
of disposition.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by the
Holders.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders and
any managing underwriter; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of
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<PAGE>
process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Promptly notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act as a result of the happening
of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such Securities
are being sold through underwriters, copies of (i) the opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration given to the underwriters in such underwritten public offering,
which opinion shall be in such form as is reasonably satisfactory to counsel to
the underwriters, and (ii) the letter dated as of such date, from the
independent certified public accountants of the Company, to the underwriters in
such underwritten public offering, addressed to the underwriters, which letter
shall be in such form as is reasonably satisfactory to counsel to the
underwriters.
2.6 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
2.7 Expenses of Demand and S-3 Registrations. The Company shall pay
all expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings, or qualifications pursuant to Sections
2.2 and 2.4, including without
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<PAGE>
limitation (i) all registration, filing, and qualification fees (including, but
not limited to, filing fees with the SEC, fees due to the National Association
of Securities Dealers and fees due for listing on any stock exchange or for
qualifying for quotation on the Nasdaq system; (ii) printers and accounting
fees; (iii) fees and disbursements of counsel selected by the Company; and (iv)
the reasonable fees and disbursements of one counsel for the selling Holders;
provided, however, that the Company shall not be required to pay for any
- -------- -------
expenses of any registration proceeding begun pursuant to Section 2.2 or 2.4 if
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered (in which case all
Holders participating in the registration shall bear such expenses), unless the
Holders of a majority of the Registrable Securities agree to forfeit their
rights to one registration during the applicable period under, as the case may
be, Section 2.2 (demand registration) or Section 2.4 (S-3 registration);
provided further, however, that if at the time of such withdrawal, the Holders
- -------- ------- -------
have either (i) learned of a material adverse change in the conditions,
business, or prospects of the Company from that known to the Holders at the time
of their request or (ii) been informed by the underwriters of such registration
that more than 20% of the Registrable Securities requested for registration
shall not be includable therein due to market factors, and in either such case
the Holders have withdrawn the request with reasonable promptness following such
disclosure, then the Holders shall not be required to pay such expenses and
shall retain their rights pursuant to Sections 2.2 and 2.4.
2.8 Expenses of "Piggy-Back" Registration. The Company shall pay all
-------------------------------------
expenses incurred in connection with any registration, filing, or qualification
of Registrable Securities with respect to the registrations pursuant to Section
2.3 for each Holder, including without limitation all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto, and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to the Registrable Securities.
2.9 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.10 Indemnification. In the event any Registrable Securities are included
---------------
in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder, and each person (if any) who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act, or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions, or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement of a
material fact contained in such
-12-
<PAGE>
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities law, or any rule or regulation promulgated under the Act, the
1934 Act, or any state securities law; and the Company will pay to each such
Holder, underwriter, or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 2.10(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter, or
controlling person.
(b) To the extent permitted by law, each selling Holder severally and
not jointly will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each person (if
any) who controls the Company within the meaning of the Act, any underwriter,
any other Holder selling securities in such registration statement, and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this Section 2.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
-------- -------
in this Section 2.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; and further provided that in no event shall any indemnity under this
Section 2.10(b) exceed the gross proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, similarly
noticed, to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party (together with all
-------- -------
-13-
<PAGE>
other indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel and participate in
the defense, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.10.
(d) If the indemnification provided for in this Section 2.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and of the indemnified party, on the other,
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control. Notwithstanding the foregoing, the failure of the underwriting
agreement to address an issue covered by this agreement shall not be deemed to
be a conflict.
(f) The obligations of the Company and Holders under this Section
2.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 2, and otherwise.
2.11 Reports Under Securities Exchange Act of 1934. With a view to making
---------------------------------------------
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or suppressant
to a registration on Form S-3, the Company agrees to use its best efforts:
-14-
<PAGE>
(a) to make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) to take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) to file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) to furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
2.12 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
----------------------------
during the period of duration (not to exceed one hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Act, such Investor shall not, to the extent requested by
the Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase, or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any securities of the Company held by it at any
time during such period except Common Stock included in such registration;
provided, however, that all officers, directors and holders of 10% of the
- -------- -------
outstanding shares of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
an Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 2.12 shall not apply to a registration relating solely to employee
benefit plans on Form S-
-15-
<PAGE>
1 or Form S-8 or similar forms which may be promulgated in the future, or a
registration relating solely to an SEC Rule 145 transaction on Form S-4 or
similar forms which may be promulgated in the future.
2.13 Termination of Registration Rights. No Holder shall be entitled to
----------------------------------
exercise any right provided for in this Section 2 after five (5) years following
the consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public.
3. Transfers of Certain Rights.
---------------------------
3.1 Transfer Restriction. The rights granted to the Investors may be
--------------------
transferred or succeeded to only by (i) any other Investor or any general or
limited partner, officer, parent or subsidiary corporation or other affiliate of
any Investor, or (ii) any other person or entity that acquires at least five
percent (5%) of the Registrable Shares, or (iii) who acquires at least 25% of
the Series G Stock or 25% of the Registrable Shares issued or issuable upon the
conversion of the Series G Stock; provided, however, that the Company is given
written notice by the transferee at the time of such transfer stating the name
and address of the transferee and identifying the securities with respect to
which such rights are being assigned.
3.2 Re-transfers. A transferee to whom rights are transferred pursuant to
------------
this Section 3 may not again transfer such rights to any other person or entity,
other than as provided in Section 3.1 above.
3.3 Legend. Each certificate representing the shares of Series A Stock,
------
Series B Stock, Series E Stock and Series G Stock shall bear a legend indicating
that any holder of the Series A Stock, Series B Stock, Series E Stock and Series
G Stock shall be subject to this Agreement.
4. General.
-------
4.1 Notices. All notices, requests, consents and other communications
-------
under this Agreement shall be in writing and shall be delivered by hand, by
telecopier, by overnight mail or mailed by first class certified or registered
mail, return receipt requested, postage prepaid:
If to the Company:
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard
Suite 470
Durham, N.C. 27703
Attention: President
-16-
<PAGE>
(or at such other address as may have been furnished in writing to the Investors
by the Company)
with a copy to:
Diane M. Frenier, Esq.
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, NJ 08540-6636
If to an Investor or a Holder, as applicable, at its address set forth on
Schedule 1 to this Agreement (or at such other address as may have been
furnished in writing to the Company by such Investor).
Notices provided in accordance with this Section 4.1 shall be deemed delivered
upon personal delivery, receipt by telecopy or overnight mail, or 48 hours after
deposit in the mail in accordance with the above.
4.2 Termination of this Agreement. Section 1 of this Agreement shall
-----------------------------
terminate and shall be of no further force and effect upon the conversion of all
outstanding shares of Series A Stock, Series B Stock and Series E Stock (or any
shares of other preferred stock issued upon the conversion of Series A Stock,
Series B Stock or Series E Stock) into Common Stock pursuant to the Company's
Restated Certificate of Incorporation. This Agreement shall terminate in its
entirety upon the termination of registration rights pursuant to Section 2,
except that Sections 2.10 and 4.8 shall survive such termination.
4.3 Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter, including without limitation, the Existing Investors' Rights
Agreement.
4.4 Amendments and Waivers. Except as otherwise expressly set forth in
----------------------
this Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) as follows:
(a) With respect to Section 1, with the written consent of the
Company and fifty percent (50%) of the Participation Rights Holders, calculated
based on the number of shares of Preferred Stock included in each Participation
Rights Holder's participation rights pursuant to Section 1.
(b) With respect to Section 2, with the written consent of the
Company and the Holders of not less than fifty percent (50%) of the Registrable
Shares.
-17-
<PAGE>
(c) With respect to Sections 3 and 4, with the written consent of the
Company and not less than fifty percent (50%) of the Holders, calculated based
on the number of shares of Registrable Securities held by each such Holders,
except that any amendment of any provision of this Section 4.4 shall require the
consent of at least fifty percent (50%) of the Participation Rights Holders,
Holders of Registrable Shares, as the case may be, required in such provision.
No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
4.5 Counterparts. this Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
4.6 Captions. The captions of the sections, subsections and paragraphs of
--------
this Agreement have been added for convenience only and shall not be deemed to
be a part of this Agreement.
4.7 Severability. Each provision of this Agreement shall be interpreted in
------------
such manner as to validate and give effect thereto to the fullest lawful extent,
but if any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable under applicable law, such provision
shall be ineffective only to the extent so determined and such invalidity or
unenforceability shall not affect the remainder of such provision or the
remaining provisions of this Agreement.
4.8 Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of Delaware.
* * *
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY
-------
INSPIRE PHARMACEUTICALS, INC.
By: /s/ Christy L. Shaffer
--------------------------------------
Christy L. Shaffer, Ph.D.
President and Chief Executive Officer
INVESTORS
---------
DOMAIN PARTNERS III, L.P.
BY: ONE PALMER SQUARE ASSOCIATES
BY: /s/ Kathleen K. Shoemaker
------------------------------------
NAME: Kathleen K. Shoemaker
------------------------------------
TITLE: General Partner
------------------------------------
DP III ASSOCIATES, L.P.
BY: ONE PALMER SQUARE ASSOCIATES
BY: /s/ Kathleen K. Shoemaker
------------------------------------
NAME: Kathleen K. Shoemaker
------------------------------------
TITLE: General Partner
------------------------------------
<PAGE>
BIOTECHNOLOGY INVESTMENTS LIMITED
BY: OLD COURT LIMITED
BY: /s/ Kathleen K. Shoemaker
------------------------------------
NAME: Kathleen K. Shoemaker
------------------------------------
TITLE: Attorney-In-Fact
------------------------------------
ALTA V LIMITED PARTNERSHIP
BY: ALTA V MANAGEMENT PARTNERS, L.P.
BY: /s/ Eileen McCarthy
------------------------------------
NAME: Eileen McCarthy
------------------------------------
TITLE: General Partner
------------------------------------
CUSTOMS HOUSE PARTNERS
BY: /s/ Eileen McCarthy
------------------------------------
NAME: Eileen McCarthy
------------------------------------
TITLE: General Partner
------------------------------------
MEDICAL SCIENCE PARTNERS II, L.P.
BY: /s/ Joseph F. Lovett
------------------------------------
NAME: Joseph F. Lovett
------------------------------------
TITLE: General Partner
------------------------------------
<PAGE>
INTERSOUTH PARTNERS III, L.P.
BY: /s/ Dennis J. Dougherty
---------------------------------------------
NAME: Dennis J. Dougherty
---------------------------------------------
TITLE: General Partner Intersouth Associates II, L.P.
----------------------------------------------
MSP II CO-INVESTMENT L.P.
BY: /s/ Joseph F. Lovett
---------------------------------------------
NAME: Joseph F. Lovett
---------------------------------------------
TITLE: General Partner
----------------------------------------------
VIKING MEDICAL VENTURES LIMITED
BY: /s/ Graeme A. Witts
----------------------------------------------
NAME: Graeme A. Witts
----------------------------------------------
TITLE: Director
----------------------------------------------
ACTA FINANCE
BY: /s/ George Muller
----------------------------------------------
NAME: George Muller
----------------------------------------------
TITLE: Director
----------------------------------------------
<PAGE>
COMDISCO, INC.
BY: /s/ James Labe
-----------------------------------------
NAME: James Labe
-----------------------------------------
TITLE: President, ComdiscoVentures
-----------------------------------------
ALIMENTARIA INTERNATIONAL, INC.
BY: /s/ George Muller
-----------------------------------------
NAME: George Muller
-----------------------------------------
TITLE: Power-of-Attorney
-----------------------------------------
LANDMARK EQUITY PARTNERS V, L.P.
BY:_____________________________________________
NAME:___________________________________________
TITLE:__________________________________________
LANDMARK SECONDARY PARTNERS, L.P.
BY:_____________________________________________
NAME:___________________________________________
TITLE:__________________________________________
<PAGE>
UEMCO XI LIMITED PARTNERSHIP
BY: /s/ Joseph F. Lovett
-----------------------------------------
NAME: Joseph F. Lovett
-----------------------------------------
TITLE: General Partner
-----------------------------------------
EAGLE CONSTELLATION FUND LTD.
BY: /s/ Joseph F. Lovett
-----------------------------------------
NAME: Joseph F. Lovett
-----------------------------------------
TITLE: General Partner
-----------------------------------------
BEACON HILL FINANCIAL
BY: /s/ Robert F. Johnston
-----------------------------------------
NAME: Robert F. Johnston
-----------------------------------------
TITLE: President
-----------------------------------------
MEDICAL SCIENCE II CO-INVESTMENT L.P.
BY: ____________________________________________
NAME:___________________________________________
TITLE:__________________________________________
<PAGE>
NORAM TRUST
BY: /s/ James P. Conroy
-----------------------------------------
NAME: James P. Conroy
-----------------------------------------
TITLE: Trustee
-----------------------------------------
AL-MIDANI INVESTMENT COMPANY LIMITED
BY: /s/ Mhd. Nabil Al-Midani
-----------------------------------------
NAME: Mhd. Nabil Al-Midani
-----------------------------------------
TITLE: Director
-----------------------------------------
GUTRAFIN LIMITED
BY: /s/ F.C. Lang
-----------------------------------------
NAME: F.C. Lang
-----------------------------------------
TITLE: Senior Investment Representative
-----------------------------------------
CHILD HEALTH INVESTMENT CORPORATION
BY: /s/ Craig F. Fischer
-----------------------------------------
NAME: Craig F. Fischer
-----------------------------------------
TITLE: COO
-----------------------------------------
<PAGE>
VAUGHN BRYSON
BY: /s/ Vaughn Bryson
-----------------------------------------
NAME: Vaughn Bryson
-----------------------------------------
TITLE: _________________________________________
FARVIEW MANAGEMENT COMPANY, L.P.
BY: /s/ Judith E. Cook
-----------------------------------------
NAME: Judith E. Cook
-----------------------------------------
TITLE: General Partner
-----------------------------------------
MSP HEALTHCARE OPPORTUNITIES INVESTMENT POOL
BY: /s/ F.C. Lang
-----------------------------------------
NAME: F.C. Lang
-----------------------------------------
TITLE: CEO
-----------------------------------------
ROY M. BARBEE
BY:_____________________________________________
NAME:___________________________________________
TITLE:__________________________________________
<PAGE>
BENEFIT CAPITAL MANAGEMENT CORP. AS INVESTMENT
MANAGER FOR THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA SEPARATE ACCOUNT NO. VCA-GA-5298
BY: /s/ Sue DeCarlo
-----------------------------------------
NAME: Sue DeCarlo
-----------------------------------------
TITLE: Sr. VP & CEO
-----------------------------------------
NMT NEW MEDICAL TECHNOLOGIES
BY: /s/ J.F. Rejeange /s/ J.F. Geigy
-----------------------------------------
NAME: J.F. Rejeange J.F. Geigy
-----------------------------------------
TITLE: Attorney-In-Fact Attorney-In-Fact
-----------------------------------------
JAFCO CO. LTD.
BY: /s/ Mitsumasa Murase
-----------------------------------------
NAME: Mitsumasa Murase
-----------------------------------------
TITLE: President
-----------------------------------------
JAFCO R-3 INVESTMENT ENTERPRISE PARTNERSHIP
BY: /s/ Mitsumasa Murase
-----------------------------------------
NAME: Mitsumasa Murase
-----------------------------------------
TITLE: President, Its Executive Partner
-----------------------------------------
<PAGE>
JAFCO JS-3 INVESTMENT ENTERPRISE PARTNERSHIP
BY: /s/ Mitsumasa Murase
-----------------------------------------
NAME: Mitsumasa Murase
-----------------------------------------
TITLE: President, Its Executive Partner
-----------------------------------------
JAFCO G-6(A)
BY: /s/ Mitsumasa Murase
-----------------------------------------
NAME: Mitsumasa Murase
-----------------------------------------
TITLE: President, Its Executive Partner
-----------------------------------------
JAFCO G-6(B)
BY: /s/ Mitsumasa Murase
-----------------------------------------
NAME: Mitsumasa Murase
-----------------------------------------
TITLE: President, Its Executive Partner
-----------------------------------------
JAFCO G-7(A)
BY: /s/ Mitsumasa Murase
-----------------------------------------
NAME: Mitsumasa Murase
-----------------------------------------
TITLE: President, Its Executive Partner
-----------------------------------------
<PAGE>
JAFCO G-7(B)
BY: /s/ Mitsumasa Murase
-----------------------------------------
NAME: Mitsumasa Murase
-----------------------------------------
TITLE: President, Its Executive Partner
-----------------------------------------
FUJIGIN CAPITAL CO.
BY: /s/ Osami Kita
-----------------------------------------
NAME: Osami Kita
-----------------------------------------
TITLE: President
-----------------------------------------
CURRAN PARTNERS, L.P.
BY: /s/ John P. Curran
-----------------------------------------
NAME: John P. Curran
-----------------------------------------
TITLE: General Partner
-----------------------------------------
DELAWARE CHARTER AND TRUST, JOHN P. CURRAN, IRA
BY: /s/ John P. Curran
-----------------------------------------
NAME: John P. Curran
-----------------------------------------
TITLE: Owner
-----------------------------------------
<PAGE>
INTERWEST PARTNERS VII, L.P.
INTERWEST INVESTORS VII, L.P.
BY: InterWest Management Partners VII, LLC,
their General Partner
BY: /s/ Rodney A. Ferguson
-----------------------------------------
Venture Member
GC&H INVESTMENTS
BY: /s/ John L. Cardoza
-----------------------------------------
NAME: John L. Cardoza
-----------------------------------------
TITLE: Executive Partner
-----------------------------------------
GENENTECH, INC
BY: /s/ Arthur D. Levinson
-----------------------------------------
NAME: Arthur D. Levinson, Ph.D.
-----------------------------------------
TITLE: President and Chairman of the Board
-----------------------------------------
<PAGE>
SCHEDULE 1 - SCHEDULE OF INVESTORS
----------------------------------
SERIES A INVESTORS
------------------
DOMAIN PARTNERS III, L.P.
One Palmer Square
Suite 515
Princeton, NJ 08542
Attention: Jesse I. Treu, Partner
Fax: (609) 683-9789
DP III ASSOCIATES, L.P.
One Palmer Square
Suite 515
Princeton, NJ 08542
Attention: Jesse I. Treu, Partner
Fax: (609) 683-9789
OLD COURT LIMITED AS NOMINEE OF
BIOTECHNOLOGY INVESTMENTS LIMITED
St. Peter Port House
Sausmarez Street
St. Peter Port, Guernsey
Channel Islands
with a copy to:
Domain Partners
One Palmer Square
Suite 515
Princeton, NJ
Fax: (609) 683-9789
ALTA V LIMITED PARTNERSHIP
c/o Burr, Egan Deleage and Co.
One Post Office Square, Suite 3800
Boston, MA 02110
Attention: Eileen McCarthy
Fax: (617) 482-1944
<PAGE>
CUSTOMS HOUSE PARTNERS
c/o Burr, Egan Deleage and Co.
One Post Office Square, Suite 3800
Boston, MA 02110
Attention: Eileen McCarthy
Fax: (617) 482-1944
MSP II CO-INVESTMENT L.P.
161 Worcester Road, Suite 301
Framingham, MA 01701
Attention: Joseph Lovett
General Partner and Joseph Lovett,
General Partner
Fax: (508) 620-9251
LANDMARK EQUITY PARTNERS V, L.P.
760 Hopmeadow Street
Simsbury, CT 06070
Attention: Anthony J. Rosigno
LANDMARK SECONDARY PARTNERS, L.P.
760 Hopmeadow Street
Simsbury, CT 06070
Attention: Anthony J. Rosigno
ACTA FINANCE
Avenue Montbenon 2
Lausanne, Switzerland 1003
Attention: Georges Muller
Fax: 011-41-21-320-7454
ALIMENTARIA INTERNATIONAL, INC.
Avenue Montbenon 2
Lausanne, Switzerland 1003
Attention: Georges Muller
Fax: 011-41-21-320-7454
VIKING MEDICAL VENTURES LIMITED
8 Queensway House
Queen Street
St. Helier, Jersey JE24WD
Attention: Michael Edmonds, Director
Fax: 011-44-534-69770
<PAGE>
INTERSOUTH PARTNERS III L.P.
3211 Shannon Road, Suite 610
Durham, N.C. 27707
Attention: Dennis J. Dougherty, General Partner
Fax: (919) 493-6649
COMDISCO, INC.
6111 North River Road
Rosemont, IL 60018
Attention: Jill Hanses
Fax: 847-518-5465
MEDICAL SCIENCE PARTNERS II, L.P.
161 Worcester Road, Suite 301
Framingham, MA 01701
Attention: Joseph Lovett
Fax: (508) 620-9251
SERIES B INVESTORS
------------------
UEMCO XI LIMITED PARTNERSHIP
c/o Joseph Lovett
c/o Medical Science Partners
161 Worcester Road, Suite 301
Framingham, MA 01701
Fax: (508) 620-9251
EAGLE CONSTELLATION FUND LTD.
c/o Joseph Lovett
c/o Medical Science Partners
161 Worcester Road, Suite 301
Framingham, MA 01701
Fax: (508) 620-9251
BEACON HILL FINANCIAL
c/o Mr. Jim O'Brien
19 Elm Street
Cohasset, MA 02025
<PAGE>
INTERSOUTH PARTNERS III L.P.
One Copley Parkway Suite 101
Morrisville, North Carolina 27560
Attention: Dennis J. Dougherty,
General Partner
Fax: (919) 544-6645
COMDISCO, INC.
6111 North River Road
Rosemont, IL 60018
Attention: Jill Hanses
Fax: 847-518-5465
NORAM TRUST
c/o James P. Conroy
c/o Windels, Marx, Davies & Ives
56 West 56/th/ Street
New York N.Y. 10019
AL-MIDANI INVESTMENT COMPANY LIMITED
P.O. Box 40761
Riyadh, Saudi Arabia 11511
Attn: Mr. Nabil Al-Midani
(registered office: P.O. Box 1111, Grand Cayman
Cayman Islands, B.W.I.)
CHILD HEALTH INVESTMENT CORPORATION
6803 West 64/th/ Street
Shawnee Mission, KS 66202
Attention: Craig Fischer
Fax: 913-262-1575
VAUGHN BRYSON
Life Science Advisors, Inc.
7225 Woodland Drive
Suite 230
Indianapolis, IN 46278
ROY M. BARBEE
Life Science Advisors, Inc.
7225 Woodland Drive
Suite 230
Indianapolis, IN 46278
<PAGE>
FARVIEW MANAGEMENT COMPANY, L.P.
26 Timber Park Drive
Black Mountain, N.C. 28711
Attention: Joseph Cook, Jr., General Partner
MSP HEALTHCARE OPPORTUNITIES INVESTMENT POOL
c/o Gutrafin
40 Egerton Crescent
London, SW3 2EB
UNITED KINGDOM
Attention: Francis Lang
Fax: 011-71-823-7046
MEDICAL SCIENCE II CO-INVESTMENT L.P.
c/o Medical Science Partners
161 Worcester Road, Suite 301
Framingham, MA 01701
Attention: Joseph Lovett
Fax: (508) 620-9251
BENEFIT CAPITAL MANAGEMENT CORP. AS
INVESTMENT MANAGER FOR THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT NO. VCA-GA-5298
34 Old Ridgebury Road
Danbury, CT 06817
Attention: Susan DeCarlo
NMT NEW MEDICAL TECHNOLOGIES
Innovation Center
Gewerbestrasse 18
Allschwil, CH-4123
SWITZERLAND
Attention: Lucas Alioth
JAFCO CO. LTD.
Tekko Building, 1-8-2 Marunouchi,
Chiyoda-ku, Tokyo
JAPAN 100
Attention: Mitsumasa Murase, President
JAFCO R-3 INVESTMENT ENTERPRISE PARTNERSHIP
Tekko Building, 1-8-2 Marunouchi,
Chiyoda-ku, Tokyo
JAPAN 100
Attention: Mitsumasa Murase, President
<PAGE>
JAFCO JS-3 INVESTMENT ENTERPRISE PARTNERSHIP
Tekko Building, 1-8-2 Marunouchi,
Chiyoda-ku, Tokyo
JAPAN 100
Attention: Mitsumasa Murase, President
JAFCO G-6(A)
Tekko Building, 1-8-2 Marunouchi,
Chiyoda-ku, Tokyo
JAPAN 100
Attention: Mitsumasa Murase, President
JAFCO G-6(B)
Tekko Building, 1-8-2 Marunouchi,
Chiyoda-ku, Tokyo
JAPAN 100
Attention: Mitsumasa Murase, President
JAFCO G-7(A)
Tekko Building, 1-8-2 Marunouchi,
Chiyoda-ku, Tokyo
JAPAN 100
Attention: Mitsumasa Murase, President
JAFCO G-7(B)
Tekko Building, 1-8-2 Marunouchi,
Chiyoda-ku, Tokyo
JAPAN 100
Attention: Mitsumasa Murase, President
FUJIGIN CAPITAL CO.
Central Plaza Building
4/th/ Floor
1-1 Kaguragasi, Shinjuku-ku
Tokyo, 162
JAPAN
Attention: Kazuko Murata
DOMAIN PARTNERS III, L.P.
One Palmer Square
Suite 515
Princeton, NJ 08542
Attention: Jesse I. Treu, Partner
Fax: (609) 683-9789
<PAGE>
DP III ASSOCIATES, L.P.
One Palmer Square
Suite 515
Princeton, NJ 08542
Attention: Jesse I. Treu, Partner
Fax: (609) 683-9789
OLD COURT LIMITED AS NOMINEE OF
BIOTECHNOLOGY INVESTMENTS LIMITED
St. Peter Port House
Sausmarez Street
St. Peter Port, Guernesy
Channel Islands
with a copy to:
Domain Partners
One Palmer Square
Suite 515
Princeton, NJ
Fax: (609) 683-9789
ALIMENTARIA INTERNATIONAL, INC.
Avenue Montbenon 2
Lausanne, Switzerland 1003
Attention: Georges Muller
Fax: 011-41-21-320-7454
VIKING MEDICAL VENTURES LIMITED
8 Queensway House
Queen Street
St. Helier, Jersey JE24WD
Attention: Michael Edmonds, Director
Fax: 011-44-534-69770
ALTA V LIMITED PARTNERSHIP
c/o Burr, Egan Deleage and Co.
One Post Office Square, Suite 3800
Boston, MA 02110
Attention: Eileen McCarthy
Fax: (617) 482-1944
<PAGE>
CUSTOMS HOUSE PARTNERS
c/o Burr, Egan Deleage and Co.
One Post Office Square, Suite 3800
Boston, MA 02110
Attention: Eileen McCarthy
Fax: (617) 482-1944
MEDICAL SCIENCE PARTNERS II, L.P.
161 Worcester Road, Suite 301
Framingham, MA 01701
Attention: Joseph Lovett
Fax: (508) 620-9251
SERIES E INVESTORS
------------------
DOMAIN PARTNERS III, L.P.
One Palmer Square
Suite 515
Princeton, NJ 08542
Attention: Jesse I. Treu, Partner
Fax: (609) 683-9789
OLD COURT LIMITED AS NOMINEE OF
BIOTECHNOLOGY INVESTMENTS LIMITED
St. Peter Port House
Sausmarez Street
St. Peter Port, Guernesy
Channel Islands
with a copy to:
Domain Partners
One Palmer Square
Suite 515
Princeton, NJ
Fax: (609) 683-9789
FARVIEW MANAGEMENT COMPANY, L.P.
26 Timber Park Drive
Black Mountain, N.C. 28711
Attention: Joseph Cook, Jr., General Partner
<PAGE>
BENEFIT CAPITAL MANAGEMENT CORP. AS
INVESTMENT MANAGER FOR THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT NO. VCA-GA-5298
34 Old Ridgebury Road
Danbury, CT 06817
Attention: Susan DeCarlo
CUSTOMS HOUSE PARTNERS
c/o Burr, Egan Deleage and Co.
One Post Office Square, Suite 3800
Boston, MA 02110
Attention: Eileen McCarthy
Fax: (617) 482-1944
NMT NEW MEDICAL TECHNOLOGIES
Innovation Center
Gewerbestrasse 18
Allschwil, CH-4123
SWITZERLAND
Attention: Lucas Alioth
NORAM TRUST
c/o James P. Conroy
c/o Windels, Marx, Davies & Ives
56 West 56/th/ Street
New York N.Y. 10019
AL-MIDANI INVESTMENT COMPANY LIMITED
P.O. Box 40761
Riyadh, Saudi Arabia 11511
Attn: Mr. Nabil Al-Midani
(registered office: P.O. Box 1111, Grand Cayman
Cayman Islands, B.W.I.)
ALTA V LIMITED PARTNERSHIP
c/o Burr, Egan Deleage and Co.
One Post Office Square, Suite 3800
Boston, MA 02110
Attention: Eileen McCarthy
Fax: (617) 482-1944
GUTRAFIN LIMITED
MSP Healthcare Opportunities
Investment Pool, c/o Gutrafin
<PAGE>
40 Egerton Crescent
London, SW3 2EB
UNITED KINGDOM
Attention: Francis Lang
CURRAN PARTNERS, L.P.
Curran Capital
237 Park Avenue, Suite 900
New York, N.Y. 10017
Attention: John Curran
DELAWARE CHARTER AND TRUST,
JOHN P. CURRAN, IRA
237 Park Avenue, Suite 900
New York, N.Y. 10017
Attention: John Curran
InterWest Partners VII, L.P.
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, California 94025
Attention: Rodney Ferguson
Fax: (650) 854-4706
InterWest Investors VII, L.P.
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, California 94025
Attention: Rodney Ferguson
Fax: (650) 854-4706
GC&H Investments
c/o John Cardoza
One Maritime Plaza
20th Floor
San Francisco, CA 94111
Fax: (415) 951-3699
SERIES G INVESTOR
-----------------
Genentech, Inc.
1 DNA Way
South San Francisco, California 94808
Attention: Corporate Secretary
Facsimile No.: (650) 952-9881
<PAGE>
EXHIBIT 10.24
EMPLOYEE
CONFIDENTIALITY, INVENTION ASSIGNMENT
AND NON-COMPETE AGREEMENT
THIS EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND NON-COMPETE
AGREEMENT ("Agreement") is made as of the date set forth on the signature page
below between Inspire Pharmaceuticals, Inc. ("Inspire"), and the person whose
name is set forth on the signature page below as Employee ("Employee").
In consideration of Employee's employment or continued employment by
Inspire, with the intention that this Agreement shall apply to the entire period
of Employee's employment with Inspire (including the period prior to the date of
this Agreement), Employee hereby agrees as follows:
1. Confidential Information Defined. "Confidential Information" means trade
secrets, proprietary information and materials, and confidential knowledge and
information which includes, but is not limited to, matters of a technical nature
(such as discoveries, ideas, concepts, designs, drawings, specifications,
techniques, models, diagrams, test data, scientific methods and know-how, and
materials such as reagents, substances, chemical compounds, subcellular
constituents, cell or cell lines, organisms and progeny, and mutants,
derivatives or replications derived from or relating to any of the foregoing
materials), and matters of a business nature (such as the identity of customers
and prospective customers, the nature of work being done for or discussed with
customers or prospective customers, suppliers, marketing techniques and
materials, marketing and development plans, pricing or pricing policies,
financial information, plans for further development, and any other information
of a similar nature not available to the public).
"Confidential Information" shall not include information that: (a) was in
Employee's possession or in the public domain before receipt from the Company,
as evidenced by the then existing publication or other public dissemination of
such information in written or other documentary form; (b) becomes available to
the public through no fault of Employee; (c) is received in good faith by
Employee from a third party who is not subject to an obligation of
confidentiality to the Company or any other party; or (d) is required by a
judicial or administrative authority or court having competent jurisdiction to
be disclosed by Employee, provided that Employee shall promptly notify the
Company and allow the Company a reasonable time to oppose or limit such order.
2. Non-Disclosure of Confidential Information of Inspire. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee has had or will have access to Confidential Information of Inspire.
Therefore, Employee agrees that both during and after the period of Employee's
employment with Inspire, Employee shall not, without the prior written approval
of Inspire, directly or indirectly (a) reveal, report, publish, disclose or
transfer any Confidential Information of Inspire to any person or entity, or (b)
use any Confidential Information of Inspire for any purpose or for the benefit
of any person or entity, except as may be necessary in the performance of
Employee's work for Inspire.
3. Non-Disclosure of Confidential Information of Others. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee may have had or will have access to Confidential Information of third
parties who have given Inspire the right to use such Confidential Information,
subject to a non-disclosure agreement between Inspire and such third
-1-
<PAGE>
party. Therefore, Employee agrees that both during and after the period of
Employee's employment with Inspire, Employee shall not, without the prior
written approval of Inspire, directly or indirectly (a) reveal, report, publish,
disclose or transfer any Confidential Information of such third parties to any
person or entity, or (b) use any Confidential Information of such third parties
for any purpose or for the benefit of any person or entity, except as may be
necessary in the performance of Employee's work for Inspire.
4. Property of Inspire. Employee acknowledges and agrees that all Confidential
Information of Inspire and all reports, drawings, blueprints, materials, data,
code, notes and other documents and records, whether printed, typed,
handwritten, videotaped, transmitted or transcribed on data files or on any
other type of media, and whether or not labelled or identified as confidential
or proprietary, made or compiled by Employee, or made available to Employee,
during the period of Employee employment with Inspire (including the period
prior to the date of this Agreement) concerning Inspire's Confidential
Information are and shall remain Inspire's property and shall be delivered to
Inspire within five (5) business days after the termination of such employment
with Inspire or at any earlier time on request of Inspire. Employee shall not
retain copies of such Confidential Information, documents and records.
5. Proprietary Notices. Employee shall not, and shall not permit any other
person to, remove any proprietary or other legends or restrictive notices
contained in or included in any Confidential Information.
6. Inventions.
(a) Employee shall promptly, from time to time, fully inform and disclose
to Inspire in writing all inventions, copyrightable material, designs,
improvements and discoveries of any kind which Employee now has made, conceived
or developed (including prior to the date of this Agreement), or which Employee
may later make, conceive or develop, during the period of Employee's employment
with Inspire, which pertain to or relate to Inspire's business or any of the
work or businesses carried on by Inspire ("Inventions"). This covenant applies
to all such Inventions, whether or not they are eligible for patent, copyright,
trademark, trade secret or other legal protection; and whether or not they are
conceived and/or developed by Employee alone or with others; and whether or not
they are conceived and/or developed during regular working hours; and whether or
not they are conceived and/or developed at Inspire's facility or not.
(b) Inventions shall not include any inventions made, conceived or
developed by Employee prior to Employee's employment with Inspire, a complete
list of which is set forth on Schedule A attached.
(c) All Inventions shall be the sole and exclusive property of Inspire,
and shall be deemed part of the Confidential Information of Inspire for purposes
of this Agreement, whether or not fixed in a tangible medium of expression.
Employee hereby assigns all Employee's rights in all Inventions and in all
related patents, copyrights and trademarks, trade secrets and other proprietary
rights therein to Inspire. Without limiting the foregoing, Employee agrees that
any copyrightable material shall be deemed to be "works made for hire" and that
Inspire shall be deemed the author of such works under the United States
Copyright Act, provided that in the event and to the extent such works are
determined not to constitute "works made for hire", Employee hereby irrevocably
assigns and transfers to Inspire all right, title and interest in such works.
-2-
<PAGE>
(d) Employee shall assist and cooperate with Inspire, both during and
after the period of Employee's employment with Inspire, at Inspire's sole
expense, to allow Inspire to obtain, maintain and enforce patent, copyright,
trademark, trade secret and other legal protection for the Inventions. Employee
shall sign such documents, and do such things necessary, to obtain such
protection and to vest Inspire with full and exclusive title in all Inventions
against infringement by others. Employee hereby appoints the Secretary of
Inspire as Employee's attorney-in-fact to execute documents on Employee's behalf
for this purpose.
(e) Employee shall not be entitled to any additional compensation for any
and all Inventions made during the period of Employee's employment with Inspire.
7. Covenant Not to Compete. If Employee is, at any time during Employee's
period of employment with Inspire, employed in the discovery or development
areas of the Company in a non-clerical position, or as a director level or
higher level senior manager of the Company, then this Section 7 shall apply.
Employee and Inspire agree that the services rendered by the Employee are unique
and irreplaceable, and that competitive use and knowledge of any Confidential
Information would substantially and irreparably injure Inspire's business,
prospects and good will. Employee and Inspire also agree that Inspire's
business is global in nature due to the type of products and/or services being
provided. Therefore, Employee agrees that during the period of Employee's
employment with Inspire and for a period of one (1) year thereafter, Employee
shall not, directly or indirectly, through any other person, firm, corporation
or other entity (whether as an officer, director, employee, partner, consultant,
holder of equity or debt investment, lender or in any other manner or capacity):
(a) develop, sell, market, offer to sell products and/or services anywhere
in the world that have the same or similar technological approach or technology
platform (e.g., same receptors (such as P2Y), same mechanism of action (such as
mucociliary clearance)) as those being developed, offered or sold by Inspire on
the date of the termination of Employee's employment with Inspire for any
reason;
(b) solicit, induce, encourage or attempt to induce or encourage any
employee or consultant of Inspire to terminate his or her employment or
consulting relationship with Inspire, or to breach any other obligation to
Inspire;
(c) solicit, interfere with, disrupt, alter or attempt to disrupt or alter
the relationship, contractual or otherwise, between Inspire and any consultant,
contractor, customer, potential customer, or supplier of Inspire; or
(d) engage in or participate in any business in the same industry as
Inspire which is conducted under any name that shall be the same as or similar
to the name of Inspire or any trade name used by Inspire.
Employee acknowledges that the foregoing geographic, activity and time
limitations contained in this Section 7 are reasonable and properly required for
the adequate protection of Inspire's business. In the event that any such
geographic, activity or time limitation is deemed to be unreasonable by a court,
Employee shall submit to the reduction of either said activity or time
limitation to such activity or period as the court shall deem reasonable. In
the event that Employee is in violation of the aforementioned restrictive
covenants, then the time limitation thereof shall be extended for a period of
time equal to the pendency of such proceedings, including appeals.
-3-
<PAGE>
8. Representations. Employee represents that Employee has the right to enter
into this Agreement, and that Employee's performance of all the terms of this
Agreement and his duties as an employee of Inspire will not breach any
confidential information agreement, non-competition agreement or other agreement
with any former employer of his services, either as an employee, consultant,
contractor or independent contractor, or with any other party. Employee
represents that Employee will not disclose to Inspire any trade secrets or
confidential or proprietary information of any third party that are not
generally available to the public.
9. Disclosure of this Agreement. Employee hereby authorizes Inspire to notify
others, including but not limited to customers of Inspire and any of Employee's
future employers, of the terms of this Agreement and Employee's responsibilities
under this Agreement.
10. Specific Performance. Employee acknowledges that money damages alone would
not adequately compensate Inspire in the event of a breach or threatened breach
by Employee of this Agreement, and that, in addition to all other remedies
available to Inspire at law or in equity, Inspire shall be entitled to
injunctive relief for the enforcement of its rights and to an accounting of
profits made during the period of such breach.
11. No Rights Granted. Employee understands that nothing in this Agreement
shall be deemed to constitute, by implication or otherwise, the grant by Inspire
to the employee of any license or other right under any patent, patent
application or other intellectual property right or interest belonging to
Inspire.
12. Severability.
(a) Each of the covenants provided in this Agreement are separate and
independent covenants. If any provision of this Agreement shall be determined
to be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby and any such invalid or unenforceable provision shall be
reformed so as to be valid and enforceable to the fullest extent permitted by
law.
(b) It is not a defense to the enforcement of any provision of this
Agreement that Inspire has breached or failed to perform any obligation or
covenant hereunder or under any other agreement or understanding between
Employee and Inspire.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to
conflict of law rules. All suits and claims shall be made only in state or
federal courts located in North Carolina.
14. Supersedes Other Agreements. This Agreement contains the entire agreement
of the parties with respect to subject matter hereof and supersedes all previous
agreements and understandings between the parties with respect to its subject
matter.
15. Amendments. This Agreement may not be changed, modified, released,
discharged, abandoned or otherwise terminated in whole or in part except by an
instrument in writing, agreed to and signed by the employee and a duly
authorized officer of Inspire.
16. Acknowledgements. THE EMPLOYEE ACKNOWLEDGES THAT (i) THE EMPLOYEE HAS READ
AND FULLY UNDERSTANDS THIS AGREEMENT; (ii) THE EMPLOYEE HAS BEEN GIVEN THE
OPPORTUNITY TO ASK QUESTIONS; (iii) THE
-4-
<PAGE>
EMPLOYEE HAS RECEIVED A COPY OF THIS AGREEMENT, THE ORIGINAL OF WHICH WILL BE
RETAINED IN THE EMPLOYEE'S PERSONNEL FILE; AND (iv) THE EMPLOYEE'S OBLIGATIONS
UNDER THIS AGREEMENT SURVIVE THE TERMINATION OF THE EMPLOYEE'S EMPLOYMENT WITH
INSPIRE FOR ANY REASON.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth below.
INSPIRE PHARMACEUTICALS, INC.
4222 Emperor Boulevard
Durham, North Carolina 27703
By: /s/ Christy L. Shaffer
-----------------------------------------
Christy L. Shaffer, Ph.D., President
and Chief Executive Officer
EMPLOYEE: Donald J. Kellerman
----------------------------------
(Print Name)
/s/ Donald J. Kellerman
---------------------------------------------
(Signature Here)
Date: February 3, 2000
----------------------------------------
Address: 419 Rutherglen Drive
-----------------------------------
Cary, NC 27511
---------------------------------------------
_____________________________________________
-5-
<PAGE>
SCHEDULE A
----------
PRIOR INVENTIONS
----------------
-6-
<PAGE>
EXHIBIT 10.25
EMPLOYEE
CONFIDENTIALITY, INVENTION ASSIGNMENT
AND NON-COMPETE AGREEMENT
THIS EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND NON-COMPETE
AGREEMENT ("Agreement") is made as of the date set forth on the signature page
below between Inspire Pharmaceuticals, Inc. ("Inspire"), and the person whose
name is set forth on the signature page below as Employee ("Employee").
In consideration of Employee's employment or continued employment by
Inspire, with the intention that this Agreement shall apply to the entire period
of Employee's employment with Inspire (including the period prior to the date of
this Agreement), Employee hereby agrees as follows:
1. Confidential Information Defined. "Confidential Information" means trade
secrets, proprietary information and materials, and confidential knowledge and
information which includes, but is not limited to, matters of a technical nature
(such as discoveries, ideas, concepts, designs, drawings, specifications,
techniques, models, diagrams, test data, scientific methods and know-how, and
materials such as reagents, substances, chemical compounds, subcellular
constituents, cell or cell lines, organisms and progeny, and mutants,
derivatives or replications derived from or relating to any of the foregoing
materials), and matters of a business nature (such as the identity of customers
and prospective customers, the nature of work being done for or discussed with
customers or prospective customers, suppliers, marketing techniques and
materials, marketing and development plans, pricing or pricing policies,
financial information, plans for further development, and any other information
of a similar nature not available to the public).
"Confidential Information" shall not include information that: (a) was in
Employee's possession or in the public domain before receipt from the Company,
as evidenced by the then existing publication or other public dissemination of
such information in written or other documentary form; (b) becomes available to
the public through no fault of Employee; (c) is received in good faith by
Employee from a third party who is not subject to an obligation of
confidentiality to the Company or any other party; or (d) is required by a
judicial or administrative authority or court having competent jurisdiction to
be disclosed by Employee, provided that Employee shall promptly notify the
Company and allow the Company a reasonable time to oppose or limit such order.
2. Non-Disclosure of Confidential Information of Inspire. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee has had or will have access to Confidential Information of Inspire.
Therefore, Employee agrees that both during and after the period of Employee's
employment with Inspire, Employee shall not, without the prior written approval
of Inspire, directly or indirectly (a) reveal, report, publish, disclose or
transfer any Confidential Information of Inspire to any person or entity, or (b)
use any Confidential Information of Inspire for any purpose or for the benefit
of any person or entity, except as may be necessary in the performance of
Employee's work for Inspire.
3. Non-Disclosure of Confidential Information of Others. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee may have had or will have access to Confidential Information of third
parties who have given Inspire the right to use such Confidential Information,
subject to a non-disclosure agreement between Inspire and such third
<PAGE>
party. Therefore, Employee agrees that both during and after the period of
Employee's employment with Inspire, Employee shall not, without the prior
written approval of Inspire, directly or indirectly (a) reveal, report, publish,
disclose or transfer any Confidential Information of such third parties to any
person or entity, or (b) use any Confidential Information of such third parties
for any purpose or for the benefit of any person or entity, except as may be
necessary in the performance of Employee's work for Inspire.
4. Property of Inspire. Employee acknowledges and agrees that all Confidential
Information of Inspire and all reports, drawings, blueprints, materials, data,
code, notes and other documents and records, whether printed, typed,
handwritten, videotaped, transmitted or transcribed on data files or on any
other type of media, and whether or not labelled or identified as confidential
or proprietary, made or compiled by Employee, or made available to Employee,
during the period of Employee employment with Inspire (including the period
prior to the date of this Agreement) concerning Inspire's Confidential
Information are and shall remain Inspire's property and shall be delivered to
Inspire within five (5) business days after the termination of such employment
with Inspire or at any earlier time on request of Inspire. Employee shall not
retain copies of such Confidential Information, documents and records.
5. Proprietary Notices. Employee shall not, and shall not permit any other
person to, remove any proprietary or other legends or restrictive notices
contained in or included in any Confidential Information.
6. Inventions.
(a) Employee shall promptly, from time to time, fully inform and disclose
to Inspire in writing all inventions, copyrightable material, designs,
improvements and discoveries of any kind which Employee now has made, conceived
or developed (including prior to the date of this Agreement), or which Employee
may later make, conceive or develop, during the period of Employee's employment
with Inspire, which pertain to or relate to Inspire's business or any of the
work or businesses carried on by Inspire ("Inventions"). This covenant applies
to all such Inventions, whether or not they are eligible for patent, copyright,
trademark, trade secret or other legal protection; and whether or not they are
conceived and/or developed by Employee alone or with others; and whether or not
they are conceived and/or developed during regular working hours; and whether or
not they are conceived and/or developed at Inspire's facility or not.
(b) Inventions shall not include any inventions made, conceived or
developed by Employee prior to Employee's employment with Inspire, a complete
list of which is set forth on Schedule A attached.
(c) All Inventions shall be the sole and exclusive property of Inspire,
and shall be deemed part of the Confidential Information of Inspire for purposes
of this Agreement, whether or not fixed in a tangible medium of expression.
Employee hereby assigns all Employee's rights in all Inventions and in all
related patents, copyrights and trademarks, trade secrets and other proprietary
rights therein to Inspire. Without limiting the foregoing, Employee agrees that
any copyrightable material shall be deemed to be "works made for hire" and that
Inspire shall be deemed the author of such works under the United States
Copyright Act, provided that in the event and to the extent such works are
determined not to constitute "works made for hire", Employee hereby irrevocably
assigns and transfers to Inspire all right, title and interest in such works.
-2-
<PAGE>
(d) Employee shall assist and cooperate with Inspire, both during and
after the period of Employee's employment with Inspire, at Inspire's sole
expense, to allow Inspire to obtain, maintain and enforce patent, copyright,
trademark, trade secret and other legal protection for the Inventions. Employee
shall sign such documents, and do such things necessary, to obtain such
protection and to vest Inspire with full and exclusive title in all Inventions
against infringement by others. Employee hereby appoints the Secretary of
Inspire as Employee's attorney-in-fact to execute documents on Employee's behalf
for this purpose.
(e) Employee shall not be entitled to any additional compensation for any
and all Inventions made during the period of Employee's employment with Inspire.
7. Covenant Not to Compete. If Employee is, at any time during Employee's
period of employment with Inspire, employed in the discovery or development
areas of the Company in a non-clerical position, or as a director level or
higher level senior manager of the Company, then this Section 7 shall apply.
Employee and Inspire agree that the services rendered by the Employee are unique
and irreplaceable, and that competitive use and knowledge of any Confidential
Information would substantially and irreparably injure Inspire's business,
prospects and good will. Employee and Inspire also agree that Inspire's
business is global in nature due to the type of products and/or services being
provided. Therefore, Employee agrees that during the period of Employee's
employment with Inspire and for a period of one (1) year thereafter, Employee
shall not, directly or indirectly, through any other person, firm, corporation
or other entity (whether as an officer, director, employee, partner, consultant,
holder of equity or debt investment, lender or in any other manner or capacity):
(a) develop, sell, market, offer to sell products and/or services anywhere
in the world that have the same or similar technological approach or technology
platform (e.g., same receptors (such as P2Y), same mechanism of action (such as
mucociliary clearance)) as those being developed, offered or sold by Inspire on
the date of the termination of Employee's employment with Inspire for any
reason;
(b) solicit, induce, encourage or attempt to induce or encourage any
employee or consultant of Inspire to terminate his or her employment or
consulting relationship with Inspire, or to breach any other obligation to
Inspire;
(d) solicit, interfere with, disrupt, alter or attempt to disrupt or alter
the relationship, contractual or otherwise, between Inspire and any consultant,
contractor, customer, potential customer, or supplier of Inspire; or
(d) engage in or participate in any business in the same industry as
Inspire which is conducted under any name that shall be the same as or similar
to the name of Inspire or any trade name used by Inspire.
Employee acknowledges that the foregoing geographic, activity and time
limitations contained in this Section 7 are reasonable and properly required for
the adequate protection of Inspire's business. In the event that any such
geographic, activity or time limitation is deemed to be unreasonable by a court,
Employee shall submit to the reduction of either said activity or time
limitation to such activity or period as the court shall deem reasonable. In
the event that Employee is in violation of the aforementioned restrictive
covenants, then the time limitation thereof shall be extended for a period of
time equal to the pendency of such proceedings, including appeals.
-3-
<PAGE>
8. Representations. Employee represents that Employee has the right to enter
into this Agreement, and that Employee's performance of all the terms of this
Agreement and his duties as an employee of Inspire will not breach any
confidential information agreement, non-competition agreement or other agreement
with any former employer of his services, either as an employee, consultant,
contractor or independent contractor, or with any other party. Employee
represents that Employee will not disclose to Inspire any trade secrets or
confidential or proprietary information of any third party that are not
generally available to the public.
9. Disclosure of this Agreement. Employee hereby authorizes Inspire to notify
others, including but not limited to customers of Inspire and any of Employee's
future employers, of the terms of this Agreement and Employee's responsibilities
under this Agreement.
10. Specific Performance. Employee acknowledges that money damages alone would
not adequately compensate Inspire in the event of a breach or threatened breach
by Employee of this Agreement, and that, in addition to all other remedies
available to Inspire at law or in equity, Inspire shall be entitled to
injunctive relief for the enforcement of its rights and to an accounting of
profits made during the period of such breach.
11. No Rights Granted. Employee understands that nothing in this Agreement
shall be deemed to constitute, by implication or otherwise, the grant by Inspire
to the employee of any license or other right under any patent, patent
application or other intellectual property right or interest belonging to
Inspire.
12. Severability.
(a) Each of the covenants provided in this Agreement are separate and
independent covenants. If any provision of this Agreement shall be determined
to be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby and any such invalid or unenforceable provision shall be
reformed so as to be valid and enforceable to the fullest extent permitted by
law.
(b) It is not a defense to the enforcement of any provision of this
Agreement that Inspire has breached or failed to perform any obligation or
covenant hereunder or under any other agreement or understanding between
Employee and Inspire.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to
conflict of law rules. All suits and claims shall be made only in state or
federal courts located in North Carolina.
14. Supersedes Other Agreements. This Agreement contains the entire agreement
of the parties with respect to subject matter hereof and supersedes all previous
agreements and understandings between the parties with respect to its subject
matter.
15. Amendments. This Agreement may not be changed, modified, released,
discharged, abandoned or otherwise terminated in whole or in part except by an
instrument in writing, agreed to and signed by the Employee and a duly
authorized officer of Inspire.
16. Acknowledgements. THE EMPLOYEE ACKNOWLEDGES THAT (i) THE EMPLOYEE HAS READ
AND FULLY UNDERSTANDS THIS AGREEMENT; (ii) THE EMPLOYEE HAS BEEN GIVEN THE
OPPORTUNITY TO ASK QUESTIONS; (iii) THE
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<PAGE>
EMPLOYEE HAS RECEIVED A COPY OF THIS AGREEMENT, THE ORIGINAL OF WHICH WILL BE
RETAINED IN THE EMPLOYEE'S PERSONNEL FILE; AND (iv) THE EMPLOYEE'S OBLIGATIONS
UNDER THIS AGREEMENT SURVIVE THE TERMINATION OF THE EMPLOYEE'S EMPLOYMENT WITH
INSPIRE FOR ANY REASON.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth below.
INSPIRE PHARMACEUTICALS, INC.
4222 Emperor Boulevard
Durham, North Carolina 27703
By: /s/ Christy L. Shaffer
--------------------------------------
Christy L. Shaffer, Ph.D., President
and Chief Executive Officer
EMPLOYEE: Gregory J. Mossinghoff
--------------------------------
(Print Name)
/s/ Gregory J. Mossinghoff
------------------------------------------
(Signature Here)
Date: February 4, 2000
-------------------------------------
Address: 5916 Wild Orchid Trail
---------------------------------
Raleigh, NC 27613
------------------------------------------
__________________________________________
-5-
<PAGE>
SCHEDULE A
----------
PRIOR INVENTIONS
----------------
-6-
<PAGE>
EXHIBIT 10.26
EMPLOYEE
CONFIDENTIALITY, INVENTION ASSIGNMENT
AND NON-COMPETE AGREEMENT
THIS EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND NON-COMPETE
AGREEMENT ("Agreement") is made as of the date set forth on the signature page
below between Inspire Pharmaceuticals, Inc. ("Inspire"), and the person whose
name is set forth on the signature page below as Employee ("Employee").
In consideration of Employee's employment or continued employment by
Inspire, with the intention that this Agreement shall apply to the entire period
of Employee's employment with Inspire (including the period prior to the date of
this Agreement), Employee hereby agrees as follows:
1. Confidential Information Defined. "Confidential Information" means trade
secrets, proprietary information and materials, and confidential knowledge and
information which includes, but is not limited to, matters of a technical nature
(such as discoveries, ideas, concepts, designs, drawings, specifications,
techniques, models, diagrams, test data, scientific methods and know-how, and
materials such as reagents, substances, chemical compounds, subcellular
constituents, cell or cell lines, organisms and progeny, and mutants,
derivatives or replications derived from or relating to any of the foregoing
materials), and matters of a business nature (such as the identity of customers
and prospective customers, the nature of work being done for or discussed with
customers or prospective customers, suppliers, marketing techniques and
materials, marketing and development plans, pricing or pricing policies,
financial information, plans for further development, and any other information
of a similar nature not available to the public).
"Confidential Information" shall not include information that: (a) was in
Employee's possession or in the public domain before receipt from the Company,
as evidenced by the then existing publication or other public dissemination of
such information in written or other documentary form; (b) becomes available to
the public through no fault of Employee; (c) is received in good faith by
Employee from a third party who is not subject to an obligation of
confidentiality to the Company or any other party; or (d) is required by a
judicial or administrative authority or court having competent jurisdiction to
be disclosed by Employee, provided that Employee shall promptly notify the
Company and allow the Company a reasonable time to oppose or limit such order.
2. Non-Disclosure of Confidential Information of Inspire. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee has had or will have access to Confidential Information of Inspire.
Therefore, Employee agrees that both during and after the period of Employee's
employment with Inspire, Employee shall not, without the prior written approval
of Inspire, directly or indirectly (a) reveal, report, publish, disclose or
transfer any Confidential Information of Inspire to any person or entity, or (b)
use any Confidential Information of Inspire for any purpose or for the benefit
of any person or entity, except as may be necessary in the performance of
Employee's work for Inspire.
3. Non-Disclosure of Confidential Information of Others. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee may have had or will have access to Confidential Information of third
parties who have given Inspire the right to use such Confidential Information,
subject to a non-disclosure agreement between Inspire and such third
-1-
<PAGE>
party. Therefore, Employee agrees that both during and after the period of
Employee's employment with Inspire, Employee shall not, without the prior
written approval of Inspire, directly or indirectly (a) reveal, report, publish,
disclose or transfer any Confidential Information of such third parties to any
person or entity, or (b) use any Confidential Information of such third parties
for any purpose or for the benefit of any person or entity, except as may be
necessary in the performance of Employee's work for Inspire.
4. Property of Inspire. Employee acknowledges and agrees that all Confidential
Information of Inspire and all reports, drawings, blueprints, materials, data,
code, notes and other documents and records, whether printed, typed,
handwritten, videotaped, transmitted or transcribed on data files or on any
other type of media, and whether or not labelled or identified as confidential
or proprietary, made or compiled by Employee, or made available to Employee,
during the period of Employee employment with Inspire (including the period
prior to the date of this Agreement) concerning Inspire's Confidential
Information are and shall remain Inspire's property and shall be delivered to
Inspire within five (5) business days after the termination of such employment
with Inspire or at any earlier time on request of Inspire. Employee shall not
retain copies of such Confidential Information, documents and records.
5. Proprietary Notices. Employee shall not, and shall not permit any other
person to, remove any proprietary or other legends or restrictive notices
contained in or included in any Confidential Information.
6. Inventions.
(a) Employee shall promptly, from time to time, fully inform and disclose
to Inspire in writing all inventions, copyrightable material, designs,
improvements and discoveries of any kind which Employee now has made, conceived
or developed (including prior to the date of this Agreement), or which Employee
may later make, conceive or develop, during the period of Employee's employment
with Inspire, which pertain to or relate to Inspire's business or any of the
work or businesses carried on by Inspire ("Inventions"). This covenant applies
to all such Inventions, whether or not they are eligible for patent, copyright,
trademark, trade secret or other legal protection; and whether or not they are
conceived and/or developed by Employee alone or with others; and whether or not
they are conceived and/or developed during regular working hours; and whether or
not they are conceived and/or developed at Inspire's facility or not.
(b) Inventions shall not include any inventions made, conceived or
developed by Employee prior to Employee's employment with Inspire, a complete
list of which is set forth on Schedule A attached.
(c) All Inventions shall be the sole and exclusive property of Inspire,
and shall be deemed part of the Confidential Information of Inspire for purposes
of this Agreement, whether or not fixed in a tangible medium of expression.
Employee hereby assigns all Employee's rights in all Inventions and in all
related patents, copyrights and trademarks, trade secrets and other proprietary
rights therein to Inspire. Without limiting the foregoing, Employee agrees that
any copyrightable material shall be deemed to be "works made for hire" and that
Inspire shall be deemed the author of such works under the United States
Copyright Act, provided that in the event and to the extent such works are
determined not to constitute "works made for hire", Employee hereby irrevocably
assigns and transfers to Inspire all right, title and interest in such works.
-2-
<PAGE>
(d) Employee shall assist and cooperate with Inspire, both during and
after the period of Employee's employment with Inspire, at Inspire's sole
expense, to allow Inspire to obtain, maintain and enforce patent, copyright,
trademark, trade secret and other legal protection for the Inventions. Employee
shall sign such documents, and do such things necessary, to obtain such
protection and to vest Inspire with full and exclusive title in all Inventions
against infringement by others. Employee hereby appoints the Secretary of
Inspire as Employee's attorney-in-fact to execute documents on Employee's behalf
for this purpose.
(e) Employee shall not be entitled to any additional compensation for any
and all Inventions made during the period of Employee's employment with Inspire.
7. Covenant Not to Compete. If Employee is, at any time during Employee's
period of employment with Inspire, employed in the discovery or development
areas of the Company in a non-clerical position, or as a director level or
higher level senior manager of the Company, then this Section 7 shall apply.
Employee and Inspire agree that the services rendered by the Employee are unique
and irreplaceable, and that competitive use and knowledge of any Confidential
Information would substantially and irreparably injure Inspire's business,
prospects and good will. Employee and Inspire also agree that Inspire's
business is global in nature due to the type of products and/or services being
provided. Therefore, Employee agrees that during the period of Employee's
employment with Inspire and for a period of one (1) year thereafter, Employee
shall not, directly or indirectly, through any other person, firm, corporation
or other entity (whether as an officer, director, employee, partner, consultant,
holder of equity or debt investment, lender or in any other manner or capacity):
(a) develop, sell, market, offer to sell products and/or services anywhere
in the world that have the same or similar technological approach or technology
platform (e.g., same receptors (such as P2Y), same mechanism of action (such as
mucociliary clearance)) as those being developed, offered or sold by Inspire on
the date of the termination of Employee's employment with Inspire for any
reason;
(b) solicit, induce, encourage or attempt to induce or encourage any
employee or consultant of Inspire to terminate his or her employment or
consulting relationship with Inspire, or to breach any other obligation to
Inspire;
(c) solicit, interfere with, disrupt, alter or attempt to disrupt or alter
the relationship, contractual or otherwise, between Inspire and any consultant,
contractor, customer, potential customer, or supplier of Inspire; or
(d) engage in or participate in any business in the same industry as
Inspire which is conducted under any name that shall be the same as or similar
to the name of Inspire or any trade name used by Inspire.
Employee acknowledges that the foregoing geographic, activity and time
limitations contained in this Section 7 are reasonable and properly required for
the adequate protection of Inspire's business. In the event that any such
geographic, activity or time limitation is deemed to be unreasonable by a court,
Employee shall submit to the reduction of either said activity or time
limitation to such activity or period as the court shall deem reasonable. In
the event that Employee is in violation of the aforementioned restrictive
covenants, then the time limitation thereof shall be extended for a period of
time equal to the pendency of such proceedings, including appeals.
-3-
<PAGE>
8. Representations. Employee represents that Employee has the right to enter
into this Agreement, and that Employee's performance of all the terms of this
Agreement and his duties as an employee of Inspire will not breach any
confidential information agreement, non-competition agreement or other agreement
with any former employer of his services, either as an employee, consultant,
contractor or independent contractor, or with any other party. Employee
represents that Employee will not disclose to Inspire any trade secrets or
confidential or proprietary information of any third party that are not
generally available to the public.
9. Disclosure of this Agreement. Employee hereby authorizes Inspire to notify
others, including but not limited to customers of Inspire and any of Employee's
future employers, of the terms of this Agreement and Employee's responsibilities
under this Agreement.
10. Specific Performance. Employee acknowledges that money damages alone would
not adequately compensate Inspire in the event of a breach or threatened breach
by Employee of this Agreement, and that, in addition to all other remedies
available to Inspire at law or in equity, Inspire shall be entitled to
injunctive relief for the enforcement of its rights and to an accounting of
profits made during the period of such breach.
11. No Rights Granted. Employee understands that nothing in this Agreement
shall be deemed to constitute, by implication or otherwise, the grant by Inspire
to the employee of any license or other right under any patent, patent
application or other intellectual property right or interest belonging to
Inspire.
12. Severability.
(a) Each of the covenants provided in this Agreement are separate and
independent covenants. If any provision of this Agreement shall be determined
to be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby and any such invalid or unenforceable provision shall be
reformed so as to be valid and enforceable to the fullest extent permitted by
law.
(b) It is not a defense to the enforcement of any provision of this
Agreement that Inspire has breached or failed to perform any obligation or
covenant hereunder or under any other agreement or understanding between
Employee and Inspire.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to
conflict of law rules. All suits and claims shall be made only in state or
federal courts located in North Carolina.
14. Supersedes Other Agreements. This Agreement contains the entire agreement
of the parties with respect to subject matter hereof and supersedes all previous
agreements and understandings between the parties with respect to its subject
matter.
15. Amendments. This Agreement may not be changed, modified, released,
discharged, abandoned or otherwise terminated in whole or in part except by an
instrument in writing, agreed to and signed by the Employee and a duly
authorized officer of Inspire.
16. Acknowledgements. THE EMPLOYEE ACKNOWLEDGES THAT (i) THE EMPLOYEE HAS READ
AND FULLY UNDERSTANDS THIS AGREEMENT; (ii) THE EMPLOYEE HAS BEEN GIVEN THE
OPPORTUNITY TO ASK QUESTIONS; (iii) THE
-4-
<PAGE>
EMPLOYEE HAS RECEIVED A COPY OF THIS AGREEMENT, THE ORIGINAL OF WHICH WILL BE
RETAINED IN THE EMPLOYEE'S PERSONNEL FILE; AND (iv) THE EMPLOYEE'S OBLIGATIONS
UNDER THIS AGREEMENT SURVIVE THE TERMINATION OF THE EMPLOYEE'S EMPLOYMENT WITH
INSPIRE FOR ANY REASON.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth below.
INSPIRE PHARMACEUTICALS, INC.
4222 Emperor Boulevard
Durham, North Carolina 27703
By: /s/ Christy L. Shaffer
---------------------------------------------
Christy L. Shaffer, Ph.D., President
and Chief Executive Officer
EMPLOYEE: Benjamin R. Yerxa
--------------------------------------
(Print Name)
/s/ Benjamin R. Yerxa
-------------------------------------------------
(Signature Here)
Date: February 4, 2000
-------------------------------------------
Address: 1330 Hathaway Rd
---------------------------------------
Raleigh, NC 27608
-------------------------------------------------
_________________________________________________
-5-
<PAGE>
SCHEDULE A
----------
PRIOR INVENTIONS
----------------
-6-
<PAGE>
EXHIBIT 10.27
EMPLOYEE
CONFIDENTIALITY, INVENTION ASSIGNMENT
AND NON-COMPETE AGREEMENT
THIS EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND NON-COMPETE
AGREEMENT ("Agreement") is made as of the date set forth on the signature page
below between Inspire Pharmaceuticals, Inc. ("Inspire"), and the person whose
name is set forth on the signature page below as Employee ("Employee").
In consideration of Employee's employment or continued employment by
Inspire, with the intention that this Agreement shall apply to the entire period
of Employee's employment with Inspire (including the period prior to the date of
this Agreement), Employee hereby agrees as follows:
1. Confidential Information Defined. "Confidential Information" means trade
secrets, proprietary information and materials, and confidential knowledge and
information which includes, but is not limited to, matters of a technical nature
(such as discoveries, ideas, concepts, designs, drawings, specifications,
techniques, models, diagrams, test data, scientific methods and know-how, and
materials such as reagents, substances, chemical compounds, subcellular
constituents, cell or cell lines, organisms and progeny, and mutants,
derivatives or replications derived from or relating to any of the foregoing
materials), and matters of a business nature (such as the identity of customers
and prospective customers, the nature of work being done for or discussed with
customers or prospective customers, suppliers, marketing techniques and
materials, marketing and development plans, pricing or pricing policies,
financial information, plans for further development, and any other information
of a similar nature not available to the public).
"Confidential Information" shall not include information that: (a) was in
Employee's possession or in the public domain before receipt from the Company,
as evidenced by the then existing publication or other public dissemination of
such information in written or other documentary form; (b) becomes available to
the public through no fault of Employee; (c) is received in good faith by
Employee from a third party who is not subject to an obligation of
confidentiality to the Company or any other party; or (d) is required by a
judicial or administrative authority or court having competent jurisdiction to
be disclosed by Employee, provided that Employee shall promptly notify the
Company and allow the Company a reasonable time to oppose or limit such order.
2. Non-Disclosure of Confidential Information of Inspire. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee has had or will have access to Confidential Information of Inspire.
Therefore, Employee agrees that both during and after the period of Employee's
employment with Inspire, Employee shall not, without the prior written approval
of Inspire, directly or indirectly (a) reveal, report, publish, disclose or
transfer any Confidential Information of Inspire to any person or entity, or (b)
use any Confidential Information of Inspire for any purpose or for the benefit
of any person or entity, except as may be necessary in the performance of
Employee's work for Inspire.
3. Non-Disclosure of Confidential Information of Others. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee may have had or will have access to Confidential Information of third
parties who have given Inspire the right to use such Confidential Information,
subject to a non-disclosure agreement between Inspire and such third
-1-
<PAGE>
party. Therefore, Employee agrees that both during and after the period of
Employee's employment with Inspire, Employee shall not, without the prior
written approval of Inspire, directly or indirectly (a) reveal, report, publish,
disclose or transfer any Confidential Information of such third parties to any
person or entity, or (b) use any Confidential Information of such third parties
for any purpose or for the benefit of any person or entity, except as may be
necessary in the performance of Employee's work for Inspire.
4. PROPERTY OF INSPIRE. Employee acknowledges and agrees that all Confidential
Information of Inspire and all reports, drawings, blueprints, materials, data,
code, notes and other documents and records, whether printed, typed,
handwritten, videotaped, transmitted or transcribed on data files or on any
other type of media, and whether or not labelled or identified as confidential
or proprietary, made or compiled by Employee, or made available to Employee,
during the period of Employee employment with Inspire (including the period
prior to the date of this Agreement) concerning Inspire's Confidential
Information are and shall remain Inspire's property and shall be delivered to
Inspire within five (5) business days after the termination of such employment
with Inspire or at any earlier time on request of Inspire. Employee shall not
retain copies of such Confidential Information, documents and records.
5. PROPRIETARY NOTICES. Employee shall not, and shall not permit any other
person to, remove any proprietary or other legends or restrictive notices
contained in or included in any Confidential Information.
6. INVENTIONS.
(a) Employee shall promptly, from time to time, fully inform and disclose
to Inspire in writing all inventions, copyrightable material, designs,
improvements and discoveries of any kind which Employee now has made, conceived
or developed (including prior to the date of this Agreement), or which Employee
may later make, conceive or develop, during the period of Employee's employment
with Inspire, which pertain to or relate to Inspire's business or any of the
work or businesses carried on by Inspire ("Inventions"). This covenant applies
to all such Inventions, whether or not they are eligible for patent, copyright,
trademark, trade secret or other legal protection; and whether or not they are
conceived and/or developed by Employee alone or with others; and whether or not
they are conceived and/or developed during regular working hours; and whether or
not they are conceived and/or developed at Inspire's facility or not.
(b) Inventions shall not include any inventions made, conceived or
developed by Employee prior to Employee's employment with Inspire, a complete
list of which is set forth on Schedule A attached.
(c) All Inventions shall be the sole and exclusive property of Inspire,
and shall be deemed part of the Confidential Information of Inspire for purposes
of this Agreement, whether or not fixed in a tangible medium of expression.
Employee hereby assigns all Employee's rights in all Inventions and in all
related patents, copyrights and trademarks, trade secrets and other proprietary
rights therein to Inspire. Without limiting the foregoing, Employee agrees that
any copyrightable material shall be deemed to be "works made for hire" and that
Inspire shall be deemed the author of such works under the United States
Copyright Act, provided that in the event and to the extent such works are
determined not to constitute "works made for hire", Employee hereby irrevocably
assigns and transfers to Inspire all right, title and interest in such works.
-2-
<PAGE>
(d) Employee shall assist and cooperate with Inspire, both during and
after the period of Employee's employment with Inspire, at Inspire's sole
expense, to allow Inspire to obtain, maintain and enforce patent, copyright,
trademark, trade secret and other legal protection for the Inventions. Employee
shall sign such documents, and do such things necessary, to obtain such
protection and to vest Inspire with full and exclusive title in all Inventions
against infringement by others. Employee hereby appoints the Secretary of
Inspire as Employee's attorney-in-fact to execute documents on Employee's behalf
for this purpose.
(e) Employee shall not be entitled to any additional compensation for any
and all Inventions made during the period of Employee's employment with Inspire.
7. COVENANT NOT TO COMPETE. If Employee is, at any time during Employee's
period of employment with Inspire, employed in the discovery or development
areas of the Company in a non-clerical position, or as a director level or
higher level senior manager of the Company, then this Section 7 shall apply.
Employee and Inspire agree that the services rendered by the Employee are unique
and irreplaceable, and that competitive use and knowledge of any Confidential
Information would substantially and irreparably injure Inspire's business,
prospects and good will. Employee and Inspire also agree that Inspire's
business is global in nature due to the type of products and/or services being
provided. Therefore, Employee agrees that during the period of Employee's
employment with Inspire and for a period of one (1) year thereafter, Employee
shall not, directly or indirectly, through any other person, firm, corporation
or other entity (whether as an officer, director, employee, partner, consultant,
holder of equity or debt investment, lender or in any other manner or capacity):
(a) develop, sell, market, offer to sell products and/or services anywhere
in the world that have the same or similar technological approach or technology
platform (e.g., same receptors (such as P2Y), same mechanism of action (such as
mucociliary clearance)) as those being developed, offered or sold by Inspire on
the date of the termination of Employee's employment with Inspire for any
reason;
(b) solicit, induce, encourage or attempt to induce or encourage any
employee or consultant of Inspire to terminate his or her employment or
consulting relationship with Inspire, or to breach any other obligation to
Inspire;
(c) solicit, interfere with, disrupt, alter or attempt to disrupt or alter
the relationship, contractual or otherwise, between Inspire and any consultant,
contractor, customer, potential customer, or supplier of Inspire; or
(d) engage in or participate in any business in the same industry as
Inspire which is conducted under any name that shall be the same as or similar
to the name of Inspire or any trade name used by Inspire.
Employee acknowledges that the foregoing geographic, activity and time
limitations contained in this Section 7 are reasonable and properly required for
the adequate protection of Inspire's business. In the event that any such
geographic, activity or time limitation is deemed to be unreasonable by a court,
Employee shall submit to the reduction of either said activity or time
limitation to such activity or period as the court shall deem reasonable. In
the event that Employee is in violation of the aforementioned restrictive
covenants, then the time limitation thereof shall be extended for a period of
time equal to the pendency of such proceedings, including appeals.
-3-
<PAGE>
8. REPRESENTATIONS. Employee represents that Employee has the right to enter
into this Agreement, and that Employee's performance of all the terms of this
Agreement and his duties as an employee of Inspire will not breach any
confidential information agreement, non-competition agreement or other agreement
with any former employer of his services, either as an employee, consultant,
contractor or independent contractor, or with any other party. Employee
represents that Employee will not disclose to Inspire any trade secrets or
confidential or proprietary information of any third party that are not
generally available to the public.
9. DISCLOSURE OF THIS AGREEMENT. Employee hereby authorizes Inspire to notify
others, including but not limited to customers of Inspire and any of Employee's
future employers, of the terms of this Agreement and Employee's responsibilities
under this Agreement.
10. SPECIFIC PERFORMANCE. Employee acknowledges that money damages alone would
not adequately compensate Inspire in the event of a breach or threatened breach
by Employee of this Agreement, and that, in addition to all other remedies
available to Inspire at law or in equity, Inspire shall be entitled to
injunctive relief for the enforcement of its rights and to an accounting of
profits made during the period of such breach.
11. NO RIGHTS GRANTED. Employee understands that nothing in this Agreement
shall be deemed to constitute, by implication or otherwise, the grant by Inspire
to the employee of any license or other right under any patent, patent
application or other intellectual property right or interest belonging to
Inspire.
12. SEVERABILITY.
(a) Each of the covenants provided in this Agreement are separate and
independent covenants. If any provision of this Agreement shall be determined
to be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby and any such invalid or unenforceable provision shall be
reformed so as to be valid and enforceable to the fullest extent permitted by
law.
(b) It is not a defense to the enforcement of any provision of this
Agreement that Inspire has breached or failed to perform any obligation or
covenant hereunder or under any other agreement or understanding between
Employee and Inspire.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to
conflict of law rules. All suits and claims shall be made only in state or
federal courts located in North Carolina.
14. SUPERSEDES OTHER AGREEMENTS. This Agreement contains the entire agreement
of the parties with respect to subject matter hereof and supersedes all previous
agreements and understandings between the parties with respect to its subject
matter.
15. AMENDMENTS. This Agreement may not be changed, modified, released,
discharged, abandoned or otherwise terminated in whole or in part except by an
instrument in writing, agreed to and signed by the Employee and a duly
authorized officer of Inspire.
16. ACKNOWLEDGEMENTS. THE EMPLOYEE ACKNOWLEDGES THAT (i) THE EMPLOYEE HAS READ
AND FULLY UNDERSTANDS THIS AGREEMENT; (ii) THE EMPLOYEE HAS BEEN GIVEN THE
OPPORTUNITY TO ASK QUESTIONS; (iii) THE
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EMPLOYEE HAS RECEIVED A COPY OF THIS AGREEMENT, THE ORIGINAL OF WHICH WILL BE
RETAINED IN THE EMPLOYEE'S PERSONNEL FILE; AND (iv) THE EMPLOYEE'S OBLIGATIONS
UNDER THIS AGREEMENT SURVIVE THE TERMINATION OF THE EMPLOYEE'S EMPLOYMENT WITH
INSPIRE FOR ANY REASON.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth below.
INSPIRE PHARMACEUTICALS, INC.
4222 Emperor Boulevard
Durham, North Carolina 27703
By: /s/ Christy L. Shaffer
----------------------------------------------
Christy L. Shaffer, Ph.D., President
and Chief Executive Officer
EMPLOYEE: Janet L. Rideout
---------------------------------------
(Print Name)
/s/ Janet L. Rideout
-------------------------------------------------
(Signature Here)
Date: February 4, 2000
---------------------------------------------
Address: 3101 Morningside Drive
----------------------------------------
Raleigh, NC 27607
-------------------------------------------------
-------------------------------------------------
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<PAGE>
SCHEDULE A
----------
PRIOR INVENTIONS
----------------
The attached list represents items assigned to Burroughs Wellcome/Glazo Wellcome
as of December 1999; however, it may not be a complete list and some cases may
still issue.
Patents
<TABLE>
<S> <C> <C>
1. US 3,956,277: "Purine Sugar Derivatives." G.B. Elion, J.E. Litster, and L.M. Beacham III.
2. US 4,136, 175: "Purine Nucleotide Antiviral Composition and Methods of Use." J.E.[L.] Rideout,
R.L. Miller, and G.B. Elion.
3. US 4,299,823: "Pyrazolo Pyrimidine Riboside Compounds, Pharmaceutical Compositions and Method of
Use." J.L. Rideout, T.A. Krenitsky, and G.B. Elion.
4. US 4,299,824: "Substituted Pyrazolo Pyrimidine Riboside Compounds, Pharmaceutical Compositions
and Method of Use." J.L. Rideout, T.A. Krenitsky, and G.B. Elion.
5. US 4,347,315: "Synthesis of Ribosides Using Bacterial Phosphorylase." T.A. Krenitsky and J.L.
Rideout.
6. US 4,381,344: "Process for Producing Deoxyribosides Using Bacterial Phosphorylase." J.L. Rideout
and T.A. Krenitsky.
7. US 4,481,197: "Anti-inflammatory Deoxyribosides." J.L. Rideout and T.A. Krenitsky.
8. US 4,724, 232: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N. Lehrman,
M.H. St. Clair, and P.A. Furman.
9. US 4,780,452: "[7-] Substituted-3--D-Ribofuranosyl-3-H-Imidazo [4,5-b] Pyridines and
Pharmaceutical Compositions Thereof." T.A. Krenitsky, J.L. Rideout, G.W. Koszalka.
10. US 4,780,453: "Treatment of Feline Viral Infections." J.L. Rideout, D.W. Barry, S.N. Lehrman,
M.H. St. Clair, and P.A. Furman.
11. US 4,818,538: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
12. US 4,818,750: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
13. US 4,828,838: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
14. US 4,833,130: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
15. US 4,837,208: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
16. US 4,847,244: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
17. US 4,847,511: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
18. US 4,874,609: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
19. US 4,916,218: "1 - (-D-xylofuranosyl)thymine derivatives." M.R. Almond, J.D. Wilson and J.L.
Rideout.
20. US 5,041,543: "Nucleoside and Use Thereof." S.R. Shaver, G.A. Freeman, and J.L. Rideout.
21. US 5,064,946; UK 8,706,176: "Therapeutic Nucleosides." S.R. Shaver, G.A. Freeman, and J.L. Rideout.
22. US 5,068,320: "2-Amino-6-(Cyclopropylamino) purine 9--D-2',3' -dideoxyribofuranoside and Its
Pharmaceutically Acceptable Salts." G.W. Koszalka, C.L. Burns, T.A. Krenitsky, and
J.L. Rideout.
23. US 5,086,044: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
24. US 5,093,114: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, P.A. Furman.
25. US 5,153,318: "3'-Azido Nucleoside Compound". J.L. Rideout, G.A. Freeman, S.A. Short, M.R.
Almond, and J.L. Collins.
26. US 5,185,437: "Therapeutic Nucleosides." G.W. Koszalka, C.L. Burns, T.A. Krenitsky, and J.L.
Rideout.
27. US 5,643,891: "Treatment of Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H. St.
Clair, and P.A. Furman.
28. US 5,683,990: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman
29. US 5,877,163: "Treatment of Human Viral Infections." J.L. Rideout, D.W. Barry, S.N Lehrman, M.H.
St. Clair, and P.A. Furman.
30. US 5,885,957: "Treatment of HTLV-I Infections." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St.
Clair, P.A. Furman.
31. UK 1,573,777: "9--D-Arabinonucleosides and an Enzymatic process for their preparation."
T.A. Krenitsky, J.L. Rideout, and G.B. Elion (Wellcome Foundation, Ltd.).
32. UK 8,506,869: "Antiviral Compound." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair, P.A.
Furman, and G.A. Freeman.
33. UK 8,511,774: "Antiviral Compounds." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair, and
P.A. Furman.
34. UK 8,511,775: "Antibacterial Compounds." L.M. Beechman III, H.S. LeBlanc, G.A. Freeman, and J.L
Rideout.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
35. UK 8,523,878: "Therapeutic Nucleosides." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair,
P.A. Furman, G.A. Feeman, T.P. Zimmerman, G. Wolberg, P.N.S. de Miranda, S.R.
Shaver, L.E. Kirk III, D.H. King, and R.H. Clemons.
36. UK 8,523,881: "Antiviral Compounds." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair, PA.
Furman, and G.A. Freeman.
37. UK 8,603,450: "Antiviral Compounds." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair, PA.
Furman, and G.A. Freeman.
38. UK 8,603,447: "Therapeutic Compounds." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair,
PA. Furman, and G.A. Freeman et al.
39. UK 8,603,719: "Antiviral Compounds." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair, and
PA. Furman.
40. UK 8,716,233: "Chemical Process." M.R. Almond, J.L. Rideout, and J.D. Wilson.
41. WO 92/16215: "Use of 3'- Azido-2', 3' - Dideoxyguanosine for the Treatment of Hepatitis B."
J.L. Rideout, D.R. Averett, G.A. Freeman.
42. EP002192: "Enzymatic Synthesis of Purine Arabinonucleosides." T.A. Krenitsky, G.B. Elion,
J.E. Rideout.
43. EP038568: "Synthesis of Deazapurine Nucleosides." T.A. Krenitsky, J.L. Rideout.
44. EP021293: "4-Substituted Thio-1--D-Ribofuranosylpyrazolo (3,4-D) Pyrimidines,
Processes for Their Preparation, Pharmaceutical Formulations and Medical Uses."
J.E. Rideout, T.A. Krenitsky, G.B. Elion.
45. EP038569: "Deazapurine Nucleosides, Formulations and Preparation Thereof." J.L. Rideout,
T.A. Krenitsky.
46. EP196185: "Antiviral Nucleosides." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair,
P.A. Furman.
47. EP287215: "Therapeutic Nucleosides." J.L. Rideout, G.A. Freeman, S.R. Shaver.
48. EP306597: "Antiviral Nucleosides." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair,
P.A. Furman, G.A. Freeman.
49. EP286425: "Therapeutic Nucleosides." G.W. Koszalka, T.A. Krenitsky, J.L. Rideout, C.L. Burns.
50. EP199451: "Therapeutic Nucleosides." J.L. Rideout, D.W. Barry, S.N. Lehrman, M.H. St. Clair,
P.A. Furman, L.M. Beacham III, H.S. LeBlance, G.A. Freeman.
</TABLE>
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<PAGE>
EXHIBIT 10.28
EMPLOYEE
CONFIDENTIALITY, INVENTION ASSIGNMENT
AND NON-COMPETE AGREEMENT
THIS EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND NON-COMPETE
AGREEMENT ("Agreement") is made as of the date set forth on the signature page
below between Inspire Pharmaceuticals, Inc. ("Inspire"), and the person whose
name is set forth on the signature page below as Employee ("Employee").
In consideration of Employee's employment or continued employment by
Inspire, with the intention that this Agreement shall apply to the entire period
of Employee's employment with Inspire (including the period prior to the date of
this Agreement), Employee hereby agrees as follows:
1. Confidential Information Defined. "Confidential Information" means trade
secrets, proprietary information and materials, and confidential knowledge and
information which includes, but is not limited to, matters of a technical nature
(such as discoveries, ideas, concepts, designs, drawings, specifications,
techniques, models, diagrams, test data, scientific methods and know-how, and
materials such as reagents, substances, chemical compounds, subcellular
constituents, cell or cell lines, organisms and progeny, and mutants,
derivatives or replications derived from or relating to any of the foregoing
materials), and matters of a business nature (such as the identity of customers
and prospective customers, the nature of work being done for or discussed with
customers or prospective customers, suppliers, marketing techniques and
materials, marketing and development plans, pricing or pricing policies,
financial information, plans for further development, and any other information
of a similar nature not available to the public).
"Confidential Information" shall not include information that: (a) was in
Employee's possession or in the public domain before receipt from the Company,
as evidenced by the then existing publication or other public dissemination of
such information in written or other documentary form; (b) becomes available to
the public through no fault of Employee; (c) is received in good faith by
Employee from a third party who is not subject to an obligation of
confidentiality to the Company or any other party; or (d) is required by a
judicial or administrative authority or court having competent jurisdiction to
be disclosed by Employee, provided that Employee shall promptly notify the
Company and allow the Company a reasonable time to oppose or limit such order.
2. Non-Disclosure of Confidential Information of Inspire. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee has had or will have access to Confidential Information of Inspire.
Therefore, Employee agrees that both during and after the period of Employee's
employment with Inspire, Employee shall not, without the prior written approval
of Inspire, directly or indirectly (a) reveal, report, publish, disclose or
transfer any Confidential Information of Inspire to any person or entity, or (b)
use any Confidential Information of Inspire for any purpose or for the benefit
of any person or entity, except as may be necessary in the performance of
Employee's work for Inspire.
3. Non-Disclosure of Confidential Information of Others. Employee
acknowledges that, during the period of Employee's employment with Inspire,
Employee may have had or will have access to Confidential Information of third
parties who have given Inspire the right to use such Confidential Information,
subject to a non-disclosure agreement between Inspire and such third
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<PAGE>
party. Therefore, Employee agrees that both during and after the period of
Employee's employment with Inspire, Employee shall not, without the prior
written approval of Inspire, directly or indirectly (a) reveal, report, publish,
disclose or transfer any Confidential Information of such third parties to any
person or entity, or (b) use any Confidential Information of such third parties
for any purpose or for the benefit of any person or entity, except as may be
necessary in the performance of Employee's work for Inspire.
4. Property of Inspire. Employee acknowledges and agrees that all Confidential
Information of Inspire and all reports, drawings, blueprints, materials, data,
code, notes and other documents and records, whether printed, typed,
handwritten, videotaped, transmitted or transcribed on data files or on any
other type of media, and whether or not labelled or identified as confidential
or proprietary, made or compiled by Employee, or made available to Employee,
during the period of Employee employment with Inspire (including the period
prior to the date of this Agreement) concerning Inspire's Confidential
Information are and shall remain Inspire's property and shall be delivered to
Inspire within five (5) business days after the termination of such employment
with Inspire or at any earlier time on request of Inspire. Employee shall not
retain copies of such Confidential Information, documents and records.
5. Proprietary Notices. Employee shall not, and shall not permit any other
person to, remove any proprietary or other legends or restrictive notices
contained in or included in any Confidential Information.
6. Inventions.
(a) Employee shall promptly, from time to time, fully inform and disclose
to Inspire in writing all inventions, copyrightable material, designs,
improvements and discoveries of any kind which Employee now has made, conceived
or developed (including prior to the date of this Agreement), or which Employee
may later make, conceive or develop, during the period of Employee's employment
with Inspire, which pertain to or relate to Inspire's business or any of the
work or businesses carried on by Inspire ("Inventions"). This covenant applies
to all such Inventions, whether or not they are eligible for patent, copyright,
trademark, trade secret or other legal protection; and whether or not they are
conceived and/or developed by Employee alone or with others; and whether or not
they are conceived and/or developed during regular working hours; and whether or
not they are conceived and/or developed at Inspire's facility or not.
(b) Inventions shall not include any inventions made, conceived or
developed by Employee prior to Employee's employment with Inspire, a complete
list of which is set forth on Schedule A attached.
(c) All Inventions shall be the sole and exclusive property of Inspire,
and shall be deemed part of the Confidential Information of Inspire for purposes
of this Agreement, whether or not fixed in a tangible medium of expression.
Employee hereby assigns all Employee's rights in all Inventions and in all
related patents, copyrights and trademarks, trade secrets and other proprietary
rights therein to Inspire. Without limiting the foregoing, Employee agrees that
any copyrightable material shall be deemed to be "works made for hire" and that
Inspire shall be deemed the author of such works under the United States
Copyright Act, provided that in the event and to the extent such works are
determined not to constitute "works made for hire", Employee hereby irrevocably
assigns and transfers to Inspire all right, title and interest in such works.
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<PAGE>
(d) Employee shall assist and cooperate with Inspire, both during and
after the period of Employee's employment with Inspire, at Inspire's sole
expense, to allow Inspire to obtain, maintain and enforce patent, copyright,
trademark, trade secret and other legal protection for the Inventions. Employee
shall sign such documents, and do such things necessary, to obtain such
protection and to vest Inspire with full and exclusive title in all Inventions
against infringement by others. Employee hereby appoints the Secretary of
Inspire as Employee's attorney-in-fact to execute documents on Employee's behalf
for this purpose.
(e) Employee shall not be entitled to any additional compensation for any
and all Inventions made during the period of Employee's employment with Inspire.
7. Covenant Not to Compete. If Employee is, at any time during Employee's
period of employment with Inspire, employed in the discovery or development
areas of the Company in a non-clerical position, or as a director level or
higher level senior manager of the Company, then this Section 7 shall apply.
Employee and Inspire agree that the services rendered by the Employee are unique
and irreplaceable, and that competitive use and knowledge of any Confidential
Information would substantially and irreparably injure Inspire's business,
prospects and good will. Employee and Inspire also agree that Inspire's
business is global in nature due to the type of products and/or services being
provided. Therefore, Employee agrees that during the period of Employee's
employment with Inspire and for a period of one (1) year thereafter, Employee
shall not, directly or indirectly, through any other person, firm, corporation
or other entity (whether as an officer, director, employee, partner, consultant,
holder of equity or debt investment, lender or in any other manner or capacity):
(a) develop, sell, market, offer to sell products and/or services anywhere
in the world that have the same or similar technological approach or technology
platform (e.g., same receptors (such as P2Y), same mechanism of action (such as
mucociliary clearance)) as those being developed, offered or sold by Inspire on
the date of the termination of Employee's employment with Inspire for any
reason;
(b) solicit, induce, encourage or attempt to induce or encourage any
employee or consultant of Inspire to terminate his or her employment or
consulting relationship with Inspire, or to breach any other obligation to
Inspire;
(d) solicit, interfere with, disrupt, alter or attempt to disrupt or alter
the relationship, contractual or otherwise, between Inspire and any consultant,
contractor, customer, potential customer, or supplier of Inspire; or
(d) engage in or participate in any business in the same industry as
Inspire which is conducted under any name that shall be the same as or similar
to the name of Inspire or any trade name used by Inspire.
Employee acknowledges that the foregoing geographic, activity and time
limitations contained in this Section 7 are reasonable and properly required for
the adequate protection of Inspire's business. In the event that any such
geographic, activity or time limitation is deemed to be unreasonable by a court,
Employee shall submit to the reduction of either said activity or time
limitation to such activity or period as the court shall deem reasonable. In
the event that Employee is in violation of the aforementioned restrictive
covenants, then the time limitation thereof shall be extended for a period of
time equal to the pendency of such proceedings, including appeals.
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<PAGE>
8. Representations. Employee represents that Employee has the right to enter
into this Agreement, and that Employee's performance of all the terms of this
Agreement and his duties as an employee of Inspire will not breach any
confidential information agreement, non-competition agreement or other agreement
with any former employer of his services, either as an employee, consultant,
contractor or independent contractor, or with any other party. Employee
represents that Employee will not disclose to Inspire any trade secrets or
confidential or proprietary information of any third party that are not
generally available to the public.
9. Disclosure of this Agreement. Employee hereby authorizes Inspire to notify
others, including but not limited to customers of Inspire and any of Employee's
future employers, of the terms of this Agreement and Employee's responsibilities
under this Agreement.
10. Specific Performance. Employee acknowledges that money damages alone would
not adequately compensate Inspire in the event of a breach or threatened breach
by Employee of this Agreement, and that, in addition to all other remedies
available to Inspire at law or in equity, Inspire shall be entitled to
injunctive relief for the enforcement of its rights and to an accounting of
profits made during the period of such breach.
11. No Rights Granted. Employee understands that nothing in this Agreement
shall be deemed to constitute, by implication or otherwise, the grant by Inspire
to the employee of any license or other right under any patent, patent
application or other intellectual property right or interest belonging to
Inspire.
12. Severability.
(a) Each of the covenants provided in this Agreement are separate and
independent covenants. If any provision of this Agreement shall be determined
to be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby and any such invalid or unenforceable provision shall be
reformed so as to be valid and enforceable to the fullest extent permitted by
law.
(b) It is not a defense to the enforcement of any provision of this
Agreement that Inspire has breached or failed to perform any obligation or
covenant hereunder or under any other agreement or understanding between
Employee and Inspire.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to
conflict of law rules. All suits and claims shall be made only in state or
federal courts located in North Carolina.
14. Supersedes Other Agreements. This Agreement contains the entire agreement
of the parties with respect to subject matter hereof and supersedes all previous
agreements and understandings between the parties with respect to its subject
matter.
15. Amendments. This Agreement may not be changed, modified, released,
discharged, abandoned or otherwise terminated in whole or in part except by an
instrument in writing, agreed to and signed by the Employee and a duly
authorized officer of Inspire.
16. Acknowledgements. THE EMPLOYEE ACKNOWLEDGES THAT (i) THE EMPLOYEE HAS READ
AND FULLY UNDERSTANDS THIS AGREEMENT; (ii) THE EMPLOYEE HAS BEEN GIVEN THE
OPPORTUNITY TO ASK QUESTIONS; (iii) THE
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<PAGE>
EMPLOYEE HAS RECEIVED A COPY OF THIS AGREEMENT, THE ORIGINAL OF WHICH WILL BE
RETAINED IN THE EMPLOYEE'S PERSONNEL FILE; AND (iv) THE EMPLOYEE'S OBLIGATIONS
UNDER THIS AGREEMENT SURVIVE THE TERMINATION OF THE EMPLOYEE'S EMPLOYMENT WITH
INSPIRE FOR ANY REASON.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth below.
INSPIRE PHARMACEUTICALS, INC.
4222 Emperor Boulevard
Durham, North Carolina 27703
By: /s/ Gregory J. Mossinghoff
-------------------------------------
Gregory J. Mossinghoff,
Chief Business Officer
EMPLOYEE: Christy L. Shaffer
-------------------------------
(Print Name)
/s/ Christy L. Shaffer
-----------------------------------------
(Signature Here)
Date: February 10, 2000
-----------------------------------
Address: 3 Wysteria Way
--------------------------------
Chapel Hill, NC 27514
-----------------------------------------
_________________________________________
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<PAGE>
SCHEDULE A
----------
PRIOR INVENTIONS
----------------
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<PAGE>
Exhibit 16.1
[KPMG LOGO]
150 Fayetteville Street Mall
Suite 1200
Post Office Box 29543
Raleigh, NC 27626-0543
February 25, 2000
Office of the Chief Accountant
SECPS Letter Files
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Inspire Pharmaceuticals, Inc. and,
under the date of July 30, 1999 we reported on the balance sheets of Inspire
Pharmaceuticals, Inc. as of December 31, 1998 and 19997, and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended, and for the cumulative period from the date of inception to
December 31, 1998 (the "Financial Statements"). On November 12, 1999, our
appointment as principal accountants was terminated. We have read Inspire
Pharmaceuticals, Inc.'s statements included under Item 11 of its Form S-1 dated
February 25, 2000, and we agree with such statements, except that we are not
in a position to agree or disagree with Inspire Pharmaceuticals, Inc.'s
statements that the change was approved by the board of directors or that
PricewaterhouseCoopers LLP was not engaged regarding the application of
accounting principles to a specified transaction or the type of audit opinion
that might be rendered on Inspire Pharmaceuticals, Inc.'s financial statements.
Very truly yours,
/s/ KPMG LLP
KPMG LLP
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the use in this Amendment No. 1 to the Registration
Statement on Form S-1 of Inspire Pharmaceuticals, Inc. of our report dated
February 21, 2000, relating to the financial statements of Inspire
Pharmaceuticals, Inc., which appears in such Registration Statement. We also
consent to the references to us under the headings "Selected Financial Data"
and "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
March 29, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OUR DECEMBER
31, 1997, 1998 AND 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 0 4,137,628 22,727,687
<SECURITIES> 0 0 0
<RECEIVABLES> 0 5,726 19,540
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 4,226,726 22,879,118
<PP&E> 0 2,507,297 2,865,331
<DEPRECIATION> 0 1,461,102 2,076,303
<TOTAL-ASSETS> 0 5,446,035 23,929,757
<CURRENT-LIABILITIES> 0 1,179,953 1,492,406
<BONDS> 0 362,207 357,097
0 0 0
0 24,466,659 45,895,143
<COMMON> 0 3,779 4,315
<OTHER-SE> 0 (20,566,563) (28,819,204)
<TOTAL-LIABILITY-AND-EQUITY> 0 5,446,035 23,929,757
<SALES> 0 0 0
<TOTAL-REVENUES> 0 3,600,000 600,000
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 8,063,507 7,373,559 9,156,567
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 164,321 115,295 90,175
<INCOME-PRETAX> (7,947,426) (3,737,927) (8,413,951)
<INCOME-TAX> 0 360,000 60,000
<INCOME-CONTINUING> (7,947,426) (4,097,927) (8,473,951)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (7,947,426) (4,097,927) (8,473,951)
<EPS-BASIC> (2.29) (1.14) (2.02)
<EPS-DILUTED> (2.29) (1.14) (2.02)
</TABLE>
