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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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UNITED THERAPEUTICS CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 2836 52-1984749
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
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1110 SPRING STREET
SILVER SPRING, MD 20910
(301) 608-9292
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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MARTINE A. ROTHBLATT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
UNITED THERAPEUTICS CORPORATION
1110 SPRING STREET
SILVER SPRING, MD 20910
(301) 608-9292
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
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LADAWN NAEGLE, ESQ. LESLIE E. DAVIS, ESQ.
BRYAN CAVE LLP TESTA, HURWITZ & THIBEAULT, LLP
700 THIRTEENTH STREET, N.W. HIGH STREET TOWER
SUITE 700 125 HIGH STREET
WASHINGTON, DC 20005 BOSTON, MA 02110
(202) 508-6000 (617) 248-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If any of the securities registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, par value $.01 per share $86,250,000 $23,978
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933 and includes
shares that may be purchased by the underwriters to cover
over-allotments, if any.
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 THAT 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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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. UNITED THERAPEUTICS 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 UNITED THERAPEUTICS IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
APRIL 16, 1999
Shares
[UNITED THERAPEUTICS CORPORATION LOGO]
Common Stock
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This is the initial public offering of United Therapeutics Corporation. United
Therapeutics is offering shares of Common Stock. United Therapeutics
anticipates that the initial public offering price will be between $ and
$ per share.
United Therapeutics has applied to list the Common Stock on the Nasdaq National
Market under the symbol "UTHR."
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
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PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to United Therapeutics............................. $ $
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
United Therapeutics has granted the Underwriters the right to purchase up to
additional shares at the public offering price to cover any
over-allotments.
BT ALEX. BROWN
A.G. EDWARDS & SONS, INC.
VECTOR SECURITIES INTERNATIONAL, INC.
, 1999
<PAGE> 3
DESCRIPTION OF PICTURES APPEARING ON THE INSIDE FRONT COVER PAGE:
Outline of the entire human body, also specifically depicting the heart and
lungs. Above the picture is a caption that reads: "Conditions Targeted by United
Therapeutics' Products". Along the length of the body are the following
captions, which are connected by lines to various areas of the body: (a)
"Chronic Obstructive Pulmonary Disease"; (b) "Pulmonary Hypertension" with
sub-captions "Early Stage" and "Advanced"; (c) "Peripheral Vascular Disease"
with sub-captions "Early Stage" and "Late Stage"; and (d) "Osteoarthritis".
Beneath that picture is a series of three schematic representations of
artery cross sections, appearing left to right. Above the first representation
is a caption that reads: "Normal Capillary Cross-Section". Below the
representation are two captions, with lines connecting the captions to the
picture, which read: (a) "Artery (through which blood flows)"; and (b) "Smooth
muscle cell layer (dilates and constricts)".
Above the second representation is a caption that reads: "Diseased
Capillary Cross-Section". Below the representation are three captions, with
lines connecting the captions to the picture, which read: (a) "Artery becomes
constricted, blocking blood flow"; (b) "Platelets begin to adhere to the inner
surface of the artery"; and (c) "Smooth muscle cell layer thickens, further
narrowing blood vessel".
Above the third representation is a caption that reads: "Expected Effects
of UT-15". Below the representation, there are three captions, with lines
connecting the captions to the picture, which read: (a) "A more normal blood
flow returns to the artery, and arterial blood pressure drops"; (b) "Platelets
stop adhering to the inner surface of the artery"; and (c) "Smooth muscle cells
dilate and cease proliferating".
At the bottom is the United Therapeutics logo and trademark, "Medicines for
Life(TM)".
<PAGE> 4
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. This Prospectus contains forward-looking statements. The
outcome of the events described in these forward-looking statements is subject
to risks, and actual results could differ materially. The sections entitled
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business" contain discussions of some of the
factors that could contribute to these differences.
United Therapeutics Corporation develops pharmaceuticals to treat vascular
diseases, including pulmonary hypertension and peripheral vascular disease, as
well as selected other chronic conditions. Both pulmonary hypertension and
peripheral vascular disease are characterized by reduced production of natural
prostacyclin, a highly unstable molecule that has powerful effects on
blood-vessel health. United Therapeutics' lead products, UT-15 and beraprost,
are stable synthetic forms of prostacyclin. UT-15 is delivered subcutaneously
and is currently in two multi-center Phase III clinical trials for treating
advanced pulmonary hypertension. Beraprost is delivered orally, and United
Therapeutics is beginning a Phase III clinical trial program to treat
early-stage peripheral vascular disease.
Pulmonary hypertension is a progressive, life-threatening disease that is
difficult to diagnose and treat and is currently incurable. It is characterized
by high pressure in the blood vessels between the heart and lungs, but normal
blood pressure in the rest of the body. The advanced form of pulmonary
hypertension afflicts approximately 55,000 people in North America and Europe,
and United Therapeutics believes that the potential market for UT-15 to treat
these patients is approximately $2.5 billion. The FDA has approved only one drug
treatment for advanced pulmonary hypertension. Flolan[Registered Trademark], an
intravenous infusion of prostacyclin, was approved in 1995 to treat primary
pulmonary hypertension, a small subset of advanced pulmonary hypertension.
Flolan is marketed by Glaxo Wellcome Inc. Flolan is an effective therapy, but
has numerous significant drawbacks. For example, Flolan has a short half life in
the body which increases the risk of an abrupt recurrence of hypertension and
death if its delivery is interrupted for even a short period of time.
Additionally, Flolan must be continuously infused through a catheter surgically
implanted in the patient's chest, creating a risk of life-threatening sepsis
infections. United Therapeutics believes that UT-15 overcomes the safety and
quality-of-life drawbacks associated with Flolan therapy and will provide
patients with a safe, convenient, non-intravenous form of life-long prostacyclin
therapy.
In October 1998, United Therapeutics completed a 26-patient, randomized,
double-blind, placebo-controlled, eight-week clinical trial for UT-15 in primary
pulmonary hypertension patients. Results from this trial demonstrated that UT-15
can be safely administered to severely ill patients on an outpatient basis, and
also showed that continuous, subcutaneous dosing of UT-15 leads to improvements
in pulmonary blood pressure and exercise ability. Patients receiving UT-15 in
this study experienced improvements similar to those achieved by patients
receiving Flolan therapy for 12 weeks. Each patient who finished this study
elected to receive UT-15 therapy indefinitely.
United Therapeutics is beginning a Phase III clinical trial program for
beraprost for treating early-stage peripheral vascular disease in the United
States. Peripheral vascular disease is characterized by the progressive
degradation of the circulatory system in the legs and affects over six million
people in the United States and a similar number in Europe. Peripheral vascular
disease results in over 200,000 amputations and more than $12 billion in medical
costs annually. Clinical testing outside the United States has demonstrated that
peripheral vascular disease is amenable to prostacyclin therapy. Beraprost was
approved for the treatment of peripheral vascular disease in Japan in 1994 and
generated 1998 sales of over $225 million for Toray Industries, Inc., the
developer of the compound, and its licensees. In December 1998, Hoechst Marion
Roussel,
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Inc., the European licensee of beraprost, submitted a regulatory application for
beraprost to treat peripheral vascular disease in Europe.
United Therapeutics is undertaking additional clinical studies. UT-15 is in
Phase II clinical trials to treat late-stage peripheral vascular disease, and
United Therapeutics is beginning a Phase II clinical trial program for beraprost
to treat early-stage pulmonary hypertension. United Therapeutics believes that
beraprost's current oral formulation will be complementary to UT-15 because this
formulation cannot provide the constant therapeutic levels of prostacyclin in
the body necessary to treat advanced pulmonary hypertension and late-stage
peripheral vascular disease effectively. United Therapeutics is beginning a
Phase II clinical trial program for UT-77, an elastase inhibitor, for the
treatment of chronic obstructive pulmonary disease. Finally, United Therapeutics
is beginning a Phase II/III clinical trial program for Ketotop, a transdermal
patch that delivers the FDA-approved anti-inflammatory pain reliever ketoprofen,
for the treatment of osteoarthritis.
United Therapeutics believes that it has assembled the preeminent group of
scientists and clinicians in the field of pulmonary vascular medicine. Members
of United Therapeutics' scientific advisory board have won the Nobel Prize for
the discovery and characterization of prostacyclin, discovered Flolan and
invented UT-15. Members of United Therapeutics' senior management led the team
at Burroughs Wellcome Co. that designed the clinical trials for, obtained FDA
approval of and commercialized Flolan. These executives have similarly designed
UT-15's clinical trials, which have primary end points identical to those used
for the studies to approve Flolan. United Therapeutics believes this expertise
will be instrumental in the development and commercialization of UT-15,
beraprost and its other products.
United Therapeutics also maintains a streamlined corporate infrastructure
that is focused on strategic business management. United Therapeutics outsources
the non-core aspects of its business to substantially reduce fixed overhead and
capital investment, accelerate commercialization of its products and reduce its
business risk. For example, United Therapeutics has partnered with MiniMed Inc.,
the worldwide leader in subcutaneous continuous-flow microinfusion devices.
Under the terms of this strategic alliance, MiniMed will market UT-15 through a
dedicated sales force, provide the pager-sized infusion device to patients,
train patients and care providers in its use and obtain third-party
reimbursement.
United Therapeutics' objective is to become a leader in the development and
commercialization of drugs to treat pulmonary and vascular diseases, as well as
other selected chronic conditions. To achieve this objective, United
Therapeutics is pursuing the following strategies:
- Capitalize on its experience and expertise in pulmonary vascular
medicine;
- Establish its prostacyclin products as the standard of care for pulmonary
hypertension and peripheral vascular disease;
- Minimize fixed costs and corporate overhead through outsourcing and
partnering; and
- In-license, develop and commercialize selected other product candidates.
United Therapeutics was incorporated in Delaware in June 1996. Its
principal office is located at 1110 Spring Street, Silver Spring, Maryland
20910, and its telephone number there is (301) 608-9292. United Therapeutics'
clinical development office is located at 68 T.W. Alexander Drive, Research
Triangle Park, North Carolina 27709, and its telephone number there is (919)
485-8350. Information on United Therapeutics' web site is not a part of this
Prospectus.
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THE OFFERING
Common Stock offered by United
Therapeutics.............................. shares
Common Stock to be outstanding after the
offering.................................. shares
Use of proceeds........................... For clinical development and
commercialization of its existing
products, working capital and
general corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.... UTHR
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables summarize the financial data for United Therapeutics'
business. The consolidated balance sheet data are presented as of March 31,
1999, and have been adjusted to reflect the sale of the shares of
Common Stock United Therapeutics is offering at an assumed public offering price
of $ per share (after deducting estimated underwriting discounts and
commissions and estimated offering expenses) and the application of the
estimated net proceeds. See the consolidated financial statements and related
notes appearing elsewhere in this Prospectus, "Use of Proceeds" and
"Capitalization."
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<CAPTION>
PERIOD FROM
JUNE 26, 1996 YEAR ENDED THREE MONTHS ENDED
(INCEPTION) TO DECEMBER 31, MARCH 31,
DECEMBER 31, --------------------- ---------------------
1996 1997 1998 1998 1999
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(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue............................ $ 154 $ 116 $ 54 $ -- $ 54
Operating expenses:
Research and development......... 100 2,027 11,015 1,740 11,611
General and administrative....... 85 1,006 2,366 573 848
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Loss from operations............... (31) (2,917) (13,327) (2,313) (12,405)
Net loss........................... $ (30) $ (2,901) $ (12,835) $ (2,264) $ (12,238)
Basic and diluted net loss per
share(1)......................... $ (0.02) $ (0.87) $ (1.54) $ (0.38) $ (1.19)
Shares used in computing basic and
diluted net loss per share(1).... 1,667 3,339 8,322 5,939 10,256
</TABLE>
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MARCH 31, 1999
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ACTUAL AS ADJUSTED
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(UNAUDITED)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments........ $ 15,429 $
Total assets................................................ 17,765
Accumulated deficit......................................... (28,005)
Total stockholders' equity.................................. 15,468
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(1) See Note 2 of Notes to Consolidated Financial Statements for a description
of the computation of basic and diluted net loss per share.
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This Prospectus contains trademarks owned by other companies.
Unless otherwise specifically stated, information throughout this
Prospectus (a) gives effect to a one-for-three reverse split of United
Therapeutics' Common Stock to be effected prior to the effectiveness of the
Registration Statement of which this Prospectus is a part, and (b) assumes no
exercise of the Underwriters' over-allotment option.
4
<PAGE> 8
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and the other information in this
Prospectus before deciding whether to invest in United Therapeutics' Common
Stock. If any of the following risks actually occur, United Therapeutics'
business, financial condition or operating results could be materially adversely
affected. This could cause the market price of the Common Stock to decline, and
you may lose part or all of your investment.
UNITED THERAPEUTICS' PRODUCTS MAY FAIL IN CLINICAL STUDIES
In order to receive regulatory approval for its products, United
Therapeutics must conduct clinical studies demonstrating that the drug and the
delivery mechanism for the drug are safe and effective. United Therapeutics has
started Phase III clinical studies for UT-15 for advanced pulmonary hypertension
and Phase II clinical studies for UT-15 for late-stage peripheral vascular
disease. United Therapeutics is beginning a Phase III clinical trial program to
treat early-stage peripheral vascular disease with beraprost and a Phase II
clinical trial program to treat early-stage pulmonary hypertension with
beraprost. United Therapeutics is still developing studies for its other
products. Although United Therapeutics' products, such as UT-15 and beraprost,
appear promising based on clinical studies to date, they may not be successful
in later clinical studies. United Therapeutics' 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 are not related
to the drug being studied;
- Patients do not enroll in the studies at the rate United Therapeutics
expects; and
- Drug supplies are not sufficient to treat the patients in the studies.
In addition, the FDA and foreign regulatory authorities have substantial
discretion in the approval process. The FDA and foreign regulatory authorities
may not agree that United Therapeutics has demonstrated that its products are
safe and effective.
UNITED THERAPEUTICS MAY NOT BE ABLE TO OBTAIN OR MAINTAIN REGULATORY APPROVALS
FOR ITS PRODUCTS
The process of obtaining and maintaining regulatory approvals for new drugs
is lengthy, expensive and uncertain. The research, preclinical testing and
clinical studies of potential products are subject to extensive and rigorous
regulation by numerous governmental authorities in the United States and in
other countries where United Therapeutics wants to sell its products. The
manufacturing, distribution, advertising and marketing of these products are
also subject to extensive regulation. Any new product approvals United
Therapeutics receives in the future could include significant restrictions on
the use or marketing of United Therapeutics' products. Product approvals, if
granted, can be withdrawn for failure to comply with regulatory requirements or
upon the occurrence of adverse events following commercial introduction of the
products. If United Therapeutics does not comply with laws and regulations that
apply to its business, United Therapeutics could be subject to enforcement
actions. Governmental authorities could seize United Therapeutics' products or
force United Therapeutics to recall its products. In addition, United
Therapeutics and its officers and directors could be subject to civil and
criminal penalties.
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UNITED THERAPEUTICS HAS A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE
United Therapeutics has lost money since its inception in 1996, and its
accumulated deficit was approximately $28.0 million at March 31, 1999. United
Therapeutics expects to incur substantial additional losses over the next
several years, whether or not it generates revenue, as it expands clinical
studies and continues to develop its products. United Therapeutics expects its
quarterly and annual operating results to fluctuate, depending primarily on the
following factors:
- Timing of regulatory approvals and commercial sales of its products;
- Level of patient demand for its products;
- Timing of payments to licensors and corporate partners; and
- Timing of investments in new technologies.
All of United Therapeutics' products are in clinical studies, and United
Therapeutics is not yet selling any products. United Therapeutics might not
obtain regulatory approvals for its products, including its lead products, UT-15
and beraprost, and may not be able to sell its products commercially. Even if
United Therapeutics sells its products, United Therapeutics may not ever be
profitable and may not be able to sustain any profitability it achieves. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DISCOVERIES OR DEVELOPMENTS OF NEW TECHNOLOGIES BY OTHERS MAY MAKE UNITED
THERAPEUTICS' PRODUCTS OBSOLETE
Other companies may conduct research, make discoveries or introduce new
products that render all or some of United Therapeutics' technologies and
products obsolete or not commercially viable. Researchers are continually
learning more about pulmonary and vascular diseases that may lead to new
technologies to treat the diseases. In addition, alternative approaches to
treating chronic diseases, such as gene therapy, may make United Therapeutics'
products obsolete or noncompetitive.
UNITED THERAPEUTICS' PRODUCTS MAY NOT BE COMMERCIALLY SUCCESSFUL BECAUSE
PHYSICIANS AND PATIENTS MAY NOT ACCEPT THEM
Even if regulatory authorities approve United Therapeutics' products, those
products may not be commercially successful. United Therapeutics expects that
most of its products, including UT-15, will be very expensive. Patient
acceptance of and demand for United Therapeutics' products will depend largely
on the following factors:
- Acceptance by physicians and patients of United Therapeutics' products as
safe and effective therapies;
- Reimbursement of drug and treatment costs by third-party payors;
- Pricing of alternative products;
- Convenience and ease of administration of United Therapeutics' products;
and
- Prevalence and severity of side effects associated with United
Therapeutics' products.
COMMERCIAL SUCCESS WILL DEPEND ON THIRD-PARTY PAYORS REIMBURSING FOR UNITED
THERAPEUTICS' DRUG PRODUCTS
United Therapeutics' commercial success will depend in part on third-party
payors agreeing to reimburse patients for the costs of United Therapeutics'
products. Third-party payors frequently challenge the pricing of new drugs.
United Therapeutics expects that its products will be very expensive.
Third-party payors may not approve United Therapeutics' products for
reimbursement.
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UNITED THERAPEUTICS RELIES ON THIRD PARTIES TO DEVELOP, MARKET, DISTRIBUTE AND
SELL ITS PRODUCTS AND THOSE THIRD PARTIES MAY NOT PERFORM
United Therapeutics does not have the ability to independently conduct
clinical studies, obtain regulatory approvals, market, distribute or sell its
products and intends to rely on experienced third parties to perform all of
those functions. United Therapeutics may not locate acceptable contractors or
enter into favorable agreements with them. Third parties may not successfully
carry out their contractual duties or meet expected deadlines. MiniMed Inc. is
United Therapeutics' exclusive partner for the subcutaneous delivery of UT-15
using the MiniMed(R) microinfusion device in the field of pulmonary
hypertension. MiniMed will be responsible for marketing, sales and customer
service. United Therapeutics is dependent on MiniMed's experience, expertise and
performance to successfully market and sell UT-15 for pulmonary hypertension.
See "Business -- The MiniMed Strategic Alliance."
UNITED THERAPEUTICS DEPENDS ON THIRD PARTIES TO SYNTHESIZE AND MANUFACTURE ITS
PRODUCTS AND THOSE THIRD PARTIES MAY NOT PERFORM
United Therapeutics does not have the resources, facilities or experience
to manufacture its products itself. The company depends on third parties for the
manufacture of all its products. United Therapeutics is relying on Cook Imaging
Corporation, SynQuest, Inc. and Schweizerhall, Inc. for the formulation and
manufacture of UT-15. United Therapeutics relies on Magellan Laboratories
Incorporated to test the purity and stability of each batch of UT-15. United
Therapeutics' manufacturing strategy presents the following risks:
- The manufacturing processes for some of United Therapeutics' products
have not been tested in quantities needed for commercial sales;
- Delays in scale-up to commercial quantities could delay clinical studies,
regulatory submissions and commercialization of United Therapeutics'
products;
- A long lead time is needed to manufacture UT-15, and the manufacturing
process is complex;
- If United Therapeutics has to change to another manufacturing contractor,
it may not be able to effectively sell its products;
- Without satisfactory long-term agreements with its manufacturers, United
Therapeutics will not be able to develop or commercialize its products as
planned or at all; and
- United Therapeutics 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 its products.
United Therapeutics relies exclusively on Toray Industries, Inc. to
manufacture beraprost and on Global Medical Enterprises Ltd. to supply Ketotop.
Manufacturers of United Therapeutics' products are subject to the FDA's good
manufacturing practices regulations and similar foreign standards. Third-party
manufacturers must comply with these regulations, and United Therapeutics does
not have control over their compliance. In addition, if United Therapeutics were
to change to a different manufacturer, FDA and comparable foreign regulators
would require new testing and compliance inspections and the new manufacturer
would have to be educated in the processes necessary for the production of UT-15
or any other affected product. Any of these factors could delay clinical studies
or commercialization of United Therapeutics' products and entail higher costs.
See "Business -- Government Regulation."
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UNITED THERAPEUTICS MAY NOT HAVE ADEQUATE PATENT AND OTHER INTELLECTUAL PROPERTY
PROTECTION
The U.S. patent for the UT-15 composition of matter expires in 2000, and
the U.S. patent for the method of treating pulmonary hypertension with UT-15
expires in 2009. The U.S. patents for the beraprost composition of matter and
synthesis expire in 2003 and 2010. United Therapeutics may not be able to extend
these or any other patents. Ketotop is patented in the United States, but not in
any other jurisdiction where United Therapeutics has marketing rights.
Competitors may develop products based on the same active ingredients as United
Therapeutics' products, including UT-15, and market those products after the
patents expire, or may design around United Therapeutics' existing patents.
The issued beraprost patents do not cover methods of treating any disease,
including pulmonary hypertension or peripheral vascular disease, using
beraprost. The issued Ketotop patent in the United States does not cover methods
of treating osteoarthritis with Ketotop. Patents may be issued to others which
prevent the manufacture or sale of United Therapeutics' products. United
Therapeutics may have to license those patents and pay significant fees or
royalties to the owners of the patents in order to keep marketing its products.
United Therapeutics has filed a patent application in the United States for
the use of UT-15 to treat peripheral vascular disease, but this and other patent
applications which have been or may be filed by United Therapeutics may not
issue. The scope of any patent that issues may not be sufficient to protect
United Therapeutics' technology. The laws of foreign jurisdictions in which
United Therapeutics intends to sell its products may not protect the company's
rights to the same extent as the laws of the United States.
In addition to patent protection, United Therapeutics also relies on trade
secrets, proprietary know-how and technology advances. United Therapeutics
enters into confidentiality agreements with its employees and others, but these
agreements may not be effective in protecting the company's proprietary
information. Others may independently develop substantially equivalent
proprietary information or obtain access to United Therapeutics' know-how.
Litigation, which is very expensive, may be necessary to enforce or defend
United Therapeutics' patents or proprietary rights and may not end favorably for
United Therapeutics. Any of United Therapeutics' licenses, patents or other
intellectual property may be challenged, invalidated, canceled, infringed or
circumvented and may not provide any competitive advantage to United
Therapeutics.
UNITED THERAPEUTICS DEPENDS ON LICENSES THAT MAY BE BREACHED OR TERMINATED
United Therapeutics acquires or licenses drugs which have been discovered
and initially developed by others. In addition, United Therapeutics has obtained
and will be required to obtain licenses to third-party technology to conduct its
business, including licenses for its products and a license for the MiniMed
microinfusion device. This dependence on licenses has the following risks:
- United Therapeutics may not be able to obtain future licenses at a
reasonable cost or at all;
- If any of United Therapeutics' licenses are terminated, United
Therapeutics will lose its rights to develop and market some or all of
its products;
- The licenses that United Therapeutics holds generally provide for
termination by the licensor in the event United Therapeutics breaches the
license agreement, including by failing to pay royalties and other fees
on a timely basis;
- In the event that Glaxo Wellcome or Pharmacia & Upjohn terminate their
agreements, United Therapeutics will have no further rights to utilize
their patents or trade secrets to develop and commercialize UT-15; and
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- If licensors fail to maintain the intellectual property licensed to
United Therapeutics as required by most of United Therapeutics' license
agreements, United Therapeutics may lose its rights to develop and market
some or all of its products and may be forced to incur substantial
additional costs to maintain the intellectual property itself or force
the licensor to do so.
In addition, United Therapeutics' agreement with Global Medical Enterprises
Ltd., LLC requires United Therapeutics to obtain trademark protection for the
Ketotop mark in every jurisdiction where United Therapeutics has the right to
market Ketotop. United Therapeutics has not yet begun filing trademark
applications for the Ketotop mark.
UNITED THERAPEUTICS MAY NOT HAVE ACCESS TO FUTURE INVENTIONS ARISING FROM ITS
OUTSOURCING AGREEMENTS, OR IT MAY HAVE TO SHARE THE RIGHTS RELATING TO ANY
INVENTIONS
Pursuant to the MiniMed agreement, any new inventions or intellectual
property that arise from United Therapeutics' activities with MiniMed will be
owned jointly by United Therapeutics and MiniMed. Under United Therapeutics'
agreement with Cortech, any inventions or intellectual property that relate to
UT-77 will be owned by the company that employs the person who made the
discovery. Under United Therapeutics' agreement with SynQuest, SynQuest will own
all inventions and intellectual property (including new or improved
manufacturing processes or chemical syntheses) developed during the term of the
agreement that are not directly and solely related to UT-15, the initial process
to make UT-15 and any new procedures to make UT-15. United Therapeutics may not
have rights to new developments or inventions that arise during the terms of
these agreements, or United Therapeutics may have to share the rights with
others.
UNITED THERAPEUTICS DEPENDS ON HIGHLY QUALIFIED MANAGEMENT AND TECHNICAL
PERSONNEL WHO MAY NOT REMAIN WITH THE COMPANY
United Therapeutics is highly dependent on its current management and key
scientific and technical personnel, including Ms. Martine A. Rothblatt, Chairman
of the Board and Chief Executive Officer, Dr. James W. Crow, President and Chief
Operating Officer, Dr. Gilles Cloutier, Executive Vice President, Business
Development and Chief Financial Officer, Shelmer D. Blackburn, Jr., Director of
Operations, and Dr. Roger Jeffs, Director of Research, Development and Medical.
The company does not maintain key person life insurance. United Therapeutics'
success will depend in part on retaining the services of its existing management
and key personnel and attracting and retaining new highly qualified personnel.
Expertise in the field of pulmonary and vascular disease is not generally
available in the market, and competition for qualified management and personnel
is intense.
UNITED THERAPEUTICS MAY NOT SUCCESSFULLY COMPETE WITH ESTABLISHED DRUG COMPANIES
United Therapeutics competes with established drug companies for funding,
access to licenses, personnel and third-party collaborators and during 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 United
Therapeutics. United Therapeutics is aware of existing treatments that will
compete with its products. United Therapeutics may not successfully compete with
new or existing products. See "Business -- Competition."
UNITED THERAPEUTICS MAY NEED ADDITIONAL FINANCING AND CANNOT BE CERTAIN OF
OBTAINING IT
United Therapeutics may need to spend more money than currently expected
because it may need to change its product development plans or product offerings
to address difficulties with clinical studies or preparing for commercial sales.
United Therapeutics may not be able to obtain
9
<PAGE> 13
additional funds on commercially reasonable terms or at all. If additional funds
are not available, United Therapeutics may be compelled to delay clinical
studies, curtail operations or obtain funds through collaborative arrangements
that may require it to relinquish rights to certain of its products or potential
markets.
UNITED THERAPEUTICS MAY NOT HAVE ADEQUATE INSURANCE AND MAY HAVE SUBSTANTIAL
EXPOSURE TO PAYMENT OF PRODUCT LIABILITY CLAIMS
The testing, manufacture and marketing of human drugs involves product
liability risks. United Therapeutics has product liability insurance providing
coverage of up to $2 million for each claim, and $5 million for all claims
combined. United Therapeutics may not be able to maintain this product liability
insurance at an acceptable cost, if at all, and this insurance may not provide
adequate coverage against potential losses. If claims or losses exceed United
Therapeutics' liability insurance coverage, United Therapeutics may go out of
business.
UNITED THERAPEUTICS IS NOT YET YEAR 2000 COMPLIANT
United Therapeutics is dependent on the proper functioning of its computer
and data-dependent systems and their ability to input, store, manipulate and
output dates for the years 2000 or thereafter without error or interruption
(commonly known as the Year 2000 problem). These include, but are not limited
to, its information, business, finance, operations and service systems. In
addition, United Therapeutics relies on the proper functioning of the systems of
third parties. If these or other systems fail or malfunction, United
Therapeutics' business could be negatively affected. Even if United Therapeutics
acts in a timely manner to complete all of its Year 2000 assessments and to
identify, develop and implement remedial plans which United Therapeutics
believes are adequate, some problems may not be identified or corrected in time
to prevent negative consequences to United Therapeutics' business and
operations. United Therapeutics believes that its worst case scenario includes a
power interruption and a lack of drug products to support clinical studies. See
"Management's Discussion and Analysis of Financial Condition -- Year 2000
Readiness Disclosure Statement."
THE MARKET PRICE OF UNITED THERAPEUTICS' COMMON STOCK AFTER THE OFFERING MAY NOT
EXCEED THE OFFERING PRICE
Prior to this offering, there was no public market for the Common Stock,
and a significant public trading market may not develop or continue after this
offering. The Underwriters and United Therapeutics determined the initial public
offering price of the Common Stock through negotiations. The market price of the
Common Stock after the offering may not equal or exceed the initial public
offering price.
UNITED THERAPEUTICS' STOCK PRICE COULD BE VOLATILE AND COULD DECLINE
The market prices for securities of drug companies are highly volatile, and
there are significant price and volume fluctuations in the market that may be
unrelated to particular companies' operating performances. United Therapeutics'
stock price could decline suddenly due to the following factors:
- Results of clinical trials;
- Timing of regulatory approvals;
- Fluctuations in operating results;
- Announcements by United Therapeutics or others of technological
innovations or new products;
- Failure to meet estimates or expectations of securities analysts;
10
<PAGE> 14
- Rate of product acceptance;
- Developments in patent or other proprietary rights;
- Public concern as to the safety of products developed by United
Therapeutics or by others;
- Future sales of substantial amounts of Common Stock by existing United
Therapeutics stockholders; and
- General market conditions.
Investors in United Therapeutics' Common Stock may not be able to resell
their shares at or above the initial public offering price. See "Shares Eligible
for Future Sale" and "Underwriting."
FUTURE SALES OF SHARES MAY DEPRESS THE STOCK PRICE
If a substantial number of shares of United Therapeutics' Common Stock is
sold in the public market after this offering, or investors become concerned
that substantial sales might occur, the market price of the Common Stock could
decrease. Such a decrease could make it difficult for United Therapeutics to
raise capital by selling stock or to pay for acquisitions using stock.
There will be shares of Common Stock outstanding immediately
after this offering and 1,174,458 shares issuable upon exercise of outstanding
options and warrants. Of these shares, all of the shares offered hereby will be
freely tradable unless purchased by affiliates of United Therapeutics.
Of the remaining 10,726,967 shares of Common Stock (excluding 1,174,458
shares issuable upon exercise of outstanding options and warrants),
approximately 10,337,550 shares are subject to lock-up agreements with the
Underwriters. The lock-up agreements prohibit sales or other dispositions of any
shares of Common Stock owned by the stockholders for 180 days after the
offering. Each of United Therapeutics' executive officers and directors have
signed lock-up agreements. United Therapeutics has agreed to similar
restrictions. After these lock-up agreements expire, all but approximately
666,666 of the shares subject to these lock-up agreements could be sold
immediately in the public market, subject in some cases to volume and other
restrictions.
BT Alex. Brown Incorporated may release any or all of the shares subject to
lock-up agreements at any time without notice.
After the 180-day lock-up period expires, United Therapeutics expects to
file a registration statement covering 14,939,517 shares of Common Stock
issuable upon exercise of options and other grants pursuant to the company's
equity incentive plan. United Therapeutics may issue additional shares:
- to employees;
- in connection with corporate alliances;
- in connection with acquisitions; and
- to raise capital.
In addition, the holders of 797,222 shares of Common Stock are entitled to
registration rights.
As a result of these factors, sales of a substantial number of shares of
Common Stock in the public market could occur at any time. See "Shares Eligible
for Future Sale."
EXISTING STOCKHOLDERS WILL RETAIN CONTROL OF UNITED THERAPEUTICS EVEN AFTER THIS
OFFERING
United Therapeutics' directors, executive officers and principal
stockholders will beneficially own approximately % of its outstanding
Common Stock immediately following this offering. Accordingly, these
shareholders as a group can control United Therapeutics' business. These
stockholders can direct the outcome of matters requiring approval by United
Therapeutics'
11
<PAGE> 15
shareholders, including the election of its directors and the approval of
mergers or other changes of control. Such stockholder control could delay or
prevent a change of control of United Therapeutics.
A THIRD PARTY MAY HAVE DIFFICULTY ACQUIRING UNITED THERAPEUTICS
Certain provisions of United Therapeutics' Amended and Restated Certificate
of Incorporation and Amended and Restated By-Laws, and the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, could delay
or prevent a third party from acquiring United Therapeutics or replacing members
of the United Therapeutics board of directors, even if the acquisition or the
replacements would be beneficial to United Therapeutics' stockholders. These
factors could also reduce the price that certain investors might be willing to
pay for shares of the Common Stock and result in the market price being lower
than it would be without these provisions.
STOCKHOLDERS WILL EXPERIENCE SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK VALUE
OF THEIR COMMON STOCK
Investors purchasing shares of Common Stock in this offering will incur
immediate and substantial dilution. Based on the net tangible book value of
United Therapeutics' Common Stock as of March 31, 1999, dilution in net tangible
book value to investors purchasing shares of Common Stock in this offering would
be $ per share (assuming an initial public offering price of $ per
share). In addition, investors purchasing shares of Common Stock in this
offering may incur additional dilution to the extent outstanding options and
warrants are exercised or additional shares of capital stock are issued.
MANAGEMENT WILL HAVE BROAD DISCRETION OVER THE PROCEEDS OF THE OFFERING
Assuming an initial public offering price of $ per share, United
Therapeutics will receive approximately $ from the sale of the shares
of Common Stock offered by this Prospectus. The company expects to use the net
proceeds of the offering for clinical development and commercialization of its
existing products, working capital and general corporate purposes. United
Therapeutics also might use a portion of the net proceeds to acquire or invest
in complementary businesses, products and technologies. United Therapeutics
currently has no specific plans for the balance of the proceeds. Consequently,
management and the board of directors of United Therapeutics will have the
discretion to allocate the net proceeds to uses that stockholders may not deem
advisable.
STOCKHOLDERS MAY NOT RECEIVE DIVIDENDS
United Therapeutics has never declared or paid cash dividends on any of its
capital stock. United Therapeutics currently intends to retain its earnings for
future growth and therefore does not anticipate paying cash dividends in the
future. See "Dividend Policy."
12
<PAGE> 16
USE OF PROCEEDS
United Therapeutics estimates that the net proceeds from the sale of the
shares of Common Stock that it is offering will be $ after
deducting estimated Underwriters' discounts and commissions and estimated
offering expenses and assuming an initial public offering price of $ per
share. If the Underwriters' over-allotment option is exercised in full, United
Therapeutics estimates that the net proceeds will be $ .
United Therapeutics anticipates using the net proceeds from this offering
for clinical development and commercialization of its existing products, working
capital and general corporate purposes. United Therapeutics will retain broad
discretion over the use of the net proceeds of this offering. The amounts and
timing of the expenditures may vary significantly depending on numerous factors,
such as the progress of the company's research and development efforts,
technological advances and the competitive environment for the company's
products. United Therapeutics also might use a portion of the net proceeds to
acquire or invest in complementary businesses, products and technologies. United
Therapeutics is not currently planning any acquisition, and no portion of the
net proceeds has been allocated for any specific acquisition.
United Therapeutics believes that its available cash, together with the net
proceeds of this offering, will be sufficient to meet its capital requirements
for the foreseeable future. Pending use of the net proceeds, United Therapeutics
intends to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
United Therapeutics has never declared or paid cash dividends on its
capital stock. United Therapeutics intends to retain earnings for use in the
operation and expansion of its business, and therefore does not anticipate
paying any cash dividends in the foreseeable future.
13
<PAGE> 17
CAPITALIZATION
The following table sets forth United Therapeutics' capitalization as of
March 31, 1999, (a) on an actual basis and (b) as adjusted to give effect to the
sale of the shares of Common Stock it is offering at an assumed initial public
offering price of $ per share and the application of the estimated net
proceeds as well as an amendment to United Therapeutics' Certificate of
Incorporation to increase its authorized Common Stock to 100,000,000 shares.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion................... $ 313 $
Stockholders' equity
Preferred stock, $.01 par value; 10,000,000 shares
authorized actual and as adjusted; no shares
outstanding, actual, and as adjusted................... -- --
Common stock, $.01 par value; 50,000,000 shares
authorized, 10,726,967 shares issued and outstanding,
actual; 100,000,000 shares authorized, shares
issued and outstanding, as adjusted(1)................. 107
Additional paid-in capital.................................. 43,365
Accumulated deficit......................................... (28,004)
-------- -------
Total stockholders' equity................................ 15,468
-------- -------
Total capitalization................................. $ 15,781 $
======== =======
</TABLE>
- ---------------
(1) Based on the number of shares outstanding on March 31, 1999. Excludes
1,174,458 shares issuable upon exercise of options and warrants outstanding
as of March 31, 1999 at a weighted average exercise price of $11.89 per
share. An additional 14,057,532 shares are available for future issuances
under the Amended and Restated Equity Incentive Plan. See
"Management -- Equity Incentive Plan."
14
<PAGE> 18
DILUTION
The net tangible book value of United Therapeutics as of March 31, 1999 was
$15.3 million, or $1.42 per share of Common Stock. Net tangible book value per
share represents the amount of total tangible assets less total liabilities
divided by the number of shares of Common Stock outstanding at that date. After
giving effect to the sale of the shares of Common Stock being offered
hereby at an assumed initial public offering price of $ per share, and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses, the pro forma net tangible book value of United Therapeutics
as of March 31, 1999, would have been $ , or $ per share. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing stockholders, and an immediate dilution of $ per share
to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share at March 31, 1999....... $1.42
Increase per share attributable to new investors..........
-----
Pro forma net tangible book value per share after this
offering..................................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1999,
the differences between the number of shares of Common Stock issued by United
Therapeutics, the total consideration paid and the average price per share paid
by existing stockholders and by the new investors purchasing shares in this
offering (at an assumed initial public offering price of $ per share):
<TABLE>
<CAPTION>
SHARES ISSUED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 10,726,967 % $43,472,469 % $4.05
New investors................
---------- ------- ----------- -------
Total...................... % $ %
========== ======= =========== =======
</TABLE>
The foregoing discussion and tables assume no exercise of any outstanding
stock options or warrants. The discussion does not include 1,174,458 shares
issuable upon exercise of options and warrants outstanding as of March 31, 1999
at a weighted average exercise price of $11.89. An additional 14,057,532 shares
are available for future issuances under the Equity Incentive Plan. To the
extent that any shares reserved for issuance under the company's stock plan or
the warrants are issued, there will be further dilution to new investors.
15
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with United Therapeutics' consolidated financial statements and
related notes included elsewhere in this Prospectus and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus. The consolidated statement of operations data for
the period from June 26, 1996 (date of inception) through December 31, 1996 and
for the years ended December 31, 1997 and 1998, and the consolidated balance
sheet data as of December 31, 1997 and 1998, are derived from the audited
consolidated financial statements which have been audited by KPMG LLP,
independent auditors, and are included elsewhere in this Prospectus. The
consolidated balance sheet data as of December 31, 1996 are derived from audited
consolidated financial statements not included herein. The selected data
presented below for the three-month periods ended March 31, 1998 and 1999, and
as of March 31, 1999, are derived from the unaudited consolidated financial
statements included elsewhere in this Prospectus. The historical results are not
necessarily indicative of results to be expected for future periods.
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 26, 1996 YEAR ENDED THREE MONTHS ENDED
(INCEPTION) TO DECEMBER 31, MARCH 31,
DECEMBER 31, --------------------- ---------------------
1996 1997 1998 1998 1999
---------------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenue................................ $ 154 $ 116 $ 54 $ -- $ 54
Operating expenses:
Research and development............. 100 2,027 11,015 1,740 11,611
General and administrative........... 85 1,006 2,366 573 848
---------------- -------- -------- -------- --------
Total operating expense............ 185 3,033 13,381 2,313 12,459
---------------- -------- -------- -------- --------
Loss from operations................... (31) (2,917) (13,327) (2,313) (12,405)
Other income (expense):
Interest income...................... 1 135 510 52 178
Interest expense..................... -- (8) (15) -- (7)
Write-down of investment............. -- (111) -- -- --
---------------- -------- -------- -------- --------
Total other income, net............ 1 16 495 52 171
---------------- -------- -------- -------- --------
Net loss before income tax............. (30) (2,901) (12,832) (2,261) (12,234)
Income tax............................. -- -- (3) (3) (4)
---------------- -------- -------- -------- --------
Net loss............................... $ (30) $ (2,901) $(12,835) $ (2,264) $(12,238)
================ ======== ======== ======== ========
Basic and diluted net loss per
share(1)............................. $ (0.02) $ (0.87) $ (1.54) $ (0.38) $ (1.19)
================ ======== ======== ======== ========
Shares used in computing basic and
diluted net loss per share(1)........ 1,667 3,339 8,322 5,939 10,256
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------- MARCH 31,
1996 1997 1998 1999
--------- --------- --------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.................................... $ 94 $ 5,018 $ 16,802 $ 15,429
Total assets..................................... 102 5,074 18,747 17,765
Note payable(2).................................. -- -- 314 313
Accumulated deficit.............................. (30) (2,931) (15,767) (28,005)
Total stockholders' equity....................... 70 4,617 16,676 15,468
</TABLE>
- ---------------
(1) See Note 2 of Notes to Consolidated Financial Statements for a description
of the computation of pro forma basic and diluted net loss per share.
(2) Includes current portion.
16
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and related notes appearing elsewhere in this Prospectus. The
following discussion contains forward-looking statements that reflect the plans
and estimated beliefs of management. Actual results could differ materially from
those anticipated in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below and elsewhere in
this Prospectus, particularly in "Risk Factors."
OVERVIEW
United Therapeutics develops pharmaceuticals to treat vascular diseases
including pulmonary hypertension and peripheral vascular disease, as well as
selected other chronic conditions. United Therapeutics commenced operations in
June 1996 and, since inception, has devoted substantially all of its resources
to its research and development programs. United Therapeutics has generated no
product revenues and has funded its operations primarily from the proceeds of
private placements of equity securities. United Therapeutics operates with a
minimal number of employees and has contracted with qualified third parties for
substantially all pharmaceutical development activities, including drug
manufacturing and certain key aspects of clinical trials.
United Therapeutics has incurred net losses each year since inception and
had an accumulated deficit of $28.0 million at March 31, 1999. United
Therapeutics expects to continue to incur net losses over the next several
quarters due to lack of product revenues and increased expenditures for drug
development, manufacturing and administrative activities.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
Revenue for the three months ended March 31, 1999 was approximately
$54,000, as compared to zero for the corresponding period in 1998. This revenue
was earned under an orphan drug grant awarded by the FDA.
Research and development expenses consist primarily of costs to acquire
pharmaceutical products for development and amounts paid to contract research
organizations, hospitals and laboratories for the provision of services and
materials for drug development and clinical trials. Research and development
expenses were $11.6 million for the three months ended March 31, 1999, as
compared to $1.7 million for the three months ended March 31, 1998. This
increase resulted almost entirely from the payment of an up-front licensing fee
consisting of Common Stock and $100,000 in cash to obtain the exclusive rights
to develop beraprost, an oral form of prostacyclin, to treat peripheral vascular
disease in the United States and Canada. Research and development expenses for
the three months ended March 31, 1999 also reflect an increased level of patient
enrollment in United Therapeutics' Phase III clinical trials of UT-15.
General and administrative expenses consist primarily of personnel
salaries, office expenses and professional fees. General and administrative
expenses were $848,000 for the three months ended March 31, 1999, as compared to
$573,000 for the three months ended March 31, 1998. This increase was due
primarily to increased staffing to support expanded operations.
Interest income for the three months ended March 31, 1999 was $178,000, as
compared to $52,000 for the three months ended March 31, 1998. This increase was
attributable to an increase in the amount of cash available for investing
resulting from $3.2 million of net proceeds from privately placing Common Stock
during the latter part of 1998 and early 1999.
17
<PAGE> 21
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Revenue for the year ended December 31, 1998 was approximately $54,000, as
compared to approximately $116,000 for the year ended December 31, 1997. The
1998 revenue was earned under an orphan drug grant awarded by the FDA. The 1997
revenue was earned under a contract relating to primary pulmonary hypertension
research.
Research and development expenses were $11.0 million for the year ended
December 31, 1998, as compared to $2.0 million for the year ended December 31,
1997. This increase resulted primarily from higher expenditures of approximately
$7.6 million in 1998 associated with the commencement of Phase III clinical
trials for United Therapeutics' lead product, UT-15. In addition, the company
paid up-front licensing fees of Common Stock, options, warrants and cash to
obtain exclusive rights to develop beraprost to treat pulmonary hypertension in
the United States and Canada, and UT-77 for all indications worldwide.
General and administrative expenses were $2.4 million for the year ended
December 31, 1998, as compared to $1.0 million for the year ended December 31,
1997. This increase was due primarily to the recruitment and hiring of
additional administrative personnel and increased legal and other professional
fees associated with license and patent activities and the expansion of United
Therapeutics' operations.
Interest income for the year ended December 31, 1998 was approximately
$510,000, as compared to approximately $135,000 for the year ended December 31,
1997. This increase was attributable to an increase in the amount of cash
available for investing resulting from $22.9 million in net proceeds from United
Therapeutics' private placements of Common Stock during 1998.
YEAR ENDED DECEMBER 31, 1997
For the year ended December 31, 1997, revenue from operations was
approximately $116,000 which was earned under a contract relating to primary
pulmonary hypertension research.
United Therapeutics' first full year of operations was 1997. Accordingly,
operating expenses for 1997 were significantly higher than in 1996. Operating
expenses for the year ended December 31, 1997 totaled $3.0 million, of which
$2.0 million was for research and development expenses and $1.0 million was for
general and administrative expenses.
Interest income for the year ended December 31, 1997 was approximately
$135,000.
PERIOD FROM INCEPTION (JUNE 26, 1996) TO DECEMBER 31, 1996
Revenue from operations from inception (June 26, 1996) to December 31, 1996
was approximately $154,000 which was earned under a contract relating to primary
pulmonary hypertension research. Operating expenses for this period totaled
$185,000 of which approximately $100,000 was for research and development and
approximately $85,000 was for general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in June 1996, United Therapeutics has financed its
operations principally through various private placements of Common Stock.
United Therapeutics' working capital at March 31, 1999 was $13.6 million, as
compared with $15.1 million at December 31, 1998, and $4.6 million at December
31, 1997. Current liabilities at March 31, 1999 were $2.0 million, as compared
with $1.8 million at December 31, 1998, and $453,000 at December 31, 1997.
United Therapeutics' debt at March 31, 1999 was approximately $313,000, as
compared with $314,000 at December 31, 1998, and consisted of a note secured by
United Therapeutics' building and due in monthly installments over 25 years.
18
<PAGE> 22
Net cash used in operating activities was approximately $3.0 million, $9.6
million, $2.3 million and zero for the three months ended March 31, 1999, years
ended December 31, 1998 and 1997 and the period ended December 31, 1996,
respectively. The increases resulted from the expansion of United Therapeutics'
operations. For the three months ended March 31, 1999, United Therapeutics
invested approximately $126,000 in cash for property, plant, and equipment. From
inception through December 31, 1998, United Therapeutics invested approximately
$1.1 million in cash for property, plant, and equipment. Net cash provided by
financing activities was approximately $1.8 million, $22.9 million, $7.4 million
and $100,000, for the three months ended March 31, 1999, years ended December
31, 1998 and 1997 and the period ended December 31, 1996, respectively. Cash
flows from financing activities were derived from private equity financings
during these periods.
United Therapeutics expects that the proceeds from its initial public
offering, together with its existing capital resources, will be adequate to fund
its operations for the foreseeable future. United Therapeutics' future capital
requirements and the adequacy of its available funds will depend on many
factors, including:
- Regulatory approval of UT-15 and beraprost;
- Size and scope of its development efforts for additional products;
- Cost, timing and outcomes of regulatory reviews;
- Rate of technological advances;
- Determinations as to the commercial potential of United Therapeutics'
products under development;
- Status of competitive products;
- Defending and enforcing intellectual property rights;
- Establishment, continuation or termination of third-party manufacturing
arrangements;
- Development of sales and marketing resources or the establishment,
continuation or termination of third-party manufacturing arrangements;
- Development of sales and marketing resources or the establishment,
continuation or termination of third-party sales and marketing
arrangements;
- Establishment of additional strategic or licensing arrangements with
other companies; and
- Availability of other financing opportunities.
As of December 31, 1998, United Therapeutics had available approximately
$11.0 million in net operating loss carryforwards and $3.6 million in business
tax credit carryforwards for federal income tax purposes which expire at various
dates through 2018. As of March 31, 1999, United Therapeutics had available
approximately $22.4 million in net operating loss carryforwards and $4.3 million
in business tax credit carryforwards. As a result of past financings, United
Therapeutics experienced ownership changes as defined by rules enacted with the
Tax Reform Act of 1986. Accordingly, United Therapeutics' ability to use its net
operating loss and tax credit carryforwards is subject to certain limitations as
defined by the Tax Reform Act and may be limited.
YEAR 2000 READINESS DISCLOSURE STATEMENT
United Therapeutics uses a number of computer software programs and
operating systems in its internal operations, including applications used in
financial business systems and various administrative functions. To the extent
that these software applications, and the software applications of United
Therapeutics' vendors, suppliers, financial institutions and service providers,
contain source code that is unable to appropriately interpret the upcoming
calendar
19
<PAGE> 23
year 2000 (the "Year 2000" issue), some level of modification or even possibly
replacement of such source code or applications will be necessary.
United Therapeutics has identified the software applications that are not
Year 2000 compliant. United Therapeutics anticipates its Year 2000 remediation
efforts will be completed in the third quarter of 1999 and expects to incur
expenses of up to $100,000 to complete its remediation efforts.
United Therapeutics has contacted all of its major vendors, suppliers,
financial institutions and service providers to ensure they are Year 2000
compliant. Key third party vendors have been asked to certify in writing that
their software or systems are Year 2000 compliant. United Therapeutics has
confirmed with MiniMed that the microinfusion devices used to deliver its key
drug, UT-15, to patients have been tested and are Year 2000 compliant.
United Therapeutics believes its worst case scenario relating to Year 2000
risks includes a power interruption and a lack of pharmaceutical products to
support clinical trials. United Therapeutics is currently purchasing quantities
of pharmaceutical products for use in clinical trials to ensure adequate supply
is available in 2000. United Therapeutics is also installing uninterruptable
power systems at its locations and is maintaining backups of critical systems at
each location to serve as back up processing sites if needed.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." United Therapeutics is required to adopt
SFAS No. 133 for the year ending December 31, 2000. SFAS No. 133 established
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
Because United Therapeutics holds no derivative financial instruments and does
not engage in hedging activities, adoption of SFAS No. 133 is not expected to
have a material impact on United Therapeutics' financial condition or results of
operations.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position, or "SOP," 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
that entities capitalize certain costs related to internal-use software once
certain criteria have been met. United Therapeutics is required to implement SOP
98-1 for the year ending December 31, 1999. Adoption of SOP 98-1 is not expected
to have a material impact on United Therapeutics' financial condition or results
of operations.
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<PAGE> 24
BUSINESS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. United Therapeutics' actual results may differ significantly from
the results discussed in these forward-looking statements. Factors that may
cause such a difference include, but are not limited to, those discussed in
"Risk Factors."
OVERVIEW
United Therapeutics develops pharmaceuticals to treat vascular diseases,
including pulmonary hypertension and peripheral vascular disease, as well as
selected other chronic conditions. Both pulmonary hypertension and peripheral
vascular disease are characterized by reduced production of natural
prostacyclin, a highly unstable molecule with powerful effects on blood-vessel
health. United Therapeutics' lead products, UT-15 and beraprost, are stable
synthetic forms of prostacyclin. UT-15 is delivered subcutaneously and is
currently in two multi-center Phase III clinical trials for treating advanced
pulmonary hypertension. Beraprost is delivered orally, and United Therapeutics
is beginning a Phase III clinical trial program to treat early-stage peripheral
vascular disease.
In October 1998, United Therapeutics completed a 26-patient, randomized,
double-blind, placebo-controlled, eight-week clinical trial for UT-15 in primary
pulmonary hypertension patients. Results from this trial demonstrated that UT-15
can be safely administered to severely ill patients on an out-patient basis and
also showed that continuous, subcutaneous dosing of UT-15 leads to improvements
in pulmonary blood pressure and exercise ability. Patients receiving UT-15 in
this study experienced improvements similar to those achieved by patients
receiving Flolan therapy for 12 weeks. Flolan was approved by the FDA in 1995 to
treat primary pulmonary hypertension, a small subset of advanced pulmonary
hypertension. Each patient who finished this study elected to receive UT-15
therapy indefinitely.
United Therapeutics is beginning a Phase III clinical trial program for
beraprost for treating early-stage peripheral vascular disease in the United
States. Peripheral vascular disease is characterized by the progressive
degradation of the circulatory system in the legs and affects over six million
people in the United States and a similar number in Europe. Peripheral vascular
disease results in over 200,000 amputations and more than $12 billion in medical
costs annually. Clinical testing outside the United States has demonstrated that
peripheral vascular disease is amenable to prostacyclin therapy. Beraprost was
approved for the treatment of peripheral vascular disease in Japan in 1994 and
generated 1998 sales of over $225 million for Toray Industries, Inc., the
developer of the compound, and its licensees. In December 1998, Hoechst Marion
Roussel, Inc., the European licensee of beraprost, submitted a regulatory
application for beraprost to treat peripheral vascular disease in Europe.
United Therapeutics is undertaking additional clinical studies. UT-15 is in
Phase II clinical trials for treating late-stage peripheral vascular disease,
and United Therapeutics is beginning a Phase II clinical trial program for
beraprost to treat early-stage pulmonary hypertension. United Therapeutics
believes that beraprost's current oral formulation will be a complementary
product to UT-15 because this formulation cannot provide the constant
therapeutic levels of prostacyclin in the body necessary to treat advanced
pulmonary hypertension and late-stage peripheral vascular disease effectively.
United Therapeutics is also beginning a Phase II clinical trial program for
UT-77, an elastase inhibitor, for the treatment of chronic obstructive pulmonary
disease. Finally, United Therapeutics is beginning a Phase II/III clinical trial
program for Ketotop, a transdermal patch that delivers the FDA-approved
anti-inflammatory pain reliever ketoprofen, for the treatment of osteoarthritis.
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<PAGE> 25
BACKGROUND
VASCULAR DISEASE AND PROSTACYCLIN
Many vascular diseases are characterized by the degradation of the
blood-vessel wall lining, the aggregation of platelets and the disruption of
smooth muscle cell function. These conditions cause blockages and affect the
ability of the blood vessels to dilate and then constrict as blood flows through
the circulatory system.
Prostacyclin is an important molecule that is produced by the body and has
powerful effects on blood-vessel health and function. Natural prostacyclin is
inherently unstable, with a half life in the body of under six minutes. It
appears to act in three key ways to keep blood vessels functioning properly:
- It dilates blood vessels, where necessary, enabling smooth blood flow;
- It prevents platelet aggregation; and
- It prevents proliferation of smooth muscle cells surrounding the vessels,
which otherwise would constrict the vessels and obstruct blood flow.
PULMONARY HYPERTENSION
Pulmonary hypertension is a progressive, life-threatening vascular disease
that is difficult to diagnose and treat and is currently incurable. It is
characterized by high pressure in the blood vessels between the heart and lungs
(the pulmonary blood vessels), but normal blood pressure in the rest of the
body. The high pressure is due to the narrowing of pulmonary blood vessels
caused primarily by reduced production of prostacyclin in the affected blood
vessels. This elevated pulmonary blood pressure causes increasing strain on the
right side of the heart as it tries to pump blood to the lungs. Patients with
early-stage pulmonary hypertension may be unaware they have the disease. As the
disease progresses, however, patients suffer breathlessness and fainting spells
and are increasingly unable to carry out normal daily activities. Patients with
untreated advanced pulmonary hypertension become bed-ridden and die, usually of
right-heart failure. According to statistics compiled by the National Institutes
of Health before the introduction of Flolan in 1995, the mean survival period
for a patient with primary pulmonary hypertension was approximately 30 months
from diagnosis. Survival of patients using Flolan appears to be markedly
increased. The five-year survival rate of children using Flolan is 92%.
Traditionally, physicians have thought of pulmonary hypertension as
consisting of two diseases: primary pulmonary hypertension and secondary
pulmonary hypertension. Primary pulmonary hypertension has been defined as
pulmonary hypertension with no identified specific cause. Secondary pulmonary
hypertension has been defined as pulmonary hypertension with a known cause such
as heart, lung or liver dysfunction or the connective tissue disease,
scleroderma. Currently, several thousand people in North America and Europe have
been diagnosed with primary pulmonary hypertension, while over 50,000 people in
North America and Europe have advanced secondary pulmonary hypertension. Primary
pulmonary hypertension and advanced secondary pulmonary hypertension appear to
be amenable to prostacyclin therapy. In its 1998 world symposium on primary
pulmonary hypertension, The World Health Organization proposed a new combined
classification -- pulmonary hypertension -- to recognize the similarity between
primary pulmonary hypertension and secondary pulmonary hypertension. The new
classification also includes pulmonary hypertension linked to the use of
Redux(R) or phen-fen diet drugs, HIV infection and genetic predisposition to the
disease. In addition, according to a 1989 report published in Chest, the
official publication of the American College of Chest Physicians, the prevalence
of pulmonary hypertension in the U.S. male population is between 8% and 13% for
men between the ages of 35 and 44, depending on severity. It is also reported
that the prevalence of mild pulmonary hypertension in men age 65 and older
exceeds 20%.
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<PAGE> 26
Current Treatments
Flolan. The FDA has approved only one drug treatment for primary pulmonary
hypertension and no drug treatments for secondary pulmonary hypertension. The
approved drug treatment is Flolan, a continuous intravenous infusion of
prostacyclin, marketed by Glaxo Wellcome Inc. in the United States since 1995.
Flolan has also been approved for the treatment of primary pulmonary
hypertension in France and Switzerland. Prior to Flolan's approval in the United
States for primary pulmonary hypertension, physicians often treated pulmonary
hypertension with off-label use of other drugs such as calcium channel blockers
and anticoagulants. In certain circumstances, these are still used off-label to
treat pulmonary hypertension. The FDA approved Flolan based on results from
Glaxo Wellcome's pivotal Phase III trial, in which Flolan proved to be an
effective treatment for patients with primary pulmonary hypertension. Patients
who were treated with Flolan experienced clinical benefits during the 12-week
study, such as increased survival and exercise ability. In contrast, patients
who were not treated with Flolan because they were in the control group
experienced a worsening of their condition. Of the 40 patients in the control
group, eight died during the study, while no patients treated with Flolan died.
Although Flolan is not an approved treatment for secondary pulmonary
hypertension, a study of scleroderma patients presented at the November 1998
American Heart Association meeting reported that Flolan appears to be a safe and
effective treatment for advanced secondary pulmonary hypertension.
Flolan's active component, prostacyclin, dilates blood vessels, prevents
platelet aggregation and prevents proliferation of smooth muscle cells
surrounding blood vessels. The half life of Flolan in the body, however, is
under six minutes.
Although Flolan extends the lives of patients with primary pulmonary
hypertension, there are a number of significant drawbacks associated with Flolan
treatment:
- Because of its short half life and unstable nature, Flolan must be
delivered continuously by an external pump through an intravenous
catheter surgically implanted in the patient's chest;
- Because of Flolan's short half life, patients risk abrupt recurrence of
hypertension (called rebound hypertension) and death in the event Flolan
delivery is interrupted for even a short period of time;
- Because of Flolan's highly unstable nature, patients must prepare a
mixture of Flolan under completely sterile conditions one or more times a
day;
- Patients experience frequent infections, including life-threatening
sepsis, from the catheter or from mixing the drug under unsterile
conditions;
- Because of its highly unstable nature, Flolan should always remain
refrigerated, even during administration;
- To be mobile, patients must wear or carry a pack containing the pump and
ice; and
- Patients cannot swim, shower or otherwise immerse themselves in water
because of the infection risks caused by the permanent intravenous
catheter.
Because of these safety and quality-of-life drawbacks, physicians typically
prescribe Flolan for only those approximately 2,000 patients with the most
advanced stages of pulmonary hypertension. Other patients who could benefit from
Flolan therapy are not using Flolan because they live in countries where Flolan
is unavailable or they are diagnosed with forms of pulmonary hypertension for
which Flolan is not approved and thus the costs of Flolan therapy are generally
not reimbursed by third-party payors.
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<PAGE> 27
Transplants. Besides Flolan, the only other treatment for advanced
pulmonary hypertension is a lung or heart-lung transplant. There are significant
drawbacks associated with transplants, including the following:
- Patients often die before suitable donor organs become available;
- Less than 20% of heart-lung transplant patients survive for 10 years;
- Post-operative complications can result in organ rejection, requiring
another transplant if organs are available; and
- Transplant patients require life-long immuno-suppressant drug therapy
that entails life-threatening side effects, including vulnerability to
serious infections and diseases such as cancer and insulin-dependent
diabetes.
Market Size
United Therapeutics believes that the potential market for a
non-intravenous form of prostacyclin such as UT-15 to treat advanced pulmonary
hypertension exceeds $2.5 billion. There are an estimated 55,000 people
suffering from advanced pulmonary hypertension in North America and Europe. Of
these, only approximately 2,000 patients receive Flolan therapy. According to
the Journal of Pharmacy Systems Reports, the annual cost of Flolan therapy in
the United States, including the necessary supplies and pumps, is in excess of
$57,000 per patient, or over $110 million in the aggregate. In addition, Flolan
patients incur substantial annual hospitalization and other costs related to the
surgically implanted catheter. The costs associated with Flolan therapy are
reimbursable by third-party payors, including Medicare. In addition to UT-15,
which United Therapeutics is developing to treat patients with advanced
pulmonary hypertension. United Therapeutics believes that its oral form of
prostacyclin therapy, beraprost, may provide an opportunity to treat millions of
patients with early-stage pulmonary hypertension.
PERIPHERAL VASCULAR DISEASE
When vascular disease affects the blood vessels in the legs, it is referred
to as peripheral vascular disease. While the precise cause of peripheral
vascular disease is unknown, diabetes, obesity, smoking and lack of exercise are
associated with the disease. In the early stages of the disease, the patient is
at first free of symptoms and then experiences mild to severe pain while
walking. As the disease progresses, the patient experiences leg pain while at
rest and suffers from delayed wound healing which sometimes leads to ulcers,
gangrene and amputation. The mean survival period of the late-stage peripheral
vascular disease patient is six years.
Peripheral vascular disease affects approximately six million people in the
United States, and United Therapeutics believes that a similar number of people
are affected by the disease in Europe. Additionally, there are approximately
350,000 new diagnoses of peripheral vascular disease annually in the United
States and 650,000 new diagnoses of peripheral vascular disease annually in
Europe.
Current Treatments
Treatment for peripheral vascular disease depends upon the disease stage.
In the early stages, physicians treat the disease primarily by recommending
lifestyle changes such as special diet and regular exercise programs. If these
changes are not effective in halting the progress of the disease, physicians
sometimes prescribe drug treatment. The progression of the disease frequently
results in repeated surgeries or other interventions, including angioplasty to
unblock the arteries of the leg, arterial grafts to bypass the blocked arteries
and insertion of stents to prevent the arteries from collapsing. If these
procedures are ineffective, amputations are often required. The FDA has approved
only two drugs for peripheral vascular disease, pentoxifylline
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and cilostazol. Pentoxifylline improves the flow properties of the red blood
cells, and cilostazol reduces the stickiness of blood platelets. Cilostazol
should not be prescribed for patients with certain cardiovascular complications,
including those that commonly occur in patients with peripheral vascular
disease. The company believes that neither of these drugs provide all the
benefits of UT-15 or beraprost.
Market Size
Surgeons currently perform approximately 200,000 amputations each year in
the United States and Europe on late-stage peripheral vascular disease patients
and an additional 600,000 non-amputation surgical procedures. Based on an
average cost of $16,000 per amputation and of $15,000 per angioplasty, there is
in excess of $12 billion spent each year on surgeries related to peripheral
vascular disease in the United States and Europe. United Therapeutics is
evaluating how much of this market can be addressed by prostacyclin therapy. The
company expects that many amputations may be avoided and, when prostacyclin
therapy is used in conjunction with the other surgical procedures, repeat
surgical procedures may be reduced.
CHRONIC OBSTRUCTIVE PULMONARY DISEASE
Chronic obstructive pulmonary disease (COPD) is a serious and potentially
life-threatening inflammation of the lungs characterized by chronic obstruction
of airflow. The two principal subsets of COPD are emphysema and chronic
bronchitis.
Emphysema
Approximately two million people in the United States, and the company
believes a similar number in Europe, suffer from emphysema, which is a disease
affecting the small airways of the lung. Emphysema may be hereditary or caused
by smoking or environmental toxins. Patients with emphysema experience shortness
of breath, labored breathing, excessive and chronic coughing and production of
excessive sputum. In healthy lungs, two proteins act in harmony to keep the
lungs clear and functional. The first protein, elastase, is carried by the
body's white blood cells and protects the lungs by killing bacteria and
neutralizing inhaled particles. Once these beneficial effects are achieved, the
second protein -- alpha-1 antitrypsin -- neutralizes elastase, which, if left to
act unchecked, destroys lung tissue. In patients with emphysema, the alpha-1
antitrypsin levels are greatly reduced, which allows elastase to damage the
elastic fibers of the lungs, rendering the lungs unable to expand and contract
as with normal breathing. In most cases, this damage is permanent and
irreversible.
Chronic Bronchitis
Approximately 14 million people in the United States, and the company
believes a similar number in Europe, suffer from chronic bronchitis, which is a
disease affecting the large airways of the lungs. Chronic bronchitis is an
inflammation of the bronchi which can be caused by smoking, environmental toxins
or bacterial infections. Patients with chronic bronchitis, like emphysema
patients, experience shortness of breath, labored breathing, excessive and
chronic coughing and production of excessive sputum.
Current Treatments
Current management of COPD is based on the degree of the respiratory
obstruction and the extent of the patient's disability. Prolastin(R) is the only
FDA-approved drug specifically for the 10% of emphysema patients with an
inherited deficiency of alpha-1 antitrypsin. Prolastin is difficult to
manufacture and is not available in sufficient quantities to support this subset
of emphysema patients. A lung transplant is the treatment of last resort for
late-stage emphysema
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<PAGE> 29
patients. There is no treatment currently available to restore lung elasticity
and thus reverse the progression of emphysema.
With respect to chronic bronchitis, physicians prescribe bronchodilators,
which act to open airways in the lungs, early in the disease process, including
Combivent(R) and Atrovent(R) inhalation aerosols. Theophylline and albuterol are
frequently prescribed to produce dilation of bronchioles for both emphysema and
chronic bronchitis. Finally, physicians have used intermittent positive pressure
breathing devices and continuous oxygen therapy when other agents have failed.
For patients with the most advanced stages of emphysema, the only treatment is a
lung transplant.
Market Size
There were 97,000 deaths in the United States in 1995 attributable to COPD,
the country's fourth leading cause of death. There are approximately 500,000
hospitalizations annually due to chronic bronchitis. Over $2 billion was spent
in the United States in 1993 on drugs for the treatment of COPD. The current
market for Prolastin, the only approved product to treat alpha-1 antitrypsin
deficiency, is estimated to be $100 million.
STRATEGY
United Therapeutics' objective is to become a leader in the development and
commercialization of drugs to treat pulmonary and vascular diseases, as well as
other selected chronic conditions. To achieve this objective, United
Therapeutics is pursuing the following strategies:
Capitalize on United Therapeutics' Experience and Expertise in Pulmonary
Vascular Medicine. United Therapeutics believes that it has assembled the
preeminent group of scientists and clinicians in the field of pulmonary vascular
medicine. Members of United Therapeutics' scientific advisory board have won the
Nobel Prize for the discovery and characterization of prostacyclin, discovered
Flolan and invented UT-15. Members of United Therapeutics' senior management led
the team at Burroughs Wellcome Co. that designed the clinical trials for,
obtained FDA approval of and commercialized Flolan. These executives have
similarly designed UT-15's clinical trials, which have primary end points
identical to those used for the studies to approve Flolan. United Therapeutics
believes this expertise will be instrumental in the development and
commercialization of UT-15, beraprost and its other products.
Establish United Therapeutics' Prostacyclin Products as the Standard of
Care for Pulmonary Hypertension and Peripheral Vascular Disease. United
Therapeutics is seeking to establish UT-15 and beraprost, its stable analogs of
prostacyclin, as the worldwide standards of care for the treatment of pulmonary
hypertension and peripheral vascular disease. Currently, United Therapeutics is
conducting two multi-center pivotal Phase III clinical trials of UT-15 for
advanced pulmonary hypertension and a Phase II trial of UT-15 for late-stage
peripheral vascular disease. United Therapeutics is also beginning a
multi-center Phase III clinical trial program for beraprost to treat early-stage
peripheral vascular disease and a Phase II clinical trial program for beraprost
to treat early-stage pulmonary hypertension. United Therapeutics believes that
its influential scientific advisory board, strong network of clinical
investigators and experienced management team can demonstrate and communicate to
physicians the benefits of treating pulmonary hypertension and peripheral
vascular disease patients with United Therapeutics' stable synthetic forms of
prostacyclin following their approval.
Minimize Fixed Costs and Corporate Overhead Through Outsourcing and
Partnering. United Therapeutics maintains a streamlined corporate infrastructure
that is focused on strategic business management. United Therapeutics contracts
with FDA-approved manufacturers for the synthesis and manufacture of its
products and with established drug sales organizations for marketing and
distribution of its products. United Therapeutics has partnered with MiniMed
Inc., the worldwide leader in subcutaneous continuous-flow microinfusion device
systems, to design,
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develop and implement the delivery of UT-15 therapies for pulmonary hypertension
using MiniMed products. By outsourcing the non-core aspects of its business,
United Therapeutics believes that it will substantially reduce fixed overhead
and capital investment, accelerate commercialization of its products and reduce
its business risk.
In-License, Develop and Commercialize Selected Other Product
Candidates. United Therapeutics intends to continue to in-license and develop
product candidates that:
- have positive human safety and efficacy data;
- address a chronic condition with currently inadequate or high-cost
treatment options; and
- address a condition with little existing or potential treatment
competition.
Accordingly, United Therapeutics has in-licensed UT-77 and Ketotop. The company
is developing UT-77, which appears to prevent elastase from destroying lung
tissue, for the treatment of chronic obstructive pulmonary disease. United
Therapeutics is beginning a Phase II clinical trial program for UT-77. United
Therapeutics is also beginning a Phase II/III clinical trial program for
Ketotop, a unique transdermal delivery system for the FDA-approved
anti-inflammatory pain reliever, ketoprofen. Ketotop is currently being sold by
others in several countries outside the United States.
UNITED THERAPEUTICS' PRODUCTS
The following table summarizes United Therapeutics' potential product
portfolio.
<TABLE>
<CAPTION>
PRODUCT MODE OF DELIVERY INDICATION CLINICAL TRIAL STATUS UT TERRITORY
- ---------- ---------------- --------------------- ----------------------- -------------
<S> <C> <C> <C> <C>
UT-15 Subcutaneous Advanced pulmonary Phase III Worldwide
hypertension
UT-15 Subcutaneous Late-stage peripheral Phase II Worldwide
vascular disease
Beraprost Oral Early-stage Beginning Phase III U.S./Canada
peripheral
vascular disease
Beraprost Oral Early-stage pulmonary Beginning Phase II U.S./Canada
hypertension
UT-77 Inhalation Chronic obstructive Beginning Phase II Worldwide
pulmonary disease
Ketotop Transdermal Osteoarthritis Beginning Phase II/III North America
</TABLE>
UT-15
In December 1996 and January 1997, United Therapeutics obtained worldwide
rights to UT-15 for all indications from Glaxo Wellcome and Pharmacia & Upjohn.
Pulmonary Hypertension
United Therapeutics has focused primarily on developing UT-15 as its lead
product for treating advanced pulmonary hypertension. UT-15 is a significantly
more stable form of prostacyclin than Flolan, and United Therapeutics believes
that it will provide patients with a convenient and non-intravenous life-long
prostacyclin therapy. In contrast to Flolan, UT-15 is stable at room temperature
for up to five years and has a half life in the human body of approximately 45
minutes. These attributes allow for a safer and more convenient delivery of
UT-15 to patients. Specifically, UT-15 does not need to be administered by a
refrigerated, bulky pump through a surgically implanted catheter. Instead, UT-15
is delivered by subcutaneous
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<PAGE> 31
infusion with a pager-sized MiniMed microinfusion device, the same type of
reliable device that has been used to deliver insulin to over 60,000 diabetics.
Subcutaneous delivery of UT-15 also eliminates the risk of sepsis infection and
related hospitalization associated with the Flolan catheter. UT-15's extended
half life also greatly reduces the risk of death from life-threatening rebound
hypertension in cases of treatment interruption. The stability of UT-15 also
allows it to be prepackaged, thus eliminating the need to reconstitute the drug
one or more times daily under completely sterile conditions, as is the case with
Flolan.
The primary differences between the Flolan therapy and the UT-15 therapy
are summarized in the following table.
<TABLE>
<CAPTION>
CHARACTERISTIC FLOLAN UT-15
- ------------------------------------------------------------ ----------- ------------
<S> <C> <C>
Delivery of drug Intravenous Subcutaneous
Surgical implant of catheter Yes No
Constant refrigeration Yes No
Sterile conditions for frequent drug constitution required Yes No
Risk of rebound hypertension High Low
Risk of serious infections, including sepsis High Low
Bulky pack for pump Yes No
Swimming and showers prohibited Yes No
</TABLE>
UT-15 is currently in pivotal Phase III clinical trials for advanced
pulmonary hypertension. In earlier clinical trials, United Therapeutics
demonstrated that UT-15, delivered in a brief intravenous infusion, has similar
effects on primary pulmonary hypertension patients as does a comparable infusion
of Flolan. United Therapeutics then demonstrated that UT-15, delivered in a
brief subcutaneous infusion to primary pulmonary hypertension patients, had
similar effects as when delivered intravenously. Recently, United Therapeutics
studied 26 primary pulmonary hypertension patients in a randomized,
double-blind, placebo-controlled, eight-week trial that concluded:
- UT-15 can be safely administered to severely ill patients on an
outpatient basis;
- Continuous dosing of UT-15 leads to improvement in pulmonary blood
pressure and exercise ability; and
- These improvements are similar to improvements observed with Flolan
administered for 12 weeks.
Each patient who finished this study in October 1998 elected to receive
UT-15 therapy indefinitely.
United Therapeutics is now enrolling 224 advanced pulmonary hypertension
patients (without distinction between primary and secondary pulmonary
hypertension) in each of two pivotal Phase III trials of UT-15 at approximately
40 select medical centers. The main objective of the trials is to determine the
impact of continuous subcutaneous UT-15 therapy on exercise ability after 12
weeks of therapy. The primary endpoints for these trials are identical to those
in the studies to approve Flolan. Secondary objectives include assessing the
impact of UT-15 on the symptoms of advanced pulmonary hypertension.
Peripheral Vascular Disease
United Therapeutics is also developing UT-15 for late-stage peripheral
vascular disease. Peripheral vascular disease appears to be similar to pulmonary
hypertension in that there is a
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reduction in natural prostacyclin in the affected blood vessels. In September
1998, United Therapeutics completed a Phase II study which assessed the safety
and blood flow effects of UT-15 administered intravenously to patients with
late-stage peripheral vascular disease. The study demonstrated that UT-15 can be
administered safely to patients with late-stage peripheral vascular disease and
substantially increased blood flow in the affected areas of the legs. United
Therapeutics will next undertake a pre-pivotal study to optimize dosing levels
of UT-15 for pivotal Phase III trials. Other studies by independent clinical
investigators have shown that Flolan provides therapeutic benefit to patients
with early- and late-stage peripheral vascular disease.
BERAPROST
In September 1998, United Therapeutics obtained an exclusive license from
Toray Industries, Inc. for beraprost for the treatment of pulmonary hypertension
in the United States and Canada. In March 1999, United Therapeutics obtained an
additional exclusive license from Toray for beraprost for the treatment of
peripheral vascular disease in the United States and Canada. Beraprost is an
oral form of prostacyclin that is chemically stable and has a half life in the
body of approximately one hour. Like natural prostacyclin and UT-15, beraprost
dilates blood vessels, prevents platelet aggregation and prevents proliferation
of smooth muscle cells surrounding blood vessels. United Therapeutics believes
that beraprost may be an important treatment for early-stage peripheral vascular
disease and for early-stage pulmonary hypertension. Intermittent oral doses of
beraprost do not, however, provide consistent levels of the drug in the blood
necessary to treat advanced stages of these diseases. Consequently, United
Therapeutics believes that UT-15 will be the more effective treatment for the
late stages of these diseases.
Beraprost has proven to be safe and effective for the treatment of
peripheral vascular disease in clinical studies conducted outside the United
States and has been approved for treatment of peripheral vascular disease in
Japan since 1994. Sales in Japan of beraprost by Toray and its licensees were
over $225 million in 1998. Toray has licensed to Hoechst Marion Roussel, Inc.
rights to beraprost in Europe. Hoechst has conducted extensive clinical research
with beraprost, including a 1997-1998 controlled study in patients suffering
from intermittent leg pain due to blood vessel blockages. This study shows that
beraprost is effective in treating patients with early-stage peripheral vascular
disease, and Hoechst has filed for approval of beraprost for the treatment of
peripheral vascular disease in Europe. A recent Japanese study presented at the
1998 American Heart Association meeting suggests that beraprost may improve
survival in patients with pulmonary hypertension as well. In that study, 21 of
the 24 patients using beraprost survived during the four year study period, as
compared to eight of the 34 patients not using beraprost. United Therapeutics is
beginning a Phase III clinical trial program for beraprost to treat early-stage
peripheral vascular disease and Phase II clinical trial program for beraprost to
treat early-stage pulmonary hypertension.
UT-77
In November 1998, United Therapeutics acquired from Cortech, Inc. exclusive
worldwide rights to develop and market UT-77 for all indications, except the
treatment of skin conditions. United Therapeutics believes that UT-77 is the
only potential new chemical entity or drug in Phase II or later clinical trials
for preventing elastase from destroying the lung tissue of patients with chronic
obstructive pulmonary disease. United Therapeutics intends to develop UT-77 for
delivery by both injection and inhalation. The company is beginning a
multi-center Phase II study to assess the effectiveness of UT-77 in improving
breathing of patients suffering from periodic life-threatening episodes
associated with COPD. Cortech conducted extensive pre-clinical and clinical
studies of UT-77 that showed continuous intravenous infusion of UT-77 inhibits
elastase overproduction and enhances lung function in COPD patients. Prior to
United Therapeutics' license from Cortech, clinical investigators in U.S.
medical centers conducted
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Phase I and Phase II studies involving 40 patients that showed UT-77 to be
safely tolerated as a continuous intravenous infusion therapy. These studies
also showed that the drug affected the levels of certain proteins in the body
that are involved in several respiratory diseases. United Therapeutics believes
that these results provide a reasonable basis for further development of UT-77
as a treatment for COPD.
KETOTOP
In July 1998, United Therapeutics began collaborating with Global Medical
Enterprises Ltd. and Global Medical Enterprises Ltd., LLC to develop Ketotop,
and in February 1999, United Therapeutics obtained the exclusive rights from
Global Medical to develop Ketotop for marketing in North America and Central
America. Ketotop is a unique, transdermal drug delivery system which contains
ketoprofen, an FDA-approved oral pain reliever that has strong anti-inflammatory
properties. United Therapeutics plans to market Ketotop to relieve
osteoarthritis and other musculo-skeletal pain. Osteoarthritis is a disease that
afflicts nearly 21 million people in the United States, including 13.7 million
with osteoarthritis of the knee. Although highly effective, ketoprofen in pill
form frequently produces gastric irritation. To address this problem, Ketotop
uses a unique matrix technology to provide ketoprofen transdermally in
concentrated doses specifically to targeted sites for a sustained period of 12
to 14 hours. United Therapeutics believes that this delivery system, which is
patented in the United States, is the most effective way to deliver pain relief
through the skin. United Therapeutics is beginning Phase II/III studies to
demonstrate that Ketotop is safe and effective for the treatment of
osteoarthritis.
TELEMEDICINE SERVICES
Pulmonary hypertension patients require periodic monitoring of certain
bodily measurements such as heart and lung function. Much of this monitoring can
be achieved with less expense and inconvenience by using telemedicine devices
that enable physicians to monitor patients remotely. United Therapeutics intends
to provide telemedicine services for a fee to patients and physicians using and
prescribing United Therapeutics' products. United Therapeutics also intends to
utilize its experience with pulmonary hypertension telemedicine to explore the
development of similar internet-based services for other chronic diseases.
THE MINIMED STRATEGIC ALLIANCE
MiniMed Inc. is a world leader in the design, development, manufacturing
and marketing of advanced infusion systems for the delivery of drugs. The
pager-sized microinfusion device which MiniMed has agreed to provide United
Therapeutics to deliver UT-15 by continuous, subcutaneous infusion is a system
substantially similar to the system which has been successfully marketed to over
60,000 diabetics for insulin delivery.
United Therapeutics entered into an agreement with MiniMed in September
1997 to collaborate in the design, development and implementation of therapies
to treat pulmonary hypertension utilizing MiniMed products and UT-15. The term
of the agreement is for seven years after the FDA grants a new drug approval for
UT-15 and will be automatically extended for additional 12-month periods unless
otherwise terminated. The agreement is subject to early termination in the event
of a material breach or bankruptcy of either party. United Therapeutics and
MiniMed have established a Management Committee comprised of two representatives
from each company to implement the agreement. MiniMed will:
- Establish a dedicated sales force for UT-15 for advanced pulmonary
hypertension;
- Take responsibility for the marketing and sales of UT-15 to physicians
who treat pulmonary hypertension;
- Train patients and care providers in the use of the MiniMed device with
UT-15;
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- Provide the MiniMed device, related supplies and customer service;
- Obtain third-party payor reimbursement approvals; and
- Assist patients with third-party payor reimbursement.
United Therapeutics has agreed to pay MiniMed the greater of a percentage
of the revenues derived from commercial sales of UT-15 or a fixed amount per
patient per year. In the event that there are any discoveries or improvements
arising out of work performed under the agreement, the parties will have joint
ownership of those discoveries or improvements.
PATENTS AND PROPRIETARY RIGHTS
United Therapeutics' success will depend in part on its ability to obtain
and maintain patent protection for its products, preserve trade secrets, prevent
third parties from infringing upon its proprietary rights and operate without
infringing upon the proprietary rights of others, both in the United States and
internationally.
GLAXO WELLCOME ASSIGNMENT
In January 1997, Glaxo Wellcome Inc. assigned to United Therapeutics
patents and patent applications for the use of the stable prostacyclin analog
now known as UT-15 for the treatment of pulmonary hypertension and congestive
heart failure. Glaxo Wellcome has a right to negotiate a license from United
Therapeutics if United Therapeutics decides to license any part of the marketing
rights to a third party. Glaxo Wellcome waived this right with respect to the
agreement with MiniMed. Under the agreement, Glaxo Wellcome is entitled to
certain royalties from United Therapeutics for a period of 10 years from the
date of the first commercial sale of any product containing UT-15. If United
Therapeutics grants to a third party any license to UT-15, Glaxo Wellcome is
also entitled to a percentage of all consideration payable to United
Therapeutics by such licensee.
For pulmonary hypertension, the patent does not expire in the United States
until October 2009 and until various dates from September 2009 to August 2013 in
nine other countries. For congestive heart failure, the patent does not expire
until May 2011 in the United States and from May 2011 to March 2012 in five
other countries. United Therapeutics is responsible for all patent prosecution
and maintenance for the UT-15 patent portfolio.
PHARMACIA & UPJOHN LICENSE
In December 1996, Pharmacia & Upjohn Company exclusively licensed to United
Therapeutics patents and a patent application for the composition and production
of the stable prostacyclin analog now known as UT-15. United Therapeutics filed
a U.S. patent application for a new synthesis and production method for UT-15 in
October 1997. United Therapeutics believes that its method is a substantial
improvement over the Pharmacia & Upjohn method. United Therapeutics intends to
use its improved and unique synthesis method rather than the licensed Pharmacia
& Upjohn method for the actual production of the UT-15 product.
Under the Pharmacia & Upjohn agreement, United Therapeutics paid an initial
license fee and must make additional milestone payments for orphan and
non-orphan indications of the compound. United Therapeutics will make certain
royalty payments to Pharmacia & Upjohn until the later of the expiration of the
applicable patent or 10 years after the date of the first commercial sale of a
product in a country defined as a milestone country under the agreement. The
agreement may be terminated earlier by either party in certain circumstances,
including upon a material breach by or bankruptcy of the other party, and by
United Therapeutics at any time upon 60 days' notice to Pharmacia & Upjohn.
Pursuant to the agreement, United Therapeutics is obliged to use its best
efforts to conduct a research and development program in the United States
relating to the use of the product containing the compound for at least one
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indication, and to obtain regulatory approvals and market a product in the
United States and such other countries as United Therapeutics deems appropriate.
The term of the patent licensed from Pharmacia & Upjohn expires in March
2000 in the United States and various dates from January 2001 to February 2010
in 14 other countries. Pharmacia & Upjohn is responsible for prosecution and
maintenance of the U.S. and foreign patent portfolio relating to the UT-15
compound and synthesis method, but may discontinue prosecution of and/or abandon
the patent portfolio and give United Therapeutics an opportunity to prosecute or
maintain the portfolio.
TORAY INDUSTRIES LICENSES
In September 1998, United Therapeutics entered into an agreement with Toray
Industries, Inc. obtaining the exclusive right to develop and market beraprost
in the existing immediate-release oral form in the United States and Canada for
the treatment of pulmonary hypertension and other pulmonary vascular diseases,
plus certain additional rights of first refusal for other products, therapies or
territories. In exchange, United Therapeutics paid Toray cash and Common Stock,
and granted Toray an option to purchase additional Common Stock. United
Therapeutics also agreed to pay Toray milestone payments. In March 1999, United
Therapeutics entered into an agreement with Toray obtaining the exclusive right
to develop and market beraprost in the United States and Canada for the
treatment of peripheral vascular disease. United Therapeutics paid Toray cash
and Common Stock and agreed to pay Toray certain milestone payments.
Pursuant to the agreements, United Therapeutics has agreed to pay all costs
and expenses associated with undertaking clinical trials, obtaining regulatory
approvals and commercializing beraprost in the United States and Canada for the
treatment of pulmonary hypertension and peripheral vascular disease. Toray has
retained all manufacturing rights for beraprost. United Therapeutics has agreed
to purchase beraprost solely from Toray at specified prices based on volume. The
agreements each set forth a product development schedule. In the event that
development by United Therapeutics falls significantly behind the schedule
specified in either agreement, Toray may terminate that agreement. Furthermore,
United Therapeutics is responsible under the agreements for achieving minimum
annual product net sales as determined in advance by mutual agreement. In the
event that United Therapeutics is unable to meet any minimum annual net sales
requirement for two consecutive years, Toray may convert the exclusive license
to a non-exclusive license. United Therapeutics would then be required to share
any product marketing rights approved by the FDA with a third-party licensee
chosen by Toray. Each agreement expires 10 years following FDA approval of
beraprost for the particular disease indication. United Therapeutics may extend
each agreement for unlimited one-year periods with Toray's consent.
The United States patents licensed by United Therapeutics cover the
compound beraprost and its method of synthesis and will expire in January 2003
and April 2010. The licensed Canadian patent expires in January 2003. There are
no issued patents covering methods of treating any disease, including pulmonary
hypertension and peripheral vascular disease, using beraprost. Toray is
responsible for prosecuting and maintaining beraprost patents with United
Therapeutics' reasonable assistance.
CORTECH LICENSE
In November 1998, United Therapeutics signed an agreement with Cortech,
Inc. obtaining the exclusive right to develop and market a serine elastase
inhibitor compound, now known as UT-77, for all indications worldwide, except
for certain dermatological uses. In exchange, United Therapeutics made a cash
payment and granted Cortech a warrant to purchase Common Stock (which vests only
if United Therapeutics continues developing UT-77 after November 2000, and
terminates in November 2004), and agreed to make substantial milestone payments
and pay royalty fees which will not exceed a certain percentage of net sales.
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Pursuant to the agreement, United Therapeutics is required to use
reasonable efforts to develop and conduct research and pre-clinical and human
clinical trials to obtain all regulatory approvals to manufacture, market and
commercialize the products that United Therapeutics determines are commercially
feasible. United Therapeutics may choose to discontinue the development of the
products without penalty upon written notice to Cortech if the products do not
satisfy United Therapeutics' clinical needs for targeted indications. If United
Therapeutics terminates the agreement, however, Cortech will receive an
exclusive royalty-free license to use any improvements, know-how, data,
information or regulatory filings or any other intellectual property arising
from United Therapeutics' performance under the agreement. Under the agreement,
inventions or improvements to the technology for the manufacture or use of UT-77
are retained by the party whose employees conceive them. Cortech may terminate
the agreement if United Therapeutics does not commence Phase II clinical trials
of UT-77 before May 2001, subject to certain exceptions.
UT-77 is patented in the United States and in 22 foreign countries. Patent
applications are pending in six countries. The U.S. patent expires in June 2010
and foreign counterparts expire between August 2008 and December 2012. Cortech
is responsible for patent prosecution and maintenance under the agreement.
GLOBAL MEDICAL ENTERPRISES AGREEMENT
In February 1999, United Therapeutics entered into an agreement with Global
Medical Enterprises Ltd. and Global Medical Enterprises Ltd., LLC. This
agreement gives to United Therapeutics the exclusive right to commercialize and
sell Ketotop in the United States, Canada, Mexico, Central America and the
Caribbean for treatment of all indications. Global Medical holds its rights
under an exclusive sales and distribution agreement with Pacific
Pharmaceuticals, Inc., the Korean manufacturer of Ketotop. Both the agreement
between United Therapeutics and Global Medical and the agreement between Global
Medical and Pacific Pharmaceuticals expire in July 2008. The agreement between
United Therapeutics and Global Medical will be extended if Pacific
Pharmaceuticals extends its agreement with Global Medical. The agreement is
subject to early termination in the event of a material breach or bankruptcy of
either party or if the underlying agreement between Global Medical and Pacific
Pharmaceuticals is terminated. United Therapeutics has agreed to purchase
Ketotop solely from Global Medical and will pay Global Medical a product
purchase price equal to Global Medical's cost of obtaining Ketotop from Pacific
Pharmaceuticals plus a profit percentage. United Therapeutics and Global Medical
will jointly determine Global Medical's compensation for sales in additional
territories.
Ketotop is patented in the United States, but is not patented in any other
territory where United Therapeutics has marketing rights. The Ketotop patent
expires in April 2013. There are no issued U.S. patents covering methods of
treating osteoarthritis with Ketotop. Global Medical and Pacific Pharmaceuticals
are responsible for prosecuting and maintaining the Ketotop patent portfolio. In
addition, United Therapeutics is obligated under its agreement with Global
Medical to obtain trademark protection for Pacific Pharmaceuticals for the
Ketotop mark in every jurisdiction where United Therapeutics has marketing
rights. United Therapeutics has not yet filed trademark applications for
Ketotop.
PATENT TERM EXTENSIONS
United Therapeutics believes that some of the patents to which it has
rights may be eligible for extensions of up to five years based upon patent term
restoration procedures in Europe and in the United States under the Waxman-Hatch
Act. For instance, under Waxman-Hatch, the Toray U.S. patent relating to the
compound beraprost could be extended by up to five years, giving the product
patent protection until as late as January 2008 if approval in the United States
is received before expiration of the original patent term in 2003. In addition,
patent extensions are available under similar laws in Europe. United
Therapeutics is considering which products it will seek to
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extend under Waxman-Hatch and similar laws of other jurisdictions. See
"-- Government Regulation."
ORPHAN DRUG STATUS AND GRANTS
In June 1997, United Therapeutics was notified by the FDA that UT-15 for
primary pulmonary hypertension qualified for orphan drug status. The company
believes that if UT-15 is approved by the FDA, no other treatment for primary
pulmonary hypertension using prostacyclin will be approved by the FDA for seven
years, unless such other treatment is significantly safer or more effective than
UT-15. In November 1998, United Therapeutics received a $430,000 grant from the
FDA's orphan drug grant program for the development of UT-15 for the treatment
of primary pulmonary hypertension, $107,500 of which has been recognized as
revenue through March 31, 1999.
CLINICAL INVESTIGATOR NETWORK
United Therapeutics has established a multi-center clinical investigation
network with approximately 40 leading medical centers. This network consists of
pulmonologists and cardiologists from centers in North America, Europe,
Australia and Israel who collectively treat a majority of patients with advanced
pulmonary hypertension. These physicians understand and have extensive
experience in clinical research of severe pulmonary diseases. United
Therapeutics is continually expanding its clinical investigator network by
adding professionals who have demonstrated success in conducting clinical
research required for regulatory approval.
MANUFACTURING
United Therapeutics contracts with qualified third-party manufacturers to
produce its drugs. This manufacturing strategy enables United Therapeutics to
direct financial resources to product licensing, clinical development and
anticipated commercialization efforts rather than diverting resources to
building manufacturing plants and establishing compliance with the FDA's good
manufacturing practices regulations.
SynQuest, Inc. manufactures and Cook Imaging Corporation formulates the
bulk active ingredient in UT-15 for United Therapeutics. United Therapeutics has
contracted with Schweizerhall, Inc. as a second source of manufacturing. An
analytical testing laboratory, Magellan Laboratories Inc., tests the purity and
stability of each batch of manufactured UT-15 for compliance with FDA standards.
MARKETING AND SALES
United Therapeutics has contracted with MiniMed to exclusively handle, on a
commission basis, sales and marketing of UT-15 when formulated for subcutaneous
delivery for pulmonary hypertension. MiniMed has extensive experience in
marketing subcutaneous microinfusion systems. In addition, MiniMed maintains a
sizable insurance assistance department to expedite claims processing and to
assist patients in obtaining third-party reimbursement. United Therapeutics
retains sales and marketing rights to UT-15 for all indications other than
pulmonary hypertension. See "-- The MiniMed Strategic Alliance."
United Therapeutics intends to contract with MiniMed or a similarly
qualified organization for the sales and marketing of UT-15 for peripheral
vascular disease and for its other products. The company believes that there are
several qualified drug sales organizations that are capable of selectively
marketing drugs for target diseases in North America and Europe. United
Therapeutics does not intend to establish its own sales force, although it will
actively collaborate and co-promote its products with the drug sales
organizations with which it contracts.
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COMPETITION
Many drug companies engage in research and development to commercialize
products to treat blood vessel and lung diseases. United Therapeutics competes
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 United Therapeutics. United Therapeutics is aware of
existing treatments that will compete with its products, including the
following:
- UT-15 will compete with Flolan, the only FDA-approved treatment for
primary pulmonary hypertension;
- UT-15 and beraprost will compete with two FDA-approved drugs,
pentoxifylline and cilostazol, for the treatment of peripheral vascular
disease;
- UT-77 will compete with one FDA-approved drug, Prolastin, for the
treatment of chronic obstructive pulmonary disease; and
- Ketotop will compete with existing oral drugs containing the FDA-approved
pain reliever ketoprofen, as well as with a variety of other oral and
transdermal pain relievers.
Competitors may develop and commercialize additional products that compete
with United Therapeutics' products and may do so more rapidly than United
Therapeutics. For example, United Therapeutics understands that:
- Schering AG may develop Iloprost (a stable form of prostacyclin) as a
drug delivered through sustained inhalation to treat pulmonary
hypertension;
- Boehringer Ingelheim International GmbH was conducting a controlled study
of a potentially competitive drug for early-stage pulmonary hypertension;
- There are unpublished reports on the use of continuously inhaled nitric
oxide as a therapy for pulmonary hypertension of the newborn; and
- Several companies are developing other drugs and surgical methods for
treating different aspects of peripheral vascular disease.
GOVERNMENTAL REGULATION
The research, development, testing, manufacture, promotion, marketing and
distribution of drug products are extensively regulated by government
authorities in the United States and other countries. Drugs are subject to
rigorous regulation by the FDA in the United States and similar regulatory
bodies in other countries. The steps ordinarily required before a new drug may
be marketed in the United States (similar steps are required in most other
countries) include:
- Preclinical laboratory tests, preclinical studies in animals and
formulation studies and the submission to the FDA of an investigational
new drug application for a new drug or antibiotic;
- Adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug for each indication;
- The submission of a new drug application to the FDA; and
- FDA review and approval of the new drug application prior to any
commercial sale or shipment of the drug.
Preclinical tests include laboratory evaluation of product chemistry
toxicity and formulation, as well as animal studies. The results of preclinical
testing are submitted to the FDA as part of an investigational new drug
application. A 30-day waiting period after the filing of each
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investigational new drug application is required prior to the commencement of
clinical testing in humans. At any time during this 30-day period or at any time
thereafter, the FDA may halt proposed or ongoing clinical trials until the FDA
authorizes trials under specified terms. The investigational new drug
application process may be extremely costly and substantially delay development
of United Therapeutics' products. Moreover, positive results of preclinical
tests will not necessarily indicate positive results in clinical trials.
Clinical trials to support new drug applications are typically conducted in
three sequential phases, but the phases may overlap. During Phase I, the initial
introduction to 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 trails, are undertaken 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
new drug application is submitted. The FDA may request additional information
before accepting a new drug application 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 new drug application 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 new drug application and the manufacturing
facilities are favorable, the FDA may issue 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 new drug
application and authorization of commercial marketing of the drug for certain
indications. The FDA may refuse to approve the new drug application or issue a
not approvable letter, outlining the deficiencies in the submission and often
requiring additional testing or information.
The FDA may designate a product as an "orphan drug" if the drug is a drug
intended to treat a rare disease or condition. A disease or condition is
considered rare if it affects fewer than 200,000 people in the United States, or
if it affects more than 200,000 people but will be sold for less money than it
will cost to develop. If a sponsor obtains the first FDA marketing approval for
a certain orphan drug, the sponsor will have a seven-year exclusive right to
market the drug for the orphan indication.
If regulatory approval of UT-15 or any of United Therapeutics' other
products is granted, it will be limited to certain disease states or conditions.
The manufacturers of approved products and their manufacturing facilities will
be subject to continual review and periodic inspections. Because United
Therapeutics intends to contract with third parties for manufacturing of its
products, its control of compliance with FDA requirements will be incomplete. In
addition, identification of certain side effects or the occurrence of
manufacturing problems after any of its drugs are on the market could cause
subsequent withdrawal of approval, reformulation of the drug, additional
preclinical testing or clinical trials, and changes in labeling of the product.
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The Waxman-Hatch Act provides that patent terms may be extended during the
FDA regulatory review period for the related product. This period is generally
one-half the time between the effective date of an investigational new drug
application and the submission date of a new drug application, plus the time
between the submission date of a new drug application and the approval of that
application, subject to a maximum extension of five years. Similar patent term
extensions are available under European laws.
Outside the United States, United Therapeutics' ability to market its
products will also be contingent upon receiving marketing authorizations from
the appropriate regulatory authorities. The foreign regulatory approval process
includes all of the risks associated with FDA approval set forth above. 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 EU member state.
Under a new regulatory system in the EU, marketing authorizations may be
submitted at either a centralized, a decentralized or a national level. The
centralized procedure is mandatory for the approval of biotechnology products
and high technology products and available at the applicant's option for other
products. The centralized procedure provides for the grant of a single marketing
authorization that is valid in all EU member states. The decentralized procedure
is available for all medicinal products that are not subject to the centralized
procedure. The decentralized procedure provides for mutual recognition of
national approval decisions, changes existing procedures for national approvals
and establishes procedures for coordinated EU actions on products, suspensions
and withdrawals. Under this procedure, the holder of a national marketing
authorization for which mutual recognition is sought may submit an application
to one or more EU member states, certify that the dossier is identical to that
on which the first approval was based or explain any differences and certify
that identical dossiers are being submitted to all member states for which
recognition is sought. Within 90 days of receiving the application and
assessment report, each EU member state must decide whether to recognize
approval. The procedure encourages member states to work with applicants and
other regulatory authorities to resolve disputes concerning mutual recognition.
Lack of objection of a given country within 90 days automatically results in
approval of the EU country.
United Therapeutics will choose the appropriate route of European
regulatory filing to accomplish the most rapid regulatory approvals. However,
the chosen regulatory strategy may not secure regulatory approvals or approvals
of the chosen product indications. United Therapeutics intends to secure
European regulatory approval for the use of UT-15 for pulmonary hypertension and
peripheral vascular disease in parallel with its United States and Canadian
regulatory filings. The company has contracted with Quintiles (UK) Ltd., a
contract research organization, to assist with its European clinical development
and regulatory actions.
PRODUCT LIABILITY INSURANCE
United Therapeutics owns a Products/Clinical Trials Liability Insurance
Policy with Federal Insurance Company. It is a master policy with limits of $5
million in the aggregate and $2 million per occurrence. In addition, United
Therapeutics owns policies covering clinical trials in Austria, France, Spain
and Italy. United Therapeutics believes this insurance is adequate.
EMPLOYEES
United Therapeutics had 20 employees as of December 31, 1998. The company
also maintains active independent contractor relationships with various
individuals with whom it has month-to-month consulting contracts. The company
believes its employee relations are excellent. None of United Therapeutics'
employees is subject to a collective bargaining agreement.
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FACILITIES
United Therapeutics maintains three facilities. The company's clinical
development office is in Research Triangle Park, North Carolina in 5,000 square
feet of leased office space. United Therapeutics' corporate office is in Silver
Spring, Maryland in an 8,000 square foot building that it owns. The company's
subsidiary, Unither Telemedicine Services Corporation, leases approximately
3,000 square feet of office space in the District of Columbia. The Research
Triangle Park lease expires in June 2001, and the District of Columbia lease
expires in February 2001 with an extension at United Therapeutics' option.
United Therapeutics believes these facilities are adequate for its current and
planned operations.
LEGAL PROCEEDINGS
United Therapeutics is not a party to any legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of United Therapeutics:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- ----------------------------------------------------
<S> <C> <C>
Martine A. Rothblatt(1)(4)............. 44 Chairman, Chief Executive Officer and Director
James W. Crow, Ph.D.(1)(4)............. 55 President, Chief Operating Officer and Director
Gilles Cloutier, Ph.D.(1).............. 54 Executive Vice President, Business Development,
Chief Financial Officer, Treasurer and Director
Shelmer D. Blackburn, Jr.(1)........... 38 Director of Operations, Secretary and Director
Paul A. Mahon.......................... 35 Assistant Secretary and General Counsel
Olivia Giscard d'Estaing............... 37 Director
David Gooray, M.D.(2)(3)............... 49 Director
Jean-Guy Lambert(2).................... 58 Director
Noah A. Samara(3)(4)................... 42 Director
</TABLE>
- -------------------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
(4) Member of Nominating Committee.
Martine A. Rothblatt, J.D., M.B.A., is a co-founder of United Therapeutics.
She has served as Chairman of its Board of Directors and Chief Executive Officer
since its inception in 1996. In 1995, Ms. Rothblatt endowed the PPH Cure
Foundation to help find cures for pulmonary hypertension, which afflicts one of
her daughters, and continues to manage the foundation. Since 1990, she has
helped develop, as an independent consultant, satellite communications
businesses, including CD Radio Inc., which she founded and served as Chairman
and Chief Executive Officer until December 1992, WorldSpace Corp., which she
co-founded and served as Chief Operating Officer from January 1993 through
January 1995, and Sky Station International, Inc., where she served part-time as
Executive Vice President from October 1996 through November 1997. Since February
1995 Ms. Rothblatt has also served as President of Beacon Projects, Inc., a
company she incorporated for her satellite communications consulting and real
estate management activities, and as Of Counsel to the law firm of Mahon Patusky
Rothblatt & Fisher, Chartered. Ms. Rothblatt also serves as the Chairman of the
Bioethics Subcommittee of the International Bar Association and President of the
William Harvey Medical Research Foundation. Ms. Rothblatt devotes substantially
all of her time to the affairs of United Therapeutics.
James W. Crow, Ph.D., is a co-founder of United Therapeutics and has served
as President and Chief Operating Officer and as a member of its Board of
Directors since its inception in 1996. Prior to 1996, Dr. Crow worked for more
than 18 years at Glaxo Wellcome Inc. (formerly Burroughs Wellcome Co.) in
positions such as International Project Leader, Associate Medical Director and
Senior Clinical Research Scientist. While he was associate director of the
Pulmonary II Section, Dr. Crow led the team that developed and obtained FDA
approval for Flolan for the treatment of primary pulmonary hypertension patients
in September 1995.
Gilles Cloutier, Ph.D., is a co-founder of United Therapeutics and has
served as Executive Vice President, Business Development and Treasurer and as a
member of its Board of Directors since its inception in 1996 and Chief Financial
Officer since December 1997. Prior to 1996, Dr. Cloutier served as President of
CatoPharma Canada, Inc. from April 1992 to February 1997. From April 1990 to
April 1992, Dr. Cloutier was the Vice President of Clinical Operations at
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Quintiles Transnational Corp. Dr. Cloutier has more than 24 years of experience
in all phases of the drug development process in the United States, Canada and
other international locations.
Shelmer D. Blackburn, Jr., B.S., is a co-founder of United Therapeutics and
has served as Director of Operations, Secretary and a member of its Board of
Directors since its inception in 1996. Prior to 1996, Mr. Blackburn worked for
eight years at Glaxo Wellcome Inc. (formerly Burroughs Wellcome Co.) where he
was responsible for the design and management of clinical trials for Flolan, as
well as for an artificial surfactant for the treatment of neonatal patients with
respiratory distress syndrome.
Paul A. Mahon has served as General Counsel and Assistant Secretary of
United Therapeutics since its inception in 1996. He has been a principal and
managing partner of Mahon Patusky Rothblatt & Fisher, Chartered since its
formation in 1993.
Jean-Guy Lambert, M.B.A., has served on the Board of Directors of United
Therapeutics since July 1997. Since August 1996, Mr. Lambert has served as
Chairman, President and Chief Executive Officer of Dacha Capital, Inc., a
merchant bank. From June 1993 to August 1996, Mr. Lambert was President and
Chief Executive Officer of Intermont Inc., an oil and gas corporation. From
September 1991 to June 1993, Mr. Lambert acted as financial advisor to
Hydro-Quebec. Mr. Lambert is a Director of several publicly traded companies,
including QR Canada Capital, Inc., Enerplus Resources Fund and Explogas Ltd.
Noah A. Samara, J.D., M.B.D., has served on the Board of Directors of
United Therapeutics since 1997. He has served as Chairman and Chief Executive
Officer of WorldSpace Corporation, a satellite communications company, since
August 1990.
David Gooray, M.D., has served on the Board of Directors of United
Therapeutics since December 1997. Dr. Gooray has practiced cardiovascular
medicine in Virginia, Maryland and the District of Columbia since July 1986.
Since 1986, he has also served as an instructor in medicine at Howard University
Medical School and principal investigator in a National Institutes of Health
study.
Olivia Giscard d'Estaing, M.S.B., has served on the Board of Directors
since July 1998. She has been employed as Director of Asset Management Services
at Banque Eurofin since 1988. She is in charge of mutual fund management with
assets over $1 billion.
The Amended and Restated Certificate of Incorporation of United
Therapeutics provides that the Board of Directors is to consist of three
classes, as nearly equal in size as the number of members permits. Each class of
directors generally has a term of three years, except that the term of the
initial Class I directors expires at the annual meeting of stockholders in 2000.
At each annual stockholders meeting, the successors of the class of directors
whose term expires at such meeting shall be elected to hold office for a term
expiring in three years. United Therapeutics' Board of Directors is currently
comprised of eight directors, with two classes of three directors and one class
of two directors. Executive officers are elected by, and serve at the discretion
of, the Board.
BOARD COMMITTEES
The Board of Directors has the following committees: an Executive
Committee; a Compensation Committee, which approves salaries and incentive
compensation for executive officers of the company and which administers the
company's equity incentive plan; an Audit Committee, which reviews the results
and scope of the audit and other services provided by United Therapeutics'
independent auditors; and a Nominating Committee, which reviews and recommends
candidates for the Board of Directors.
40
<PAGE> 44
SCIENTIFIC ADVISORY BOARD
United Therapeutics has assembled a team of scientific and medical advisors
to advise it on issues related to specific pharmaceutical products. The current
group of advisors are experts in pulmonary hypertension and vascular biology.
United Therapeutics plans to assemble different advisory groups specific to
other products under development. In certain cases, these advisors have agreed
to be available for consultation for a specified number of days each year, but
individuals may consult and meet informally with the company on a more frequent
basis. All of these scientific and medical advisors are employed by major
medical schools, research institutions, hospitals, or other institutions and may
have other commitments that may limit their availability to United Therapeutics.
United Therapeutics' Scientific Advisory Board consists of the following
individuals:
Sir John Vane, D.Sc., F.R.S., is the 1982 Nobel Laureate in Physiology or
Medicine and discoverer of prostacyclin. Dr. Vane served as the Group Research
and Development Director at the Wellcome Foundation, Ltd. from 1974 to 1986, and
is President of the William Harvey Research Institute, The Medical School of
Queen Mary and Westfield College, London, which he founded in 1986. Since 1987,
he has been the non-executive Chairman of Technology Transfer Company of the
Imperial Cancer Research Fund. Since 1993, he has been Chairman of England's
Biomedical Research Education Trust. Throughout his distinguished career, Dr.
Vane has received numerous honors, in addition to over 25 Distinguished
Lectureships and 30 honorary memberships and degrees. He received his D. Phil.
and D.Sc. from Oxford University and is the author of more than 800
publications. He serves on the Board of Directors of deCODE genetics Inc. and,
until recently, served on the Board of Directors of Vanguard Medica Group plc, a
pharmaceutical company which he founded in 1991 and which is traded on the
London Stock Exchange.
Salvador Moncada, M.D., Ph.D., D.Sc., has been a Director of the Cruciform
Project at the University College, London, England since 1995. Dr. Moncada
co-discovered prostacyclin and Flolan. He was a Director of Research at the
Wellcome Foundation, Ltd. United Kingdom from 1986 to 1995. Dr. Moncada is also
internationally recognized as one of the key discoverers of the role of nitric
oxide in vascular biology. He is the author and editor of numerous scientific
textbooks, and the recipient of over 50 scientific awards, honorary memberships
and degrees.
Sir Magdi Yacoub, M.D., F.A.C.S., is a leading cardiothoracic surgeon and
developer of surgical techniques of heart and heart-lung transplantation. Dr.
Yacoub has been a professor at the National Heart and Lung Institute in London
since 1986.
Lewis Rubin, M.D., is the Professor of Medicine and Head of Pulmonary and
Critical Care Medicine, University of California, San Diego. Dr. Rubin is the
author of Primary Pulmonary Hypertension and numerous other publications on
pulmonary hypertension and pulmonary physiology. He is the recipient of the PPH
Cure Foundation 1997 Scientific Progress Award.
Robyn Barst, M.D., has been the Director since 1987 of the Children's
Pulmonary Hypertension Center, Columbia Presbyterian Medical Center. Dr. Barst
is an Associate Professor of Pediatrics and Medicine, Columbia University,
College of Physicians and Surgeons. She is the recipient of the PPH Cure
Foundation 1996 Scientific Progress Award and a leading expert on pulmonary
hypertension in children.
Urban Ramstedt, Ph.D., is the Director of Immunology at AVANT
Immunotherapeutics, Inc., Needham, Massachusetts. Dr. Ramstedt has written over
40 articles on immunology and gene therapy.
Tim Higenbottam, M.D., F.R.C.P., has been a Professor of Respiratory
Medicine at Sheffield University since 1995. Dr. Higenbottam is a leading
European expert on pulmonary hypertension. From 1981 to 1995, he was the Head of
Pulmonary Hypertension Medicine at Papworth Hospital, Cambridge, England.
41
<PAGE> 45
Jay H. Sanders, M.D., F.A.C.P., Dr. Sanders is the President and CEO of The
Global Telemedicine Group, Founding President of the American Telemedicine
Association, Professor of Medicine (Adjunct) at Johns Hopkins University School
of Medicine, and Visiting Professor, Yale University School of Medicine. He is a
member of the Executive Committee of the Board of Directors of the Universal
Service Administrative Corporation and serves on the Department of Defense
Telemedicine Board of Directors. Dr. Sanders is the Senior Editor of the
Telemedicine Journal and is generally recognized as America's leading expert on
telemedicine. In addition to serving on the United Therapeutics Scientific
Advisory Board, Dr. Sanders is also Chairman of the Unither Telemedicine
Advisory Board.
DIRECTOR COMPENSATION
United Therapeutics reimburses each member of its Board of Directors for
out-of-pocket expenses incurred in connection with attending Board meetings.
Each director who is not also an employee also receives a fee of $8,000 per
year.
SCIENTIFIC ADVISOR COMPENSATION
Each of Drs. Vane, Moncada and Yacoub have agreements under which he is
entitled to receive 1,666 shares of the company's Common Stock for each year of
service on the Scientific Advisory Board, plus $3,000 per meeting attended.
United Therapeutics granted 3,333 shares of Common Stock to each of Drs. Vane,
Moncada and Yacoub for his service from October 1996 through October 1998.
United Therapeutics granted Dr. Ramstedt options to purchase 1,666 shares of
Common Stock for his service on the Scientific Advisory Board during 1997 and
1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the Compensation Committee members has served as an officer or
employee of United Therapeutics or its subsidiaries, except Martine A.
Rothblatt, who has been Chairman and Chief Executive Officer of United
Therapeutics since its inception in 1996. Effective March 1999, Ms. Rothblatt
resigned from the Compensation Committee, which currently consists solely of
non-employee directors.
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<PAGE> 46
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to or earned by United Therapeutics' Chief Executive
Officer and the other executive officers who earned in excess of $100,000 in
cash compensation during the year ended December 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS(#)(1)
- --------------------------- ---- -------- -------------
<S> <C> <C> <C>
Martine A. Rothblatt.................................... 1998 $120,000 83,333
Chairman and Chief Executive Officer
James W. Crow........................................... 1998 150,000 69,999
President and Chief Operating Officer
Gilles Cloutier......................................... 1998 150,000 50,000
Executive Vice President, Business Development,
Chief Financial Officer and Treasurer
Shelmer D. Blackburn, Jr................................ 1998 100,000 53,333
Director of Operations and Secretary
</TABLE>
- -------------------------
(1) Information represents stock options awarded under United Therapeutics'
Amended and Restated Equity Incentive Plan.
STOCK OPTION GRANTS AND EXERCISES
The following tables show for the year ended December 31, 1998, certain
information regarding options granted to, and held at year end by, the named
executive officers:
OPTION GRANTS IN FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE FOR OPTION TERM(4)
OPTIONS FISCAL PRICE PER EXPIRATION -----------------------------
NAME GRANTED(#) YEAR(2) SHARE(3) DATE 5% 10%
- ---- ---------- -------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martine A. Rothblatt... 83,333 13.6% $19.80 11/08 $1,037,672 $2,629,665
James W. Crow.......... 3,333 0.6 3.00 3/08 6,288 15,936
66,666 10.9 18.00 11/08 754,666 1,912,472
Gilles Cloutier........ 50,000 8.2 18.00 11/08 566,005 1,434,368
Shelmer D. Blackburn... 3,333 0.6 3.00 3/08 6,288 15,936
50,000 8.2 18.00 11/08 566,005 1,434,368
</TABLE>
- -------------------------
(1) Each of the Options listed in the table above were granted pursuant to
United Therapeutics' Equity Incentive Plan and vest upon the achievement of
certain business milestones within certain specified time periods.
(2) Based on an aggregate of 611,068 options granted to employees, directors and
consultants in 1998, including the named executive officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant, as determined by the Board
of Directors.
(4) The potential realizable value is calculated by assuming that the stock
price on the date of grant as determined by the Board of Directors
appreciates at the indicted annual rate compounded annually for the entire
term of the option (10 years) and the option is exercised and sold on the
last day of its term for the appreciated stock price. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent United Therapeutics' estimate or
projection of the future Common Stock price.
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<PAGE> 47
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998(#) DECEMBER 31, 1998($)(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Martine A. Rothblatt.............. 13,333 136,666 $ $
James W. Crow..................... 13,333 115,000
Gilles Cloutier................... 10,000 90,000
Shelmer D. Blackburn, Jr.......... 8,333 78,333
</TABLE>
- -------------------------
(1) Based on the initial public offering price of $ , less the exercise
price, without taking into account any taxes that may be payable in
connection with the transaction, multiplied by the number of shares
underlying the option.
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
In April 1999, United Therapeutics entered into an Executive Employment
Agreement with Martine A. Rothblatt, its Chief Executive Officer. The employment
agreement provides for an initial five year term ending on December 31, 2004,
and automatically renews for successive one-year periods unless either party
terminates the agreement. The current annual salary specified in the agreement
is $180,000. Ms. Rothblatt is entitled to bonuses for each year of the initial
term of the agreement in the form of stock options, in addition to other
discretionary bonuses that may be awarded by the Board of Directors. At the end
of the first year of her agreement, Ms. Rothblatt will receive an option to
purchase the number of shares of Common Stock equal to one percent of the
increase in the company's market capitalization after United Therapeutics'
initial public offering, divided by 18. At the end of each of the next four
years, Ms. Rothblatt will receive an option to purchase the number of shares
equal to one percent of the increase in United Therapeutics' market
capitalization over the prior year, divided by 18. These options will be fully
exercisable on the date of grant. The options will have an exercise price equal
to or exceeding the fair market value of a share of United Therapeutics' Common
Stock on the date of grant. The options are exercisable over five years if Ms.
Rothblatt is a 10% or greater shareholder on the date of grant, or 10 years
otherwise.
If Ms. Rothblatt's employment is terminated due to her death or disability,
the company will continue to pay to Ms. Rothblatt or her estate her current base
salary through the end of the calendar year following such death or disability,
and, if her employment is terminated for disability, United Therapeutics will
pay for continued benefits under its short-term and long-term disability
insurance programs. If Ms. Rothblatt's employment is terminated by United
Therapeutics other than for cause, or if Ms. Rothblatt terminates her employment
for good reason (as such terms are defined in the agreement), including
circumstances involving a change in control of United Therapeutics, she will be
entitled to a lump sum cash payment equal to the sum of (a) her current base
salary plus any bonus and incentive payments which have been earned through the
date of termination, (b) the greater of her bonus and incentive payments for the
prior year or the average of such payments for the prior two years, on a
prorated basis for the year of termination, (c) three times the sum of her
highest annual base salary for the preceding 12 months and the greater of her
previous year's bonus and incentive payment or the average of those payments for
the previous two years, and (d) the difference between the fair market price and
the exercise price of any non-vested options held by Ms. Rothblatt. In addition,
Ms. Rothblatt will receive certain employee and retirement benefits. The
agreement prohibits Ms. Rothblatt from engaging in activities competitive with
the company for five years following termination of her employment.
United Therapeutics has entered into employment agreements with each of
Drs. Crow and Cloutier and Mr. Blackburn. The term of Dr. Crow's agreement ends
on July 15, 2002, and
44
<PAGE> 48
provides for an annual base salary of at least $150,000. The term of Mr.
Blackburn's agreement ends on August 1, 2002, and provides for an annual base
salary of at least $100,000. The term of Dr. Cloutier's agreement ends on April
7, 2003, and provides for an annual base salary of at least $150,000. Each of
the agreements with Drs. Crow and Cloutier and Mr. Blackburn also provides for
an automatic annual renewal unless either party terminates with at least 30 days
notice to the other party. In addition, each of the agreements provides that if
the employee is terminated by United Therapeutics other than for cause, or if
the employee terminates the agreement for good reason (as those terms are
defined in the agreements), the employee is entitled to his base salary through
the full term of the agreement. In addition, each of these agreements prohibits
Drs. Crow and Cloutier and Mr. Blackburn from accepting employment, consultancy
or other business relationships with a competitor of United Therapeutics for
twelve months following his last receipt of compensation from United
Therapeutics.
AMENDED AND RESTATED EQUITY INCENTIVE PLAN
The company's Equity Incentive Plan originally became effective November
12, 1997, and was subsequently amended and restated effective April 9, 1999. The
Plan provides for the grant of awards, including options, stock appreciation
rights, restricted stock awards or performances share awards or any other right
or interest relating to shares or cash to eligible directors, officers, key
employees and consultants. As amended, a total of 14,939,517 shares of Common
Stock has been reserved and is available for awards under the Plan, including
7,939,517 shares of Common Stock specifically reserved for stock option grants
to the Chief Executive Officer in accordance with her Executive Employment
Agreement. The maximum number of shares that may be granted to any one
participant other than the Chief Executive Officer in any calendar year may not
exceed 500,000 shares. The maximum number of shares that may be granted to the
Chief Executive Officer in any one calendar year may not exceed 500,000 shares
in 2000, 701,353 shares in 2001, 681,434 shares in 2002, 2,757,832 shares in
2003 and 3,298,898 shares in 2004.
The Plan is administered by the Compensation Committee, which must consist
of two or more non-employee directors approved by the Board. The committee has
the power to determine the terms and conditions of awards, including but not
limited to the exercise price, the number of shares of Common Stock subject to
each award, the vesting provisions of each award and the form of consideration
payable upon exercise. In addition, the committee has the authority to amend,
modify or terminate the Plan, provided that no action may affect any shares
previously issued and sold or any award previously granted under the Plan
without the written consent of the participant.
Options granted under the Plan are not generally transferable by the
optionee. Options granted under the Plan must generally be exercised within 10
years, subject to earlier termination upon termination of the holder's
employment, disability or death, but in no event later than the expiration of
the option's term. The exercise price of all options granted under the Plan must
be at least equal to the fair market value of the underlying shares of Common
Stock on the date of the grant. Incentive stock options granted to any
participant who owns 10% or more of United Therapeutics' outstanding Common
Stock must have an exercise price equal to or exceeding 110% of the fair market
value of a share of Common Stock on the date of the grant and must not be
exercisable for longer than five years.
Under the Plan, a participant may also be awarded a "performance award,"
which means that the participant may receive cash, stock or other awards which
is contingent upon achieving performance goals established by the committee. The
committee may also make "deferred share" awards under the Plan. A participant
who receives a deferred share award is entitled to receive the company's stock
in the future for services performed between the date of the award and the date
the participant may receive the stock.
45
<PAGE> 49
A participant who is granted a "stock appreciation right" under the Plan
has the right to receive all or a percentage of the fair market value of a share
of stock on the date of exercise of the stock appreciation right minus the grant
price of the stock appreciation right determined by the committee. If a stock
appreciation right is granted in connection with an incentive stock option, the
grant price must not be less than the fair market value of the stock on the date
of grant. Finally, the committee may make "restricted stock" awards under the
Plan. Restricted stock granted under the Plan is subject to such terms and
conditions as the committee determines when it makes the award, and carries
voting, dividend and other ownership rights as set forth in the award agreement
relating to the restricted stock. Unless the committee otherwise provides, upon
termination of employment during the period when the restrictions apply, the
participant's restricted stock is forfeited to United Therapeutics.
In the event of certain changes of control of United Therapeutics, the
Compensation Committee has discretion to provide that any award under the Plan
that may be exercised will become fully exercisable, and/or that all
restrictions on any awards under the Plan will lapse as the Compensation
Committee determines, which may be prior to the change of control.
As of April 9, 1999 options to purchase 881,985 shares of Common Stock were
outstanding. There are 14,057,532 shares reserved for future grants or purchases
under the Plan, including 7,939,517 shares of Common Stock reserved for issuance
to the Company's Chairman and Chief Executive Officer pursuant to her employment
agreement. No performance awards, deferred share awards, stock appreciation
rights or restricted stock awards are outstanding under the Plan. The Plan will
terminate in November 2007, unless terminated sooner by the Board.
46
<PAGE> 50
CERTAIN TRANSACTIONS
On April 29, 1998, United Therapeutics purchased an office building for its
corporate headquarters from an entity owned by Martine A. Rothblatt, the
Chairman and Chief Executive Officer of United Therapeutics, for approximately
$581,000, including expenses. United Therapeutics leased office space from
Beacon Projects, Inc. in 1997 and 1998 under a lease that was terminated when
the company purchased its building. Ms. Rothblatt is the President and owner of
Beacon Projects. Payments under that lease totaled $12,000 for the year ended
December 31, 1998, and $15,000 for the year ended December 31, 1997. In
addition, Unither Telemedicine Services Corporation, a subsidiary of United
Therapeutics, entered into a lease for office space with Beacon Projects in
March 1999. Payments under this lease will be approximately $30,000 annually
until the lease expires in 2001. The Board of Directors approved these
transactions based on independent appraisals and without the participation of
Ms. Rothblatt. United Therapeutics believes that the terms of each of the
transactions were at least as favorable as terms it could have obtained in arm's
length transactions with an independent third party.
Each of Ms. Rothblatt, Paul A. Mahon, General Counsel and Assistant
Secretary of United Therapeutics, and Christopher Patusky, an officer of the
company's telemedicine subsidiary, is a principal of the law firm Mahon Patusky
Rothblatt & Fisher, Chartered, which United Therapeutics has retained in the
past and intends to retain in the future. United Therapeutics paid the law firm
$107,000 during the three months ended March 31, 1999, $157,000 during the year
ended December 31, 1998, $81,000 during the year ended December 31, 1997 and
$5,000 during the period from inception to December 31, 1996.
In 1998, United Therapeutics entered into a cooperative drug discovery
agreement with William Harvey Research Limited. United Therapeutics paid
$162,273 during 1998 and $85,988 for the three months ended March 31, 1999 under
this agreement. Under the agreement, United Therapeutics is required to pay
William Harvey a royalty equal to 10% of net sales and license fees that the
company earns from discoveries of William Harvey, Ms. Rothblatt is president of
William Harvey Medical Research Foundation, an affiliate of William Harvey
Research Limited.
During 1997, Ms. Rothblatt loaned United Therapeutics $500,000 at an
interest rate of 10% per annum. On August 19, 1997, principal and accrued
interest totaling $508,334 was converted into Common Stock pursuant to the terms
of the loan agreement. The company issued to Ms. Rothblatt 309,428 shares at
approximately $1.62 per share.
During 1996 and 1997, United Therapeutics earned substantially all of its
revenue from the PPH Cure Foundation. Ms. Rothblatt is also a Director of the
PPH Cure Foundation. United Therapeutics earned $115,909 for the year ended
December 31, 1997, and $153,972 during the period from June 26, 1996 (date of
inception) through December 31, 1996.
The Amended and Restated Certificate of Incorporation and the Amended and
Restated By-laws provide that United Therapeutics will indemnify each of its
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law. In addition, United Therapeutics is entering into indemnity
agreements with each of the directors, which provide that United Therapeutics
will indemnify each director to the fullest extent permitted by law.
47
<PAGE> 51
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of United Therapeutics' Common Stock as of March 31, 1999,
and as adjusted to reflect the sale of the shares of Common Stock offered
hereby, by (a) each person who United Therapeutics knows owns more than 5% of
its Common Stock, (b) each of its directors, (c) each of its named executive
officers, and (d) all of its directors and executive officers as a group. Except
as otherwise noted below, the address of each person listed below is the
company's address.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES(1)
NUMBER OF SHARES -------------------
OF COMMON STOCK BEFORE AFTER
NAME BENEFICIALLY OWNED(1) OFFERING OFFERING
- ---- --------------------- -------- --------
<S> <C> <C> <C>
Noah A. Samara........................................ 3,035,229 28.3%
Martine A. Rothblatt(2)............................... 1,248,374 11.6%
Credit Suisse Asset Mgmt Pharma Fund
P.O. Box 800
CH 8070 Zurich
Switzerland......................................... 666,666 6.2%
Jean-Guy Lambert(3)................................... 571,944 5.3%
Merrill Lynch KECALP 1997
225 Liberty Street
New York, New York 10080-6123....................... 555,555 5.2%
James W. Crow(4)...................................... 441,665 4.1%
Gilles Cloutier(5).................................... 436,666 4.1%
Shelmer D. Blackburn, Jr.(6).......................... 431,665 4.0%
Olivia Giscard d'Estaing(7)........................... 207,666 1.9%
David Gooray, M.D. ................................... 11,333 *
All directors and executive officers as a group
(9 persons)(8)...................................... 6,397,875 59.0%
</TABLE>
- -------------------------
* Represents less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Beneficial ownership also includes shares of stock subject to
options and warrants currently exercisable or convertible, or exercisable or
convertible within 60 days of the date of this table. Percentage of
beneficial ownership is based on 10,726,967 shares of Common Stock
outstanding as of March 31, 1999 and shares of Common Stock
outstanding after completion of this offering (assuming the Underwriters do
not exercise their over-allotment option). Unless otherwise indicated, to
the knowledge of United Therapeutics, all persons listed have sole voting
and investment power with respect to their shares of Common Stock, except to
the extent authority is shares by spouses under applicable law.
(2) Includes 35,556 shares held by Ms. Rothblatt's children and 413,204 shares
held by her spouse. Ms. Rothblatt disclaims beneficial ownership of such
shares. Also includes 26,666 shares of Common Stock issuable upon exercise
of stock options within 60 days.
(3) Includes 500,000 shares of Common Stock owned by Dacha Capital, Inc. Mr.
Lambert is the President and Chief Executive Officer of Dacha Capital. Mr.
Lambert disclaims beneficial ownership of shares held by Dacha Capital
except to the extent of his proportionate interest therein. Also includes
33,333 shares of Common Stock issuable upon exercise of stock options within
60 days.
(4) Includes 24,999 shares of Common Stock issuable upon exercise of stock
options within 60 days.
(5) Includes 416,666 owned by The Hammock House Inc., LLC. Dr. Cloutier is the
Managing Director of Hammock House. Also includes 20,000 shares of Common
Stock issuable upon exercise of stock options within 60 days.
(6) Includes 14,999 shares of Common Stock issuable upon exercise of stock
options within 60 days.
(7) Includes 199,333 shares of Common Stock owned by Caisse Central des Banques
Popularies, an affiliate of Banque Eurofin. Ms. Giscard d'Estaing is the
Director of Asset Management at Banque Eurofin. Ms. Giscard d'Estaing
disclaims beneficial ownership of shares held by Caisse Central des Banques
Popularies.
(8) Includes 120,330 shares of Common Stock issuable upon exercise of stock
options within 60 days.
48
<PAGE> 52
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, United Therapeutics' authorized capital
stock will consist of 100 million shares of Common Stock, par value $0.01, and
10 million shares of preferred stock, par value $0.01.
COMMON STOCK
Upon the closing of this offering, there will be shares of Common
Stock outstanding. The holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of United Therapeutics'
stockholders. The holders of Common Stock have no cumulative voting rights with
respect to the election of directors or any other matter.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board of Directors may from time to time
determine.
Upon the liquidation, dissolution, distribution of assets or winding up of
United Therapeutics, holders of Common Stock are entitled to share ratably, in
proportion to the number of shares of Common Stock held, all the assets
remaining after distribution of the full preferential amounts due to the holders
of the outstanding shares of preferred stock, if any. A consolidation, merger or
reorganization of United Therapeutics with any other corporation, or a sale of
all or substantially all of the assets shall not be considered a dissolution,
liquidation or winding up of United Therapeutics.
The Amended and Restated Certificate of Incorporation denies holders of
Common Stock all preemptive rights and rights to covert their Common Stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are, and
all shares of Common Stock to be outstanding upon completion of this offering
will be, fully paid and nonassessable.
PREFERRED STOCK
Pursuant to United Therapeutics' Amended and Restated Certificate of
Incorporation, the Board of Directors will have the authority, without further
action by the stockholders, to issue up to 10 million shares of preferred stock
in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and the
number of shares constituting any series or the designation of such series,
without any further vote or action by the stockholders. The issuance of
preferred stock could adversely affect the voting power of holders of Common
Stock, and the likelihood that such holders will receive dividend payments and
payments upon liquidation may have the effect of delaying, deferring or
preventing a change in control of United Therapeutics, which could have a
depressive effect on the market price of United Therapeutics' Common Stock.
United Therapeutics has no present plan to issue any shares of preferred stock.
REGISTRATION RIGHTS
Upon completion of this offering, 797,222 shares of Common Stock will be
entitled to certain rights with respect to the registration of such shares under
the Securities Act of 1933, as amended. If United Therapeutics proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other security holders of such registration rights
will be entitled to notice of the registration and will be entitled to include,
at United Therapeutics' expense, such shares therein. In addition, certain of
the holders may require
49
<PAGE> 53
United Therapeutics, at its expense and on not more than two occasions at any
time beginning approximately six months from the date of the closing of this
offering, to file a registration statement under the Securities Act, with
respect to their shares of Common Stock, and United Therapeutics will be
required to use its best efforts to effect the registration, subject to certain
conditions and limitations. Further, certain holders may require the company at
its expense to register their shares on Form S-3 when such form becomes
available to the company, subject to certain conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
United Therapeutics is subject to Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. Section 203, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder
unless:
- Prior to such date, the Board of Directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- Upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- On or subsequent to such date, the business combination is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
- Any merger or consolidation involving the corporation and the interested
stockholder;
- Any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- Subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; or
- The receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person. See "Risk Factors -- A Third Party May Have
Difficulty Acquiring United Therapeutics."
LIMITATION OF LIABILITY AND INDEMNIFICATION
United Therapeutics' Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws contain certain provisions permitted under Delaware
law relating to the liability of directors. These provisions eliminate a
director's personal liability for monetary damages resulting from a breach of
fiduciary duty, except in circumstances involving certain wrongful acts, such
as:
- For any breach of the director's duty of loyalty to United Therapeutics
or its stockholders;
50
<PAGE> 54
- For acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- For any acts under Section 174 of the Delaware General Corporation Law;
or
- For any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate United Therapeutics' rights or
any stockholder's rights to seek non-monetary relief, such as an injunction or
rescission, in the event of a breach of director's fiduciary duty. These
provisions will not alter a director's liability under federal securities laws.
In addition, United Therapeutics is entering into separate indemnification
agreements with United Therapeutics' directors that provide the directors
indemnification protection. United Therapeutics believes that these provisions
and agreements will assist it in attracting and retaining qualified individuals
to serve as directors and officers.
TRANSFER AGENT
The transfer agent and registrar for United Therapeutics' Common Stock is
The Bank of New York.
LISTING
United Therapeutics has applied to have its Common Stock quoted on the
Nasdaq National Market under the symbol "UTHR."
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<PAGE> 55
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for United
Therapeutics' Common Stock. Future sales of substantial amounts of United
Therapeutics' Common Stock in the public market could adversely affect
prevailing market prices. Furthermore, since no shares will be available for
sale shortly after this offering because of certain contractual and legal
restrictions on resale as described below, sales of substantial amounts of
Common Stock in the public market after these restrictions lapse could adversely
affect the prevailing market price and United Therapeutics' ability to raise
equity capital in the future.
Upon completion of this offering, United Therapeutics will have outstanding
an aggregate of shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option, and excluding 1,174,458 shares issuable
upon exercise of outstanding warrants and options. Of these shares, all of the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended, unless such
shares are purchased by "affiliates" as that term is defined in Rule 144 under
the Securities Act. The remaining 10,726,967 shares of Common Stock (excluding
1,174,458 shares issuable upon exercise of outstanding warrants and options)
held by existing stockholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. Restricted shares may be sold in
the public market only if registered or if they qualify for an exemption from
registration described below under Rules 144, 144(k) or 701 promulgated under
the Securities Act.
Beginning 180 days after the date of this Prospectus, approximately
10,337,550 restricted shares subject to lock-up agreements between the
Underwriters and certain stockholders, including officers and directors, will
become eligible for sale in the public market pursuant to Rule 144(k), Rule 144
or Rule 701. The lock-up agreements provide that the stockholders will not sell
or otherwise dispose of any shares of Common Stock without the prior written
consent of BT Alex. Brown Incorporated for a period of 180 days from the date of
this Prospectus. Bona fide gifts or distributions to the stockholders or limited
partners of stockholders are excepted from the restrictions of the lock-up
agreements, provided the transferee agrees to be bound by similar restrictions.
BT Alex. Brown Incorporated, may release all or any portion of the securities
subject to the lock-up agreements without notice. See "-- Registration Rights"
and "Underwriting."
Rule 144. Pursuant to Rule 144, beginning 90 days after the date the
registration statement of which this Prospectus is a part is declared effective,
a person (or persons whose shares are aggregated) who has beneficially owned
restricted shares for at least one year (including the holding period of any
prior owner other than an affiliate) would generally be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:
- 1% of the outstanding shares of United Therapeutics' Common Stock then
outstanding (which will equal approximately shares immediately
after this offering); or
- The average weekly trading volume of United Therapeutics' Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about United Therapeutics.
Rule 144(k). Under Rule 144(k), a person who was not an affiliate of
United Therapeutics at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701. In general, under Rule 701 of the Securities Act, any of the
company's employees, consultants or advisors, other than affiliates, who
purchases or receives shares from
52
<PAGE> 56
the company in connection with a compensatory stock purchase plan or option plan
or other written agreement will be eligible to resell such shares beginning 90
days after the effective date of the registration statement of which this
Prospectus is a part, subject only to the manner of sale provisions of Rule 144,
and by affiliates under Rule 144 without compliance with its holding period
requirements.
Registration Rights. Upon completion of this offering, the holders of
797,222 shares of Common Stock, or their transferees, will be entitled to
certain rights with respect to the registration of such shares under the
Securities Act. Registration of such shares under the Securities Act would
result in such shares becoming freely tradable without restriction under the
Securities Act (except for shares purchased by affiliates) immediately upon the
effectiveness of such registration.
Stock Options. United Therapeutics intends to file a registration
statement under the Securities Act covering 14,939,517 shares of Common Stock
reserved for issuance under its Amended and Restated Equity Incentive Plan 180
days following completion of this offering. Thereafter, shares which are issued
under the plan will, subject to Rule 144 volume limitations applicable to
affiliates, be available for sale in the open market, beginning approximately
180 days after the effective date of the initial public offering.
53
<PAGE> 57
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
Underwriters named below, through their representatives, BT Alex. Brown
Incorporated, A.G. Edwards & Sons, Inc. and Vector Securities International,
Inc. have severally agreed to purchase from United Therapeutics the following
respective numbers of shares of Common Stock at the initial public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERWRITER ---------
<S> <C>
BT Alex. Brown Incorporated.................................
A.G. Edwards & Sons, Inc....................................
Vector Securities International, Inc........................
--------
Total..................................................
========
</TABLE>
The underwriting agreement provides that the obligations of the several
Underwriters to purchase the shares of Common Stock offered hereby are subject
to certain conditions. The Underwriters are obligated to purchase all of the
shares of Common Stock offered hereby, other than those covered by the
over-allotment option described below, if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock to the public
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at a price that represents a concession not in excess of
$ per share under the public offering price. The Underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share to
certain other dealers. After the initial public offering, the offering price and
other selling terms may be changed by the representatives of the Underwriters.
United Therapeutics has granted to the Underwriters an option, exercisable
not later than 30 days after the effective date of the registration statement of
which this Prospectus is a part, to purchase up to additional shares
of United Therapeutics Common Stock at the initial public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby. To the extent that the Underwriters exercise such option, each of the
Underwriters will become obligated, subject to certain conditions, to purchase
approximately the same percentage of additional shares of Common Stock as the
number of shares of Common Stock to be purchased by it in the above table bears
to , and United Therapeutics will be obligated, pursuant to the
option, to sell such shares to the Underwriters to the extent the option is
exercised. If any additional shares of Common Stock are purchased, the
Underwriters will offer additional shares on the same terms as those on which
the shares are being offered.
54
<PAGE> 58
United Therapeutics has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
United Therapeutics' officers, directors and stockholders, have agreed not
to offer, sell, contract to sell or otherwise dispose of or enter into any
transaction which is designed to, or could be expected to, result in the
disposition of any portion of any Common Stock for period of 180 days after the
effective date of the registration statement of which this Prospectus is a part
without the prior written consent of BT Alex. Brown Incorporated. Such consent
may be given at any time without public notice. United Therapeutics has entered
into a similar agreement, except that it may issue shares of Common Stock
pursuant to the exercise of outstanding options and warrants and it may grant
options to purchase shares of Common Stock under the Equity Incentive Plan.
The representatives of the Underwriters have advised us that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the Common Stock. Specifically, the Underwriters may over-allot
shares of the Common Stock in connection with the offering, creating a short
position in the Common Stock for their own account. Additionally, to cover such
over-allotments or to stabilize the market price of United Therapeutics' Common
Stock, the Underwriters may bid for, and purchase, shares of the Common Stock in
the open market. Finally, the representatives, on behalf of the Underwriters may
also reclaim selling concessions allowed to an Underwriter or a dealer if the
underwriting syndicate repurchases shares distributed by that Underwriter or
dealer. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and if they do,
they may end any of these activities at any time.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for United
Therapeutics' Common Stock. Consequently, the initial public offering price for
the Common Stock will be determined by negotiation among the representatives of
the Underwriters and United Therapeutics. Among the factors to be considered in
determining the public offering price will be:
- The company's results of operations in recent periods;
- The company's present stage of development;
- The market capitalizations and stages of development of other companies
which United Therapeutics and the representatives of the Underwriters
believe to be comparable to United Therapeutics;
- Estimates of the company's business potential; and
- Prevailing market conditions.
LAWYERS
The validity of the shares of Common Stock offered hereby will be passed
upon for United Therapeutics by Bryan Cave LLP, Washington, D.C. James L. Nouss,
Jr., a partner of Bryan Cave LLP, owns 8,333 shares of Common Stock of United
Therapeutics and is one of three managers of a private investment fund which
owns 133,333 shares of Common Stock of United Therapeutics. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
55
<PAGE> 59
EXPERTS
The consolidated balance sheets of United Therapeutics, as of December 31,
1997 and 1998, and the consolidated statements of operations, stockholders'
equity and cash flows for the period from June 26, 1996 (inception) to December
31, 1996 and for the years ended December 31, 1997 and 1998 included in this
Prospectus and registration statement have been included herein in reliance upon
the report of KPMG LLP, independent certified public accountants, appearing
elsewhere in this Prospectus, given on the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
United Therapeutics has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-1 under the
Securities Act with respect to the shares of Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedule filed therewith. Certain items are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to United Therapeutics and the Common Stock
offered hereby, reference is made to the Registration Statement and the exhibits
and schedule filed therewith. Statements contained in this Prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement, and the exhibits and schedule filed therewith, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Commission's regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the Commission. The Commission maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the site is http://www.sec.gov. The Registration Statement,
including all exhibits thereto and amendments thereof, has been filed
electronically with the Commission.
56
<PAGE> 60
UNITED THERAPEUTICS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of KPMG LLP, Independent Auditors.................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998
and March 31, 1999 (unaudited)............................ F-3
Consolidated Statements of Operations for the period from
inception (June 26, 1996) to December 31, 1996, the years
ended December 31, 1997 and 1998 and the three months
ended March 31, 1998 (unaudited) and 1999 (unaudited)..... F-4
Consolidated Statements of Stockholders' Equity for the
period from inception (June 26, 1996) to December 31,
1996, the years ended December 31, 1997 and 1998 and the
three months ended March 31, 1999 (unaudited)............. F-5
Consolidated Statements of Cash Flows for the period from
inception (June 26, 1996) to December 31, 1996, the years
ended December 31, 1997 and 1998 and the three months
ended March 31, 1998 (unaudited) and 1999 (unaudited)..... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 61
When the one-for-three reverse stock split referred to in Note 12 of the
Notes to the Consolidated Financial Statements is effected, we will be in a
position to render the following report.
KPMG LLP
INDEPENDENT AUDITORS' REPORT
The Board of Directors
United Therapeutics Corporation:
We have audited the accompanying consolidated balance sheets of United
Therapeutics Corporation and subsidiaries (the Company) as of December 31, 1997
and 1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period from inception (June 26, 1996) to December
31, 1996 and the years ended December 31, 1997 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of United
Therapeutics Corporation and subsidiaries as of December 31, 1997 and 1998, and
the results of their operations and their cash flows for the period from
inception (June 26, 1996) to December 31, 1996 and the years ended December 31,
1997 and 1998 in conformity with generally accepted accounting principles.
McLean, Virginia
April 2, 1999, except for Note 12,
which is as of June , 1999
F-2
<PAGE> 62
UNITED THERAPEUTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1997 1998 1999
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $5,018,145 $ 6,779,067 $15,429,340
Investments (note 9)........................... -- 10,023,190 --
Accounts receivable............................ -- 53,750 107,500
---------- ----------- -----------
Total current assets........................ 5,018,145 16,856,007 15,536,840
---------- ----------- -----------
Property, plant, and equipment (notes 3 and 8):
Land........................................... -- 134,370 134,370
Building and improvements...................... -- 866,322 965,402
Furniture and equipment........................ 66,489 416,881 444,245
Less - accumulated depreciation................ (14,568) (50,065) (73,847)
---------- ----------- -----------
Property, plant, and equipment, net......... 51,921 1,367,508 1,470,170
---------- ----------- -----------
Certificate of deposit........................... -- 509,506 516,916
Deferred offering costs.......................... -- -- 206,050
Other............................................ 3,603 13,817 34,781
---------- ----------- -----------
Total assets................................ $5,073,669 $18,746,838 $17,764,757
========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 383,323 $ 1,707,103 $ 1,735,626
Accrued professional fees...................... 41,931 14,161 229,146
Payroll taxes withheld......................... 27,913 33,629 17,500
Current portion of note payable (note 8)....... -- 4,098 4,189
---------- ----------- -----------
Total current liabilities................... 453,167 1,758,991 1,986,461
Note payable, excluding current portion (note
8)............................................. -- 310,262 309,181
Other liabilities................................ 3,319 1,759 1,339
---------- ----------- -----------
Total liabilities........................... 456,486 2,071,012 2,296,981
---------- ----------- -----------
Commitments and contingencies (notes 5 and 10)
Stockholders' equity (note 6):
Preferred stock, par value $.01, 10,000,000
shares authorized at December 31, 1997 and
1998, and March 31, 1999, no shares
issued...................................... -- -- --
Common stock, par value $.01, 50,000,000 shares
authorized at December 31, 1997 and 1998,
and March 31, 1999, 5,882,833, 10,115,597,
and 10,726,967 shares issued and outstanding
at December 31, 1997 and 1998 and March 31,
1999, respectively.......................... 58,829 101,156 107,270
Additional paid-in capital..................... 7,489,655 32,341,370 43,365,199
Accumulated deficit............................ (2,931,301) (15,766,700) (28,004,693)
---------- ----------- -----------
Total stockholders' equity.................. 4,617,183 16,675,826 15,467,776
---------- ----------- -----------
Total liabilities and stockholders'
equity.................................... $5,073,669 $18,746,838 $17,764,757
========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 63
UNITED THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 26, 1996 THREE MONTHS ENDED
(INCEPTION) TO YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, -------------------------- --------------------------
1996 1997 1998 1998 1999
--------------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Grant revenue (note 3)........ $ 153,972 $ 115,909 $ 53,750 $ -- $ 53,750
---------- ----------- ------------ ----------- ------------
Operating expenses:
Research and development.... 99,642 2,026,718 11,015,053 1,739,683 11,611,458
General and
administrative............ 84,876 1,006,354 2,366,494 572,788 847,949
---------- ----------- ------------ ----------- ------------
Total operating
expenses............... 184,518 3,033,072 13,381,547 2,312,471 12,459,407
---------- ----------- ------------ ----------- ------------
Loss from operations...... (30,546) (2,917,163) (13,327,797) (2,312,471) (12,405,657)
Other income (expense):
Interest income............. 469 134,726 510,068 51,726 178,090
Interest expense............ -- (8,334) (14,570) -- (6,972)
Write-down of investment
(note 9).................. -- (110,453) -- -- --
---------- ----------- ------------ ----------- ------------
Total other income........ 469 15,939 495,498 51,726 171,118
---------- ----------- ------------ ----------- ------------
Net loss before income
tax.................... (30,077) (2,901,224) (12,832,299) (2,260,745) (12,234,539)
Income tax (note 7)........... -- -- 3,100 2,855 3,454
---------- ----------- ------------ ----------- ------------
Net loss.................. $ (30,077) $(2,901,224) $(12,835,399) $(2,263,600) $(12,237,993)
========== =========== ============ =========== ============
Net loss per common share -
basic and diluted........... $ (0.02) $ (0.87) $ (1.54) $ (0.38) $ (1.19)
========== =========== ============ =========== ============
Weighted average number of
common shares outstanding --
basic and diluted........... 1,666,663 3,339,437 8,321,749 5,939,015 10,255,857
========== =========== ============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 64
UNITED THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, June 26, 1996............................. -- $ -- $ -- $ -- $ --
Issuance of common stock........................... 1,666,663 16,667 83,333 -- 100,000
Net loss........................................... -- -- -- (30,077) (30,077)
---------- -------- ----------- ------------ ------------
Balance, December 31, 1996......................... 1,666,663 16,667 83,333 (30,077) 69,923
Issuance of common stock........................... 3,900,078 39,001 6,881,149 -- 6,920,150
Conversion of loan principal and accrued interest
into common stock................................ 309,428 3,094 505,240 -- 508,334
Stock issued in exchange for services.............. 6,664 67 19,933 -- 20,000
Net loss........................................... -- -- -- (2,901,224) (2,901,224)
---------- -------- ----------- ------------ ------------
Balance, December 31, 1997......................... 5,882,833 58,829 7,489,655 (2,931,301) 4,617,183
Issuance of common stock........................... 4,028,404 40,284 22,864,247 -- 22,904,531
Stock issued in exchange for services.............. 37,694 376 131,709 -- 132,085
Stock issued for exclusive license agreement....... 166,666 1,667 1,498,333 -- 1,500,000
Options and warrants issued for exclusive license
agreements....................................... -- -- 353,000 -- 353,000
Options issued in exchange for services............ -- -- 4,426 -- 4,426
Net loss........................................... -- -- -- (12,835,399) (12,835,399)
---------- -------- ----------- ------------ ------------
Balance, December 31, 1998......................... 10,115,597 101,156 32,341,370 (15,766,700) 16,675,826
Issuance of common stock (unaudited)............... 111,370 1,114 1,994,202 -- 1,995,316
Stock issued for exclusive license agreement
(unaudited)...................................... 500,000 5,000 8,995,000 -- 9,000,000
Options issued in exchange for services
(unaudited)...................................... -- -- 34,627 -- 34,627
Net loss (unaudited)............................... -- -- -- (12,237,993) (12,237,993)
---------- -------- ----------- ------------ ------------
Balance, March 31, 1999 (unaudited)................ 10,726,967 $107,270 $43,365,199 $(28,004,693) $ 15,467,776
========== ======== =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 65
UNITED THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 26, 1996 THREE MONTHS ENDED
(INCEPTION) TO YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, --------------------------- ---------------------------
1996 1997 1998 1998 1999
--------------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $ (30,077) $ (2,901,224) $(12,835,399) $ (2,263,600) $(12,237,993)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation..................................... 1,168 13,400 35,497 5,929 23,782
Stock issued for exclusive license agreement..... -- -- 1,500,000 -- 9,000,000
Stock and options issued in exchange for
services....................................... -- 20,000 136,511 -- 34,627
Options and warrants issued for exclusive license
agreements..................................... -- -- 353,000 -- --
Interest accrued on convertible loan............. -- 8,334 -- -- --
Write-down of investment......................... -- 110,453 -- -- --
Amortization of discount on investments.......... -- -- (23,229) -- --
Changes in operating assets and liabilities:
Accounts receivable.............................. -- -- (53,750) (4,409) (53,750)
Other assets..................................... (3,721) 118 (10,214) 97 (20,964)
Accounts payable................................. 23,127 363,515 1,323,601 303,268 28,475
Accrued professional fees........................ -- 41,931 (27,770) 64,442 214,985
Payroll taxes withheld........................... 9,353 18,560 5,716 (27,913) (16,129)
------------ ------------ ------------ ------------ ------------
Net cash used in operating activities............ (150) (2,324,913) (9,596,037) (1,922,186) (3,026,967)
------------ ------------ ------------ ------------ ------------
Cash flows used in investing activities:
Purchases of property, plant, and equipment........ (5,838) (60,651) (1,033,953) (22,779) (126,444)
Purchases of investments and certificate of
deposit.......................................... -- (110,453) (10,509,467) -- (7,410)
Sales and maturities of investments................ -- -- -- -- 10,023,190
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by
investing activities........................... (5,838) (171,104) (11,543,420) (22,779) 9,889,336
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock............. 100,000 6,920,150 22,904,531 2,450,034 1,995,316
Proceeds from convertible loan..................... -- 500,000 -- -- --
Payments of principal on note payable.............. -- -- (2,771) -- (990)
Principal payments under capital lease
obligations...................................... -- -- (1,381) (330) (372)
Deferred offering costs............................ -- -- -- -- (206,050)
------------ ------------ ------------ ------------ ------------
Net cash provided by financing activities........ 100,000 7,420,150 22,900,379 2,449,704 1,787,904
------------ ------------ ------------ ------------ ------------
Net increase in cash and cash equivalents........ 94,012 4,924,133 1,760,922 504,739 8,650,273
Cash and cash equivalents, beginning of period...... -- 94,012 5,018,145 5,018,145 6,779,067
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents, end of period............ $ 94,012 $ 5,018,145 $ 6,779,067 $ 5,522,884 $ 15,429,340
============ ============ ============ ============ ============
Supplemental schedule of noncash investing and
financing activities:
Note payable issued for building................... $ -- $ -- $ 317,131 $ -- $ --
============ ============ ============ ============ ============
Loan principal and accrued interest converted into
common stock..................................... $ -- $ 508,334 $ -- $ -- $ --
============ ============ ============ ============ ============
Supplemental cash flow information -- cash paid for
interest........................................... $ -- $ -- $ 14,570 $ 140 $ 6,972
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 66
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS DESCRIPTION
United Therapeutics Corporation (the Company) was incorporated on June 26,
1996 under the laws of the State of Delaware. The Company is a pharmaceutical
company based in Silver Spring, Maryland and Research Triangle Park, North
Carolina, that is focused on clinical development and commercialization of
in-licensed compounds for the treatment of life-threatening diseases
characterized by high chronic care costs. The initial focus of the Company is
the development of therapies to treat patients with pulmonary hypertension, a
generally fatal disorder of the pulmonary arteries with no adequate long-term
therapies. All of the Company's products are currently in clinical trial
programs.
The Company has three wholly owned subsidiaries: LungRx, Unither
Pharmaceuticals, Inc. (UPI) and Unither Telemedicine Services Corporation
(UTSC). UPI and UTSC were formed in 1998. None of these subsidiaries have
commenced operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
United Therapeutics Corporation and its three wholly owned subsidiaries. All
significant intercompany balances were eliminated in combination.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL INFORMATION
The interim consolidated financial statements of the Company for the three
months ended March 31, 1998 and 1999 included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations relating to interim financial statements. In the opinion of
management, the accompanying unaudited interim consolidated financial statements
reflect all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company at March 31,
1998 and 1999, and the results of its operations and its cash flows for the
three months ended March 31, 1998 and 1999.
CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with original
maturities of three months or less. Cash equivalents consist of money market
funds and certificates of deposit and amount to $4,960,748, $6,769,034, and
$6,286,683 at December 31, 1997 and 1998 and March 31, 1999, respectively.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
F-7
<PAGE> 67
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Estimated useful lives of the assets are as follows:
<TABLE>
<S> <C>
Building and improvements................................... 39 years
Furniture and equipment..................................... 3-7 years
</TABLE>
RESEARCH AND DEVELOPMENT
Research and product development costs are expensed as incurred.
LICENSED TECHNOLOGY
Costs incurred in obtaining the license rights to technology in the
research and development stage are expensed as incurred and in accordance with
the specific contractual terms of the applicable license agreements.
INCOME TAXES
Income taxes are accounted for in accordance with Financial Accounting
Standards Board Statement No. 109 (SFAS No. 109). Under the asset and liability
method of SFAS No. 109, deferred tax assets and liabilities are determined based
on the differences between the financial reporting and the tax bases of assets
and liabilities and are measured using the tax rates and laws that are expected
to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
INVESTMENTS
The Company's only investment at December 31, 1998 is considered a
held-to-maturity security. Held-to-maturity securities are those securities
which the Company has the ability and intent to hold until maturity and are
recorded at amortized cost, adjusted for the amortization or accretion of
premiums or discounts. Premiums and discounts are amortized or accreted over the
life of the related held-to-maturity security as an adjustment to yield using
the effective interest method.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, investments, accounts
payable and payroll taxes withheld approximate fair value due to their short
maturities. The fair value of the Company's note payable (see note 8) is
estimated to be the carrying amount, since it is an adjustable rate note.
LOSS PER COMMON SHARE
Basic loss per common share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during the year.
Common stock equivalents, consisting of options and warrants, are not included
in the calculation as their effect would be anti-dilutive. Accordingly, diluted
loss per common share is the same as basic loss per common share.
F-8
<PAGE> 68
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Estimates also affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
STOCK OPTION PLAN
The Company applies the provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, to account for its stock options. SFAS No. 123 allows
companies to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for employee
stock option grants made in 1996 and subsequent years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
apply the provisions of APB Opinion No. 25 and provide the pro forma disclosures
of SFAS No. 123. The Company accounts for non-employee stock option awards in
accordance with SFAS No. 123.
GRANT REVENUE
Grant revenue is recognized ratably over the terms of the agreements.
DEFERRED OFFERING COSTS
Costs incurred in connection with the Company's initial public offering are
deferred and reported as assets in the accompanying balance sheets. Upon
successful completion of the initial public offering, these deferred offering
costs will be netted against the additional paid-in capital resulting from the
offering.
3. RELATED PARTY TRANSACTIONS
REVENUE
During 1996 and 1997, the Company earned substantially all of its revenue
from a grant from the PPH Cure Foundation (the Foundation). A director of the
Foundation is also the Chairman and CEO of the Company. This grant terminated at
the end of March 1997. Total revenue earned from the Foundation's grant was
$153,972 and $115,909 for the period ended December 31, 1996 and the year ended
December 31, 1997, respectively.
CONVERTIBLE LOAN
In 1997, the Chairman and CEO loaned the Company $500,000. The principal
and accrued interest, totaling $508,334 based on an interest rate of 10 percent,
were converted on August 19, 1997 into 309,428 shares of common stock under the
terms of the loan agreement. The conversion price was approximately $1.62 per
share.
BUILDING
In 1998, the Company purchased an office building for its corporate
headquarters from Beacon Projects, Inc., an entity owned by the Company's
Chairman and CEO. The purchase price, including related expenses, was
approximately $581,000.
F-9
<PAGE> 69
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OFFICE LEASES
During 1997 and 1998, the Company leased office space from Beacon Projects,
Inc., a company owned by the Chairman and CEO of the Company. In August 1998,
this lease was terminated when the Company purchased the office building from
the Chairman and CEO of the Company. Payments made by the Company under this
lease totaled $15,000 and $12,000 for the years ended December 31, 1997 and
1998, respectively, and $4,500 and $0 for the quarters ending March 31, 1998 and
1999, respectively.
In March 1999, Unither Telemedicine Services Corporation leased office
space from Beacon Projects, Inc. (see note 10).
LEGAL SERVICES
During 1996, 1997 and 1998, the Company obtained professional services from
a law firm affiliated with the Chairman and CEO and two executive officers. The
Company incurred expenses of approximately $5,000, $81,000 and $157,000 during
the period ended December 31, 1996 and during years ended December 31, 1997 and
1998, respectively, for services rendered by the law firm. The Company incurred
expenses of approximately $50,000 and $107,000 during the quarters ended March
31, 1998 and 1999, respectively, for services rendered by the law firm.
4. LICENSE AGREEMENTS
GLAXO WELLCOME ASSIGNMENT
In January 1997, Glaxo Wellcome Inc. assigned to the Company patents and
patent applications for the use of the stable prostacyclin analog now known as
UT-15 for the treatment of pulmonary hypertension and congestive heart failure.
Glaxo Wellcome has a right to negotiate a license from the Company if the
Company decides to license any part of the marketing rights to a third party.
Glaxo Wellcome waived this right with respect to the agreement with MiniMed
described below. Under the agreement, Glaxo Wellcome is entitled to certain
royalties from the Company for a period of ten years from the date of the first
commercial sale of any product containing UT-15 (see note 5). If the Company
grants to a third party any license to UT-15, Glaxo Wellcome is also entitled to
a percentage of all consideration payable to the Company by such licensee. The
Company is responsible for all patent prosecution and maintenance for UT-15.
PHARMACIA & UPJOHN LICENSE
In December 1996, Pharmacia & Upjohn Company exclusively licensed to the
Company patents and a patent application for the composition and production of
the stable prostacyclin analog now known as UT-15. Under the Pharmacia & Upjohn
agreement, the Company paid an initial license fee and must make additional
milestone payments (see note 5) for orphan and non-orphan indications of the
compound. The Company will make royalty payments based on a percentage of sales
(see note 5) to Pharmacia & Upjohn until the later of the expiration of the
applicable patent or ten years after the date of the first commercial sale of a
product in a country defined as a milestone country under the agreement. The
agreement may be terminated earlier by either party in certain circumstances,
including upon a material breach by or bankruptcy of the other party, and by the
Company at any time upon 60 days' notice to Pharmacia & Upjohn. Pursuant to the
agreement, the Company is obliged to use its best efforts to conduct a research
and development program in the United States relating to the use of the product
containing the
F-10
<PAGE> 70
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
compound for at least one indication, and to obtain regulatory approvals and
market a product in the United States and such other countries as the Company
deems appropriate.
MINIMED INC.
The Company entered into an agreement with MiniMed in September 1997 to
collaborate in the design, development, and implementation of therapies to treat
pulmonary hypertension and peripheral vascular disease utilizing MiniMed
products and UT-15. The term of the agreement is for seven years after the FDA
grants a new drug approval for UT-15 and will be automatically extended for
additional 12-month periods unless otherwise terminated. The agreement is
subject to early termination in the event of a material breach or bankruptcy of
either party. The Company and MiniMed have established a Management Committee
comprised of two representatives from each company to implement the agreement.
MiniMed has agreed to establish a dedicated sales force for UT-15 for advanced
pulmonary hypertension. The Company has agreed to pay MiniMed the greater of a
percentage of the revenues derived from commercial sales of UT-15 (see note 5)
or a fixed amount per patient per year.
TORAY INDUSTRIES LICENSES
In September 1998, United Therapeutics entered into an agreement with Toray
Industries, Inc. obtaining the exclusive right to develop and market beraprost
in the United States and Canada for the treatment of pulmonary vascular disease,
including pulmonary hypertension, plus certain additional rights of first
refusal for other products, therapies or territories. In exchange, United
Therapeutics paid Toray cash and Common Stock, and granted Toray an option to
purchase additional Common Stock (see note 6). United Therapeutics also agreed
to pay Toray milestone payments (see note 5). In March 1999, United Therapeutics
entered into an agreement with Toray obtaining the exclusive right to develop
and market beraprost in the United States and Canada for the treatment of
peripheral vascular disease. United Therapeutics paid Toray cash and Common
Stock and agreed to pay Toray certain milestone payments (see note 5).
Pursuant to the agreements, United Therapeutics has agreed to pay all costs
and expenses associated with undertaking clinical trials, obtaining regulatory
approvals and commercializing beraprost in the United States and Canada for the
treatment of pulmonary hypertension and peripheral vascular disease. Toray has
retained all manufacturing rights for beraprost. United Therapeutics has agreed
to purchase beraprost solely from Toray at specified prices based on volume. The
agreements each set forth a product development schedule. In the event that
development by United Therapeutics falls significantly behind the schedule
specified in either agreement, Toray may terminate that agreement. Furthermore,
United Therapeutics is responsible under the agreements for achieving minimum
annual product net sales as determined in advance by mutual agreement. In the
event that United Therapeutics is unable to meet any minimum annual net sales
requirement for two consecutive years, Toray may convert the exclusive license
to a non-exclusive license. United Therapeutics would then be required to share
any product marketing rights approved by the FDA with a third-party licensee
chosen by Toray. Each agreement expires 10 years following FDA approval of
beraprost for the particular disease indication. United Therapeutics may extend
each agreement for unlimited 12-month periods with Toray's consent.
F-11
<PAGE> 71
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CORTECH LICENSE
In November 1998, United Therapeutics entered into an agreement with
Cortech, Inc. to obtain the exclusive right to develop and market a serine
elastase inhibitor compound, now known as UT-77, for all indications worldwide,
except for certain dermatological uses. In exchange, United Therapeutics made a
cash payment and granted Cortech a warrant to purchase Common Stock (which vests
only if United Therapeutics continues developing UT-77 after November 2, 2000,
and terminates in November 2004) (see note 6), and agreed to make substantial
milestone payments and pay royalty fees which will not exceed a certain
percentage of net sales (see note 5). Pursuant to the agreement, United
Therapeutics is required to use reasonable efforts to develop and conduct
research and pre-clinical and human clinical trials to obtain all regulatory
approvals to manufacture, market and commercialize the products that United
Therapeutics determines are commercially feasible. United Therapeutics may
choose to discontinue the development of the products without penalty upon
written notice to Cortech if the products do not satisfy United Therapeutics'
clinical needs for targeted indications. If United Therapeutics terminates the
agreement, however, Cortech will receive an exclusive royalty-free license to
use any improvements, know-how, data, information or regulatory filings or any
other intellectual property arising from United Therapeutics' performance under
the agreement. Cortech may terminate the agreement if United Therapeutics does
not commence Phase II clinical trials of UT-77 before May 2001, subject to
certain exceptions.
GLOBAL MEDICAL ENTERPRISES AGREEMENT
In February 1999, United Therapeutics entered into an agreement with Global
Medical Enterprises Ltd. and Global Medical Enterprises Ltd., LLC. This
agreement gives to United Therapeutics the exclusive right to commercialize and
sell Ketotop in the United States, Canada, Mexico, Central America and the
Caribbean for treatment of all indications. Global Medical holds these rights
under an exclusive sales and distribution agreement with Pacific
Pharmaceuticals, Inc., the Korean manufacturer of Ketotop. Both the agreement
between United Therapeutics and Global Medical and the agreement between Global
Medical and Pacific Pharmaceuticals expire in July 2008. The agreement between
United Therapeutics and Global Medical will be extended if Pacific
Pharmaceuticals extends its agreement with Global Medical. The agreement is
subject to early termination in the event of a material breach or bankruptcy of
either party or if the underlying agreement between Global Medical and Pacific
Pharmaceuticals is terminated. United Therapeutics has agreed to purchase
Ketotop solely from Global Medical. United Therapeutics will pay Global Medical
a product purchase price equal to Global Medical's cost of obtaining Ketotop
from Pacific Pharmaceuticals plus a profit percentage. United Therapeutics and
Global Medical will jointly determine Global Medical's compensation for sales in
additional territories.
5. COMMITMENTS
CLINICAL TRIALS AND OTHER RESEARCH
The Company has contracted with universities and research organizations to
perform clinical trials and other research related to UT-15 and other products.
The Company generally pays all expenses incurred in carrying out the clinical
trials and research activities. Total expenses under these agreements was
approximately $0, $1,700,000 and $7,600,000 in 1996, 1997, and 1998,
respectively. Total expenses for the quarters ended March 31, 1998 and 1999 was
approximately $1,400,000 and $2,200,000, respectively. Total payments under
these agreements in 1999 is not expected to exceed $13,000,000.
F-12
<PAGE> 72
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNIVERSITY COLLEGE LONDON
In 1997, the Company entered into a cooperative drug discovery agreement
with University College London (UCL) to identify and develop compounds with
therapeutic effectiveness against pulmonary hypertension and other diseases
treatable by potassium channel compounds. The agreement may be terminated by the
Company if the Company decides not to fund further drug development. Annual
funding by the Company is expected to be between $500,000 and $1,000,000 over
the next several years. Under the agreement, the Company is required to pay UCL
a royalty equal to a percentage of net sales and license fees that the Company
earns from discoveries and products developed by UCL. This royalty obligation
extends for 15 years or, if later, until any issued patents expire.
WILLIAM HARVEY RESEARCH LIMITED
In 1998, the Company entered into a cooperative drug discovery agreement
with William Harvey Research Limited (WHR) to identify and develop an antisense
therapy as a potential treatment for pulmonary hypertension. Funding by the
Company under this agreement is expected to be between $600,000 and $700,000
annually over the next 30 months. The agreement may be terminated by the Company
after 30 months. Under the agreement, the Company is required to pay UCL a
royalty equal to a percentage of net sales and license fees that the Company
earns from discoveries developed by WHR. This royalty obligation extends for 15
years or, if later, until any issued patents expire.
MILESTONE AND ROYALTY PAYMENTS
The Company has in-licensed certain products under agreements described in
note 4. These agreements generally include milestone payments to be paid in cash
by the Company upon the achievement of certain product development and
commercialization goals set forth in each agreement. Total milestone payments
under these agreements are approximately $5.4 million and are anticipated to be
paid over the next 5 years.
Additionally, certain agreements described in note 4 require the Company to
pay royalties. The royalties are generally based on a percentage of net sales or
other product fees earned by the Company. Royalties will become due when sales
are generated and will range from 2.5 to 30 percent of net product revenues as
defined in the respective agreements.
EMPLOYMENT AGREEMENT
In April 1999, the Company executed an employment agreement with its CEO.
The agreement establishes minimum compensation and benefits for an initial
period of five years. The agreement also requires the Company to issue options
to the CEO at the end of each of the next five years to purchase a number of
shares of common stock equal to one percent of the increase in the Company's
market capitalization after the initial public offering over the prior year,
divided by 18, subject to certain annual limitations. The exercise price of the
options will be 110 percent of the fair market value of a share of common stock
on the date of grant, or 100 percent of fair market value if the CEO owns less
than 10 percent of the Company's outstanding common stock on the date of grant.
If the CEO is terminated without cause or leaves with good reason, she will
receive severance equal to three years of base salary plus the value of any
vested options.
F-13
<PAGE> 73
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCKHOLDERS' EQUITY
COMMON STOCK
The Company was originally capitalized through the issuance of 1,666,663
shares of common stock for $0.06 per share, with a par value of $0.01. In 1997,
the number of authorized shares of common stock was increased from 20,000,000 to
50,000,000 shares. Also in 1997, 4,209,506 shares of common stock were issued at
prices ranging from $1.20 to $3.00. Of this total, 309,428 shares were issued as
a result of the conversion of a loan and accrued interest thereon from the
Chairman and CEO of the Company totalling $508,334.
On December 7, 1997, the Company's board of directors approved a
one-for-two reverse stock split of the Company's common stock. All common shares
and per share amounts in the accompanying financial statements have been
retroactively adjusted to reflect this reverse stock split. Authorized shares
and the par values of common and preferred stock were not affected.
In 1998, the Company issued 4,028,404 shares of common stock for cash at
prices ranging from $3.00 to $18.00.
The Company sold 111,370 shares of common stock in January and February
1999 at a price of $18.00 per share.
On April 5, 1999 and April 8, 1999, the Company's Board of Directors and
shareholders approved an amendment to the Company's Certificate of
Incorporation, which will become effective upon consummation of the initial
public offering, increasing the number of authorized shares of common stock to
100,000,000 shares.
PREFERRED STOCK
A total of 10,000,000 shares of preferred stock with a par value of $0.01
were authorized in 1997. No preferred stock has been issued.
STOCK AND OPTIONS ISSUED FOR EXCLUSIVE LICENSE AGREEMENTS AND IN EXCHANGE
FOR SERVICES
In 1998 the Company issued 166,666 shares of common stock and options to
purchase 166,666 shares of common stock in exchange for an exclusive license
agreement. The stock was valued at $1,500,000, based on prices of similar
quantities of stock sold to unrelated parties during the period. The fair value
of the options was estimated on the date of grant at $185,000 using the
Black-Scholes option pricing model. The total of $1,685,000 was expensed as a
research and development expense.
In 1998, the Company issued warrants to purchase 116,666 shares of common
stock in exchange for an exclusive license agreement. The fair value of the
warrants was estimated on the date of grant at $168,000 using the Black-Scholes
option pricing model and was expensed as a research and development expense.
The Company issued a total of 37,694 shares of common stock in recognition
of consulting services rendered during the year ended December 31, 1998. The
stock's fair value and related compensation expense (ranging from $3.00 to
$9.00) per share was estimated based on prices of similar quantities of stock
sold to unrelated parties during the period.
F-14
<PAGE> 74
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In March 1999 the Company issued 500,000 shares of common stock in exchange
for another exclusive license agreement. The stock was valued at $9,000,000
($18.00 per share) by the Company based on recent sales at $18.00 per share. The
total of $9,000,000 was expensed as a research and development expense.
EMPLOYEE OPTIONS
The Company's Board of Directors adopted an equity incentive plan (the
Plan) effective November 12, 1997. On April 5, 1999 and April 8, 1999, the
Company's Board of Directors and shareholders approved an amendment and
restatement of the Plan to increase the total number of shares of Common Stock
that may be issued pursuant to the Plan to 14,939,517 shares, including
7,939,517 shares reserved for issuance to the CEO under her employment agreement
(see note 5). The Plan provides for the grant of awards, including options,
stock appreciation rights, restricted stock awards and other rights as defined
in the Plan, to eligible participants. Options granted under the Plan are not
transferable and must generally be exercised within 10 years. The price of all
options granted under the Plan must be at least equal to the fair market value
of the common stock on the date of grant. With respect to any participant who
owns 10 percent or more of the Company's outstanding common stock on the date of
grant, the exercise price of any incentive stock option granted to that
participant must equal or exceed 110 percent of the fair market value of the
common stock on the date of grant and the option must not be exercisable for
longer than five years. During the year ended December 31, 1997, options to
purchase a total of 274,000 shares were granted under this Plan at exercise
prices of $3.00 to $16.50. For the year ended December 31, 1998 and quarter
ended March 31, 1999, options to purchase a total of 610,401 shares and 5,500
shares, respectively, were granted under this Plan at exercise prices of $3.00
to $19.80.
Additional options have been granted to employees outside of the Plan which
have terms between five and ten years.
The Company applies APB Opinion No. 25 in accounting for options granted to
employees and, accordingly, no compensation expense has been recognized in the
financial statements with respect to such options. Had the Company determined
compensation expense under SFAS No. 123 based on the fair value at the grant
date for its stock options, the Company's net loss would have been increased to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JUNE 26, 1996) YEAR ENDED THREE MONTHS ENDED
TO DECEMBER 31, MARCH 31,
DECEMBER 31, -------------------------- --------------------------
1996 1997 1998 1998 1999
--------------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss:
As reported............................. $(30,077) $(2,901,224) $(12,835,399) $(2,263,600) $(12,237,993)
Pro forma............................... (30,077) (2,905,862) (12,989,645) (2,263,775) (12,247,017)
Basic and diluted loss per common share:
As reported........................... $ (0.02) $ (0.87) $ (1.54) $ (0.38) $ (1.19)
Pro forma............................. $ (0.02) $ (0.87) $ (1.56) $ (0.38) $ (1.19)
-------- ----------- ------------ ----------- ------------
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions generally used for grants
F-15
<PAGE> 75
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in 1998 and quarter ending March 31, 1999: dividend yield of 0 percent, risk
free interest rate of 4.73 and 5.30 percent, respectively, and expected lives of
7.5 years.
A summary of the status of the Company's employee stock options as of
December 31, 1997 and 1998 and March 31, 1999, and changes during the years and
period then ended is presented below:
<TABLE>
<CAPTION>
1997 1998 MARCH 31, 1999
------------------- ------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- --------- ------- --------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period.... -- $ -- 274,000 $13.77 878,485 $12.69
Granted............................... 274,000 13.77 610,401 12.12 5,500 18.00
Exercised............................. -- -- -- -- -- --
Forfeited............................. -- -- (5,916) 3.00 (2,000) 3.00
------- ------ ------- ------ ------- ------
Outstanding at end of period.......... 274,000 $13.77 878,485 $12.69 881,985 $12.75
======= ====== ======= ====== ======= ======
Options exercisable at end of
period.............................. 21,250 $ 7.80 180,318 $ 8.28 182,385 $ 8.40
======= ====== ======= ====== ======= ======
Weighted-average fair value of options
granted during the period........... $ 0.06 $ 3.30 $ 4.83
======= ======= =======
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
REMAINING EXERCISE EXERCISE
EXERCISE PRICES NUMBER CONTRACTUAL LIFE PRICE NUMBER PRICE
--------------- ------- ---------------- --------- ------- ---------
<C> <S> <C> <C> <C> <C> <C>
$ 3.00 ................ 141,818 5.7 $ 3.00 68,318 $ 3.00
9.00 ................ 236,000 5.2 9.00 68,333 9.00
15.00 ................ 150,667 8.9 15.00 30,333 15.00
16.50 ................ 66,667 8.9 16.50 13,334 16.50
18.00 ................ 200,000 10.0 18.00 -- --
19.80 ................ 83,333 10.0 19.80 -- --
------------- ------- ------- ------- ------- -------
$3.00 - 19.80 ................ 878,485 7.75 $ 12.69 180,318 $ 8.28
============= ======= ======= ======= ======= =======
</TABLE>
F-16
<PAGE> 76
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at March 31, 1999 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
REMAINING EXERCISE EXERCISE
EXERCISE PRICES NUMBER CONTRACTUAL LIFE PRICE NUMBER PRICE
--------------- ------- ---------------- --------- ------- ---------
<C> <S> <C> <C> <C> <C> <C>
$ 3.00 ................ 139,818 5.41 $ 3.00 68,485 $ 3.00
9.00 ................ 236,000 4.98 9.00 68,333 9.00
15.00 ................ 150,667 8.65 15.00 30,333 15.00
16.50 ................ 66,667 8.65 16.50 13,334 16.50
18.00 ................ 205,500 9.75 18.00 1,900 18.00
19.80 ................ 83,333 9.75 19.80 -- --
------------- ------- ------- ------- ------- -------
$3.00 - 19.80 ................ 881,985 7.52 $ 12.75 182,385 $ 8.40
============= ======= ======= ======= ======= =======
</TABLE>
In addition to options issued to employees, the Company also issued options
to consultants during the year ended December 31, 1998 and the quarter ended
March 31, 1999. A total of 6,333 shares and 9,141 shares, with exercise prices
of $15.00 to $18.00, were outstanding at December 31, 1998 and March 31, 1999,
respectively.
F-17
<PAGE> 77
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
A reconciliation of tax benefit computed at the statutory federal tax rate
on losses from operations before income taxes to the actual income tax expense
is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 26, 1996 THREE MONTHS ENDED
(INCEPTION) TO YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
-------------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal tax provision
(benefit) computed at
the statutory rate..... $(10,527) $(1,015,428) $(4,362,981) $ (768,653) $(4,160,918)
State tax provision
(benefit), net of
federal tax provision
(benefit).............. (595) (113,936) (842,180) (18,041) (821,400)
Change in the beginning
of the period valuation
allowance for deferred
tax assets allocated to
tax expenses........... 11,023 1,127,859 7,564,698 1,724,744 5,379,070
General business credit
generated.............. -- -- (3,005,476) (1,096,912) (655,958)
Nondeductible expenses
and other.............. 99 1,505 649,039 161,717 262,660
-------- ----------- ----------- ----------- -----------
Total income tax
expense............. $ -- $ -- $ 3,100 $ 2,855 $ 3,454
======== =========== =========== =========== ===========
</TABLE>
F-18
<PAGE> 78
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net effect of net operating loss
carryforwards and the temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Company's deferred tax assets
as of December 31, 1997 and 1998 and March 31, 1999, respectively, are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1997 1998 1999
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........... $ 973,412 $ 4,245,686 $ 8,922,662
General business credit.................... -- 3,640,146 4,296,104
Cumulative effect of using cash basis
accounting for income tax purposes...... 165,311 690,302 726,943
Furniture and equipment principally due to
differences in depreciation............. 159 (19,164) (24,028)
Nonqualifed stock options.................. -- 146,610 160,970
----------- ----------- ------------
Total deferred tax assets............... 1,138,882 8,703,580 14,082,651
Valuation allowance.......................... (1,138,882) (8,703,580) (14,082,651)
----------- ----------- ------------
Net deferred tax assets................. $ -- $ -- $ --
=========== =========== ============
</TABLE>
The valuation allowance for deferred tax assets increased $1,127,859 and
$7,564,698 for the years ended December 31, 1997 and 1998, respectively, and
$5,379,071 for the period ended March 31, 1999.
At December 31, 1998, the Company had net operating loss carryforwards of
approximately $11,000,000 and business tax credit carryforwards of approximately
$3,600,000 for federal income tax purposes which expire at various dates through
2018. The respective amounts at March 31, 1999 were approximately $22,400,000
and $4,300,000. Business tax credits can offset future tax liabilities and arise
from qualified research expenditures. A portion of the net operating loss and
tax credit carryforwards are subject to various utilization limitations under
the Internal Revenue Code as a result of ownership changes experienced by the
Company.
8. NOTE PAYABLE
On April 29, 1998, the Company purchased an office building from a company
owned by the Chairman and CEO of the Company for approximately $581,000. At that
time, the Company assumed an existing adjustable rate mortgage on the building
of approximately $318,000. The mortgage currently bears an interest rate of 8.75
percent, and is payable in monthly installments through 2022. The mortgage is
collateralized by the deed of trust on the building.
F-19
<PAGE> 79
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum principal payments under the note payable are as follows:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1999........................................................ $ 4,098
2000........................................................ 4,471
2001........................................................ 5,305
2002........................................................ 5,788
2003........................................................ 5,809
2004 and thereafter......................................... 288,889
--------
314,360
Less current portion........................................ (4,098)
--------
$310,262
========
</TABLE>
9. INVESTMENTS
Investments at December 31, 1997 consisted of an equity investment in a
joint venture totalling $110,453 which was carried at the lower of cost or net
realizable value. Due to the speculative nature of this investment, it was
deemed to have no realizable value for financial statement purposes, and was
written down to $0 in 1997. During 1998, the Company terminated its involvement
in the joint venture. No amounts were recovered.
Investments at December 31, 1998 consisted of a single debt security issued
by the Federal Home Loan Mortgage Corporation. This security matured at its face
value of $10,049,000 on January 20, 1999. Its fair value at December 31, 1998
was $10,025,887. Its amortized cost was $10,023,190, with gross unrealized
holding gains of $25,810, for the year ended December 31, 1998. After maturing
on January 20, 1999, the face value of $10,049,000 was deposited into a money
market account.
10. LEASES
The Company leases office space for use in its research and development
activities in North Carolina. The initial leases commenced in 1997 and had
initial terms of six months. The leases are renewable semi-annually and were
renewed in 1998.
In March 1999, a subsidiary of the Company leased office space from a
company owned by the Chairman and CEO of the Company (see note 3). The lease
expires in 2001 and may be extended for two years. The subsidiary is responsible
for base rentals and its proportionate share of common utilities and
maintenance. Also in March 1999, the Company leased an automobile for its CEO.
Approximate minimum annual rent payments due under these noncancelable leases
are as follows:
F-20
<PAGE> 80
UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1999........................................................ $30,000
2000........................................................ 39,000
2001........................................................ 12,000
2002........................................................ 3,000
</TABLE>
Total rent expense for the period ended December 31, 1996 and the years
ended December 31, 1997 and 1998 was $0, $25,340 and $97,033, respectively.
Total rent expenses for the quarters ended March 31, 1998 and 1999 were
approximately $19,000 and $38,000, respectively.
11. INITIAL PUBLIC OFFERING
In April 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission for the sale
of up to 6,000,000 shares of common stock. Direct costs associated with the
offering have been deferred and will be recorded as a reduction of stockholders'
equity if the offering is consummated. If the offering is not consummated, the
deferred offering costs will be charged to operations.
12. REVERSE STOCK SPLIT (UNAUDITED)
On April 5, 1999, the Company's Board of Directors approved a one-for-three
reverse stock split of its outstanding common stock that is subject to the
initial public offering being effective. Authorized shares and the par values of
common and preferred stock were not affected. All share and per share amounts in
the accompanying financial statements have been retroactively adjusted to
reflect the reverse stock split for all periods presented.
F-21
<PAGE> 81
------------------------------------------------------------
------------------------------------------------------------
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. UNITED
THERAPEUTICS HAS NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM
THAT CONTAINED IN THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
SALE OF COMMON STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT AFTER THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO
SELL OR SOLICITATION OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY
CIRCUMSTANCES UNDER WHICH THE OFFER OR SOLICITATION IS UNLAWFUL.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 1
Risk Factors............................ 5
Use of Proceeds......................... 13
Dividend Policy......................... 13
Capitalization.......................... 14
Dilution................................ 15
Selected Consolidated Financial Data.... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 17
Business................................ 21
Management.............................. 39
Certain Transactions.................... 47
Principal Stockholders.................. 48
Description of Capital Stock............ 49
Shares Eligible for Future Sale......... 52
Underwriting............................ 54
Lawyers................................. 55
Experts................................. 56
Additional Information.................. 56
Index to Consolidated Financial
Statements............................ F-1
</TABLE>
---------------------
DEALER PROSPECTUS DELIVERY OBLIGATION:
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, 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 PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Shares
[UNITED THERAPEUTICS CORPORATION LOGO]
Common Stock
------------------
PROSPECTUS
------------------
BT ALEX. BROWN
A.G. EDWARDS & SONS, INC.
VECTOR SECURITIES INTERNATIONAL, INC.
, 1999
------------------------------------------------------------
------------------------------------------------------------
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts are estimates except for
the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee............................................ $23,978
Nasdaq National Market listing fee.......................... 95,000
NASD filing fee............................................. 9,125
Blue sky qualification fees and expenses.................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer agent and registrar fees........................... *
Directors' and Officers' Insurance.......................... *
Miscellaneous............................................... *
-------
Total............................................. *
=======
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Delaware law, the Registrant's Amended and Restated
Certificate of Incorporation provides that no director of the Registrant will be
personally liable to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (a) for any breach
of duty of loyalty to United Therapeutics or to its stockholders, (b) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the Delaware General
Corporation Law, or (d) for any transaction from which the director derived an
improper personal benefit.
The Registrant's Amended and Restated Certificate of Incorporation further
provides that the Registrant must indemnify its directors and executive officers
and may indemnify its other officers and employees and agents to the fullest
extent permitted by Delaware law. The Registrant believes that indemnification
under its Amended and Restated Certificate of Incorporation covers negligence
and gross negligence on the part of indemnified parties.
The Registrant has entered into indemnification agreements with each of its
directors and officers. These agreements, among other things, require the
Registrant to indemnify such directors and officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of the Registrant, arising out of such person's services as a director or
officer of the Registrant, any subsidiary of the Registrant or any other company
or enterprise to which the person provides services at the request of the
Registrant.
The Underwriting Agreement (Exhibit 1) will provide for indemnification by
the Underwriters of the Registrant, its directors, its officers who sign the
Registration Statement, and the Registrant's controlling persons for certain
liabilities, including liabilities arising under the Securities Act.
II-1
<PAGE> 83
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since June 1996, the Registrant has sold and issued the following
unregistered securities:
(1) As of March 31, 1999, the Registrant had granted stock options to
purchase 168,905 shares of its Common Stock to employees, consultants and
directors pursuant to its Amended and Restated Equity Incentive Plan. Of these
options to purchase, no shares have been exercised, 7,916 have been canceled,
and the remainder are outstanding.
(2) As of March 31, 1999, the Registrant had granted stock options to
purchase an additional 730,137 shares of its Common Stock to employees,
consultants and directors, all of which are outstanding.
(3) In August 1996, the Registrant issued an aggregate of 1,666,663 shares
of its Common Stock to its four co-founders for an aggregate consideration of
$100,000.
(4) From January 1, 1997 through December 31, 1997, the Registrant issued
3,906,742 shares of Common Stock for an aggregate consideration of $6,940,150.
(5) In July 1997, the Registrant issued 309,428 shares of its Common Stock
to Martine A. Rothblatt, in consideration for the conversion of a note,
including accrued interest thereon, for an aggregate consideration of $508,334.
(6) From January 1, 1998 through December 31, 1998, the Registrant issued
37,694 shares of its Common Stock in consideration for various consulting
services valued at approximately $132,085.
(7) From January 1, 1998 through December 31, 1998, the Registrant issued
an aggregate of 3,472,849 shares of its Common Stock to directors and officers
and several accredited investors (not including those reflected in item (5)) for
an aggregate cash consideration of $17,904,530.
(8) From January 1, 1998 through December 31, 1998 the Registrant issued an
aggregate of options to purchase 2,500 shares of its Common Stock to a
consultant in exchange for services.
(9) In September 1998, the Registrant issued 166,666 shares of its Common
Stock, and granted options to acquire an additional 166,666 shares of Common
Stock in consideration of an exclusive license.
(10) In October 1998, the Registrant issued an aggregate of 555,555 shares
of Common Stock to two accredited investors for an aggregate consideration of
$5,000,001.
(11) In November 1998, the Registrant issued warrants to purchase 116,666
shares of Common Stock in consideration of an exclusive license agreement.
(12) In March 1999, the Registrant issued 500,000 shares of its Common
Stock in consideration of an exclusive license agreement.
(13) In March 1999, the Registrant issued options to purchase 2,808 shares
of its Common Stock in exchange for services.
(14) From January 31, 1999, the Registrant issued an aggregate of 111,370
shares of its Common Stock to directors, employees and several accredited
investors for an aggregate cash consideration of $11,995,316.
The sales and issuances of securities described in paragraph (1) above were
deemed to be exempt from registration under the Securities Act by virtue of Rule
701 of the Securities Act 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 provided by Rule 701. The sales and issuances of securities
described in paragraphs (2)-(14) above were deemed to be exempt from
registration under the Securities Act by virtue of Rule 4(2), Regulation D or
Regulation S promulgated thereunder.
II-2
<PAGE> 84
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of exhibits filed as a part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1 Form of Equity Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Amended and Restated By-Laws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Registration Rights Agreement, dated as of October 30, 1998,
by and among the Registrant, Merrill Lynch KECALP L.P. 1997,
and Merrill Lynch KECALP International L.P. 1997.
4.3 Form of Common Stock Purchase Agreement, executed as of
March, 1998, by and between the Registrant and each of
Community Investment Partners III L.P., LLLP, Mary Ellen and
Raul Evelio Perez, Trustees of the Mary Ellen Perez
revocable trust dated October 28, 1993, Edward D. Jones &
Co., Oakwood Investors I, L.L.C. and James L. Nouss, Jr.
4.4 Warrant to purchase shares of United Therapeutics' common
stock, issued on November 2, 1998 to Cortech, Inc.
4.5 Stock Option Grant to purchase shares of United
Therapeutics' common stock, issued on September 16, 1998 to
Toray Industries, Inc.
5 Opinion of Bryan Cave LLP*.
10.1 Amended and Restated Equity Incentive Plan.
10.2 Form of Scientific Advisor Compensation Agreement.
10.3 Executive Employment Agreement (as amended) dated as of
April 2, 1999 between the Registrant and Martine A.
Rothblatt.
10.4 Employment Agreement dated July 15, 1996 between the
Registrant and James W. Crow.
10.5 Employment Agreement dated April 7, 1997 between the
Registrant and Gilles Cloutier.
10.6 Employment Agreement dated August 1, 1996 between the
Registrant and Shelmer Blackburn, Jr.
10.7 First Flight Venture Lease Agreement dated July 1, 1997
between North Carolina Technological Development Authority,
Inc. and the Registrant.
10.8 Exclusive License Agreement dated as of December 3, 1996
between the Registrant and affiliate of Pharmacia & Upjohn
Company.**
10.9 Assignment Agreement dated as of January 31, 1997 between
the Registrant and affiliates of Glaxo Wellcome Inc.**
10.10 Cooperation and Strategic Alliance Agreement dated as of
September 3, 1997 between the Registrant and MiniMed Inc.**
10.11 Exclusive License Agreement dated as of September 24, 1998
between the Registrant and Toray Industries, Inc.**
10.12 Exclusive License Agreement dated as of November 4, 1998
between the Registrant and Cortech, Inc.**
</TABLE>
II-3
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.13 Exclusive License and Distribution Agreement dated as of
February 4, 1999 among the Registrant, Global Medical
Enterprises Ltd. and Global Medical Enterprises Ltd., LLC.**
10.14 Exclusive License Agreement dated as of March 15, 1999
between the Registrant and Toray Industries, Inc.**
10.15 Manufacturing Agreement dated as of February 11, 1998
between the Registrant and Steroids, Ltd.**
10.16 Lease dated as of March 1, 1999 between the Unither
Telemedicine Services Corp. and Beacon Projects, Inc.
10.17 UAI Technology, Inc. Office Lease dated as of July 1, 1998
between the Registrant and UAI Technology, Inc.
10.18 Form of Indemnification Agreement between the Registrant and
each of its Directors.
21 Subsidiaries of the Registrant.
23.1 Consent of KPMG LLP.
23.2 Consent of Bryan Cave LLP. Reference is made to Exhibit 5.1.
24 Powers of Attorney. See Signature Page.
27 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
** United Therapeutics has requested confidential treatment for certain portions
of this exhibit pursuant to Rule 406 of the Securities Act of 1933, as
amended.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters 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 the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has 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 the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant 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, the Registrant will, unless in
the opinion of its 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 governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act, the information omitted from the form of
Prospectus filed as part of the registration statement in reliance upon Rule
430A and contained in the form of Prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of Prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 86
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, in the City of Silver Spring, County of
Montgomery, State of Maryland on the 15th day of April, 1999.
UNITED THERAPEUTICS CORPORATION
By: /s/ MARTINE A. ROTHBLATT
-------------------------------------------------
Martine A. Rothblatt
Chairman of the Board and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Martine
Rothblatt and James W. Crow, and each of them, her or his attorneys-in-fact,
with full power of substitution, for her or him in any and all capacities, to
sign any and all amendments to this Registration Statement (including
post-effective amendments), and any and all Registration Statements filed
pursuant to Rule 462 under the Securities Act of 1933, as amended, in connection
with or related to the offering contemplated by this Registration Statement and
its amendments, if any, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by United
Therapeutics' said attorney to any and all amendments to said Registration
Statement.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed below by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MARTINE A. ROTHBLATT Chairman of the Board and April 15, 1999
- --------------------------------------------- Chief Executive Officer
Martine A. Rothblatt
/s/ JAMES W. CROW President, Chief Operating April 15, 1999
- --------------------------------------------- Officer and Director
James W. Crow
/s/ GILLES CLOUTIER Chief Financial Officer, April 15, 1999
- --------------------------------------------- Chief Accounting Officer,
Gilles Cloutier Executive Vice President,
Treasurer and Director
/s/ SHELMER D. BLACKBURN, JR. Director of Operations, April 15, 1999
- --------------------------------------------- Secretary and Director
Shelmer D. Blackburn, Jr.
/s/ JEAN-GUY LAMBERT Director April 15, 1999
- ---------------------------------------------
Jean-Guy Lambert
</TABLE>
II-5
<PAGE> 87
<TABLE>
<S> <C> <C>
/s/ NOAH A. SAMARA Director April 15, 1999
- ---------------------------------------------
Noah A. Samara
/s/ DAVID GOORAY Director April 15, 1999
- ---------------------------------------------
David Gooray
/s/ OLIVIA GISCARD D'ESTAING Director April 15, 1999
- ---------------------------------------------
Olivia Giscard d'Estaing
</TABLE>
II-6
<PAGE> 88
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1 Form of Equity Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Amended and Restated By-Laws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Registration Rights Agreement, dated as of October 30, 1998,
by and among the Registrant, Merrill Lynch KECALP L.P. 1997,
and Merrill Lynch KECALP International L.P. 1997.
4.3 Form of Common Stock Purchase Agreement, executed as of
March, 1998, by and between the Registrant and each of
Community Investment Partners III L.P., LLLP, Mary Ellen and
Raul Evelio Perez, Trustees of the Mary Ellen Perez
revocable trust dated October 28, 1993, Edward D. Jones &
Co., Oakwood Investors I, L.L.C. and James L. Nouss, Jr.
4.4 Warrant to purchase shares of United Therapeutics' common
stock, issued on November 2, 1998 to Cortech, Inc.
4.5 Stock Option Grant to purchase shares of United
Therapeutics' common stock, issued on September 16, 1998 to
Toray Industries, Inc.
5 Opinion of Bryan Cave LLP*.
10.1 Amended and Restated Equity Incentive Plan.
10.2 Form of Scientific Advisor Compensation Agreement.
10.3 Executive Employment Agreement (as amended) dated as of
April 2, 1999 between the Registrant and Martine A.
Rothblatt.
10.4 Employment Agreement dated July 15, 1996 between the
Registrant and James W. Crow.
10.5 Employment Agreement dated April 7, 1997 between the
Registrant and Gilles Cloutier.
10.6 Employment Agreement dated August 1, 1996 between the
Registrant and Shelmer Blackburn, Jr.
10.7 First Flight Venture Lease Agreement dated July 1, 1997
between North Carolina Technological Development Authority,
Inc. and the Registrant.
10.8 Exclusive License Agreement dated as of December 3, 1996
between the Registrant and affiliate of Pharmacia & Upjohn
Company.**
10.9 Assignment Agreement dated as of January 31, 1997 between
the Registrant and affiliates of Glaxo Wellcome Inc.**
10.10 Cooperation and Strategic Alliance Agreement dated as of
September 3, 1997 between the Registrant and MiniMed Inc.**
10.11 Exclusive License Agreement dated as of September 24, 1998
between the Registrant and Toray Industries, Inc.**
10.12 Exclusive License Agreement dated as of November 4, 1998
between the Registrant and Cortech, Inc.**
10.13 Exclusive License and Distribution Agreement dated as of
February 4, 1999 among the Registrant, Global Medical
Enterprises Ltd. and Global Medical Enterprises Ltd., LLC.**
10.14 Exclusive License Agreement dated as of March 15, 1999
between the Registrant and Toray Industries, Inc.**
10.15 Manufacturing Agreement dated as of February 11, 1998
between the Registrant and Steroids, Ltd.**
</TABLE>
II-7
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.16 Lease dated as of March 1, 1999 between the Unither
Telemedicine Services Corp. and Beacon Projects, Inc.
10.17 UAI Technology, Inc. Office Lease dated as of July 1, 1998
between the Registrant and UAI Technology, Inc.
10.18 Form of Indemnification Agreement between the Registrant and
each of its Directors.
21 Subsidiaries of the Registrant.
23.1 Consent of KPMG LLP.
23.2 Consent of Bryan Cave LLP. Reference is made to Exhibit 5.1.
24 Powers of Attorney. See Signature Page.
27 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
** United Therapeutics has requested confidential treatment for certain portions
of this exhibit pursuant to Rule 406 of the Securities Act of 1933, as
amended.
II-8
<PAGE> 1
EXHIBIT 1
_______________ Shares
United Therapeutics Corporation
Common Stock
($.01 Par Value)
FORM OF EQUITY UNDERWRITING AGREEMENT
_______________, 1999
BT Alex. Brown Incorporated
A.G. Edwards & Sons, Inc.
Vector Securities International, Inc.
As Representatives of the
Several Underwriters
c/o BT Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
United Therapeutics Corporation, a Delaware corporation (the "Company"),
proposes to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto for whom you are acting as representatives (the
"Representatives") an aggregate of __________ shares of the Company's Common
Stock, $.01 par value (the "Firm Shares"). The respective amounts of the Firm
Shares to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Company also proposes to sell at the
Underwriters' option an aggregate of up to __________ additional shares of the
Company's Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option
Shares if you elect to exercise the over-allotment option in whole or in part
for the accounts of the several Underwriters.
<PAGE> 2
-2-
The Firm Shares and the Option Shares (to the extent the aforementioned option
is exercised) are herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Underwriters as
follows:
(a) A registration statement on Form S-1 (File No. 333-______) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules
and Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by
the Company to you and to the extent applicable, were identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
the Commission's Electronic Data Gathering, Analysis and Retrieval System
("EDGAR"), except to the extent permitted by Regulation S-T. Such registration
statement, together with any registration statement filed by the Company
pursuant to Rule 462 (b) of the Act, herein referred to as the "Registration
Statement," which shall be deemed to include all information omitted therefrom
in reliance upon Rule 430A and contained in the Prospectus referred to below,
has become effective under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
"Prospectus" means the form of prospectus first filed with the Commission
pursuant to Rule 424(b). Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus." Any reference herein to any
Prospectus shall be deemed to refer to and include any documents incorporated
by reference therein and to include any supplements or amendments thereto filed
with the Commission after the date of filing of the Prospectus under Rules
424(b) or 430A, and prior to the termination of the offering of the Shares by
the Underwriters. For purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement to any of the foregoing, shall be deemed to include the
respective copies thereof filed with the Commission pursuant to EDGAR.
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Each of the subsidiaries
of the Company as listed in Exhibit 21 to Item 16(a) of the Registration
Statement (collectively, the "Subsidiaries") has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to own or
lease its properties and conduct its business as described in the Registration
Statement. The Subsidiaries are the only subsidiaries, direct or indirect, of
the Company. The Company and each of the Subsidiaries are duly qualified to
transact
<PAGE> 3
-3-
business in all jurisdictions in which the conduct of their business requires
such qualification, except where the failure to be so qualified would not have
a material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company (as described in the
Prospectus) and the Subsidiaries, taken as a whole (a "Material Adverse
Effect"). The outstanding shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and non-assessable
and are owned by the Company or another Subsidiary free and clear of all liens,
encumbrances and equities and claims; and no options, warrants or other rights
to purchase, agreements or other obligations to issue or other rights to convert
any obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
(c) The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and
is a valid and binding agreement on the part of the Company, enforceable
against it in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or
by general equitable principles; the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to which the
Company or any Subsidiary is a party, (ii) the charter or bylaws of the Company
or any Subsidiary, each as currently in effect, or (iii) any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any Subsidiary or over their respective properties, except in the
case of clauses (i) and (iii) for such breaches, violations or defaults as
would not have a Material Adverse Effect. No consent, approval, authorization
or order of or qualification with any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any
Subsidiary or over their respective properties is required for the execution
and delivery of this Agreement and the consummation by the Company of the
transactions herein contemplated, except such as may be required under the Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or under
state or other securities or Blue Sky laws, or under the rules and regulations
of the National Association of Securities Dealers, Inc. (the "NASD") (including
the Nasdaq Stock Market), and all of which requirements which pertain to the
Company have been satisfied by the Company in all material respects.
(d) The outstanding shares of Common Stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; the Shares
to be issued and sold by the Company have been duly authorized and when issued
and paid for as contemplated herein will be validly issued, fully paid and
non-assessable; and no preemptive rights of stockholders exist with respect to
any of the Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated
by this
<PAGE> 4
-4-
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common Stock.
(e) The information set forth under the caption "Capitalization" in the
Prospectus is true and correct. All of the Shares conform to the description
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the Company's
incorporation.
(f) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform to, the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendment thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact; and do not omit, and will not omit, to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as
to information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf
of any Underwriter through the Representatives, specifically for use in the
preparation thereof.
(g) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results
of operations and cash flows of the Company and the consolidated Subsidiaries,
at the indicated dates and for the indicated periods. Such financial
statements and related schedules have been prepared in accordance with
generally accepted principles of accounting, consistently applied throughout
the periods involved, except as disclosed therein, and all adjustments
necessary for a fair presentation of results for such periods have been made.
The summary financial and statistical data included in the Registration
Statement presents fairly the information shown therein and such data has been
compiled on a basis consistent with the financial statements presented therein
and the books and records of the company.
(h) To the best of the Company's knowledge, KPMG LLP, who have certified
certain of the financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required by the
Act and the Rules and Regulations.
(i) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects (as
described in
<PAGE> 5
-5-
the Prospectus) of the Company and of the Subsidiaries taken as a whole (a
"Material Adverse Change") or to prevent the consummation of the transactions
contemplated hereby, except as set forth in the Registration Statement.
(j) The Company and the Subsidiaries have good and marketable title to all
of the properties and assets reflected in the financial statements (or as
described in the Registration Statement) herein above described, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and the
Subsidiaries occupy their leased properties under valid and binding leases
conforming in all material respects to the description thereof set forth in the
Registration Statement.
(k) The Company and the Subsidiaries have filed all Federal, State, local
and foreign tax returns which have been required to be filed and have paid all
taxes indicated by said returns and all assessments received by them or any of
them to the extent that such taxes have become due. All tax liabilities have
been adequately provided for in the financial statements of the Company, and
the Company does not know of any actual or proposed additional material tax
assessments.
(l) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not
been any Material Adverse Change or any development involving a prospective
Material Adverse Change, whether or not occurring in the ordinary course of
business, and there has not been any material transaction entered into or any
material transaction that is probable of being entered into by the Company or
the Subsidiaries, other than transactions in the ordinary course of business
and changes and transactions described in the Registration Statement, as it may
be amended or supplemented. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement.
(m) Neither the Company nor any of the Subsidiaries is or with the giving
of notice or lapse of time or both, will be, in violation of or in default
under its Amended and Restated Certificate of Incorporation or Amended and
Restated By-Laws or under any agreement, lease, contract, indenture or other
instrument or obligation to which it is a party or by which it, or any of its
properties, is bound and which default is of material significance in respect
of the condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole or the business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
the Subsidiaries taken as a whole.
(n) Each approval, consent, order, authorization, designation, declaration
or filing by or with any regulatory, administrative or other governmental body
necessary in connection with the execution and delivery by the Company of this
Agreement and the consummation of the transactions herein contemplated (except
such additional steps as may be required by the Commission, the NASD or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
<PAGE> 6
-6-
(o) The Company and each of the Subsidiaries holds all material licenses,
certificates and permits from governmental authorities which are necessary to
the conduct of their businesses. The Company and each of the Subsidiaries are
now and have been in material compliance with all United States Food and Drug
Administration ("FDA") and any corresponding applicable foreign regulatory
authority rules, regulations and requirements applicable to them, and have
received no written notice of violations or alleged violations of such rules,
regulations and requirements. The Company and each of the Subsidiaries are not
aware of any violations of FDA rules, regulations and requirements by companies
with which the Company or any of the Subsidiaries have contracts which might
result in any Material Adverse Change. The Prospectus fairly reflects the FDA
and foreign regulatory status of the Company's proposed products.
(p) Neither the Company, nor to the Company's knowledge, any of its
affiliates, has taken or will take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
shares of Common Stock to facilitate the sale or resale of the Shares.
(q) Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940, (as
amended, the "1940 Act") and the rules and regulations of the Commission
thereunder.
(r) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) The Company and each of its Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in the same industry.
(t) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension plan" for
which the Company would have any liability that is intended to be
<PAGE> 7
-7-
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification.
(u) To the Company's knowledge, there are no affiliations or associations
between any member of the NASD and any of the Company's officers, directors or
securityholders, except as set forth in the Registration Statement.
(v) The Company has not distributed and will not distribute prior to the
later of (i) the Closing Date (as defined herein), or Option Closing Date (as
defined herein), as the case may be, and (ii) completion of the distribution of
the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(w) Neither the Company nor any Subsidiary has at any time during the last
five (5) years (i) made any unlawful contribution to any candidate for foreign
office or failed to disclose fully any contribution in violation of law, or
(ii) made any payment to any federal or state governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(x) Except as set forth in the Registration Statement and Prospectus, (i)
the Company and each Subsidiary is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to its business except for noncompliance as would not have
a Material Adverse Effect (ii) neither the Company nor any Subsidiary has
received any notice from any governmental authority or third party of an
asserted claim under Environmental Laws, which claim is required to be
disclosed in the Registration Statement and the Prospectus, (iii) the Company
does not currently foresee that it or its Subsidiaries will be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
to the best of the Company's knowledge after due inquiry, no property which is
owned, leased or occupied by the Company or its Subsidiaries has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et
seq), or otherwise designated as a contaminated site under applicable state or
local law.
(y) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or its Subsidiaries to or for the benefit of any of
the officers or directors of the Company or any of the members of the families
of any of them, except as disclosed in the Registration Statement or the
Prospectus.
(z) Except as disclosed in the Prospectus, the Company and each of its
Subsidiaries own or have the right to use any patents, patent applications,
patent rights, inventions, trade secrets, know-how, manufacturing processes,
trademarks, trademark applications, service marks, service mark applications,
trade names, copyrights, software
<PAGE> 8
-8-
programs, or other information now used in, or which are necessary for
fulfillment of, their respective obligations or the conduct of their respective
businesses as now conducted or proposed to be conducted as described in the
Prospectus (collectively, "Intellectual Property"), except where the failure to
own or have the right to use such Intellectual Property would not have a
Material Adverse Effect.
(aa) As required for the conduct of their respective businesses as now
conducted or proposed to be conducted as described in the Prospectus, all U.S.
patents owned, assigned, or licensed by the Company and its Subsidiaries are
currently in force and being maintained; annuities on all foreign patents and
foreign patent applications have been paid; and all U.S. patent applications
and foreign patent applications indicated as pending, are pending.
(bb) All trademark applications, U.S. and foreign, indicated as pending in
the Prospectus are pending, and all registration fees on trademarks which
register on or before the Closing Date or the Option Closing Date will be paid.
(cc) The Company and its Subsidiaries have no knowledge of infringement of
its patents and trademarks, and neither the Company nor its Subsidiaries is
aware that the Company's activities or products or the activities or products
of the Company's Subsidiaries, infringe any third parties' intellectual
property rights, including patents or trademarks, U.S. or foreign, and neither
the Company nor any of its Subsidiaries has been notified that it is infringing
any intellectual property or other similar rights of others.
(dd) Neither the Company nor any of its Subsidiaries has been notified
that administrative actions are pending with respect to patents (pending or
issued, U.S. or foreign) and registered trademarks or trademark applications
(U.S. or foreign), except for U.S. and foreign patent and trademark office
actions issued in the normal course of prosecution of patents and trademarks.
(ee) The Company and its Subsidiaries have no knowledge of any reason why
the patents or trademarks (upon registration) owned, assigned, or licensed by
the Company would be unenforceable or invalid.
(ff) The Company has not terminated or breached, and is not in violation
of any agreement with respect to its Intellectual Property rights.
(gg) The Company has agreements in place with [all] employees, consultants
or other persons or parties engaged by the Company or any Subsidiary providing
for the assignment or exclusive license to the Company of all intellectual
property rights in the work performed by such persons. The Company has
agreements in place with [all] employees, consultants or other persons or
parties engaged by the Company or any Subsidiary providing for the protection
of the trade secrets and confidential information of the Company, each of its
Subsidiaries, and of third parties.
<PAGE> 9
-9-
(hh) The Company has undertaken reasonable due diligence with respect to
its existing patent licenses and patent assignment agreements, including
reasonable due diligence to confirm licensors'/assignors' rights to transfer
the corresponding intellectual property.
(ii) The claims in the Company's accepted, granted or issued foreign
patents are commensurate in scope with the claims in the Company's
corresponding U.S. patents.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and covenants herein
contained, and subject to the conditions herein set forth, the Company agrees
to sell to the Underwriters and each Underwriter agrees, severally and not
jointly, to purchase, at a price of $_____ per share, the number of Firm Shares
set forth opposite the name of each Underwriter in Schedule I hereof, subject
to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in New
York Clearing House funds by Federal (same day) funds against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made through the facilities
of the Depository Trust Company, New York, New York at 10:00 a.m., New York
time, on the third business day after the date of this Agreement or at such
other time and date not later than five business days thereafter as you and the
Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and are not permitted by law or executive order to be closed.)
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of
this Section 2. The option granted hereby may be exercised in whole or in part
by giving written notice (i) at any time before the Closing Date and (ii) only
once thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be
delivered. The time and date at which certificates for Option Shares are to be
delivered shall be determined by the Representatives but shall not be earlier
than three nor later than 10 full business days after the exercise of such
option, nor in any event prior to the Closing Date (such time and date being
herein referred to as the "Option Closing Date"). If the date of exercise of
the option is three or more days before the Closing Date, the notice of
exercise shall set the Closing Date as the Option Closing Date. The number of
Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the number
of Firm Shares being purchased by such Underwriter bears to the total number of
Firm Shares being purchased, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the
Firm Shares by the
<PAGE> 10
-10-
Underwriters. You, as Representatives of the several Underwriters, may cancel
such option at any time prior to its expiration by giving written notice of
such cancellation to the Company. To the extent, if any, that the option is
exercised, payment for the Option Shares shall be made on the Option Closing
Date in Federal (same day funds) through the facilities of the Depository Trust
Company in New York, New York drawn to the order of the Company.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the
initial public offering price set forth in the Prospectus. The Representatives
may from time to time thereafter change the public offering price and other
selling terms. To the extent, if at all, that any Option Shares are purchased
pursuant to Section 2 hereof, the Underwriters will offer them to the public on
the foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (A) use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the Rules
and Regulations is followed, to prepare and timely file with the Commission
under Rule 424(b) of the Rules and Regulations a Prospectus in a form approved
by the Representatives containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations, and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall
not previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations. To the extent applicable, the
copies of the Registration Statement and each amendment thereto (including all
exhibits filed therewith), any Preliminary Prospectus or Prospectus (in each
case, as amended or supplemented) furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(b) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C) of
any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of the
institution of any proceedings for that purpose. The Company will use its best
efforts to prevent the issuance of any
<PAGE> 11
-11-
such stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representatives in endeavoring to
qualify the Shares for sale under the securities laws of such jurisdictions as
the Representatives may reasonably have designated in writing and will make
such applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so qualified or
required to file such a consent. The Company will, from time to time, prepare
and file such statements, reports, and other documents, as are or may be
required to continue such qualifications in effect for so long a period as the
Representatives may reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representatives such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), and of all amendments thereto, as
the Representatives may reasonably request.
(e) The Company will comply with the Act and the Rules and Regulations,
and the Exchange Act, and the rules and regulations of the Commission
thereunder, so as to permit the completion of the distribution of the Shares as
contemplated in this Agreement and the Prospectus. If during the period in
which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of the Underwriters, it becomes necessary
to amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, not misleading, or, if it is necessary at any time to
amend or supplement the Prospectus to comply with any law, the Company promptly
will prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus
as so amended or supplemented will not, in the light of the circumstances when
it is so delivered, be misleading, or so that the Prospectus will comply with
the law.
(f) The Company will make generally available to its security holders, as
soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earning statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
<PAGE> 12
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(g) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim financial statements of the Company
for any period subsequent to the period covered by the most recent financial
statements appearing in the Registration Statement and the Prospectus.
(h) No offering, sale, short sale or other disposition of any shares of
Common Stock of the Company or other securities convertible into or exchangeable
or exercisable for shares of Common Stock or derivative of Common Stock (or
agreement for such) will be made for a period of 180 days after the date on the
final Prospectus, directly or indirectly, by the Company otherwise than
hereunder or with the prior written consent of BT Alex. Brown Incorporated,
except for (i) option or other grants pursuant to the Company's Amended and
Restated Equity Incentive Plan, as in effect on the date hereof; (ii) stock
issued upon exercise of options granted pursuant to the Company's Amended and
Restated Equity Incentive Plan or warrants outstanding on the date hereof,
provided, however, that any individual receiving 3,333 or more shares of Common
Stock signs a Lockup Agreement (as defined in clause (j) below) as a condition
to receiving such Common Stock; (iii) strategic issuances of Common Stock for
purposes other than capital raising provided that each individual or entity
receiving any such shares of Common Stock signs a Lockup Agreement as a
condition to the issuance; or (iv) the issuance and sale of the Firm Shares and
any Option Shares.
(i) The Company will use its best efforts to list, subject to notice of
issuance, the Shares on The Nasdaq National Market.
(j) The Company has caused each officer and director and shall use its
best efforts to cause each shareholder holding 3,333 or more shares of Common
Stock of the Company to furnish to you, on or prior to the date of this
agreement, a letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to offer,
sell, sell short or otherwise dispose of any shares of Common Stock of the
Company or other capital stock of the Company, or any other securities
convertible, exchangeable or exercisable for Common Stock or derivative of
Common Stock owned by such person or request the registration for the offer or
sale of any of the foregoing (or as to which such person has the right to
direct the disposition of) for a period of 180 days after the date on the final
Prospectus, directly or indirectly, except with the prior written consent of BT
Alex. Brown Incorporated ("Lockup Agreements").
(k) The Company shall apply the net proceeds of its sale of the Shares as
set forth in the Prospectus and shall include such information with respect
thereto in such reports filed with the Commission as may be required in
accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the proceeds received
by the Company from its sale of the Shares in such a manner as would require
the Company or any of the Subsidiaries to register as an investment company
under the 1940 Act.
(m) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar for the Common Stock.
<PAGE> 13
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(n) The Company will not take, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably be expected
to constitute, the stabilization or manipulation of the price of any securities
of the Company.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, [the Underwriters' Selling Memorandum,] the Underwriters' Invitation
Letter, [the Listing Application,] the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees and
expenses (including legal fees and disbursements) incident to securing any
required review by the NASD of the terms of the sale of the Shares; [the
Listing Fee of the Nasdaq National Market]; and the expenses, including the
fees and disbursements of counsel for the Underwriters, incurred in connection
with the qualification of the Shares under State securities or Blue Sky laws.
The Company agrees to pay all costs and expenses of the Underwriters, including
the fees and disbursements of counsel for the Underwriters, incident to the
offer and sale of directed shares of the Common Stock by the Underwriters to
employees and persons having business relationships with the Company and its
Subsidiaries. The Company shall not, however, be required to pay for any of
the Underwriters' expenses (other than those related to qualification under
NASD regulation and State securities or Blue Sky laws) except that, if this
Agreement shall not be consummated because the conditions in Section 6 hereof
are not satisfied, or because this Agreement is terminated by the
Representatives pursuant to Section 11 hereof, or by reason of any failure,
refusal or inability on the part of the Company to perform any undertaking or
satisfy any condition of this Agreement or to comply with any of the terms
hereof on its part to be performed, unless such failure to satisfy said
condition or to comply with said terms be due to the default or omission of any
Underwriter, then the Company shall reimburse the several Underwriters for
reasonable out-of-pocket expenses, including fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and proposing
to market the Shares or in contemplation of performing their obligations
hereunder; but the Company shall not in any event be liable to any of the
several Underwriters for damages on account of loss of anticipated profits from
the sale by them of the Shares.
6. CONDITIONS TO OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company contained
herein, and to the performance by the Company of its covenants and obligations
hereunder and to the following additional conditions:
<PAGE> 14
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(a) The Registration Statement and all post-effective amendments thereto
shall have become effective and any and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made, and any request of
the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time,
shall have been issued and no proceedings for that purpose shall have been
taken or, to the knowledge of the Company, shall be contemplated by the
Commission and no injunction, restraining order, or order of any nature by a
Federal or state court of competent jurisdiction shall have been issued as of
the Closing Date, or Option Closing Date, as the case may be, which would
prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinions of Bryan Cave LLP,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect set forth in Schedule
II hereto. In rendering such opinion Bryan Cave LLP may rely as to matters
governed by the laws of states other than Delaware or Federal laws on local
counsel in such jurisdictions, provided that in each case Bryan Cave LLP shall
state that they believe that they and the Underwriters are justified in relying
on such other counsel. In addition to the matters set forth above, such
opinion shall also include a statement to the effect that (A) such counsel
knows of no material legal or governmental proceedings pending or threatened
against the company or any of the Subsidiaries except as set forth in the
Prospectus and (B) nothing has come to the attention of such counsel which
leads them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to
such statement, Bryan Cave LLP may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(c) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Foley & Lardner, patent
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect set forth on Schedule
III hereto. In such opinion, Foley & Lardner shall state that, during the
course of preparation of the Registration Statement, such counsel participated
in certain discussions with officers of the Company as to the patent matters
dealt with under the captions Risk Factors - Uncertainty Relating to Patents
and Proprietary Rights" and "Business - Patents, Proprietary Rights and
Licenses" in the Prospectus. While such counsel has not undertaken to
determine independently and such counsel does not assume any responsibility
for, the accuracy, completeness,
<PAGE> 15
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or fairness of the statements under such captions in the Prospectus, such
counsel shall state on the basis of these discussions that no facts have come
to their attention which cause them to believe that the statements in the
Prospectus under such captions, at the time the Registration Statement became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the Closing Date or the Option Closing
Date, as the case may be, contains an untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(d) The Representatives shall have received from Testa, Hurwitz &
Thibeault, LLP, counsel for the Underwriters, an opinion dated the Closing Date
or the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iii), (iv) and (ix) of Paragraph (b) of this
Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion
Testa, Hurwitz & Thibeault, LLP may rely as to all matters governed other than
by the laws of the Commonwealth of Massachusetts, the General Corporation Law
of the State of Delaware or Federal laws on the opinion of counsel referred to
in Paragraph (b) of this Section 6. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, or any amendment thereto, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact, necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to
such statement, Testa, Hurwitz & Thibeault, LLP may state that their belief is
based upon the procedures set forth therein, but is without independent check
and verification.
[(e) The Representatives shall have received at or prior to the Closing
Date from Testa, Hurwitz & Thibeault, LLP a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
State securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.]1
(f) You shall have received, on each of the dates hereof, the Closing Date
and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in
form and substance satisfactory to you, of KPMG LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion
the financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial
- -----------------------
1 Confirm with Syndicate Department as to whether this is required.
<PAGE> 16
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statements and certain financial and statistical information contained in the
Registration Statement and Prospectus.
(g) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the Act
and, to the best knowledge of such officers, no stop order suspending the
effectiveness of the Registrations Statement has been issued, and no
proceedings for such purpose have been taken or are, to his knowledge,
contemplated by the Commission;
(ii) The representations and warranties of the Company contained in
Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules 424
or 430A under the Act have been made;
(iv) She or he has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, as of the effective date
of the Registration Statement, the statements contained in the
Registration Statement were true and correct, and such Registration
Statement and Prospectus did not omit to state a material fact required
to be stated therein or necessary in order to make the statements therein
not misleading, and since the effective date of the Registration
Statement, no event has occurred which should have been set forth in a
supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment; and
(v) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been any
Material Adverse Change or any development involving a prospective
Material Adverse Change, whether or not arising in the ordinary
course of business.
(h) The Company shall have furnished to the Representatives such further
certificates and documents confirming the representations and warranties,
covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.
<PAGE> 17
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(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq National Market.
(j) The Lockup Agreements are in full force and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects reasonably satisfactory to the Representatives and to Testa, Hurwitz &
Thibeault, LLP, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company agrees:
(1) to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement 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 act or failure to act, or any alleged act or
failure to act, by any Underwriter in connection with, or relating in any
manner to, the Shares or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability
or action arising out of or based upon matters covered by clause (i) or
(ii) above (provided, that the Company shall not be liable under this
clause (iii) to the extent that it is determined in a
<PAGE> 18
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final judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter
through its negligence or misconduct); provided, however, that the Company
will not be liable in any such case to the extent that (i) any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission
made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof or
(ii) any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or
alleged omission contained or made in any Preliminary Prospectus and
corrected in the Prospectus and (1) any such loss, claim, damage or
liability suffered or incurred by any Underwriter (or any person who
controls any Underwriter) resulted from an action, claim or suit by any
person who purchased Shares which are the subject thereof from such
Underwriter in the offering and (2) such Underwriter failed to deliver or
provide a copy of the Prospectus to such person at or prior to the
confirmation of the sale of such Shares in any case where such delivery is
required by the Act. This indemnity obligation will be in addition to any
liability which the Company may otherwise have.
(2) to reimburse each Underwriter and each such controlling person
upon demand for any legal or other out-of-pocket expenses reasonably
incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or
liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or
not such Underwriter or controlling person is a party to any action or
proceeding. In the event that it is finally judicially determined that
the Underwriters were not entitled to receive payments for legal and
other expenses pursuant to this subparagraph, the Underwriters will
promptly return all sums that had been advanced pursuant hereto.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
<PAGE> 19
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Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing,
the indemnifying party shall pay as incurred (or within 30 days of presentation)
the fees and expenses of the counsel retained by the indemnified party in the
event (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel, (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them or (iii) the indemnifying party shall have failed to assume the defense and
employ counsel acceptable to the indemnified party within a reasonable period of
time after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment, except as
otherwise provided in such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
<PAGE> 20
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(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section
8(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
<PAGE> 21
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(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise
than by reason of any default on the part of the Company), you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or
any others, to purchase from the Company such amounts as may be agreed upon and
upon the terms set forth herein, the Firm Shares or Option Shares, as the case
may be, which the defaulting Underwriter or Underwriters failed to purchase.
If during such 36 hours you, as such Representatives, shall not have procured
such other Underwriters, or any others, to purchase the Firm Shares or Option
Shares, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of shares with
respect to which such default shall occur does not exceed 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
numbers of Firm Shares or Option Shares, as the case may be, which they are
obligated to purchase hereunder, to purchase the Firm Shares or Option Shares,
as the case may be, which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the Company or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 36-hour period to the
parties to this Agreement, to terminate this Agreement without liability on the
part of the non-defaulting Underwriters or of the Company except to the extent
provided in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option
Closing Date, as the case may be, may be postponed for such period, not
exceeding seven days, as you, as Representatives, may determine in order that
the required changes in the Registration Statement or in the Prospectus or in
any other documents or arrangements may be effected. The term "Underwriter"
includes any person substituted for a defaulting Underwriter. Any action taken
under this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
<PAGE> 22
-22-
10. NOTICES.
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to BT Alex. Brown Incorporated,
One South Street, Baltimore, Maryland 21202, Attention: Russell T. Ray,
Managing Director; with a copy to BT Alex. Brown Incorporated, One Bankers
Trust Plaza, 130 Liberty Street, New York, New York 10006, Attention: General
Counsel; if to the Company, to United Therapeutics Corporation, 1110 Spring
Street, Silver Spring, MD 20910, Attention: Martine Rothblatt; with a copy to
Bryan Cave LLP, 700 13th Street N.W., Suite 700, Washington, DC, Attention:
LaDawn Naegle, Esq.
11. TERMINATION. This Agreement may be terminated:
(a) by you by notice to the Company at any time prior to the Closing Date
if any of the following has occurred: (i) since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
any Material Adverse Change or any development involving a prospective Material
Adverse Change, whether or not arising in the ordinary course of business, (ii)
any outbreak or escalation of hostilities or declaration of war or national
emergency or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, escalation,
declaration, emergency, calamity, crisis or change on the financial markets of
the United States would, in your reasonable judgment, make it impracticable or
inadvisable to market the Shares or to enforce contracts for the sale of the
Shares, or (iii) suspension of trading in securities generally on the New York
Stock Exchange or Nasdaq-Amex or limitation on prices (other than limitations on
hours or numbers of days of trading) for securities on either such Exchange,
(iv) the enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects or may materially and adversely
affect the business or operations of the Company, (v) declaration of a banking
moratorium by United States or New York State authorities, (vi) the suspension
of trading of the Company's common stock by the Nasdaq National Market, the
Commission, or any other governmental authority or, (vii) the taking of any
action by any governmental body or agency in respect of its monetary or fiscal
affairs which in your reasonable opinion has a material adverse effect on the
securities markets in the United States; or
(b) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
<PAGE> 23
-23-
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company, the Selling Shareholders and the Underwriters acknowledge and
agree that the only information furnished or to be furnished by any Underwriter
to the Company for inclusion in any Prospectus or the Registration Statement
consists of the information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), legends
required by Item 502(d) of Regulation S-K under the Act and the information
under the caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements contained
in this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the
Company or its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
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.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
<PAGE> 24
-24-
Very truly yours,
UNITED THERAPEUTICS CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. BROWN INCORPORATED
A.G. EDWARDS & SONS, INC.
VECTOR SECURITIES INTERNATIONAL, INC.
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. Brown Incorporated
By:______________________________
Authorized Officer
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
UNITED THERAPEUTICS CORPORATION
It is hereby certified that:
1. The present name of the corporation (hereinafter called the
"corporation") is United Therapeutics Corporation. The name under which the
corporation was originally incorporated was Lung Rx, Inc.; and the date of
filing the original certificate of incorporation of the corporation with the
Secretary of State of the State of Delaware is June 26, 1996.
2. The certificate of incorporation is hereby amended in its entirety
as set forth in the Restated Certificate of Incorporation hereinafter provided
for.
3. The provisions of the certificate of incorporation of the
corporation as heretofore amended and/or supplemented, and as herein amended,
are hereby restated and integrated into the single instrument which is
hereinafter set forth, and which is entitled Amended and Restated Articles of
Incorporation of United Therapeutics Corporation.
4. The amendments and the restatement of the certificate of
incorporation herein certified have been duly adopted by the stockholders in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
5. The certificate of incorporation of the corporation, as amended and
restated herein, shall at the effective time of this amended and restated
certificate of incorporation, which shall not be the date of filing hereof but
shall be a date no later than 90 days from the date of such filing as
established by the Board of Directors, read as follows:
ARTICLE I
The name of the corporation (hereinafter referred to as the
"Corporation") is United Therapeutics Corporation.
ARTICLE II
The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name and address of the Registered
agent is Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington Delaware.
ARTICLE III
The period of duration of the Corporation is perpetual.
<PAGE> 2
ARTICLE IV
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law ("DGCL").
ARTICLE V
(a) The total number of shares of capital stock of all classes
which the Corporation shall have the authority to issue is One Hundred Ten
Million (110,000,000) shares, consisting of One Hundred Million (100,000,000)
shares of Common Stock, par value $.01 per share, and Ten Million (10,000,000)
shares of Preferred Stock, par value $.01 per share.
(b) The designations, voting powers, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of the above classes of stock are as follows:
(i) Subject to the limitations hereinafter contained and to
the requirements of the laws of the State of Delaware, authority is
hereby vested in the Board of Directors of the Corporation to issue
from time to time said Ten Million (10,000,000) shares of Preferred
Stock in one or more series, with such voting powers, full or limited,
or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated in the
resolution or resolutions providing for the issuance of such stock
adopted by the Board of Directors. Without limiting the generality of
the foregoing, in the resolution or resolutions providing for the
issuance of such shares of each particular series of Preferred Stock,
subject to the limitations hereinafter contained and to the
requirements of the laws of the State of Delaware, the Board of
Directors is also expressly authorized:
(A) to fix the distinctive serial designation of the
shares of any such series;
(B) to fix the consideration for which the shares of
any such series are to be issued;
(C) to fix the rate or amount per annum, if any, at
which the holders of the shares of any such series shall be
entitled to receive dividends, the dates on which such
dividends shall be payable, whether the dividends shall be
cumulative or noncumulative, and if cumulative, to fix the
date or dates from which such dividends shall be cumulative;
(D) to fix the price or prices at which, the times
during which, and the other terms, if any, upon which the
shares of any such series may be redeemed;
(E) to fix the rights, if any, which the holders of
shares of any such series have in the event of dissolution or
upon distribution of the assets of the Corporation;
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<PAGE> 3
(F) to determine whether the shares of any such
series shall be made convertible into or exchangeable for
other securities of the Corporation, including shares of the
Common Stock of the Corporation or shares of any other series
of the Preferred Stock of the Corporation, now or hereafter
authorized, or any new class of preferred stock of the
Corporation hereafter authorized, the price or prices or the
rate or rates at which conversion or exchange may be made, and
the terms and conditions upon which any such conversion right
or exchange right shall be exercised;
(G) to determine whether a sinking fund shall be
provided for the purchase or redemption of shares of any
series and, if so, to fix the terms and amount or amounts of
such sinking fund;
(H) to determine whether the shares of any such
series shall have voting rights, and, if so, to fix the voting
rights of the shares of such series; and
(I) to fix such other preferences and rights
privileges and restrictions applicable to any such series as
may be permitted by law.
(ii) Subject to the prior rights of the holders of any shares
of Preferred Stock, the holders of the Common Stock shall be entitled
to receive, to the extent permitted by law, such dividends as may be
declared from time to time by the Board of Directors.
In the event of any voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the Corporation, after the
holders of the Preferred Stock then outstanding, if any, shall have received the
full preferential amounts to which such holders may be entitled upon such
voluntary or involuntary liquidation, dissolution, distribution of assets or
winding up, the holders of Common Stock shall be entitled, to the exclusion of
such holders of the Preferred Stock then outstanding, to receive all the
remaining assets of the Corporation of whatever kind available for distribution
to stockholders, ratably in proportion to the number of shares of Common Stock
held by them respectively. A consolidation, merger or reorganization of the
Corporation with any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall not be considered a
dissolution, liquidation or winding up of the Corporation within the meaning of
the immediately preceding sentence.
Except as may otherwise by required by law, the By-Laws of the
Corporation or this Certificate of Incorporation, each holder of Common Stock
shall be entitled to one vote for each share of Common Stock held of record in
the name of such stockholder on all matters voted upon by the stockholders,
including the election of directors.
(c) The Corporation hereby declares that, as of the effective
date of filing of this Amended and Restated Certificate of Amendment, each three
outstanding shares of the Corporation's Common Stock, par value $.01 per share
be converted and reconstituted into one share of Common Stock, par value $.01
per share. No fractional shares shall be issued upon such conversion and
reconstitution, and the number of shares of Common Stock to be issued shall be
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<PAGE> 4
rounded down to the nearest whole share.
ARTICLE VI
All preemptive rights of shareholders are hereby denied, so
that no shares of capital stock of the Corporation of any class whether now or
hereafter authorized and no other security of the Corporation shall carry with
it and no holder or owner of any share or shares of capital stock of the
Corporation of any class whether now or hereafter authorized or of any other
security of the Corporation shall have any preferential or preemptive right to
acquire additional shares of capital stock of the Corporation of any class
whether now or hereafter authorized or of any other security of the Corporation.
All cumulative voting rights are hereby denied, so that none
of the capital stock of the Corporation of any class whether now or hereafter
authorized or of any other security of the Corporation shall carry with it and
no holder or owner of any share or shares of capital stock of the Corporation of
any class whether now or hereafter authorized or of any other security of the
Corporation shall have any right to cumulative voting in the election of
directors or for any other purpose.
The foregoing provisions are not intended to modify or
prohibit any provisions of any voting trust or agreement between or among
holders or owners of shares of stock or other securities.
ARTICLE VII
(a) Except as may be otherwise provided by law or in this
Certificate of Incorporation, the business and affairs of the Corporation shall
be managed under the direction of the Board of Directors. The number of
directors of the Corporation shall be fixed by, or in the manner provided in,
the By-Laws of the Corporation. In furtherance and not in limitation of the
powers conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized and empowered:
(i) to make, alter, amend or repeal the By-Laws of
the Corporation in any manner not inconsistent with the laws
of the State of Delaware or this Certificate of Incorporation,
subject to the power of the stockholders, at the time entitled
to vote, to alter, amend or repeal By-Laws made by the Board
of Directors;
(ii) to fix from time to time the amount of net
profits of the Corporation or of its surplus to be reserved as
working capital or for any other lawful purpose;
(iii) to authorize and issue obligations of the
Corporation, secured or unsecured, and to include therein such
provisions as to redemption, conversion or other terms thereof
as the Board of Directors in its sole discretion may
determine, and to authorize the mortgaging or pledging, as
security therefor, of any property of the Corporation, real or
personal, including after-acquired property;
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<PAGE> 5
(iv) to determine whether any, and if any, what part,
of the net profits of the Corporation or of its surplus shall
be declared in dividends and paid to the stockholders, and to
direct and determine the use and disposition of such net
profits or such surplus; and
(v) from time to time, without the vote or assent of
the stockholders, to issue additional shares of authorized
Common Stock.
In addition to the powers and authorities herein or by law
expressly conferred upon it, the Board of Directors may exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the laws of the State of Delaware,
of this Certificate of Incorporation and of the By-Laws of the Corporation.
(b) No contract or other transaction of the Corporation shall
be affected by the fact that any of the directors of the Corporation are in any
way interested in or connected with any other party to such contract or
transaction, or are themselves parties to such contract or transaction, provided
that at the meeting of the Board of Directors or of the committee there of
authorizing or confirming such contract or transaction there shall be present a
quorum of directors not so interested or connected, and such contract or
transaction shall be approved by a majority of such quorum, which shall consist
of directors not so interested or connected.
(c) The Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III, as nearly equal in number
as the then total number of directors constituting the whole Board permits. If
the number of directors is changed, any increase or decrease shall be
apportioned by the Board of Directors among the three classes so that the number
in each class shall be as nearly equal as possible. The term of office of each
class shall expire at the third annual meeting of stockholders for election of
directors following the election of such class, except that the initial term of
office of the Class I directors shall expire at the annual meeting of
stockholders in 2001, the initial term of office of the Class II directors shall
expire at the annual meeting of stockholders in 2002 and the initial term of
office of the Class III directors shall expire at the annual meeting of
stockholders in 2003. At each annual meeting of the stockholders of the
Corporation, the successors of the class of directors whose term expires at such
meeting shall be elected to hold office for a term expiring as of the third
succeeding annual meeting.
ARTICLE VIII
(a) The Corporation shall to the fullest extent permitted by
the laws of Delaware as the same now or may hereafter exist, 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 or she is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
5
<PAGE> 6
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she 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 or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she 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 reasonable cause to
believe that his or her conduct was unlawful. To the extent that a director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in this subsection (a) of
this ARTICLE VIII or in defense of any claim, issue or matter therein, he or she
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
(b) Any indemnification required under subsection (a) of this
ARTICLE VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because he or she has met
the applicable standard of conduct set forth in subsection (a) of this ARTICLE
VIII. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(c) Expenses (including attorneys' fees) incurred by an
officer or a director in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation as authorized in or pursuant to this ARTICLE
VIII.
(d) The indemnification and advancement of expenses provided
by, or granted pursuant to paragraph (c) of this ARTICLE VIII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors, the By-Laws of the Corporation or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
(e) Without limiting the provisions of this ARTICLE VIII, the
Corporation is authorized from time to time, without further action by the
stockholders of the Corporation, to enter into agreements with any director or
officer of the Corporation providing such rights of indemnification as the
Corporation may deem appropriate, up to the maximum extent permitted by law. Any
agreement entered into by the Corporation with a director may be authorized by
the other directors, and such authorization shall not be invalid on the basis
that similar agreements may have been or may thereafter be entered into with
other directors.
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<PAGE> 7
(f) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this ARTICLE VIII.
(g) The indemnification and advancement of expenses provided
by, or granted pursuant to, this ARTICLE VIII shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(h) For purposes of this ARTICLE VIII, references to a
corporation shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which if its separate existence had continued, would
have had power and authority to indemnify its directors or officers so that a
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
ARTICLE VIII with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this ARTICLE VIII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation which
imposes duties on, or involves services by such director or officer with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he or she reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this ARTICLE VIII.
(j) Persons who are not covered by the foregoing provisions of
this ARTICLE VIII and who are or were employees or agents of the Corporation, or
are or were serving at the request of the Corporation as employees or agents of
another corporation, partnership, joint venture, trust or other enterprise, may
be indemnified to the fullest extent permitted by the laws of Delaware as the
same now or may hereafter exist or to such lesser extent as the Board of
Directors of the Corporation, in its discretion, may from time to time deem
appropriate.
ARTICLE IX
Except as otherwise provided in this Certificate of
Incorporation, any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation and may not be effected
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<PAGE> 8
by consent in writing by such stockholders. A special meeting of stockholders
may be called only by the Board of Directors pursuant to a resolution adopted by
the affirmative vote of a majority of the entire Board of Directors or by the
Chairman of the Board of Directors, a Vice Chairman of the Board of Directors or
the President.
ARTICLE VIII
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 the
provisions of Section 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 the provisions of Section 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 a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors.
ARTICLE XI
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director except (i) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions), or (iv) for any transaction from which the director derived an
improper personal benefit. Should the DGCL be amended hereafter so as to expand
or limit the liability of a director, then the liability of a director of the
Corporation shall be so expanded to the fullest extent required or so limited to
the fullest extent permitted by such amendment without the need for amendment of
this Certificate of Incorporation or further action on the part of the
stockholders of the Corporation.
* * * * * *
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<PAGE> 9
IN WITNESS WHEREOF, said United Therapeutics Corporation, has
caused this certificate to be signed by its President and Secretary, this ______
day of April, 1999.
UNITED THERAPEUTICS CORPORATION
BY /s/ Martine Rothblatt
-----------------------------
Martine Rothblatt, President
ATTEST:
BY /s/ Paul A. Mahon
-------------------
Paul A. Mahon, Secretary
9
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
UNITED THERAPEUTICS CORPORATION.
ARTICLE I
OFFICES
Section 1.1 Registered Office. The registered office of United
Therapeutics Corporation (the "Corporation") shall be in the State of Delaware
at such location and with such registered agent in charge thereof as may be
established by the Board of Directors from time to time.
Section 1.2 Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of directors and to transact such
other business as may properly be brought before the meeting at such date, time
and place either within or without the State of Delaware as may be designated
from time to time by the Board of Directors and stated in the notice of the
meeting.
Section 2.2. Special Meetings. A special meeting of the
stockholders may be called only by the Board of Directors pursuant to a
resolution adopted by the affirmative vote of a majority of the entire Board of
Directors or by the Chairman of the Board of Directors, a Vice Chairman of the
Board of Directors or the President. Only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before the meeting as hereinafter provided.
Section 2.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, annual or special, a
written notice of the meeting shall be given to such stockholder or stockholders
which shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Unless
otherwise provided by law, the written notice of any meeting shall be given not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting.
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<PAGE> 2
Section 2.4. Notice of Stockholder Business at Meetings. At
any meeting of stockholders, annual or special, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
properly brought before the meeting as hereinafter provided. For a proposal to
be properly brought before a meeting, each item of business must either (a) be
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors or the persons calling the meeting as
herein provided, (b) be otherwise properly brought before the meeting by or at
the direction of the Board of Directors, or (c) be otherwise properly brought
before the meeting by a stockholder as hereinafter provided. For a proposal to
be properly brought before a meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation, in
the case of an annual meeting, not less than ninety (90) days nor more than one
hundred and twenty (120) days prior to the meeting of stockholders and, in the
case of a special meeting, not less than ten (10) days immediately following the
giving of notice of such special meeting; provided, however, that in the event
that less than one hundred (100) days notice or prior public disclosure of the
date of the annual meeting of stockholders is given or made to the stockholders,
to be timely, notice of a proposal delivered by the stockholder must be received
by the Secretary not later than the close of business on the tenth day following
the day on which notice of the date of the annual meeting of stockholders was
mailed or such public disclosure was made to the stockholders. The provisions of
this Section 2.4 shall also govern what constitutes timely notice for purposes
of Rule 14a-4(c) under the Securities Exchange Act of 1934, as amended. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief description of the
proposal desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address of record of the
stockholder proposing the business and any other stockholders known by such
stockholder to be supporting the proposal, (c) the class or classes of stock and
number of shares of such class or classes of stock which are beneficially owned
by the proposing stockholder or stockholders on the date of the stockholder
notice, and (d) any material interest of the proposing stockholder or
stockholders in the proposal.
Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at a meeting of stockholders except in accordance
with the procedures set forth in this Section 2.4. The Board of Directors may
reject any stockholder proposal submitted for consideration at a meeting of
stockholders which is not made in accordance with the terms of this Section 2.4
or which is not a proper subject for stockholder action in accordance with
provisions of applicable law. Alternatively, if the Board of Directors fails to
consider the validity of any such stockholder proposal, the presiding officer of
the meeting of stockholders may, if the facts warrant, determine and declare to
the persons attending the meeting that the business was not properly brought
before the meeting in accordance with the provisions of this Section 2.4, and he
or she shall further declare that any such business not properly brought before
such meeting shall not be transacted. The Board of Directors or, as the case may
be, the presiding officer of the meeting shall have absolute authority to decide
questions of compliance with the foregoing procedures and the Board of
Directors' or, as the case may be, the presiding officer's ruling thereon shall
be final and conclusive. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of stockholders of reports of
officers, directors and committees of the Board of Directors, but, in connection
with such reports, no new business shall
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be acted upon at such meeting unless stated, filed and received as herein
provided.
Section 2.5. Nomination of Director Candidates. To be
qualified for election as a director, persons must be nominated in accordance
with the procedures set forth in this Section 2.5. Nominations of candidates for
election to the Board of Directors of the Corporation may be made only by or at
the direction of the Board of Directors or by a stockholder entitled to vote at
such meeting of stockholders. All such nominations, except 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. To be timely, a stockholder's
notice shall be delivered to or mailed and received by the Secretary not less
than ninety (90) days nor more than one hundred and twenty (120) days prior to
the meeting of stockholders; provided, however, that in the event that less than
one hundred (100) days' notice or prior public disclosure of the date of the
meeting of stockholders is given or made to stockholders, to be timely, notice
of a nomination delivered by such stockholder must be received by the Secretary
not later than the close of business on the tenth day following the day on which
notice of the date of the meeting of stockholders was mailed or such public
disclosure was made to the stockholders. Such stockholder's notice shall set
forth (a) the name, age, business address and residence address, and the
principal occupation or employment of any nominee proposed in such notice, (b)
the name and address of the stockholder or stockholders giving the notice as the
same appears in the Corporation's stock ledger, (c) the number of shares of
capital stock of the Corporation which are beneficially owned by any such
nominee and by such nominating stockholder or stockholders, and (d) such other
information concerning any such nominee as would be required, under the rules of
the Securities and Exchange Commission, in a proxy statement soliciting proxies
for the election of such nominee.
At the request of the Board of Directors, any person nominated
for election as a director shall furnish to the Secretary the information
required by this Section 2.5 to be set forth in a stockholder's notice of
nomination which pertains to the nominee. The Chairman of a meeting of
stockholders shall, if the facts warrant, determine and declare at such meeting
of stockholders that such nomination was not made in accordance with the
procedures prescribed by this Section 2.5, and he or she shall further declare
that the defective nomination shall be disregarded. The Chairman of a meeting of
stockholders shall have absolute authority to decide questions of compliance
with the foregoing procedures and his or her ruling thereon shall be final and
conclusive.
Section 2.6. Adjournments. Any meeting of stockholders, annual
or special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 2.7. Quorum. At each meeting of stockholders, except
where otherwise provided by law or the Certificate of Incorporation or these
By-Laws, the holders of a majority of
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the outstanding shares of each class of stock entitled to vote at the meeting,
present in person or represented by proxy, shall constitute a quorum. For
purposes of the foregoing, two or more classes or series of stock shall be
considered a single class if the holders thereof are entitled to vote together
as a single class at the meeting. In the absence of a quorum, the stockholders
so present may, by majority vote, adjourn the meeting from time to time in the
manner provided by Section 2.6 of these By-Laws until a quorum shall be present
or represented. The stockholders present or represented at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum. Shares of the
Corporation's own capital stock belonging on the record date for the meeting to
the Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including, but not limited to,
its own stock, held by it in a fiduciary capacity.
Section 2.8. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his or her absence by
the Vice Chairman of the Board, if any, or in his or her absence by the
President, or in his or her absence by a Vice President, or in the absence of
all of the foregoing persons by a chairman designated by the Board of Directors,
or in the absence of such designation by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.9. Voting; Proxies. Unless otherwise provided in the
Certificate of Incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him or her which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders may authorize another person or
persons to act for him or her by proxy, but no such proxy shall be voted or
acted upon after three (3) years from the date of such proxy, unless the proxy
provides for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date than the original proxy with the Secretary
of the Corporation. Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding shares of all classes of stock entitled to vote thereon
present in person or by proxy at such meeting shall so determine. At all
meetings of stockholders for the election of directors, a plurality of the votes
cast shall be sufficient to elect. All other elections and questions shall,
unless otherwise provided by law or by the Certificate of Incorporation or these
By-Laws, be decided by the vote of the holders of a majority of the outstanding
shares of all classes of stock entitled to vote thereon present in person or by
proxy at the meeting, provided that (except as otherwise required by law or by
the Certificate of Incorporation) the Board of Directors may require a larger
vote upon any election or question.
Section 2.10. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any
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meeting of stockholders or any adjournment thereof, 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, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. If no record date is fixed by the Board of
Directors: (1) 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; (2) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto. 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 may fix a new
record date for the adjourned meeting.
Section 2.11. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten (10) days before every meeting of
stockholders, annual or special, a complete list of the stockholders entitled to
vote at such meeting, arranged in alphabetical order, and showing the address of
each such stockholder and the number of shares registered in the name of each
such 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 (10) 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.
Section 2.12. Consent of Stockholders in Lieu of Meeting.
Except as otherwise provided in the Certificate of Incorporation, any action
required by law to be taken at any annual or special meeting of stockholders of
the Corporation, or any action which may be taken at any annual or special
meeting of stockholders, may not be effected by consent in writing in lieu of a
meeting by such stockholders.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. Powers; Number; Qualifications. Except as may be
otherwise provided by law or in the Certificate of Incorporation, the business
and affairs of the Corporation shall be managed under the direction of the Board
of Directors. The number of directors which shall constitute the whole Board
shall be not less than five (5) nor more than twenty (20). The exact number of
directors within the minimum and maximum limitation specified in the preceding
sentence shall be fixed from time to tome exclusively by resolution of a
majority of the whole Board. Directors need not be stockholders or residents of
the State of Delaware.
The Board of Directors is specifically authorized to divide
the Board into three
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classes, as authorized by the Delaware General Corporation Law and the
Certificate of Incorporation, designated Class I, Class II and Class III, as
nearly equal in number as the then total number of directors constituting the
whole Board permits. The term of office of each class shall expire at the third
annual meeting of stockholders for election of directors following the election
of such class, except that the initial term of office of the Class I directors
shall expire at the annual meeting of stockholders in 2001, the initial term of
office of the Class II directors shall expire at the annual meeting of
stockholders in 2002 and the initial term of office of the Class III directors
shall expire at the annual meeting of stockholders in 2003. At each annual
meeting of stockholders, directors of the class whose term then expires shall be
elected for a full term of three (3) years to succeed the directors of such
class so that the term of office of the directors of one class shall expire in
each year.
Section 3.2. Election; Term of Office; Resignation; Removal;
Vacancies. The members of each class of directors shall be elected at the annual
meeting of the stockholders at which the term of office of such class expires,
as provided herein. Each director shall hold office until the expiration of the
term for which he or she was elected and shall continue in office until his or
her successor is elected and qualified or until his or her earlier resignation
or removal. Any director may resign at any time upon written notice to the Board
of Directors or to the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein, no acceptance of such resignation shall be
necessary to make it effective. A director may be removed from office only for
cause and by the affirmative vote of the holders of not less than eighty percent
(80%) of all the outstanding shares of stock of the Corporation entitled to vote
generally in the election of directors at a special meeting of stockholders
called expressly for that purpose. Unless otherwise provided in the Certificate
of Incorporation or these By-Laws, any vacancies which exist following the
election of the initial director shall be filled by the initial director and
vacancies and newly created directorships resulting from any increase in the
authorized number of directors or from any other cause shall be filled by a
majority of the directors then in office, although less than a quorum, or by the
sole remaining director, and directors so chosen shall hold office until the
next annual election of the class for which such directors shall have been
chosen, and until their successors shall be elected and qualified. The
stockholders of the Corporation are expressly prohibited from cumulating their
votes in any election of directors of the Corporation.
Section 3.3. Regular Meetings. Regular meetings of the Board
of Directors shall be held at such places within or without the State of
Delaware and at such times as the Board may from time to time determine, and if
so determined, notice thereof need not be given.
Section 3.4. Special Meetings. Special meetings of the Board
of Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the Vice
Chairman of the Board, if any, by the President or by any two directors. Notice
of any special meeting of the Board of Directors shall be given at least five
(5) days prior to the date of the special meeting by written notice to each
director.
Section 3.5. Telephonic Meetings Permitted. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors, or any committee designated by the Board, may participate in
a meeting of the Board or of such
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committee, as the case may be, 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 in a meeting pursuant to this
Section 3.5 shall constitute presence in person at such meeting.
Section 3.6. Quorum; Vote Required for Action. At all meetings
of the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. The vote of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board unless the Certificate of Incorporation or these By-Laws shall
require a vote of a greater number. In case at any meeting of the Board a quorum
shall not be present, the members of the Board present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 3.7. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, if any, or in his or her
absence by the Vice Chairman of the Board, if any, or in his or her absence by
the President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 3.8. Informal Action by Directors. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, 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 if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or such committee.
Section 3.9. Compensation. The Board of Directors shall have
the authority to fix compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
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ARTICLE IV
COMMITTEES
Section 4.1. Committees. The Board of Directors may, by
resolution adopted by a majority of the entire Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of such committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting of such
committee and not disqualified from voting, whether or not he or she or they
constitute a quorum, may unanimously appoint another member of the Board to act
at such meeting in place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board 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 power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of dissolution,
removing or indemnifying directors or amending these By-Laws; and, unless the
resolution expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
Section 4.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may make, alter and
repeal rules for the conduct of its business. In the absence of a provision by
the Board of Directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of such vote if a
quorum is then present shall be the act of such committee, and in all other
respects each committee shall conduct its business in the same manner as the
Board of Directors of the Corporation conducts its business pursuant to Article
III of these By-Laws.
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ARTICLE V
OFFICERS
Section 5.1. Officers; Election; Qualification; Term of
Office; Resignation; Removal; Vacancies. As soon as practicable after the annual
meeting of stockholders in each year, the Board of Directors shall elect a
President and a Secretary, and the Board of Directors may, if it so determines,
elect from among its members a Chairman of the Board and a Vice Chairman of the
Board. The Board may also elect one or more Vice Presidents, one or more
Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and
one or more Assistant Treasurers and may give any of them such further
designations or alternate titles as it considers desirable. Each such officer
shall hold office until the first meeting of the Board of Directors after the
annual meeting of stockholders next succeeding his or her election, and until
his or her successor is elected and qualified or until his or her earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Board of Directors or to the President or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. The Board of Directors may remove any officer
with or without cause at any time. Any such removal shall be without prejudice
to the contractual rights of such officer, if any, with the Corporation, but the
election or appointment of an officer shall not of itself create contractual
rights. Any number of offices may be held by the same person. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the Board of
Directors at any regular or special meeting of the Board.
Section 5.2. Powers and Duties of Executive Officers. The
officers of the Corporation shall have such powers and duties in the management
of the Corporation as may be prescribed by the Board of Directors and, to the
extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board of Directors. The Board may require any
officer, agent or employee to give security for the faithful performance of his
or her duties.
ARTICLE VI
STOCK
Section 6.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman or Vice Chairman of the Board of Directors, if
any, or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
certifying the number of shares owned by him or her in the Corporation. If such
certificate is manually signed by one officer or manually countersigned by a
transfer agent or by a registrar, any other signature on the certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has 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
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agent or registrar at the date of issue.
Section 6.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or his or her legal representative, to
give the Corporation a bond sufficient to indemnify the Corporation against any
claim that may be made against the Corporation on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Indemnification of Officers and Directors. The
Corporation shall to the fullest extent permitted by the laws of Delaware as the
same now or may hereafter exist, 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 or she is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director or officer 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 or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she 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 or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she 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
reasonable cause to believe that his or her conduct was unlawful. To the extent
that a director or officer of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
7.1 of this ARTICLE VII or in defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
Section 7.2. Determination. Any indemnification required under
Section 7.1 of this ARTICLE VII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 7.1 of this ARTICLE VII. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
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Section 7.3. Advancement of Expenses. Expenses (including
attorneys' fees) incurred by an officer or a director in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in or
pursuant to this ARTICLE VII.
Section 7.4. Other Rights of Indemnification. The
indemnification and advancement of expenses provided by, or granted pursuant to
this ARTICLE VII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law of the Corporation, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office.
Section 7.5. Indemnification Agreements. Without limiting the
provisions of this ARTICLE VII, the Corporation is authorized from time to time,
without further action by the stockholders of the Corporation, to enter into
agreements with any director or officer of the Corporation providing such rights
of indemnification as the Corporation may deem appropriate, up to the maximum
extent permitted by law. Any agreement entered into by the Corporation with a
director may be authorized by the other directors, and such authorization shall
not be invalid on the basis that similar agreements may have been or may
thereafter be entered into with other directors.
Section 7.6. Liability Insurance. The Corporation shall have
the power to purchase and maintain insurance on behalf of any person who is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability under the
provisions of this ARTICLE VII.
Section 7.7. Survival of Right to Indemnification. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this ARTICLE VII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
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Section 7.8. Definitions. For purposes of this ARTICLE VII,
references to a "corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers so that a person who is or was a director or officer of
such constituent corporation, or is or was serving at the request of such
constituent corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this ARTICLE VII with respect to the resulting
or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
For purposes of this ARTICLE VII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation which
imposes duties on, or involves services by such director or officer with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he or she reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this ARTICLE VII.
Section 7.9. Indemnification of Employees and Agents. Persons
who are not covered by the foregoing provisions of this ARTICLE VII and who are
or were employees or agents of the Corporation, or are or were serving at the
request of the Corporation as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise, may be indemnified to the
fullest extent permitted by the laws of Delaware as the same now or may
hereafter exist or to such lesser extent as the Board of Directors of the
Corporation, in its discretion, may from time to time deem appropriate.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors.
Section 8.2. Seal. The Corporation may have a corporate seal
which shall have the name of the Corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 8.3. Manner of Notice. Whenever, under the provisions
of the statutes or of the Certificate of Incorporation or of these By-Laws,
notice is required to be given to any stockholder, it shall not be construed to
mean personal notice, but such notice may be given in writing, by mail,
addressed to such stockholder, at his or her address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at
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the time when the same shall be deposited in the United States mail. Notice to
directors or officers of the Corporation may be given by telegram, telephone,
mailgram, telex, telecopier, courier or any other similar medium.
Section 8.4. Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Whenever notice is required to be given by law or
under any provision of the Certificate of Incorporation or these By-Laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting was not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these By-Laws.
Section 8.5. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
her or their votes are counted for such purpose, provided: (1) the material
facts as to his or her 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 vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or (2)
the material facts as to his or her 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 thereof 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.
Section 8.6. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 8.7. Amendment of By-Laws. These By-Laws may be
altered or repealed, and new By-Laws made, by the Board of Directors or by the
affirmative vote of the holders of not less than eighty percent (80%) of the
combined voting power of the outstanding shares of stock of the Corporation
entitled to vote generally in the election of directors, voting
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together as a single class.
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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
October 30, 1998
To the several persons named
at the foot hereof (each a
"Buyer" and collectively,
the "Buyers")
Dear Sirs:
This will confirm that in consideration of the purchase by you of an
aggregate 1,666,667 shares of Common Stock, $.01 par value ("Common Stock"), of
United Therapeutics Corporation, a Delaware corporation (the "Company"),
pursuant to the Stock Purchase Agreement dated as of October 30, 1998 among the
Company and the several Buyers named as parties thereto (the "Purchase
Agreement"), the Company hereby covenants and agrees with each of you, and with
each subsequent holder of Restricted Stock (as such term is defined herein) as
follows:
1. Certain Definitions. As used herein, the following terms shall
have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Shares" shall mean the 1,666,667 shares of Common Stock
issued and sold to the Buyers pursuant to the Purchase Agreement.
"Common Stock" shall mean the Common Stock, $.01 par value, of the
Company, as constituted as of the date of this Agreement, subject to
adjustment pursuant to the provisions of Section 10 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
<PAGE> 2
"Public Sale" shall mean any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or to the
public pursuant to the provisions of Rule 144 (or any successor or similar
rule) adopted under the Securities Act.
"Registration Expenses" shall mean the expenses so described in
Section 8 hereof.
"Restricted Stock" shall mean, subject to the provisions of Section
10 hereof, (i) the Common Shares and (ii) any securities issued upon
exchange, adjustment or transfer of any such shares, the certificates for
which are required by the provisions of Section 2 hereof to bear the
legend set forth in such Section.
"Securities Act" shall mean the Securities Act of 1933 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8
hereof.
2. Restrictive Legend. Each certificate representing the Common
Shares and, other than in a Public Sale or as otherwise provided in Section 3
hereof, each certificate issued upon exchange or transfer of any Common Shares,
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. NEITHER THE SECURITIES EVIDENCED
BY THIS CERTIFICATE, NOR ANY INTEREST THEREIN, MAY BE
OFFERED, SOLD, TRANSFERRED, ENCUMBERED OR OTHERWISE
DISPOSED OF UNLESS EITHER (I) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND THE LAWS RELATING
THERETO OR (II) THE ISSUER HAS RECEIVED AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO
THE ISSUER, STATING THAT SUCH REGISTRATION IS NOT
REQUIRED."
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
Restricted Stock (other than under the circumstances described in Section 4, 5
or 6 hereof), the holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the Company (it being agreed
that Reboul, MacMurray, Hewitt, Maynard & Kristol shall be satisfactory) to the
effect
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<PAGE> 3
that the proposed transfer of such Restricted Stock may be effected without
registration under the Securities Act, whereupon the holder of such Restricted
Stock shall be entitled to transfer such Restricted Stock in accordance with the
terms of its notice; provided, however, that in the case of any Buyer that is a
partnership, no such opinion or other documentation shall be required if such
notice shall cover a transfer by such partnership to its partners and provided,
further, however, that the shares so transferred shall remain subject to this
Agreement. Each certificate representing the Restricted Stock transferred as
above provided shall bear the legend set forth in Section 2, unless (i) such
transfer is in accordance with the provisions of Rule 144 (or any other rule
permitting public sale without registration under the Securities Act) and is not
made by an affiliate of the Company or (ii) the opinion of counsel referred to
above is to the further effect that the transferee and any subsequent transferee
(other than an affiliate of the Company) would be entitled to transfer such
securities without registration under the Securities Act.
Subject to the foregoing paragraph, the holders of Restricted Stock
shall have the right to transfer shares of Restricted Stock, in whole or in
part, and the rights associated therewith, at any time to any of their
respective affiliates.
The foregoing restrictions on transferability of Restricted Stock
shall terminate as to any particular shares of Restricted Stock when such shares
shall have been effectively registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition by
the seller or sellers thereof set forth in the registration statement concerning
such shares. Whenever a holder of Restricted Stock is able to demonstrate to the
Company (and its counsel) that the provisions of Rule 144(k) of the Securities
Act are available to such holder without limitation, such holder of Restricted
Stock shall be entitled to receive from the Company, without expense, a new
certificate not bearing the restrictive legend set forth in Section 2 in
exchange for the surrender of the existing certificate, which shall be marked
canceled by the Company.
4. Required Registration; Purchase Option.
(a) At any time following the earlier to occur of (i) the date six
months after the date on which the Company shall have completed an initial
public offering of shares of its Common Stock (hereinafter referred to as an
"IPO") and (ii) the fifth anniversary of the date hereof, the holders of
Restricted Stock constituting at least twenty-five percent (25%) of the total
Restricted Stock outstanding at such time may request the Company to register
under the Securities Act all or any portion of the Restricted Stock held by such
requesting holder or holders for sale in the manner specified in such notice,
provided, however, that the only securities which the Company shall be required
to register pursuant hereto shall be shares of Common Stock and provided
further, however, that the reasonably anticipated aggregate price to the public
would equal at least $2 million. Notwithstanding anything in this Section 4(a)
to the contrary, in the event that (x) an IPO shall not occur prior to the fifth
anniversary of this Agreement and (y) the requisite holders of Restricted Stock
request the Company to register Restricted Stock as
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<PAGE> 4
provided in clause (ii) of the preceding sentence, the Company shall have the
right and option (the "Purchase Option"), in lieu of registering such Restricted
Stock (including any additional shares of Restricted Stock for which
registration is requested as provided in Section 4(b) below) (collectively, the
"Specified Shares"), of offering to purchase all (but not less than all) of such
Specified Shares on the terms and subject to the conditions set forth in, and
for the purchase price determined in accordance with, Section 4(e) below.
(b) Promptly following receipt of any notice under Section 4(a), the
Company shall notify any holders of Restricted Stock from whom notice has not
been received and shall use its best efforts to register under the Securities
Act, for public sale in accordance with the method of disposition specified in
such notice from requesting holders, the number of shares of Restricted Stock
specified in such notice (and in any notices received from other holders of
Restricted Stock within 20 days after their receipt of such notice from the
Company). If such method of disposition shall be an underwritten public
offering, (i) the Company may designate the managing underwriter of such
offering, subject to the approval of the holders of a majority of the Restricted
Stock proposed to be sold, which approval shall not be unreasonably withheld,
and (ii) as and to the extent that, in the opinion of the managing underwriter,
the Restricted Stock so requested to be registered would adversely affect the
marketing of such Restricted Stock, the Company shall include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, (x) first, Restricted Stock requested to be included in
such registration by the holder or holders thereof, pro rata among the
requesting holders of Restricted Stock based upon the number of shares of
Restricted Stock requested to be registered and (y) second, securities the
Company proposes to sell and other securities of the Company included in such
registration by the holders thereof. The Company shall be obligated to register
Restricted Stock pursuant to Section 4(a) on two occasions only and no more than
once in any twelve-month period. Notwithstanding anything to the contrary
contained herein, each obligation of the Company to register Restricted Stock
under this Section 4 shall be deemed satisfied only when a registration
statement covering all shares of Restricted Stock specified in notices received
as aforesaid, for sale in accordance with the method of disposition specified by
the requesting holder, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, at least 90% of
such shares shall have been sold pursuant thereto.
(c) In the event that the Board of Directors of the Company
determines in good faith that the filing of a registration statement pursuant to
Section 4(a) hereof would be detrimental to the Company, the Board of Directors
may defer such filing for a period not to exceed sixty (60) days. The Board of
Directors may not effect more than one such deferral during any twelve month
period. The Board of Directors agrees to promptly notify all holders of
Restricted Stock of any such deferral, and shall provide to such holders an
explanation therefor.
(d) The Company shall be entitled to include in any registration
statement referred to in this Section 4, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account,
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<PAGE> 5
except as and to the extent that, in the opinion of the managing underwriter (if
such method of disposition shall be an underwritten public offering), such
inclusion would adversely affect the marketing of the Restricted Stock to be
sold. Except as provided in this paragraph (d), the Company will not effect any
other registration of its Common Stock, whether for its own account or that of
other holders (except with respect to a registration statement filed on Form S-8
or any successor form),, from the date of receipt of a notice from requesting
holders pursuant to this Section 4 until 90 days after the completion of the
period of distribution of the registration contemplated thereby.
(e) (1) In the event that the Company is entitled to exercise the
Purchase Option described in Section 4(a) above and elects to exercise such
Purchase Option, it shall give written notice of such election to all holders of
Specified Shares requesting registration pursuant to said Section 4(a) no later
than 30 days following receipt of such request for registration. The purchase
price (the "Purchase Price") for the Specified Shares shall be (i) an amount
representing the fair market value for such shares acceptable to the Company and
to the holders of not less than a majority of the Specified Shares (the
"Specified Majority") or, in the absence of agreement on such fair market value,
(ii) an amount representing the fair market value for such shares as determined
by an independent, nationally recognized investment banking firm mutually
acceptable to the Company and the Specified Majority. The fees and expenses of
such investment banking firm shall be paid one half by the Company and one half
by the holders of the Specified Shares, pro rata on the basis of the number of
Specified Shares held by such holders.
(2) Once the Purchase Price for the Specified Shares has been
determined as provided in clause (1) above, the Specified Majority shall have
fifteen days to determine whether or not to go forward with the sale of the
Specified Shares to the Company as provided in this Section 4(e). In the event
that the Specified Majority does not wish to sell the Specified Shares to the
Company for the Purchase Price, the Specified Majority shall give the Company
written notice during such fifteen day period of its election not to sell, in
which event the Company shall have no further obligations under this Section 4
to register any Restricted Shares or otherwise. In the event that the Specified
Majority does not respond within such fifteen day period or indicates its
acceptance of the Purchase Price, then the holders of the Specified Shares shall
sell such shares to the Company for the Purchase Price at a closing to be held
not more than fifteen days following the end of the prior fifteen day period. At
such closing, the holders of the Specified Shares shall deliver certificates
evidencing the Specified Shares to the Company, duly endorsed for transfer or
accompanied by stock powers executed in blank, against payment of the Purchase
Price therefor by wire transfer to the account or accounts specified by the
party entitled to receive the same. The Purchase Price shall be payable in cash.
5. Form S-3 Registration.
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<PAGE> 6
(a) If the Company shall receive from any holder or holders of
Restricted Stock, a written request or requests that the Company effect a
registration on Form S-3, at any time that the Company is entitled to use such
form, and any related qualification or compliance with respect to Restricted
Stock owned by such holder or holders, the reasonably anticipated aggregate
price to the public of which would equal at least $500,000, the Company will:
i) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other holders of
Restricted Stock from whom notice has not been received; and
ii) as soon as practicable, effect such registration (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under applicable blue sky or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other government
requirements or regulations) 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' Restricted Stock as are specified in such request,
together with all or such portion of the Restricted Stock of any holder or
holders thereof joining in such request as are specified in a written
request given within thirty (30) days after receipt of such written notice
from the Company, provided, however, that the only securities which the
Company shall be required to register pursuant hereto shall be shares of
Common Stock. Subject to the foregoing, the Company shall file a
registration statement covering the Restricted Stock so requested to be
registered as soon as practicable after receipt of the request or requests
of the holders of the Restricted Stock.
(b) The Company shall be obligated to register Restricted Stock
under Section 5(a) on an unlimited number of occasions but in no event more than
twice in any twelve-month period and to cause any such registration to remain in
effect for 90 days, after which time such registration may be terminated.
Registrations effected pursuant to this Section 5 shall not be counted as
requests for registration effected pursuant to Section 5.
6. Incidental Registration. If the Company at any time (other than
pursuant to Section 4 or Section 5 hereof) proposes to register any of its
Common Stock under the Securities Act for sale to the public, whether for its
own account or for the account of other security holders or both (except with
respect to registration statements on Form S-4 or S-8 or another form not
available for registering the Restricted Stock for sale to the public), it will
give written notice at such time to all holders of outstanding Restricted Stock
of its intention to do so. Upon the written request of any such holder, given
within 20 days after receipt of any such notice by the Company, to register any
of its Restricted Stock (which request shall state the intended method of
disposition thereof), the Company will use its best efforts to cause the
Restricted Stock as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to
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<PAGE> 7
permit the sale or other disposition by the holder (in accordance with its
written request) of such Restricted Stock. In the event that any registration
pursuant to this Section 6 shall be, in whole or in part, an underwritten public
offering of Common Stock, any request by a holder pursuant to this Section 6 to
register Restricted Stock shall specify that either (i) such Restricted Stock is
to be included in the underwriting on the same terms and conditions as the
shares of Common Stock otherwise being sold through underwriters under such
registration or (ii) such Restricted Stock is to be sold in the open market
without any underwriting, on terms and conditions comparable to those normally
applicable to offerings of common stock in reasonably similar circumstances. In
any such underwritten public offering of Common Stock, if, in the opinion of the
managing underwriter, the Restricted Stock so requested to be registered would
adversely affect the marketing of such Common Stock, the Company shall include
in such registration, to the extent of the number which the Company is so
advised can be sold in such offering, (x) first, securities proposed by the
Company to be sold for its own account, (y) second, Restricted Stock requested
to be included in such registration by the holder or holders thereof and other
securities of the Company requested to be included in such registration pursuant
to registration rights granted by the Company to the holders of such securities
prior to the date hereof, pro rata among the requesting holders of Restricted
Stock and such other securities based upon the number of shares of Restricted
Stock and such other securities requested to be registered and (z) third, other
securities of the Company requested to be included in such registration (other
than as described in clause (y) above).
Notwithstanding anything to the contrary contained in this Section 6,
in the event of a firm commitment underwritten initial public offering of Common
Stock of the Company, reasonably expected by the underwriters thereof to result
in aggregate net proceeds to the Company of at least $20,000,000, and a holder
of Restricted Stock does not elect, or is not allowed (at the discretion of the
underwriters thereof), to sell his Restricted Stock to such underwriters of the
Common Stock of the Company in connection with such offering, such holder shall
refrain from selling such Restricted Stock so registered pursuant to this
Section 6 during the period of distribution of the Common Stock of the Company
by such underwriters and the period in which the underwriting syndicate
participates in the after market; provided, however, that (i) each person or
group having beneficial ownership of five percent (5%) or more of the Company's
capital stock and each executive officer and director of the Company shall have
executed a written "lock-up" agreement required by the managing underwriter of
such public offering with the same "lock-up" restrictions as provided therein,
and (ii) that such holder shall, in any event, be entitled to sell his
Restricted Stock commencing on the 180th day after the effective date of such
registration statement.
7. Registration Procedures. If and whenever the Company is required
by the provisions of Section 4, 5 or 6 hereof to use its reasonable best efforts
to effect the registration of any of the Restricted Stock under the Securities
Act, the Company will, as expeditiously as possible:
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<PAGE> 8
(a) prepare (and afford counsel for the selling holders reasonable
opportunity to review and comment thereon) and file with the Commission a
registration statement (which, in the case of an underwritten public offering
pursuant to Section 4 hereof, shall be on Form S-1 (or SB-1), S-3 or other form
of general applicability satisfactory to the managing underwriter selected as
therein provided) with respect to such securities and use its best efforts to
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);
(b) prepare (and afford counsel for the selling holders reasonable
opportunity to review and comment thereon) and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and as shall
comply with the provisions of the Securities Act with respect to the disposition
of all Restricted Stock covered by such registration statement in accordance
with the sellers' intended method of disposition set forth in such registration
statement for such period;
(c) furnish to each seller and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons may reasonably request
in order to facilitate the public sale or other disposition of the Restricted
Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or blue sky laws of
such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter, shall reasonably
request, and use its best efforts to list all Restricted Stock covered by such
registration statement on any securities exchange on which any other securities
of the same class as the Restricted Stock are then listed;
(e) immediately notify each seller under such registration statement
and each underwriter, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(f) use its best efforts (if the offering is underwritten) to
furnish, at the request of any seller, on the date that Restricted Stock is
delivered to the underwriters for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Company for the purposes of
such registration, addressed to the underwriters and to such seller, stating
that such registration statement has become effective under the Securities Act
and that (A) to the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under
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<PAGE> 9
the Securities Act, (B) the registration statement, the related prospectus, and
each amendment or supplement thereof, comply as to form in all material respects
with the requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder (except that such counsel need express
no opinion as to financial statements contained therein or any information
provided by the underwriters or the sellers) and (C) to such other effects as
may reasonably be requested by counsel for the underwriters or by such seller or
its counsel, and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to the registration in respect of
which such letter is being given as such underwriters or seller may reasonably
request; and
(g) make available for inspection by each seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by such seller or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement and permit
such seller, attorney, accountant or agent to participate in the preparation of
such registration statement.
For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
six months after the effective date thereof.
In connection with each registration hereunder, the selling holders
of Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as shall be
reasonably necessary in order to assure compliance with federal and applicable
state securities laws.
In connection with each registration pursuant to Sections 4, 5 and 6
hereof covering an underwritten public offering, the Company agrees to enter
into a written agreement with the managing underwriter selected in the manner
herein provided in such form and containing such provisions as are customary in
the securities business for such an arrangement between underwriters and
companies of the Company's size and investment stature, provided that such
agreement shall not contain any such provision applicable to the Company which
is
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inconsistent with the provisions hereof and provided, further, that the time and
place of the closing under said agreement shall be as mutually agreed upon among
the Company and such underwriter.
8. Expenses. All expenses incurred by the Company in complying with
Sections 4, 5 or 6 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National Association
of Securities Dealers, Inc. or any successor thereto, transfer taxes, fees of
transfer agents and registrars, costs of insurance and fees and expenses of one
counsel for the sellers of Restricted Stock, but excluding any Selling Expenses,
are herein called "Registration Expenses". All underwriting discounts and
selling commissions applicable to the sale of Restricted Stock are herein called
"Selling Expenses".
The Company will pay all Registration Expenses in connection with
each registration statement filed pursuant to Section 4, 5 or 6 hereof. All
Selling Expenses and any Registration Expenses not required to be paid by the
Company in connection with any registration statement filed pursuant to Section
4, 5 or 6 hereof shall be borne by the participating sellers in proportion to
the number of shares sold by each, or by such persons other than the Company
(except to the extent the Company shall be a seller) as they may agree.
9. Indemnification. In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, 5 or 6 hereof,
to the extent permitted by law, the Company will indemnify and hold harmless
each seller of such Restricted Stock thereunder and each underwriter of
Restricted Stock thereunder and each officer, director and each other person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or underwriter or controlling person may become
subject under the Securities Act 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 Restricted Stock was
registered under the Securities Act pursuant to Section 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon 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, and will reimburse each
such seller, each such underwriter and each such controlling person for any
legal or other expenses as and when reasonably incurred by them 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
if and to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and in conformity with information furnished by such
seller, such underwriter or such controlling person in writing specifically for
use in the preparation of such registration statement or prospectus and provided
further, however,
10
<PAGE> 11
that the indemnity contained in this Section 8 with respect to any preliminary
prospectus shall not inure to the underwriter's benefit or to the benefit of any
such other person in respect of any loss, claim, damage or liability asserted by
a person who purchased the Restricted Stock from the underwriter if a copy of
the final prospectus (as the same may be amended or supplemented) was not sent
or given to such person with or prior to written confirmation of the sale to
such person and if the untrue statement or omission or alleged untrue statement
or omission of a material fact contained in such preliminary prospectus was
corrected in the final prospectus (as the same may be amended or supplemented
prior to such sale) and if the underwriter would not have been liable had a copy
of the final prospectus (as the same may be amended or supplemented prior to
such sale) been so sent or given.
In the event of a registration of any of the Restricted Stock under
the Securities Act pursuant to Section 4, 5 or 6 hereof, to the extent permitted
by law, each seller of such Restricted Stock thereunder, severally and not
jointly, will indemnify and hold harmless the Company and each officer, director
and each other person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act 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 the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Section 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon 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, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
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 such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished to the Company in writing
specifically for use in such registration statement or prospectus; provided,
further, however, that the liability of each seller hereunder shall be limited
to the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the proceeds of shares sold by such seller under
such registration statement bears to the total proceeds of all securities sold
thereunder, but not to exceed the proceeds received by such seller from the sale
of Restricted Stock covered by such registration statement.
Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be
11
<PAGE> 12
made against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission to so notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified party other
than under this Section 9. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 9 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party, or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
(or, if there is more than one indemnified party, all of the indemnified parties
collectively) shall have the right to select a separate counsel with the consent
of the indemnifying party (which consent shall not be unreasonably withheld) and
to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified parties hereunder. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
prior written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
If the indemnification provided for in the first two paragraphs of
this Section 9 is unavailable or insufficient to hold harmless an indemnified
party under such paragraphs in respect of any losses, claims, damages or
liabilities or actions in respect thereof referred to therein, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the sellers of such Restricted Stock, on the other, in connection
12
<PAGE> 13
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or actions as well as any other relevant equitable considerations,
including without limitation the failure to give any notice under the third
paragraph of this Section 9. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement, or
omission, of a material fact relates to information supplied by the Company, on
the one hand, or the sellers of such Restricted Stock, on the other, and to the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the sellers of
Restricted Stock agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by pro rata allocation (even if all
of the sellers of such Restricted Stock were treated as one entity for such
purpose) or by any other method of allocation which did not take account of the
equitable considerations referred to above in this paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or actions in respect thereof, referred to above in this paragraph,
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this paragraph, the sellers
of Restricted Stock shall not be required to contribute any amount in excess of
the amount, if any, by which the total proceeds from the Common Stock sold by
each of them in an offering to the public exceeds the amount of any damages
which they would have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act),
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 9
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters. In the event that such indemnification
of underwriters is on such other terms and conditions, the indemnification of
the sellers of Restricted Stock in such underwriting shall, at the sellers'
request, be modified to conform to such terms and conditions.
10. Changes in Common Stock. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
11. Representations and Warranties of the Company. The Company
represents and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or
13
<PAGE> 14
By-laws of the Company, or any provision of any indenture, agreement or other
instrument to which it or any of its properties or assets is bound, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws from time to time
in effect affecting the enforcement of creditors rights generally and to general
equitable principles.
12. Rule 144 Reporting. The Company agrees with you as follows:
(a) The Company shall make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act
(or any successor act, regulation or rule thereto), at all times from and after
the date it is first required to do so.
(b) The Company shall file with the Commission in a timely manner all
reports and other documents as the Commission may prescribe under Section 13(a)
or 15(d) of the Exchange Act (or any successor act, regulation or rule thereto)
at any time after the Company has become subject to such reporting requirements
of the Exchange Act.
(c) The Company shall furnish to such holder of Restricted Stock
forthwith upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after the date it first becomes subject to such reporting requirements), and 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 so
filed as a holder may reasonably request to avail itself of any rule or
regulation of the Commission allowing a holder of Restricted Stock to sell any
such securities without registration.
13. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto, including without limitation the rights to
indemnification under Section 9 hereof, shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not. Without limiting the generality of the foregoing, the registration
rights conferred herein on the holders of Restricted Stock shall inure to the
benefit of any and all subsequent holders from time to time of the Restricted
Stock for so long as the certificates representing the Restricted Stock shall be
required to bear the legend specified in Section 2 hereof.
14
<PAGE> 15
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first-class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at 1110 Spring Street, Silver Spring,
Maryland 20910, Attention: Chief Executive Officer, with a copy to James
L. Nouss, Jr., Esq., Bryan Cave LLP, One Metropolitan Square, 211 N.
Broadway, Suite 3600, St. Louis, Missouri 63102-2750;
if to any Buyer, at its address as set forth in Schedule I hereto,
with a copy to John C. MacMurray, Esq., Reboul, MacMurray, Hewitt, Maynard
& Kristol, 45 Rockefeller Plaza, New York, New York 10111; and
if to any subsequent holder of Restricted Stock, to it at such
address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Restricted Stock) or to
the holders of Restricted Stock (in the case of the Company). Any notice or
other communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective when delivered in hand to the party
to which directed or if sent by first-class registered mail, postage prepaid and
properly addressed as set forth above, at the earlier of (i) the time when
received by the addressee or (ii) the fifth business day following the dispatch
thereof.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE.
15. This Agreement and the Schedules hereto and the other documents
delivered pursuant hereto or in connection herewith constitute the full and
entire understanding and agreement between the parties, and supersede all prior
understandings, negotiations and prior agreements between the parties with
regard to the subjects hereof and thereof.
16. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the parties shall
negotiate in good faith with a view to the substitution therefor of a suitable
and equitable solution in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid provision, provided,
however, that the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained herein shall not
be in any way impaired thereby, it being intended that all of the rights and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.
15
<PAGE> 16
17. Headings of sections and paragraphs of this Agreement are
inserted for convenience of reference only and shall not affect the
interpretation or be deemed to constitute a part hereof.
18. 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.
16
<PAGE> 17
Please indicate your acceptance of the foregoing by signing and
returning the enclosed counterpart of this letter, whereupon this letter (herein
sometimes called "this Agreement") shall be a binding agreement between the
Company and you.
Very truly yours,
UNITED THERAPEUTICS CORPORATION
By: /s/ Martine Rothblatt
-------------------------------------
Name:
Title:
AGREED TO AND ACCEPTED
as of the date first above written:
MERRILL LYNCH KECALP L.P. 1997
By: /s/ Robert F. Tully
----------------------------------
Name: Robert F. Tully
Title: Vice President and Treasurer
KECALP, Inc.: General Partner
MERRILL LYNCH KECALP INTERNATIONAL
L.P. 1997
By: /s/ Robert F. Tully
----------------------------------
Name: Robert F. Tully
Title: Treasurer
KECALP International Ltd.: General Partner
17
<PAGE> 18
SCHEDULE I
Buyers
<TABLE>
<CAPTION>
No. of Shares
-------------
<S> <C>
MERRILL LYNCH KECALP L.P. 1997 1,250,000
World Financial Center
South Tower - 23rd Floor
225 Liberty Street
New York, New York 10080-6123
Attention: Mr. Andrew Kaufmann
MERRILL LYNCH KECALP 416,667
INTERNATIONAL L.P. 1997
World Financial Center
South Tower - 23rd Floor
225 Liberty Street
New York, New York 10080-6123
Attention: Mr. Andrew Kaufmann
</TABLE>
<PAGE> 1
EXHIBIT 4.3
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement"), dated as of
March 30, 1998, is entered into by and between United Therapeutics
Corporation, a Delaware corporation (the "Company"), and the investor(s)
signing below, ("Investor").
WITNESSETH:
WHEREAS, the Company wishes to issue and sell to Investor, and Investor wishes
to purchase from the Company, the number of shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), set forth opposite the
name of Investor below in accordance with the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained in the Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1 Purchase of Common Stock. For and in consideration of a purchase
price of US $1.00 per share of common stock delivered to the Company upon the
execution of this Agreement or heretofore deposited with the Company, the
Company hereby issues and sells to Investor, and Investor hereby purchases from
the Company, the number of shares of Common Stock set forth opposite the name
of Investor below.
1.2 Delivery of Certificates. Upon the execution of this Agreement, the
Company shall forthwith deliver to Investor a certificate registered in the
name of such Investor representing the number of shares of Common Stock
purchased by Investor.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representation and Warranties of the Company. The Company represents
and warrants to each Investor that:
(a) 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 is qualified
to do business and is in good standing under the laws of each
jurisdiction where the ownership of its property or the conduct of
its business so requires.
<PAGE> 2
(b) Authorization. The execution, delivery and performance of
this Agreement is within the Company's corporate powers and has been
duly authorized by all necessary corporate action of the Company.
(c) Valid Issuance of Common Stock. The shares of Common Stock
issued pursuant to this Agreement have been duly authorized and are
validly issued, fully paid and nonassessable.
(d) Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 10,000,000 shares
of Preferred Stock. As of the date hereof 17,675,108 shares of
Common Stock are issued and outstanding. As of the date hereof, no
shares of Preferred Stock are issued and outstanding. All of the
outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable. Except as may
be described in the Company's offering memorandum for the offer and
sale of up to 6,000,000 shares of Common Stock, which offering is
expected to close on March 31, 1998 (the "Offering Memorandum"), (i)
no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) the
Company has no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such
right to distribute to holders of any shares of its capital stock
any evidence of indebtedness or assets of the Company and (iii) the
Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other
distribution in respect thereof. Except as may be provided in this
Agreement, no person or entity is entitled to (i) any preemptive or
similar right with respect to the issuance of any capital stock of
the Company, or (ii) any rights with respect to the registration of
any capital stock of the Company under the Securities Act of 1933,
as amended (the 'Securities Act"). All of the issued and
outstanding shares of Common Stock have been offered, issued and
sold by the Company in compliance with applicable federal and state
securities laws.
(e) Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any governmental authority is required
on the part of the Company in connection with the execution and
delivery of this Agreement, the offer, issuances, sale and delivery
of the Common Stock purchased hereunder or the other transactions
contemplated hereby, except such filings as shall have been made
prior to and shall be effective on and as of the closing of the
transactions contemplated hereby. Based on the representations and
warranties of the Investor contained in Section 2.2 of this
Agreement and based on the representations and warranties of any
other investor purchasing shares of
<PAGE> 3
Common Stock in the second round financing of the Company contemplated
by the Offering Memorandum contained in Section 2.2 or corresponding
provision of any Common Stock Purchase Agreement executed in connection
therewith, the offer, sale and issuance of the Common Stock to each of
the investors in the second round financing of the Company will be in
compliance with applicable federal and state securities laws.
(f) Litigation. There is no action, suit, proceeding or investigation
pending or, to the best knowledge of the Company, threatened, against
the Company which questions the validity of the second round financing
offering, this Agreement or the right of the Company to enter into it,
or which might result, either individually or in the aggregate, in any
material adverse change in the assets, conditions (financial or
otherwise), or business of the Company.
(g) Compliance. The Company has, in all material respects, complied with
all laws, regulations and orders applicable to its business and has all
material permits and licenses required thereby. The Company is not in
violation of any term or provision of its Certificate of Incorporation
or By-Laws. The Company is not in violation of any material term or
provision of any material indenture, lease, agreement or other
instrument to which the Company is a party or by which it or any of its
properties is bound or any decree, judgment or order applicable to the
Company.
(h) Full Disclosure. The representation and warranties of the Company
contained in this Agreement and those statements made by the Company in
the Offering Memorandum do not contain any untrue statement of a
material fact or any omission of a material fact necessary to make the
respective statements contained here or therein, in light of the
circumstances under which the statements were made, not misleading.
2.2 Representations and Warranties of the Investor. Investor represents
and warrant to the Company that:
(a) Purchase Entirely for Own Account; Investment Experience: Disclosure of
Information. Investor is purchasing the shares of Common Stock for its
own account without a view to any distribution thereof in violation of
the Securities Act of 1933, as amended (the "Securities Act") or any
applicable state securities law, and the Investor is experienced in
evaluation and making investments of this type, and has had access to,
and has received, all information that she or he reasonably has
required to evaluate this investment.
(b) Accredited Investor. Investor is financially able to bear the risks
of the investment and is an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act. Such Investor
understands and
<PAGE> 4
acknowledges that investment in the Common Stock is speculative and
involves a high degree of risk.
(c) Restricted Securities. Investor acknowledges that the
Company is issuing and selling the shares of Common Stock in
reliance upon the exemption from registration provided in Section
4(2) of the Securities Act and is relying upon Investor's
representation, and agrees that said shares of Common Stock may only
be pledged, offered, sold or transferred if registered under the
Securities Act or pursuant to an exemption from the registration
requirements thereunder. Investor understands that absent
registration of the shares of Common Stock under the Securities Act,
compliance with an applicable exemption under the Securities Act is
required for a sale or other disposition of such shares of Common
Stock. Investor further understands and acknowledges that there is
not now available, and may not be available when he or she wishes to
sell such shares of Common Stock, adequate current public
information with respect to the Company which would permit offers or
sales of the shares of Common Stock pursuant to Rule 144 promulgated
under the Securities Act.
(d) Legends. Investor agrees that the following legend shall be
placed on any certificates evidencing the shares of Common Stock:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. Such shares have
been acquired for investment and may not be pledged, offered,
sold or transferred except in compliance with the registration
requirements of the Securities Act of 1933 or an exemption
therefrom, or upon delivery to the Company if requested, of an
opinion of counsel, in form and substance reasonably
satisfactory unto said corporation, that registration under
such Act is not required."
Investor understands that, so long as such legends may remain on the
certificates representing the shares of Common Stock, the Company may
maintain appropriate "stop transfer" orders with respect to such
shares on its books and records and with its registrar and transfer
agent.
2.3 Registration Rights of Investor
(a) Registration Rights. Whenever the Company proposes to file a
registration statement for a public offering and sale of the Common
Stock of the Company with the Securities and Exchange Commission (a
"Registration Statement"), at any time from and after the date
hereof and from time to time, the Company shall, prior to such
filing, give written notice to the Investor to do so and, upon the
written request of the Investor given within 20 days after the
Company provides such notice, the Company shall use its best efforts
to cause all shares
<PAGE> 5
of Common Stock which the Company has been requested by the Investor
to register to be registered under the Securities Act. In connection
with any underwritten public offering of Common Stock, if in the
opinion of the managing underwriter the registration of all, or part
of, the shares of Common Stock which the Investor has requested to be
included would materially and adversely affect such public offering,
then the Company shall be required to include in the underwriting
only the number shares of Common Stock which the managing underwriter
believes may be sold without causing such adverse effect. If the
number of shares of Common Stock to be included in the underwriting
in accordance with the foregoing is less than the total number of
shares which the Investor, together with any other investors having
similar registration rights, have requested to be included, then all
such investors (including the Investor) who have requested
registration in such registration shall participate in the
underwriting pro rata based upon their total ownership of shares of
Common Stock of the Company. If any investor would be entitled to
include more shares of Common Stock than such investor requested to
be registered, the excess shall be allocated among other requesting
investors pro rata based upon their total ownership of shares of
Common Stock.
(b) Fee and Expenses. The Company will pay all expenses of all
registrations under this Agreement, including, without limitation, all
registration and filing fees, exchange listing fees, printing
expenses, fees and disbursements of counsel for the Company and fees
and expenses of counsel for the Investor, state blue Sky fees and
expenses, and the expenses of any special audits incident to or
required by any such registration, but excluding underwriting
discounts and selling commissions in connection with the offer and
sale of the shares of Common Stock by the Investor.
(c) Indemnification of Investor. In the event of any registration of any
of the shares of Common Stock under the Securities Act pursuant to
this Agreement, the Company will indemnify and hold harmless the
Investor, and each other person, if any, who controls the Investor
within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act") against any losses,
claims, damages or liabilities, joint or several, to which such
Investor 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 are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement under which the shares of
Common Stock were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement
under which the shares of Common Stock 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
<PAGE> 6
required to be stated therein or necessary to make statements therein
not misleading; and the Company will reimburse such Investor and each
such controlling person for any legal or other expense reasonably
incurred by such Investor or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company should 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 Investor or controlling person
specifically in use in the preparation thereof.
2.4 Rule 144 Requirements. After the earliest of (i) the closing of a
sale of securities by the Company pursuant to a Registration Statement, (ii)
the registration by the Company of a class securities under Section 12 of the
Exchange Act of (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Security Act;
(b) use its best efforts to file with the SEC 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 the trustee upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144,
and of the Securities Act and Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and 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 SEC allowing it
to sell any shares of Common Stock without registration.
ARTICLE III
MISCELLANEOUS
3.1 Expenses. All legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the person incurring such expenses.
3.2 Amendments; Waivers. Any provisions of the Agreement may be amended
or waived between the Company and the Investor if, but only if, such amendment
or waiver is in writing and is signed by the Company and the Investor affected
thereby. No failure
<PAGE> 7
or delay by any party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and
exclusive of any rights or remedies provided by law.
3.3 No Third Party Beneficiaries. This Agreement is made solely for the
benefit of the parties hereto and shall not confer any rights on any other
person.
3.4 Notices. Any notice, request, consent, approval or other
communication which is required or permitted to be given or made by a party to
the other pursuant to any provision of this Agreement shall be given or made in
writing and shall be served personally or sent by prepaid registered mail
addressed to the party as follows:
If to the Company:
United Therapeutics Corporation
1826 R Street, NW
Washington, DC 20009
Attention: Chief Executive Officer
Fax: (202) 518-8200
If to an Investor, at the address provided below for such Investor;
or to such other address as a party may from time to time advise the other
party hereto by notice in writing. Every such notice so given shall be deemed
to be received only upon delivery to the party to be charged with notice.
Notwithstanding the foregoing, notices may be given by fax and shall, if
receipt is confirmed electronically to the sender's equipment, be deemed to
have been received the business day after sending.
3.5 Severability. Should any provision of this Agreement for any reason
be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any of the other provisions of this Agreement.
3.6 Headings. The descriptive heading of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement.
3.7 Applicable Law. The validity and interpretation of this Agreement and
the performance by the parties of their respective obligations hereunder shall
be governed by the laws of the State of Delaware.
3.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof
<PAGE> 8
of this Agreement to produce or account for more than one counterpart signed by
the party to be charged thereby.
3.9 Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matters hereof, and supersedes all
previous agreements and understandings among the parties with respect to such
matters.
3.10 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns and transferees. This Agreement may not be assigned by any
Investor without the prior written consent of the Company.
3.11 Survival of Representation and Warranties. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.
3.12 Covenants of the Company
(a) Inspection. The Company shall permit the Investor, or any authorized
representative thereof, to visit and inspect the properties of the
Company, including its corporate and financial records, and to discuss
its business and finances with officers of the Company, during normal
business hours following reasonable notice and as often as may be
reasonably requested.
(b) Financial Statements and Other Information. The Company will deliver
to the Investor (i) within 120 days after the end of each fiscal year
of the Company, an audited balance sheet of the Company as at the end
of such year and audited statements of income and of cash flow of the
Company for such year, certified by certified public accountants of
established national reputation selected by the Company, and prepared
in accordance with generally accepted accounting principles, applied
on a consistent basis and (ii) within 60 days after the end of each
fiscal quarter of the Company, an unaudited balance sheet of the
Company as of the end of such fiscal quarter, and unaudited statements
of income and cash flow of the company for such fiscal quarter and for
the current fiscal year to the end of such fiscal quarter.
(c) Termination of Covenants. The obligations of the Company under this
Section 3.12 shall terminate upon occurrence of an initial public
offering of the Company's Common Stock in which minimum of $10,000,000
in proceeds are raised by the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
<PAGE> 9
Investor
/s/ Daniel A. Burkhardt 100,000
- ---------------------------------------------- -----------------------------
Signature Number of Share Purchased
Community Investment Partners III, L.P., LLLP
---------------------------------------------
Name on Stock Certificate
12555 Manchester Road
---------------------------------------------
Address of Record
St. Louis MO 63131
---------------------------------------------
City, State, Zip Code
314-515-2664
---------------------------------------------
Fax Number
314-515-2000
---------------------------------------------
Phone Number
Accepted By:
United Therapeutics Corporation
/s/ Martine Rothblatt
------------------------------
By
Martine A. Rothblatt
------------------------------
Name
Chairman and Chief
------------------------------
Title
Executive Officer
<PAGE> 10
SCHEDULE A TO EXHIBIT 4.3
The following Common Stock Purchase Agreements are identical in their terms to
the Common Stock Purchase Agreement in this Exhibit 4.3, with the exception of
the following terms:
Common Stock Purchase Agreement between the Registrant and Oakwood Investors I,
LLC -
Investor's Signature: R. Perez
Name on Certificate: Oakwood Investors I, LLC
No. of Shares: 400,000
Address of Record: 890 Durrow Drive
St. Louis, MO 63141
Fax No: 314-567-0978
Phone Number: 314-731-4600
Common Stock Purchase Agreement between the Registrant and James L. Nouss -
Investor's Signature: James L. Nouss
Name on Certificate: James L. Nouss
No. of Shares: 25,000
Address of Record: Suite 3600, One Metropolitan Square
St. Louis, MO 63102
Fax No: 314-259-2020
Phone Number: 314-259-2000
Common Stock Purchase Agreement between the Registrant and Daniel A. Burkhardt-
Investor's Signature: Daniel A. Burkhardt
Name on Certificate: Daniel A. Burkhardt
No. of Shares: 100,000
Address of Record: 12555 Manchester Road
St. Louis, MO 63131
Fax No: 314-515-2664
Phone Number: 314-515-2000
Common Stock Purchase Agreement between the Registrant and Mary Ellen Perez and
Raul Evelio Perez, Trustees of the Mary Ellen Perez revocable trust dated
October 28, 1993 -
Investor's Signature: R. Perez and Mary Ellen Perez
Name on Certificate: Mary Ellen Perez and Raul Evelio Perez, Trustees
of the Mary Ellen Perez revocable trust dated
October 28, 1993
No. of Shares: 100,000
Address of Record: 890 Durrow Drive
St. Louis, MO 63141
Fax No: 314-567-0978
Phone Number: 314-731-4600
<PAGE> 1
EXHIBIT 4.4
THIS WARRANT, AND ANY SECURITIES WHICH MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION, UNLESS AN EXEMPTION FROM THE REQUIREMENT OF SUCH
REGISTRATION IS AVAILABLE UNDER THE CIRCUMSTANCES AT THE TIME OBTAINING (AND, IF
REASONABLY REQUESTED BY THE COMPANY, DEMONSTRATED BY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY).
WARRANT TO PURCHASE
350,000 SHARES
OF THE COMMON STOCK, PAR VALUE $00.01 PER SHARE,
OF UNITED THERAPEUTICS CORPORATION
For value received, CORTECH, INC., a Delaware corporation, or its permitted
successors or assigns (collectively, the "INVESTOR"), are entitled to subscribe
for and purchase from UNITED THERAPEUTICS CORPORATION, a Delaware corporation
(the "COMPANY"), from and after November 2, 2000 (the "WARRANT EXERCISE DATE"),
up to 350,000 fully paid and nonassessable shares (the "SHARES") of the
Company's common stock, par value $00.01 per share ("COMMON STOCK"), at the
purchase price of $3.00 per Share (the "EXERCISE PRICE"); provided however, that
the Exercise Price shall be $6.00 per Share if (a) UT, prior to January 15,
1999, consummates an aggregate equity investment of not less than five million
dollars ($5,000,000) in UT by one or more third party investors (the
"Financing") at a purchase price per Share of at least $6.00 per Share with
respect to such Financing, and (b) UT provides Cortech with notice and written
evidence of such Financing reasonably acceptable to Cortech, which notice shall
be postmarked no later than January 15, 1999. The Company agrees and
acknowledges that no Financing shall be considered consummated unless and until
the Financing has been received by the Company. The number and character of
Shares issuable pursuant to this Warrant are subject to adjustment as provided
herein. The Investor's right to purchase Shares pursuant to this Warrant shall
terminate on November 2, 2004.
Notwithstanding any other provision herein to the contrary, and with
reference to that certain Exclusive License Agreement between Cortech, Inc. and
the Company with an Effective Date as of November 2, 1998 (the "LICENSE
AGREEMENT"), this Warrant shall terminate without any further rights for the
Investor hereunder in the event that the Company, using its commercially
reasonable discretion, has terminated all research, development and
commercialization efforts regarding the Licensed Compound and the Products (as
such terms are defined in the License Agreement), as set forth in Section 3.6 of
the License Agreement, prior to the Warrant Exercise Date (and any such
termination on or after the Warrant Exercise Date shall be without effect
hereunder).
<PAGE> 2
This Warrant is subject to the following additional provisions, terms and
conditions:
1. Exercise of Warrant.
a. Manner of Exercise. This Warrant may be exercised by the holder
hereof, in whole or in part, by surrender of this Warrant, together with written
notice of exercise (a sample form of exercise is attached hereto as Exhibit A1),
to the Company at the principal office of the Company (which, for purposes of
this Warrant, shall be deemed to be the Company's address for notice purposes as
provided in Section 8 below) accompanied by payment (in cash, certified check or
bank draft payable to the order of the Company) of the Exercise price multiplied
by the number of Shares for which this Warrant is being exercised, or by
exercise of the Net Exercise Right as provided in Section 1(b) below.
b. Net Exercise Right. In lieu of payment of the Exercise Price
pursuant to Section 1(a) above, this Warrant may also be exercised, in whole or
in part, by surrender of this Warrant together with written notice of exercise
specifying the holder's election to convert all, or any specified portion, of
this Warrant (the "NET EXERCISE RIGHT") into the number of Shares equal to the
quotient obtained by dividing:
(x) the value of the Shares for which the Warrant is then being
exercised (determined by subtracting the aggregate Exercise Price of
such Shares in effect immediately prior to the exercise of the Net
Exercise Right from the aggregate fair market value of the Shares
immediately prior to the exercise of the Net Exercise Right) by
(y) the fair market value of one Share immediately prior to the
exercise of the Net Exercise Right.
The fair market value of a Share as of a particular date shall be determined as
follows:
(1) If the Common Stock is publicly traded on a particular
valuation date, fair market value on such date shall be:
(i) the closing sale price of the Common Stock, as quoted on any
national securities exchange on which such stock shall be listed and
registered, on the business day immediately preceding the valuation
date;
(ii) the closing sale price of the Common Stock, if such stock is then
quoted on the National Association of Securities Dealers, Inc.
("NASDAQ") National Market, on the business day immediately preceding
the valuation date; or
(iii) if the Common Stock is not then traded on a national securities
exchange or on the NASDAQ National Market, but is quoted on NASDAQ, the
average of the
2
<PAGE> 3
closing bid and asked prices for the Common Stock as reported on NASDAQ
on the business day immediately preceding the valuation date.
(2) If the Common Stock is not publicly traded on a particular
valuation date, fair market value on such date shall be determined by the Board
of Directors of the Company acting in good faith (taking into account, as such
Board of Directors acting in good faith deems appropriate, any recent corporate
events involving a determination of value for the Company's securities (e.g.,
the closing of an offering of securities or the granting of incentive stock
options)).
c. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected on the date on which the Investor provides the
Company with the deliveries contemplated by Section 1(a) above.
d. Delivery of Stock Certificates. Certificates representing the Shares
purchased upon any exercise of this Warrant shall bear the restrictive legend
set forth in Section 9 below and shall be delivered to the Investor promptly
following such exercise. A new Warrant exercisable for the number of Shares, if
any, with respect to which this Warrant shall not have been exercised shall also
be delivered to the Investor. No fractional Shares shall be issued upon the
exercise of this Warrant; rather, the Investor shall receive an amount, in cash,
equal to the fair market value of any such fractional Shares (determined with
reference to the provisions of Section 1(b) above).
2. Shares Issuable Upon Exercise.
a. Reserved. The Company covenants and agrees that all Shares that may
be issued upon the exercise of this Warrant shall, upon issuance pursuant to an
exercise of this Warrant in accordance with its terms, be duly authorized and
validly issued, fully paid and nonassessable Shares, free and clear of all
preemptive rights. The Company will at all times reserve and keep available,
solely for issuance and delivery upon the exercise of this Warrant, such number
of Shares of the Company Stock as shall be issuable from time to time upon the
exercise of this Warrant.
b. Restricted Securities. Investor acknowledges that the Company is
issuing this Warrant in reliance upon the exemption from registration provided
under Section 4(2) of the Securities Act and is relying upon Investor's
representation that it is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act of 1933, as amended (the "1933
ACT"). Investor acknowledges that the Shares to be issued upon the exercise of
this Warrant may be unregistered at the time of exercise and, in such event,
Investor acknowledges that the Shares to be issued upon the exercise of this
Warrant may only be pledged, offered, sold or transferred if registered under
the 1933 Act or pursuant to an exemption from the registration requirements
thereunder. Investor understands that absent registration of the Shares to be
issued upon the exercise of this Warrant under the 1933 Act, compliance with an
applicable exemption under the 1933 Act is required for a sale or other
disposition of such shares. Investor further understands and acknowledges that
there is not now available, and may
3
<PAGE> 4
not be available when it wishes to sell such Shares to be issued upon the
exercise of this Warrant, adequate current public information with respect to
the Company which would permit offers or sales of the Shares pursuant to Rule
144 promulgated under the 1933 Act. Investor acknowledges that the Company is
under no obligation to register the Shares to be issued upon the exercise of
this Warrant. Investor understands that, so long as the legend provided in
Section 9 below may remain on the certificates presenting the Shares to be
issued upon the exercise of this Warrant, the Company may maintain appropriate
"stop transfer" orders with respect to such shares on its books and records and
with its registrar and transfer agent.
Listed. Prior to the issuance of any Shares, the Company shall secure
the listing or quotation of such Shares upon each national securities exchange
or automated quotation system, if any, upon which shares of Common Stock are
then listed or traded (subject to official notice of issuance upon exercise of
this Warrant) and shall maintain, so long as any other shares of Common Stock
shall be so listed or traded, such listing or quotation of all Shares from time
to time issuable upon the exercise of this Warrant. The Company shall so list or
secure quotation on each national securities exchange or automated quotation
system, and shall maintain such listing or quotation of, any other shares
issuable upon any exercise of this Warrant if and so long as any shares of the
same class shall be listed or quoted on such national securities exchange or
automated quotation system.
3. Adjustment. The Exercise Price and/or the number and type of
securities issuable upon any exercise of this Warrant shall be subject to
adjustment from time to time as hereinafter provided in this Section 3.
a. If the Company, at any time, divides the outstanding shares of its
Common Stock into a greater number of shares (whether pursuant to a stock split,
stock dividend or otherwise), and conversely, if the outstanding shares of its
Common Stock are combined into a smaller number of shares, the number of Shares
available upon any exercise of this Warrant and the Exercise Price in effect
immediately prior to such division or combination shall be proportionately
adjusted to reflect the reduction or increase in outstanding shares.
b. If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of shares of Common
Stock shall be entitled to receive stock, other securities or assets with
respect to or in exchange for such shares of Common Stock, then, as a condition
of such reorganization, reclassification, consolidation, merger or sale, the
holder of this Warrant shall have the right to purchase and receive upon the
basis and upon the terms and conditions specified in this Warrant and in lieu of
the Shares immediately theretofore purchasable and receivable upon the exercise
of this Warrant, such shares of stock, other securities or assets as would have
been issued or delivered to the Investor if the Investor had exercised this
Warrant and had received such
4
<PAGE> 5
Shares prior to such reorganization, reclassification, consolidation, merger or
sale. The Company shall not effect any such consolidation or merger unless,
prior to the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger shall assume by written
instrument executed and mailed to the Investor (i) the obligation to deliver to
the Investor such shares of stock, other securities or assets as, in accordance
with the foregoing provisions, the Investor may be entitled to purchase and (ii)
the other obligations of the Company set forth or referred to in this Warrant.
c. If, after the initial issuance of this Warrant to the Investor, the
Company shall declare a dividend or distribution payable to holders of the
Common Stock (whether payable in cash, securities or other assets of the
Company), upon any exercise of this Warrant the Investor shall be entitled to
receive, and the Company shall promptly pay to the Investor, any such
dividend(s) and/or distribution(s) (as well as any other cash, securities or
other assets which the Investor would have received had it held any securities
received in any such dividend(s) and/or distribution(s)), also giving effect to
the other provisions of this Section 3.
d. Promptly following any adjustment under this Section 3, the Company
shall give written notice thereof (by first class mail, postage prepaid) to the
Investor (at the Investor's address as shown on the books of the Company), which
notice shall state the Exercise Price and number of Shares (or other securities
or assets) resulting from such adjustment, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
e. The terms of this Warrant shall be binding upon the successors of
the Company.
4. No Rights as Stockholder; Notice. The Investor shall not by virtue of
this Warrant be entitled to any rights of a stockholder of the Company. However,
the Company shall give notice to the Investor if at any time prior to the
expiration or exercise in full of this Warrant any of the following events shall
occur:
(a) the Company shall declare any dividend or distribution with respect to
its capital stock;
(b) a dissolution, liquidation or winding up of the Company shall be
proposed; or
(c) a capital reorganization or reclassification of the capital stock of
the Company, any consolidation or merger of the Company with or into
another corporation, any transaction or series of transactions in
which more than fifty percent (50%) of the voting securities of the
Company are transferred to another person, or any sale or conveyance
to another corporation of the property of the Company as an entirety
or substantially as an entirety.
5
<PAGE> 6
Such giving of notice shall be effected at least fifteen (15) business days
prior to the date fixed as a record date or effective date or the date of
closing of the Company's stock transfer books for the determination of the
stockholders entitled to such dividend or distribution, or for the determination
of the stockholders entitled to vote on such proposed merger, consolidation,
sale, conveyance, dissolution, liquidation or winding up. Such notice shall
specify such record date or the date of closing the stock transfer books, as the
case may be.
5. Registered Owner. The Company may treat the registered owner hereof as
the owner for all purposes (notwithstanding any markings or notations on the
face of this Warrant).
6. Loss, Theft, Destruction or Mutilation. Upon receipt of the Company of
satisfactory evidence of the loss, theft, destruction or mutilation of this
Warrant and either (in the case of loss, theft or destruction) indemnification
satisfactory to the Company or (in the case of mutilation) the surrender of this
Warrant for cancellation, the Company will execute and deliver to the Investor,
without charge, a Warrant of like denomination.
7. Public Reporting. With a view to making available to the Investor the
benefits of Rule 144 ("RULE 144") promulgated under the 1933 Act, and any other
rule or regulation of the Securities and Exchange Commission (the "SEC") that
may at any time permit the Investor to sell Shares to the public without
registration, the Company agrees that, for so long as a class of its securities
is registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "1934 ACT"), the Company will: (i) make and keep public information
available, as those terms are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act; and (iii) furnish
to the Investor, forthwith upon request, (a) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the 1933 Act
and the 1934 Act, (b) a copy of the most recent annual or quarterly report of
the Company filed with the SEC and such other reports and documents so filed by
the Company which the Investor may reasonably request, and (c) such other
information as may be reasonably requested in availing the Investor of any rule
or regulation of the SEC which permits the selling of any Shares without
registration under the 1933 Act.
8. Notices. Any notice or demand desired or required to be given hereunder
shall be in writing and given (except as otherwise provided herein) by personal
delivery, certified or registered mail or air courier addressed as follows:
If to the Company: United Therapeutics Corporation
2 Davis Drive
Research Triangle Park, North Carolina 27709
Attention: President
6
<PAGE> 7
with a copy to: Mahon Patusky Rothblatt & Fisher
1735 Connecticut Avenue, N.W.
Third Floor
Washington, D.C. 20009
Attention: Paul A. Mahon, Esq.
If to Cortech, Inc.: Cortech, Inc.
6850 North Broadway
Denver, Colorado 80221
Attention: President
with a copy to: Dechert Price & Rhoads
Princeton Pike Corp. Center
997 Lennox Drive, Building 3
Lawrenceville, NJ 08648
Attention: Allen Bloom, Esq.
or to such other address as the party to receive the notice or request shall
designate by notice to the other. Any notice or request shall be deemed given
when received.
9. Legend. The Company may cause each certificate representing Shares
issued upon exercise of this Warrant to bear a legend in substantially the
following form:
"The securities represented by this certificate have not been registered or
qualified under the Federal Securities Act of 1933 (the "1933 ACT") or
applicable state securities laws and are "restricted securities" within the
meaning of Rule 144 promulgated under the 1933 Act. The securities may not
be sold or transferred without complying with Rule 144 in the absence of
effective registration under the 1933 Act or other compliance under or
exemption from the 1933 Act and applicable state securities laws."
10. Taxes. The Company agrees that it will pay, and will hold the Investor
harmless from any and all liability with respect to, any stamp or similar taxes
which may be determined to be payable to the State of Delaware in connection
with the issuance, delivery or exercise of this Warrant (as well as the issuance
or delivery of Shares upon any exercise of this Warrant).
11. Miscellaneous. Neither this Warrant nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. The Section headings in this Warrant are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
7
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
delivered by its duly authorized officers as of November 2, 1998.
UNITED THERAPEUTICS CORPORATION,
a Delaware corporation
By: /s/ Martine A. Rothblatt
--------------------------
Its: Chief Executive Officer
--------------------------
By:_____________________________
Its:____________________________
Witness:
8
<PAGE> 9
EXHIBIT A1
WARRANT EXERCISE
(To be signed only upon an exercise of the Warrant)
The undersigned, the holder of the attached Warrant, hereby elects to
exercise the purchase right represented by such Warrant for, and to purchase
thereunder, __________ of the Shares of Common Stock of United Therapeutics
Corporation to which such Warrant relates and herewith makes payment of
$__________ therefor in cash or by certified check or bank draft [OR ELECTION IS
MADE WITH RESPECT TO THE CURRENT EXERCISE OF THE WARRANT TO UTILIZE THE NET
EXERCISE RIGHT AS DESCRIBED IN SUCH WARRANT] and requests that the certificate
for such Shares be issued in the name of, and be delivered to
________________________, whose address is set forth below the signature of the
undersigned.
Dated:____________________________
____________________________________
[SIGNATURE]
____________________________________
____________________________________
____________________________________
[ADDRESS]
9
<PAGE> 1
EXHIBIT 4.5
THIS STOCK OPTION GRANT, AND ANY SECURITIES WHICH MAY BE ACQUIRED UPON THE
EXERCISE OF THIS STOCK OPTION GRANT, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS
AN EXEMPTION FROM THE REQUIREMENT OF SUCH REGISTRATION IS AVAILABLE UNDER THE
CIRCUMSTANCES AT THE TIME OBTAINING (AND, IF REASONABLY REQUESTED BY THE
COMPANY, DEMONSTRATED BY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
STOCK OPTION GRANT TO PURCHASE
500,000 SHARES OF THE COMMON PAR VALUE $0.01 PER SHARE,
OF UNITED THERAPEUTICS CORPORATION
For value received, Toray Industries, Inc. a Japan corporation, or its
permitted successors or assigns (collectively, the "Investor"), are entitled to
subscribe for and purchase from UNITED THERAPEUTICS CORPORATION, a Delaware
corporation (the "Company"), from September 16, 1998 (the "Stock Option Grant
Exercise Date"), up to 500,000 fully paid and nonassessable shares (the
"Shares") of the Company's common stock, par value $0.01 per share ("Common
Stock"), at the purchase price of $3.00 per share (the "Exercise Price"). The
number and character of Shares issuable pursuant to this Stock Option Grant are
subject to adjustment as provided herein. The Investor's right to purchase
Shares pursuant to this Stock Option Grant shall terminate on that date which is
thirty (30) days following the date of UT's first filing of a New Drug
Application (NDA) in the United States for Beraprost Sodium.
This Stock Option Grant is subject to the following additional provisions,
terms and conditions:
1. Exercise of Stock Option Grant.
a. Manner of Exercise. This Stock Option Grant may be exercised by the
holder hereof, in whole or in part, by surrender of this Stock Option Grant,
together with written notice of exercise (a sample form of exercise is attached
hereto as Attachment A), to the Company at the principal office of the Company
(which, for the purposes of this Stock Option Grant, shall be deemed to be the
Company's address for notice purposes as provided in Section 8 below)
accompanied by payment (in cash, certified check or bank draft payable to the
order of the Company) of the Exercise Price multiplied by the number of Shares
for which this Stock Option Grant is being exercised.
<PAGE> 2
b. When Exercise Effective. Each exercise of this Stock Option Grant
shall be deemed to have been effected on the date on which the Investor provides
the Company with the deliveries contemplated by Section 1(a) above.
c. Delivery of Stock Certificates. Certificates representing the Shares
purchased upon any exercise of this Stock Option Grant shall bear the
restrictive legend set forth in Section 9 below and shall be delivered to the
Investor promptly following such exercise. A new Stock Option Grant exercisable
for the number of Shares, if any, with respect to which this Stock Option Grant
shall not have been exercised shall also be delivered to the Investor.
2. Shares Issuable Upon Exercise.
a. Reserved. The Company covenants and agrees that all Shares that may
be issued upon the exercise of this Stock Option Grant shall, upon issuance
pursuant to an exercise of this Stock Option Grant in accordance with its terms,
be duly authorized and validly issued, fully paid and nonassessable Shares, free
and clear of all preemptive rights. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the exercise of this Stock
Option Grant, such number Shares of the Common Stock as shall be issuable from
time to time upon the exercise of this Stock Option Grant.
b. Restricted Securities. Investor acknowledges that the Company is
issuing this Stock Option Grant upon the exemption from registration provided in
Section 4(2) of the Securities Act and is relying upon Investor's representation
that it is an "accredited investor" within the meaning of Rule 501 of Regulation
D under the Securities Act of 1933, as amended. Investor acknowledges that the
Shares to be issued upon the exercise of this Stock Option Grant may be
unregistered at the time of exercise and, in such event, Investor agrees that
the Shares be issued upon the exercise of this Stock Option Grant may only be
pledged, offered, sold or transferred if registered under the Securities Act or
pursuant to an exemption from the registration requirements thereunder. Investor
understands that absent registration of the Shares to be issued upon the
exercise of this Stock Option Grant under the Securities Act, compliance with an
applicable exemption under the Securities Act is required for a sale or other
disposition of such shares. Investor further understands and acknowledges that
there is not now available, and may not be available when it wishes to sell such
Shares to be issued upon the exercise of this Stock Option Grant, adequate
public information with respect to the Company which would permit offers or
sales of the shares of Class A preferred stock pursuant to Rule 144 promulgated
under the Securities Act. Investor acknowledges that the Company is under no
obligation to register the Shares to be issued upon the exercise of this Stock
Option Grant. Investor understands that, so long as the legend provided in
Section 9 below may remain on the certificates representing the Shares to be
issued upon the exercise of this Stock Option Grant, the Company may maintain
appropriate "stop transfer" orders with respect to such shares on its books and
records and with its registrar and transfer agent.
3. Adjustment. The Exercise Price and/or the number and type of securities
issuable upon any exercise of this Stock Option Grant shall be subject from time
to time as hereinafter provided in Section 3.
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a. If the Company, at any time, divides the outstanding shares of its
Common Stock into a greater number of shares (whether pursuant to a stock split,
stock dividend or otherwise) and conversely, if the outstanding shares of its
Common Stock are combined into a smaller number of shares, the number of Shares
available upon any exercise of this Stock Option Grant and the Exercise Price in
effect immediately prior to such division or combination shall be
proportionately adjusted to reflect the reduction or increase in outstanding
shares.
b. If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of shares of Common
Stock shall be entitled to receive stock, other securities or assets with
respect to or in exchange for such shares of Common Stock, then, as a condition
of such reorganization, reclassification, consolidation, merger or sale, the
holder of this Stock Option Grant shall have the right to purchase and receive
upon the basis and upon the terms and conditions specified in this Stock Option
Grant and in lieu of the Shares immediately theretofore purchasable and
receivable upon the exercise upon the exercise of this Stock Option Grant, such
shares of stock, other securities or assets as would have been issued or
delivered to the Investor if the Investor had exercised this Stock Option Grant
and had received such Shares prior to such reorganization, reclassification,
consolidation, merger or sale. The Company shall not effect any such
consolidation or merger unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or
merger shall assume by written instrument executed and mailed to the Investor
(i) the obligation to deliver to the Investor such shares of stock, other
securities or assets as, in accordance with the foregoing provisions, the
Investor may be entitled to purchase and (ii) the other obligations of the
Company set forth or referred to in this Stock Option Grant.
c. If, after the initial issuance of this Stock Option Grant to the
Investor, the Company shall declare a dividend or distribution payable to
holders of the Common Stock (whether payable in cash, securities or other assets
of the Company), upon any exercise of this Stock Option Grant the Investor shall
be entitled to receive, and the Company shall promptly pay to the Investor, any
such dividend(s0 and/or distribution(s) (as well as any other cash, securities
or other assets which the Investor would have received had it held any
securities received in any such dividend(s) and/or distributions)), also giving
to the other provisions of this Section 3.
d. Promptly following any adjustment under this Section 3, the Company
shall give written notice thereof (by first class mail, postage prepaid) to the
Investor (at the Investor's address as shown on the books of the Company), which
notice shall state the Exercise Price and number of Shares (or other securities
or assets) resulting from such adjustment, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
e. The terms of this Stock Option Grant shall be binding upon the
successors of the Company.
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<PAGE> 4
4. No Rights as Stockholder; Notice. The Investor shall not by virtue of
this Stock Option Grant be entitled to any rights of a stockholder of the
Company. However, the Company shall give notice to the Investor if at any time
prior to the expiration or exercise in full of this Stock Option Grant any of
the following events shall occur:
(a) the Company shall declare any dividend or distribution with respect to
its capital stock;
(b) a dissolution, liquidation or winding up to the Company shall be
proposed; or
(c) a capital reorganization or reclassification of the capital stock of
the Company, any consolidation or merger of the Company with or into another
corporation, any transaction or series of transactions in which more than fifty
percent (50%) of the voting securities of the Company are transferred to another
person, or any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety.
Such giving of notice shall be effected at least fifteen (15) business days
prior to the date fixed as a record date or effective date or the date of
closing of the Company's stock transfer books for the determination of the
stockholders entitled to such dividend or distribution, or for the determination
of the stockholders entitled to vote on such proposed merger, consolidation,
sale, conveyance, dissolution, liquidation or winding up. Such notice shall
specify such record date or the closing date or the date of closing the stock
transfer books, as the case may be.
5. Registered Owner. The Company may treat the registered owner hereof as
the owner for all purposes (notwithstanding any markings or notations on the
face of this Stock Option Grant).
6. Loss, Theft, Destruction, or Mutilation. Upon receipt by the Company of
satisfactory evidence of the loss, theft, destruction or mutilation of this
Stock Option Grant and either (in the case of loss, theft or destruction)
indemnification satisfactory to the Company or (in the case of mutilation) the
surrender of this Stock Option Grant for cancellation, the Company will execute
and deliver to the Investor, without charge, a Stock Option Grant of like
denomination.
7. Public Reporting. With a view to making available to the Investor the
benefits of Rule 144 ("Rule 144") promulgated under the Securities Act of 1933,
as amended (the "1933 Act"), and any other rule or regulation of the Securities
and Exchange Commission (the "SEC") that may at any time permit the Investor to
sell Shares to the public without registration, the Company agrees that, for so
long as a class of its securities is registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company will:
(i) make and keep public information available, as those terms are understood
and defined in Rule 144, at all times; (ii) file with the SEC in a timely manner
all reports and other documents required of the Company under the 1933 Act and
the 1934 Act; and (iii) furnish to the Investor, forthwith upon request, (a) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (b) a copy of the most
recent annual or
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<PAGE> 5
quarterly report of the Company filed with the SEC and such other reports and
documents so filed by the Company which the Investor may reasonably request, and
(c) such other information as may be reasonably requested in availing the
investor of any rule or regulation of the SEC which permits the selling of any
Shares without registration under the 1933 Act.
9. Notices. Any notice or demand desired or required to be given hereunder
shall be in writing and given (except as otherwise provided herein) by personal
delivery, certified or registered mail or air courier addressed as follows:
If to the Company: United Therapeutics Corporation
1110 Spring Street
Silver Spring, MD 20910
Attn: Martine Rothblatt, CEO
If to Toray Industries: Toray Industries, Inc. Head Office
2-1, Nihonbashi-Muromachi 2-chome
Chuo-ku
Tokyo 103-8666
Japan
Attn: Masanobu Naruto, Ph.D.
General Manager
Pharmaceuticals Planning Dept.
or to such other address as the party to receive the notice or request shall
designate by notice to the other. Any notice or request shall be deemed given
when received.
9. Legend. The Company may cause each certificate representing Shares
issued upon exercise of this Stock Option Grant to bear legend in substantially
the following form:
"The securities represented by this certificate have not been
registered or qualified under the Federal Securities Act of 1933 (the
"1933 Act") or applicable state securities laws and are "restricted
securities" within the meaning of Rule 144 promulgated under the 1933
Act. The securities may not be sold or transferred without complying
with Rule 144 in the absence of effective registration under the 1933
Act or other compliance under or exemption from the 1933 Act and
applicable state securities laws."
10. Taxes. The Company agrees that it will pay, and will hold the Investor
harmless from any and all liability with respect to, any stamp or similar taxes
which may be determined to be payable to the State of Delaware in connection
with the issuance, delivery or exercise of this Stock Option Grant (as well as
the issuance or delivery of Shares upon any exercise of this Stock Option
Grant).
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11. Miscellaneous. Neither this Stock Option Grant nor any term hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. The Section headings in this Stock Option
Grant are for purposes of references only and shall not limit or otherwise
affect the meaning hereof.
IN WITNESS WHEREOF, the Company has caused this Stock Option Grant to be
signed and delivered by its duly authorized officers as of September 16, 1998.
UNITED THERAPEUTICS CORPORATION,
a Delaware corporation
/s/ Martine A. Rothblatt
By: Martine A. Rothblatt
Chief Executive Officer
Witness:
/s/ Theresa Bongartz
- -----------------------
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Attachment A
STOCK OPTION GRANT EXERCISE
(To be signed only upon an exercise of the Stock Option Grant)
The undersigned, the holder of the attached Stock Option Grant, hereby
elects to exercise the purchase right represented by such Stock Option Grant
for, and to purchase thereunder, _________________of the Shares of Common Stock
of United Therapeutics Corporation to which such Stock Option Grant relates and
herewith makes payment of $________________ therefor in cash or by certified
check or bank draft [or election is made with respect to current exercise of the
Stock Option Grant to utilize the Net Exercise Right as described in such Stock
Option Grant] and requests that the certificate for such Shares be issued in the
name of, and be delivered to_____________________ , whose address is set forth
below the signature of the undersigned.
Dated:____________________
______________________________
Signature
______________________________
Title
______________________________
Address
______________________________
______________________________
<PAGE> 1
Exhibit 10.1
UNITED THERAPEUTICS CORPORATION
AMENDED AND RESTATED EQUITY INCENTIVE PLAN
(As amended effective April 9, 1999)
<PAGE> 2
ARTICLE I
PURPOSE
1.1 General.
The purpose of the United Therapeutics Corporation Equity Incentive
Plan (the "Plan") is to promote the success, and enhance the value, of United
Therapeutics Corporation (the "Company"), by linking the personal interests of
its qualified directors, officers and other key employees to those of Company
stockholders and by providing its qualified directors, officers and other key
employees with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of employees upon whose judgment, interest, and
special effort the successful conduct of the Company's operation is largely
dependent. Accordingly, the Plan permits the grant of incentive awards from time
to time to selected directors, officers and key employees.
ARTICLE 2
EFFECTIVE DATE
2.1 Effective Date.
The Plan was originally effective November 12, 1997, subject to
approval by the stockholders of the Company, which approval was duly obtained.
Amendments to the Plan were approved by the Board of Directors on April 9, 1999,
subject to the approval of the stockholders of the Company. The Plan as so
amended and restated will be deemed to be approved by the stockholders if it
receives the approval of the holders of a majority of the shares of stock of the
Company in accordance with the applicable provisions of the Laws of the State of
Delaware and the By-laws of the Company. Any Awards granted under the Plan as so
amended prior to stockholder approval are effective when made (unless the
Committee specifies otherwise at the time of grant), but no Award may be
exercised or settled and no restrictions relating to any Award may lapse before
stockholder approval. If the stockholders fail to approve the Plan as amended
within twelve (12) months of April 9, 1999, any Award previously made pursuant
to the amended Plan shall be automatically canceled without any further act.
ARTICLE 3
DEFINITIONS
3.1 Definitions.
When appearing in this Plan with the initial letter capitalized, and
the word or phrase does not commence a sentence, the word or phrase shall
generally be given the meaning ascribed to it in this Section or in Sections 1.1
or 2.1, unless a clearly different meaning is required by the context. The
following words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, or Performance Share Award, or any other right or interest
relating to Stock or cash, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
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(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" means the committee of the Board described in Article
4.
(f) "Company" means United Therapeutics Corporation.
(g) "Disability" shall mean any illness or other physical or mental
condition of a Participant that renders the Participant incapable of
performing his customary and usual duties for the Company, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the Committee, is permanent and continuous in nature.
The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Participant's
condition. Such disability determination shall be made in accordance
with Code section 22(e)(3).
(h) "Effective Date" has the meaning assigned such term in Section 2.1.
(i) "Fair Market Value" means with respect to Stock or any other
property, the fair market value of such Stock or other property
determined by such methods or procedures as may be established from
time to time by the Committee.
(j) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision
thereto.
(k) "Non-Qualified Stock Option" means an Option that is not an
Incentive Stock Option.
(l) "Option" means a right granted to a Participant under the Plan to
purchase Stock at a specified price during specified time periods. An
Option may be either an Incentive Stock Option or a Non-Qualified Stock
Option.
(m) "Participant" means a person who, as a director, officer or key
employee of the Company, has been granted an Award under the Plan.
(n) "Performance Award" means a right granted to a Participant under
Article 9 to receive cash, Stock, or other Awards, the payment of which
is contingent upon achieving certain performance goals established by
the Committee (includes "Performance Shares" and "Performance Units").
(o) "Performance Share" means a right granted to a Participant under
Article 9 to receive shares of Company Stock, the payment of which is
contingent upon achieving certain performance goals.
(p) "Performance Units" means a right granted to a Participant under
Article 9 to receive units the value of which is equivalent to $1.00,
the payment of which is contingent upon achieving certain performance
goals.
(q) "Plan" means the United Therapeutics Corporation Amended and
Restated Equity Incentive Plan, as it may be further amended from time
to time.
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(r) "Restricted Stock Award" means Stock granted to a Participant under
Article 10 that is subject to certain restrictions and to risk of
forfeiture.
(s) "Retirement" means a Participant's termination of employment with
the Company after attaining any normal or early retirement age
specified in any pension, profit sharing or other retirement program
sponsored by the Company.
(t) "Stock" means the United Therapeutics Corporation par value common
stock of the Company and such other securities of the Company as may be
substituted for Stock pursuant to Article 12.
(u) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR and the grant price of the SAR, as
determined pursuant to Article 8.
(v) "1933 Act" means the Securities Act of 1933, as amended from time
to time.
(w) "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time.
ARTICLE 4
ADMINISTRATION
4.1 Committee.
The Plan shall be administered by the Compensation Committee of the
Board. The Committee shall consist of two or more members of the Board who are
(i) "outside directors" as that term is used in Section 162 of the Code and the
regulations promulgated thereunder, and (ii) "non-employee directors," as such
term is defined for purposes of Rule 16b-3 promulgated under Section 16 of the
1934 Act or any successor provision, except as may be otherwise permitted under
Section 16 of the 1934 Act and the rules and regulations promulgated thereunder.
4.2 Action by the Committee.
For purposes of administering the Plan, the following rules of
procedure shall govern the Committee. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting who are, at which a quorum is present and acts approved in writing by a
majority of the Committee in lieu of a meeting shall be deemed the acts of the
Committee. Each member of the Committee is entitled, in good faith, to rely or
act upon any report or other information furnished to that member by any officer
or other employee of the Company, the Company's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the Plan.
4.3 Authority of Committee.
The Committee has the exclusive power, authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
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<PAGE> 5
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the
Plan, including but not limited to, the exercise price, grant price, or
purchase price, any restrictions or limitations on the Award, any
schedule for lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, based
in each case on such considerations as the Committee in its sole
discretion determines;
(e) Determine whether, to what extent, and under what circumstances an
Award may be granted, or the exercise price of an Award may be paid in
(cash, Stock, other Awards, or other property), or an Award may be
canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(g) Decide all other matters that must be determined in connection with
an Award;
(h) Establish, adopt or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan.
4.4 Decisions Binding.
The Committee is hereby granted discretionary authority to construe and
interpret the provisions of the Plan. The Committee's interpretation of the
Plan, any Awards granted under the Plan, any Award Agreement and all decisions
and determinations by the Committee with respect to the Plan are final, binding,
and conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1 Number of Shares.
Subject to adjustment as provided in Section 12.1, the aggregate number
of shares of Stock reserved and available for Awards, except with respect to
Options granted pursuant to Section 7.3, shall be 7,000,000. Subject to
adjustment as provided in Section 12.1, the aggregate number of shares of Stock
reserved and available for the Options granted pursuant to Section 7.3 shall be
7,939,517.
5.2 Lapsed Awards.
To the extent that an Award is canceled, terminates, expires or lapses
for any reason, any shares of Stock subject to the Award will again be available
for the grant of an Award under the Plan and shares subject to SARs or other
Awards settled in cash will be available for the grant of an Award under the
Plan.
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<PAGE> 6
5.3 Stock Distributed.
Any Stock distributed pursuant to an Award may consist, in whole or in
part, of authorized and unissued Stock, treasury Stock or Stock purchased on the
open market.
5.4 Limitation on Number of Shares Subject to Awards.
Notwithstanding any provision in the Plan to the contrary, the maximum
number of shares of Stock with respect to one or more Awards that may be granted
to any one Participant over any one calendar year period during the term of the
Plan shall not exceed 500,000; provided, however, that the maximum number of
shares of Stock with respect to an Option granted to the Chief Executive Officer
pursuant to Section 7.3 in 2000 shall not exceed 500,000; in 2001 shall not
exceed 701,353; in 2002 shall not exceed 681,434; in 2003 shall not exceed
2,757,832; and in 2004 shall not exceed 3,298,898.
ARTICLE 6
ELIGIBILITY
6.1 General.
Awards may be granted only to individuals who are directors (including
non-employee directors), officers or other key employees (including employees
who also are directors or officers) of or consultants to the Company, as
determined by the Committee.
ARTICLE 7
STOCK OPTIONS
7.1 General.
The Committee is authorized to grant Options to Participants in such
amounts as it deems appropriate in its discretion and subject to such conditions
and based on such criteria as it may deem advisable (including performance based
criteria or conditions) consistent with the other terms of the Plan and the
following:
(a) Exercise Price. The exercise price per share of Stock under an
Option shall be determined by the Committee.
(b) Time and Conditions of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part.
The Committee also shall determine the performance or other conditions,
if any, that must be satisfied before all or part of an Option may be
exercised.
(c) Payment. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants. Without limiting the power and discretion conferred on
the Committee pursuant to the preceding sentence, the Committee may, in
the exercise of its discretion, but need not, allow a Participant to
pay the Option price by directing the Company to withhold from the
shares of Stock that would otherwise be issued upon exercise of the
Option that number of shares
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<PAGE> 7
having a Fair Market Value on the exercise date equal to the Option
price, all as determined pursuant to rules and procedures established
by the Committee.
(d) Evidence of Grant. All Options shall be evidenced by a written
Award Agreement between the Company and the Participant. The Award
Agreement shall include such provisions as may be specified by the
Committee.
(e) Dividend Equivalents. Any Option may provide for the payment of
dividend equivalents to the Participant on a current, deferred or
contingent basis or may provide that Dividend Equivalents be credited
against the option price. The right to Dividend Equivalents, if so
provided, shall be evidenced in the Award Agreement.
7.2 Incentive Stock Options.
The terms of any Incentive Stock Options granted under the Plan must
comply with the following additional rules:
(a) Exercise Price. Subject to Section 7.2 (e) below, the exercise
price per share of Stock shall be set by the Committee, provided that
the exercise price for any Incentive Stock Option shall not be less
than the Fair Market Value as of the date of the grant.
(b) Exercise. Subject to Section 7.2(e) below, in no event may any
Incentive Stock Option be exercisable for more than ten (10) years from
the date of its grant.
(c) Lapse of Option. An Incentive Stock Option shall lapse under the
following circumstances:
(1) The Incentive Stock Option shall lapse three months after
the Participant's termination of employment, if the
termination of employment was (i) attributable to Retirement
or (ii) for any other reason, provided that the Committee has
approved, in writing, the continuation of any Incentive Stock
Option outstanding on the date of the Participant's
termination of employment.
(2) If the Participant becomes disabled within the meaning of
Disability under Section 3.1(g) of the Plan, then the Option
will lapse twelve (12) months after employment ceased due to
the Disability.
(3) If the Participant separates from employment other than as
provided in paragraph (1) or (2), the Incentive Stock Option
shall lapse at the time of the Participant's termination of
employment.
(5) If the Participant dies before the Option lapses pursuant
to paragraph (1), (2) or (3) or before its original expiration
as indicated above, the Incentive Stock Option shall lapse,
unless it is previously exercised, on the date on which the
Option would have lapsed had the Participant lived and had his
employment status (i.e., whether the Participant was employed
by the Company on the date of his death or had previously
terminated employment) remained unchanged. Upon the
Participant's death, any exercisable Incentive Stock Options
may be exercised by the Participant's legal representative or
representatives, by the person or persons entitled to
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<PAGE> 8
do so under the Participant's last will and testament, or, if
the Participant shall fail to make testamentary disposition of
such Incentive Stock Options or shall die intestate, by the
person or persons entitled to receive such Incentive Stock
Options under the applicable laws of descent and distribution.
(d) Individual Dollar Limitation. The aggregate Fair Market Value
(determined at the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
(e) Ten Percent Owners. No Incentive Stock Option shall be granted to
any individual who, at the date of grant, owns stock possessing more
than ten percent of the total combined voting power of all classes of
stock of the Company unless the exercise price per share of such Option
is at least 110% of the Fair Market Value per share of Stock at the
date of grant and the Option expires no later than five (5) years after
the date of grant.
(f) Expiration of Incentive Stock Options. No Award of an Incentive
Stock Option may be made pursuant to the Plan after the day immediately
prior to the tenth anniversary of the original Effective Date (i.e.,
November 12, 19977).
(g) Right to Exercise. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant.
(h) Grants only to Employees. Incentive Stock Options may be granted
only to employees of the Company.
7.3 Incentive Stock Option Grants to Chief Executive Officer
Pursuant to the terms of the Executive Employment Agreement entered
into by and between the Company and its Chief Executive Officer, dated April 5,
1999, as amended, the Company shall make annual grants of Incentive Stock
Options to the Chief Executive Officer. The number of shares subject to each
Incentive Stock Option shall be determined in accordance with the Employment
Agreement. The terms of the Award Agreement for such Option grants shall be in
form and substance as attached to the Employment Agreement.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 Grant of SARs.
The Committee is authorized to grant SARs to Participants on the
following terms and conditions:
(a) Right to Payment. Upon the exercise of a SAR, the Participant to
whom it is granted has the right to receive all or a percentage of:
(1) The Fair Market Value of one share of Stock on the date of
exercise, minus,
(2) The grant price of the SAR as determined by the Committee.
In the case of a SAR offered in tandem with an Incentive Stock
Option, the grant
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price of the SAR shall not be less than the Fair Market Value
of one share of Stock on the date of grant.
(b) Tandem Awards. SARs may be granted alone or in tandem with options.
If a SAR is granted in tandem with an option, the SAR may only be
exercised at a time when the related option is exercisable and the
difference between the Fair Market Value and the grant price is a
positive number. The exercise of the tandem SAR requires the surrender
of the related option for cancellation.
(c) Other Terms. All awards of SARs shall be evidenced by an Award
Agreement. The terms, methods of exercise, methods of settlement, form
of consideration payable in settlement, and any other terms and
conditions of any SAR shall be determined by the Committee at the time
of the grant of the Award and shall be reflected in the Award
Agreement. The grant of any SAR may include the right to Dividend
Equivalents as described in Section 7.1(e).
ARTICLE 9
PERFORMANCE AWARDS
9.1 Grant of Performance Awards.
The Committee is authorized to grant Performance Awards to Participants
on such terms and conditions as may be selected by the Committee. The Committee
shall have the complete discretion to determine the number of Performance Awards
granted to each Participant. All grants of Performance Awards shall be evidenced
by an Award Agreement.
9.2 Right to Payment.
A grant of Performance Awards gives the Participant rights, valued as
determined by the Committee, and payable to, or exercisable by, the Participant
to whom the Performance Awards are granted, in whole or in part, as the
Committee shall establish at grant or thereafter. The Committee shall set
performance goals and other terms or conditions to payment of the Performance
Awards in its discretion which, depending on the extent to which they are met,
will determine the number and value of Performance Shares that will be paid to
the Participant.
9.3 Other Terms.
Performance Awards may be payable in cash, Stock, or other property,
and have such other terms and conditions as determined by the Committee and
reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1 Grant of Restricted Stock.
The Committee is authorized to make Awards of Restricted Stock to
Participants in such amounts and subject to such terms and conditions as may be
selected by the Committee. All Awards of Restricted Stock shall be evidenced by
a Restricted Stock Award Agreement.
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10.2 Issuance and Restrictions.
Restricted Stock shall be subject to such restrictions as the Committee
may choose to impose. These restrictions may lapse separately or in combination
at such times, under such circumstances, in such installments, or otherwise, as
the Committee determines at the time of the grant of the Award or thereafter. An
award of Restricted Stock will provide the Participant with voting, dividend and
other ownership rights provided in the Award Agreement.
10.3 Forfeiture.
Except as otherwise determined by the Committee at the time of the
grant of the Award or thereafter, upon termination of employment during the
applicable restriction period, Restricted Stock, that is at that time subject to
restrictions, shall be forfeited and reacquired by the Company; provided,
however, that the Committee may provide in any Award Agreement that restrictions
or forfeiture conditions relating to Restricted Stock will be waived in whole or
in part in the event of termination resulting from any specified cause, and the
Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.
10.4 Certificates for Restricted Stock.
Restricted Stock granted under the Plan may be evidenced in such
manner as the Committee shall determine. If certificates representing shares of
Restricted Stock are registered in the name of the Participant, certificates
must bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, and the Company shall retain
physical possession of the certificate until such time as all applicable
restrictions lapse.
ARTICLE 10A
DEFERRED SHARES
10A.1 Deferred Shares.
The Committee is authorized to make Awards of Deferred Shares to
Participants in such amounts and subject to such terms and conditions as may be
selected by the Committee. A Deferred Share Award shall entitle the Participant
to receive Stock from the Company in the future in consideration for services
performed during the Deferral Period. All services required of the Participant
for receipt of the Deferred Share shall be evidenced by an Award Agreement.
10A.2 Deferral Period.
The "Deferral Period" means the time period mandated by the Award
Agreement during which specified services are to be performed by the Participant
that will merit receipt of the Deferred Shares.
10A.3 Other Conditions.
The Committee may authorize Dividend Equivalents, defined under Section
7.1(e), to be provided on or after the date of any grant under this Section.
During the
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Deferral Period the Participant has no right to transfer any rights covered by
the Award and no right to vote the Stock.
The grant of any Deferred Shares may require the payment of additional
consideration. However, in no case shall the additional consideration exceed the
Fair Market Value of the Shares on the date of grant.
ARTICLE 11
PROVISIONS APPLICABLE TO AWARDS
11.1 Stand-Alone, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee,
be granted either alone or in addition to, in tandem with, or in substitution
for, any other Award granted under the Plan. If an Award is granted in
substitution for another Award, the Committee may require the surrender of such
other Award in consideration of the grant of the new Award. Awards granted in
addition to or in tandem with other Awards may be granted either at the same
time as or at a different time from the grant of such other Awards.
11.2 Exchange Provisions.
The Committee may at any time offer to exchange or buy out any
previously granted Award for a payment in cash, Stock, or another Award (subject
to Section 12.1), based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made.
11.3 Term of Award.
The term of each Award shall be for the period as determined by the
Committee, provided that in no event shall the term of any Incentive Stock
Option or a Stock Appreciation Right granted in tandem with the Incentive Stock
Option exceed a period of ten years from the date of its grant.
11.4 Form of Payment for Awards.
Subject to the terms of the Plan, the Award Agreement or any applicable
law, payments or transfers to be made by the Company on the grant or exercise of
an Award may be made in such form as the Committee determines at or after the
time of grant, including without limitation, cash, Stock, other Awards, or other
property, or any combination, and may be made in a single payment or transfer,
in installments, or on a deferred basis, in each case determined in accordance
with rules adopted by, and at the discretion of, the Committee.
11.5 Limits on Transfer.
No right or interest of a Participant in any Award may be encumbered or
pledged to or in favor of any party other than the Company , or shall be subject
to any lien, obligation, or liability of such Participant to any other party
other than the Company . No Award shall be assignable or transferable by a
Participant other than by will or the laws of descent and distribution or,
except in the case of an Incentive Stock Option, pursuant
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to a qualified domestic relations order as defined in Section 414(p)(1)(B) of
the Code, if the order satisfies Section 414(p)(1)(A) of the Code.
11.6 Beneficiaries.
Notwithstanding Section 13.5, a Participant may, in the manner
determined by the Committee, designate a beneficiary to exercise the rights of
the Participant and to receive any distribution with respect to any Award upon
the Participant's death. A beneficiary, legal guardian, legal representative, or
other person claiming any rights under the Plan is subject to all terms and
conditions of the Plan and any Award Agreement applicable to the Participant,
except to the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If the
Participant is married, a designation of a person other than the Participant's
spouse as his beneficiary with respect to more than 50 percent of the
Participant's interest in the Award shall not be effective without the written
consent of the Participant's spouse. If no beneficiary has been designated or
survives the Participant, payment shall be made to the person entitled thereto
under the Participant's will or the laws of descent and distribution. Subject to
the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the
Committee.
11.7 Stock Certificates.
All Stock certificates delivered under the Plan are subject to any
stop-transfer orders and other restrictions as the Committee deems necessary or
advisable to comply with federal or state securities laws, rules and regulations
and the rules of any national securities exchange or automated quotation system
on which the Stock is listed, quoted, or traded. The Committee may place legends
on any Stock certificate to reference restrictions applicable to the Stock.
11.8 Acceleration Upon Death or Disability.
Notwithstanding any other provision in the Plan or any Participant's
Award Agreement to the contrary, upon the Participant's death or Disability, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully exercisable and all
restrictions on outstanding Awards shall lapse. Any Option or Stock Appreciation
Rights Awards shall then lapse in accordance with the other provisions of the
Plan and the Award Agreement. To the extent that this provision causes Incentive
Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the
excess Options shall be deemed to be Non-Qualified Stock Options.
11.9 Acceleration Upon Certain Events.
In the event of (i) the commencement of a public tender offer for all
or any portion of the Stock, (ii) a proposal to merge, consolidate or otherwise
combine with another company is submitted to the stockholders of the Company for
approval, or (iii) the Board approves any transaction or event that would
constitute a change of control of the Company of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the
Committee may in its sole discretion declare all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised to become fully exercisable, and/or all restrictions on all
outstanding Awards to lapse, in each case as of such date as the Committee may,
in its sole discretion, declare, which may be on or before the consummation of
such tender offer or other transaction or event. To the extent that this
provision causes Incentive
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Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the
excess Options shall be deemed to be Non-Qualified Stock Options.
ARTICLE 12
CHANGES IN CAPITAL STRUCTURE
12.1 General.
In the event a stock dividend is declared upon the Stock, the shares of
Stock then subject to each Award shall be increased proportionately without any
change in the aggregate purchase price therefor. In the event the Stock shall be
changed into or exchanged for a different number or class of shares of stock or
securities of the Company or of another company, whether through reorganization,
recapitalization, stock split, reverse stock split, combination of shares,
merger or consolidation, there shall be substituted for each such share of Stock
then subject to each Award the number and class of shares into which each
outstanding share of Stock shall be so exchanged. The Committee shall make such
adjustments to the aggregate purchase price for the shares then subject to each
Award as it deems necessary or advisable to put Participants in the same
relative position after such change in capital structure as before such change.
ARTICLE 13
AMENDMENT, MODIFICATION AND TERMINATION
13.1 Amendment, Modification and Termination.
With the approval of the Board, at any time and from time to time, the
Committee may terminate, amend or modify the Plan; provided, however, that no
amendment of the Plan may be made without approval of the stockholders of the
Company as may be required by the Code, by the insider trading rules of Section
16 of the 1934 Act, by any national securities exchange or automated quotation
system on which the Stock is listed or reported.
13.2 Awards Previously Granted.
No termination, amendment, or modification of the Plan shall adversely
affect any Award previously granted under the Plan, without the written consent
of the Participant.
ARTICLE 14
GENERAL PROVISIONS
14.1 No Rights to Awards.
No Participant or employee shall have any claim to be granted any Award
under the Plan, and neither the Company nor the Committee is obligated to treat
Participants and employees uniformly.
14.2 No Stockholder Rights.
No Award gives the Participant any of the rights of a stockholder of
the Company unless and until shares of Stock are in fact issued to such person
in connection with such Award.
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14.3 Withholding.
The Company shall have the authority and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy federal, state, and local taxes (including the Participant's FICA
obligation) required by law to be withheld with respect to any taxable event
arising as a result of the Plan. With respect to withholding required upon any
taxable event under the Plan, the Committee may, at the time the Award is
granted or thereafter, require that any such withholding requirement be
satisfied, in whole or in part, by withholding shares of Stock having a Fair
Market Value on the date of withholding equal to the amount to be withheld for
tax purposes, all in accordance with such procedures as the Committee
establishes.
14.4 No Right to Employment.
Nothing in the Plan or any Award Agreement shall interfere with or
limit in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue in
the employ of the Company.
l4.5 Unfunded Status of Awards.
The Plan is intended to be an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Company .
14.6 Indemnification.
To the extent allowable under applicable law, each member of the
Committee shall be indemnified and held harmless by the Company from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
such member in connection with or resulting from any claim, action, suit, or
proceeding to which such member may be a party or in which he may be involved by
reason of any action or failure to act under the Plan and against and from any
and all amounts paid by such member in satisfaction of judgment in such action,
suit, or proceeding against him provided he gives the Company an opportunity, at
its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the By-Laws of the Company or as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
14.7 Relationship to Other Benefits.
No payment under the Plan shall be taken into account in determining
any benefits under any pension, retirement, savings, profit sharing, group
insurance, welfare or benefit plan of the Company.
14.8 Expenses.
The expenses of administering the Plan shall be borne by the Company.
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14.9 Titles and Headings.
The titles and headings of the Sections in the Plan are for
convenience of reference only, and in the event of any conflict, the text of the
Plan, rather than such titles or headings, shall control.
14.10 Gender and Number.
Except where otherwise indicated by the context, any masculine term
used herein also shall include the feminine; the plural shall include the
singular and the singular shall include the plural.
14.11 Fractional Shares.
No fractional shares of Stock shall be issued and the Committee shall
determine, in its discretion, whether cash shall be given in lieu of fractional
shares or whether such fractional shares shall be eliminated by rounding up.
14.12 Securities Law Compliance.
With respect to any person who is, on the relevant date, obligated to
file reports under Section 16 of the 1934 Act, transactions under the Plan are
intended to comply with Rule 16b-3(d) as transactions between the Company and
its officers or directors. To the extent any provision of the Plan or action by
the Committee fails to so comply, it shall be void to the extent permitted by
law and voidable as deemed advisable by the Committee.
14.13 Government and Other Regulations.
The obligation of the Company to make payment of awards in Stock or
otherwise shall be subject to all applicable laws, rules, and regulations, and
to such approvals by government agencies as may be required. The Company shall
be under no obligation to register under the 1933 Act, any of the shares of
Stock paid under the Plan. If the shares paid under the Plan may in certain
circumstances be exempt from registration under the 1933 Act, the Company may
restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
14.14 Governing Law.
To the extent not governed by federal law, the Plan and all Award
Agreements shall be construed in accordance with and governed by the laws of the
District of Columbia.
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EXHIBIT 10.2
[LUNG LOGO]
Lung Rx, Inc.
Corporate Office Research Office
1826 R Street, NW 100 Europa Drive, Suite 599
Washington, DC Chapel Hill, NC
20009 27154
Tel: 202-518-0200 Tel: 919-942-3031
Fax: 202-518-0802 Fax: 919-942-3421
[Date]
[Addressee/Member of Scientific Advisory Board]
Dear ___________:
Thank you so much for agreeing to serve on the Scientific Advisory Board
of _________.
For your information, I will outline the mission of our new company and
enclose two informational brochures: (1) The PPH Cure Foundation and (2) Lung
Rx. As we discussed, Lung Rx is a small, but I think important, Research and
Development Company with a long term objective of disease management. Our
company is dedicated to identifying, developing and bringing to market
important therapies to treat patients who are suffering from severe pulmonary
diseases. Our clinical testing, drug development and marketing will be
international. With your help, our short-term goals will be to select and
develop the best follow-on therapies for prostacyclin. These therapies should
have all of the important safety and efficacy benefits of prostacyclin without
the requirement for continuous intravenous therapy.
Additionally, your ideas and direction will be most important in guiding
us through and focusing our energies in the view of the several new, and
perhaps important developments in nitric oxide, endothelin blockers, potassium
channel agonists and gene therapy for prostacyclin synthase and/or NOS. Our
company's medium term goals include identifying, developing and marketing one
or several of these new candidates. Again, your assistance is most important.
Though the long-term mission o Lung Rx is disease management for general
pulmonary diseases including secondary pulmonary hypertension, ARDS and COPD,
our current support is derived exclusively from the PPH Cure Foundation; Lung
Rx is absolutely dedicated to developing these therapies in, and bringing these
therapies to severely ill patients with primary pulmonary hypertension (PPH).
Consistent with Lung Rx's mission, our development and marketing strategy in
PPH will be international.
Ms. Rothblatt and I are delighted that you will join our Scientific
Advisory Board. As you can well imagine, a small company such as Lung Rx cannot
afford to make mistakes in setting its direction; we need your assistance in
setting and refining (when necessary) our strategies to effectively and
efficiently carry out our mission to bring these much needed therapies to
critically ill patients.
With your agreement, compensation will cover business travel expenses
$1,500 per Board meeting.
All the best and many thanks.
James W. Crow
------------------------
President
Enclosure
<PAGE> 1
EXHIBIT 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
(AS AMENDED)
This Executive Employment Agreement is entered into as of April 2, 1999 (the
"Effective Date"), by and between United Therapeutics Corporation ("UT"), a
company organized under the laws of the State of Delaware, having a place a
business 1110 Spring Street, Silver Spring, MD 20910, and Martine A. Rothblatt
("Executive"), a resident of the State of Maryland.
Whereas, UT is engaged in the development, implementation and operation of an
international pharmaceutical business (the "UT Business");
Whereas, Executive currently serves as the Chairman and Chief Executive Officer
of UT and her services and knowledge are valuable to UT in connection with the
management of UT and the UT Business;
Whereas, UT has determined that it is in the best interests of UT and its
stockholders to secure Executive's continued services, to ensure Executive's
continued dedication to UT, and to provide appropriate compensation, including
incentive compensation to Executive, and in order to further such goals, UT is
desirous of entering this Agreement; and
Whereas, Executive is desirous of entering into an employment agreement with UT
on the terms and conditions set forth herein,
Now, Therefore, in consideration of the foregoing and the mutual covenants
contained herein, UT and Executive agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the respective
meanings set forth below:
1.1 "Affiliate" means any corporation, partnership or other entity,
controlling, controlled by, or under common control with UT, by virtue of direct
or indirect beneficial ownership of voting securities of or voting interest in
the controlled entity.
1.2 "Board" means the Board of Directors of UT.
1.3 "Cause" means (a) the willful and continued failure by Executive to
substantially perform her duties with UT (other than any such failure resulting
from Executive's incapacity due to physical or mental illness, or any such
actual or anticipated failure resulting from Executive's termination for Good
Reason) after a demand for substantial performance is delivered to Executive by
the Board (which demand shall specifically identify the manner in which the
Board
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believes that Executive has not substantially performed her duties); or (b) the
willful engaging by Executive in gross misconduct materially and demonstrably
injurious to UT. For purposes of this definition, no act or failure to act on
the part of Executive shall be considered "willful" unless done or omitted to be
done by Executive not in good faith and without reasonable belief that her
action(s) or omission(s) was in the best interests of UT. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause
unless and until UT provides Executive with a copy of a resolution adopted by an
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for the purpose (after
reasonable notice to Executive and opportunity for Executive, with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
the Executive has been guilty of conduct set forth in subsections (a) or (b)
above, setting forth the particulars in detail. A determination of Cause by the
board shall not be binding upon or entitled to deference by any finder of fact
in the event of a dispute, it being the intent of the parties that such finder
of fact in the event of a dispute shall make an independent determination of
whether the termination was for "Cause" as defined in (a) and (b) above.
1.4 "Code" means the Internal Revenue Code of 1986, as amended.
1.5 "Confidential Information" means all information known to UT or learned
by Executive during the term of employment and not generally known, including
any and all general and specific knowledge, experience, information and data,
technical or non-technical, including, without limitation and whether or not
patentable, processes, skills, information, know-how, trade secrets, data,
designs, formulae, algorithms, specifications, samples, methods, techniques,
compilations, computer programs, devices, concepts, inventions, developments,
discoveries, improvements, and commercial or financial information, in any form,
including without limitation, oral, written, graphic, demonstrative, machine
recognizable, specimen or sample form.
1.6 "Conflicting Product or Service" means any product or service of any
person or organization other than UT, in existence or under development, which
resembles or competes with a product or service of UT's which is then in
existence or under development, excluding, however, the preclinical compound
AFP-07 under development by the PPH Cure Foundation.
1.7 "Conflicting Organization" means any person or organization engaged in,
or about to become engaged in, research on or development, production,
marketing, or selling of a "Conflicting Product or Service."
1.8 "Date of Termination" means (a) the effective date on which Executive's
employment by UT terminates as specified in a Notice of Termination by UT or
Executive, as the case may be, or (b) if Executive's employment by UT terminates
by reason of death, the date of death of Executive. Notwithstanding the previous
sentence, (i) if the Executive's employment is terminated for disability as
defined in Section 1.9, then such Date of Termination shall be no earlier than
thirty (30) days following the date on which a Notice of Termination is
received, and (ii) if the Executive's employment is terminated by UT other than
for Cause, then such Date of
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Termination shall be no earlier than thirty (30) days following the date on
which Notice of Termination is received.
1.9 "Disability" means Executive's failure to substantially perform her
duties with UT on a full-time basis for at least one hundred eighty (180)
consecutive days as a result of Executive's incapacity due to mental or physical
illness.
1.10 "Good Reason" means, without Executive's express written consent, the
occurrence of any of the following events:
(a) (i) The assignment to Executive of any duties inconsistent in any
material adverse respect with Executive's position(s), duties,
responsibilities or status with UT immediately prior thereto, (ii)
a material adverse change in Executive's reporting
responsibilities, titles or offices with UT as in effect
immediately prior thereto, (iii) any removal or involuntary
termination of Executive by UT otherwise than as expressly
permitted by this Agreement (including any purported termination
of employment which is not effected by a Notice of Termination),
or (iv) any failure to re-elect Executive to any position with UT
held by Executive immediately prior thereto;
(b) A reduction by UT in Executive's rate of annual base salary as in
effect immediately prior thereto or the failure of UT in any year
(commencing with calendar year 1999) to increase the Executive's
annual base salary by an amount equal to the average percentage
increases in base salary for all officers of UT during the two
full calendar years immediately preceding such year except for
across-the-board salary reductions, freezes, or reduced increases
similarly affecting all Executives of UT and all Executive or any
person in control of UT;
(c) Any requirement of UT that Executive (i) be based anywhere other
than the facilities where Executive is located on the date of this
Agreement or reasonably equivalent facilities within twenty five
(25) miles of such facilities or (iii) travel for the business of
UT to an extent substantially more burdensome than the travel
obligations of Executive immediately prior to the date of this
Agreement;
(d) The failure of UT to continue the Executive's participation in any
bonus or other incentive plans in which she was participating
immediately prior thereto or any reduction in the amount of bonus
or incentive compensation which she is able to receive, without
replacement of such bonus or incentive plans with bonus, incentive
or other compensation of at least substantially comparable value
to the Executive;
(e) The failure of UT to (i) to continue in effect any employee
benefit plan or compensation plan in which Executive is
participating immediately prior thereto, unless Executive is
permitted to participate in other plans providing Executive with
substantially comparable benefits, or the taking of any action by
UT which
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<PAGE> 4
would adversely affect Executive's participation in or materially
reduce Executive's benefits under any such plan, (ii) to provide
Executive and Executive's dependents with welfare benefits
(including without limitation, medical prescription drug, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs)
in accordance with the most favorable plans, practices, programs
and policies of UT in effect for Executive immediately prior
thereto or as is in effect for other senior Executive of UT, (iii)
to provide fringe benefits and perequisites in accordance with the
most favorable plans, practices, programs and policies of UT in
effect for Executive immediately prior thereto or as is in effect
for senior Executives of UT, or (iv) to provide Executive with
paid vacation in accordance with the most favorable plans,
policies, programs and practices of UT as in effect for Executive
immediately prior thereto or as is in effect for other senior
Executives of UT.
(f) The failure of UT to pay on a timely basis any amounts owed
Executive as salary, bonus, deferred compensation or other
compensation;
(g) The failure of UT to obtain an assumption agreement from any
successor as contemplated in Section 8.8;
(h) The refusal by UT to continue to allow Executive to attend to
matters or engage in activities not directly related to the
business of UT which were permitted by UT immediately prior
thereto, including without limitation serving on the boards of
directors of other companies or entities;
(i) The purported termination of Executive's employment which is not
effected pursuant to a Notice of Termination which satisfies the
requirements of a Notice of Termination; or
(j) Any other material breach by UT of its obligations under this
Agreement.
For the purposes of this Agreement, any good faith determination of Good Reasons
made by Executive shall be conclusive on the parties; provided, however, that an
isolated and insubstantial action taken in good faith and which is remedied by
UT within ten (10) days after receipt of written notice thereof given by
Executive shall not constitute Good Reason.
1.11 "Inventions" means inventions, designs, discoveries, developments,
creations and improvements created, discovered, developed or conceived,
regardless of whether reduced to practice.
1.12 "Nonqualifying Termination" means a termination of Executive's employment
(a) by UT for Cause, (b) by Executive for any reason other than for Good Reason
with Notice of Termination, (c) as a result of Executive's death, (d) by UT due
to Executive disability, unless within thirty (30) days after Notice of
Termination is provided to Executive following such disability Executive shall
have returned to substantial performance of Executive duties on a full-time
basis, or (e) as a result of Executive's Retirement.
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1.13 "Notice of Termination" means a written notice by UT or Executive as the
case may be, to the other, which (i) indicates the specific termination
provision in this Agreement relied upon, (iii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated, and (iii) specifies the termination date. The failure by Executive or
UT to set forth in such notice any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of Executive or UT
hereunder or preclude Executive or UT from asserting such fact or circumstance
in enforcing Executive's or UT's right hereunder.
1.14 "Positive Spread" means the spread between the exercise price of any
non-vested options held by Executive to acquire common stock of UT under any
stock option plan adopted by UT prior or subsequent hereto, and the average of
the bid and asked price of the common stock as reported for the Date of
Termination on the Automated Quotation System of the National Association of
Securities Dealers or if no such trades are reported on that date, the last
preceding date on which shares of UT or its Affiliates common stock were traded,
or if such common stock of UT is not publicly traded, the "Fair Market Value" of
such stock as determined pursuant to the applicable stock option plan or plans.
1.15 "Retirement" means termination of employment by either the Executive or
UT on or after the Executive's attainment of age 65.
1.16 "Works of Authorship" means all computer software programs or other
writings, including, without limitation, verbal works, designs, models, drawing,
or audio, visual or audiovisual recordings.
ARTICLE 2
EMPLOYMENT
2.1 Employment. UT agrees to employ Executive as Chief Executive Officer, and
Executive agrees to accept such employment by UT on the terms and conditions set
forth herein. Executive represents and warrants that the execution, delivery and
performance by her of this Agreement will not violate any agreement, order,
judgment or decree to which she is a party or by which she is bound.
2.2 Term. Subject to the provisions of Article 4 hereof, UT shall employ
Executive for a term of five (5) years commencing as of the Effective Date and
continuing to and including December 31, 2004. The term (as herein extended)
shall automatically be extended by one (1) additional year at the end of each
year unless at least six (6) months prior to the end of the term or any
anniversary thereof, UT shall deliver to Executive or Executive shall deliver to
UT, written notice that the term shall not be so extended.
2.3 Duties. As Chief Executive Officer of UT, Executive shall have the duties
and responsibilities as may from time to time be assigned to or vested in
Executive by UT's Board of Directors (the "Board").
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(a) Executive's employment with UT shall be full-time. During the term
of employment, Executive shall, except during periods of vacation,
sick leave or other duly authorized leave of absence, and except
for not more than a few hours per week for the activities
described in subparagraph 2.3(b) below, devote the whole of
Executive's time, attention, skill and ability during usual
business hours (and outside those hours when reasonably necessary
to Executive's duties hereunder) to the faithful and diligent
performance of Executive's duties hereunder. Executive
acknowledges and agrees that Executive may be required, without
additional compensation, to perform services for any Affiliates,
and to accept such office or position with Affiliate as the Board
may reasonably require. Executive shall comply with all applicable
polices of UT and/or its Affiliates during her term of service to
UT and/or its Affiliates.
(b) During the term of employment, it shall not be a violation of this
Agreement for Executive to serve as of Counsel to Mahon, Patusky,
Rothblatt and Fisher, Chartered; President of Beacon Projects,
Inc.; an officer of UT's telemedicine affiliates; to manage
personal passive investments; to serve as an officer, manager and
a member of the board of directors of PPH Cure Foundation or World
Against Racism Foundation or William Harvey Medical Research
Foundation or, with the prior approval of the Board, the board of
directors of any other corporation or trade association; so long
as such activities (individually or collectively) do not conflict
or materially interfere with the performance of Executive's duties
hereunder.
ARTICLE 3
COMPENSATION
3.1 Base Salary. For services rendered by Executive pursuant to this
Agreement, UT agrees to pay Executive a base annual salary ("Base Salary")
commencing as of the Effective Date at the annual rate of One Hundred Eighty
Thousand Dollars ($180,000) per year, payable in accordance with UT's then
prevailing Executive payroll practices. Such Base Salary shall be subject to
review and increase at least annually by the Board (with the first such review
to occur not later than December 31, 1999) in the Board's sole discretion. In
determining any such increase, the Board shall consider any increases in the
cost of living and may provide for any performance, merit or other increase. The
term "Base Salary" as used herein shall include any increases thereto made from
time to time as permitted by this Section 3.1.
3.2 Bonuses.
(a) Annual Incentive Compensation. During each year of the initial
five-year term of this Agreement, an option to purchase such
number of shares of UT's Common Stock shall be granted to
Executive for the number of shares of Common Stock as is equal to,
for the first year, the quotient of one percent of the difference
in UT market capitalization from the date of UT's initial public
offering ("IPO") to the
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one year anniversary thereof divided by $18.00, and for each year
thereafter, the quotient of one percent of the rise in market
capitalization of UT during the preceding 365 days divided by
$18.00, all as set forth more particularly in the Option Agreement
attached hereto as Exhibit A. It is intended that each such option
will be granted pursuant to the UT Equity Incentive Plan, which
shall be amended to accommodate these grants, and will be
incentive stock options. Incentive compensation shall be vested
when earned. The maximum incentive compensation that may be earned
shall be capped for each year as follows: 500,000 in 2000; 701,353
in 2001; 681,434 in 2002; 2,757,832 in 2003; and 3,298,898 in
2004.
(b) Discretionary Bonuses. During the term of this Agreement,
Executive shall be entitled to such bonuses as may be authorized,
declared and paid by the Board, in its sole discretion. Factors
which the Board may, in its sole discretion, and without
limitation, consider with respect to any determination by the
Board with respect to the payment or amount of such bonus or
bonuses, include Executive's job performance and UT's financial
performance.
3.3 Participation in Benefit Plans. Executive shall be eligible to
participate in any long-term incentive, stock option, employee stock ownership,
pension, thrift, profit sharing, group life or disability insurance, medical or
dental coverage, education, or other retirement or employee benefit plan or
program that UT has adopted or may adopt for the benefit of its employees, on
the same basis as other Executive employees. Such participation shall be subject
to the terms and conditions of such plans or programs, including, but not
limited to, such generally applicable eligibility provisions as may be in effect
from time to time. Executive shall be entitled to paid vacation (initially four
(4) weeks per calendar year, paid sick leave, and holidays (initially eleven
(11) days per calendar year) on the same basis as may from time to time apply to
other UT Executive employees generally.
3.4 Expenses. UT shall reimburse Executive for all reasonable, ordinary and
necessary business expenses actually incurred by Executive in connection with
her performance hereunder, including ordinary and necessary expenses incurred by
Executive in connection with travel on UT business, provided all such expenses
have been approved in advance by UT in accordance with and subject to the terms
and conditions of UT's then-prevailing expense policy. As a condition precedent
to obtaining such reimbursement, Executive shall provide to UT any and all
statements, bills or receipts evidencing the expenses for which Executive seeks
reimbursement, and such other related information or materials as UT may from
time to time reasonably require. Executive shall account to UT for any expenses
that are eligible for reimbursement under this Section 3.4 in accordance with UT
policy.
3.5 Automobile. During the term of this agreement, UT shall supply Executive
with the use of an automobile, and shall pay the cost of maintenance and
insurance for such automobile.
3.6 Withholding. Anything in this Agreement to the contrary notwithstanding,
all payments required to be made by UT hereunder to Executive or Executive's
estate or beneficiaries in
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connection with Executive's employment hereunder shall be subject to the
withholding of such amounts relating to taxes as UT may reasonably determine it
should withhold pursuant to any applicable law or regulation.
ARTICLE 4
TERMINATION
4.1 Nonqualifying Termination.
(a) If the employment of Executive shall terminate during the term of
this Agreement (including any extension of such term), by reason
of a Nonqualifying Termination, then Executive shall be paid the
Executive's unpaid base salary from UT through the Date of
Termination at the rate in effect just prior to the time a Notice
of Termination is given as well as any benefits to which Executive
was entitled through the Date of Termination. In addition, in the
event that termination of employment is due to Executive's death
or Disability, UT shall continue to pay Executive's then current
Base Salary to Executive (in the case of Disability) or
Executive's legal representatives, estate, beneficiaries or heirs
(in the case of death), in accordance with UT's then-prevailing
Executive payroll practices, through the end of the calendar year
following Executive's death or termination due to Disability, but
shall have no further obligation to Executive or Executive's legal
representatives, estate, beneficiaries or heirs for any
compensation, benefits or other payments hereunder.
(b) In the event that termination of employment is due to Executive's
Disability, the payment of benefits under UT's short-term and
long-term disability insurance programs, if any, to the extent
payable with respect to any period prior to the Date of
Termination, shall offset UT's obligations under Section 4.1(a).
(c) Except as otherwise provided herein or as may be required by law,
Executive's participation in any benefit plans of UT or any of its
Affiliates shall terminate as of her Dated Termination.
4.2 Other Than Nonqualifying Termination. If the employment of Executive
shall terminate during the term of this Agreement (including any extension of
such term), other than by reason of a Nonqualifying Termination, then Executive
shall receive the following severance as compensation for services rendered.
(a) Lump Sum Cash Payment. Within five (5) days following the Date of
Termination, Executive shall receive a lump sum cash payment in
amount equal to the sum of the following.
(i) Executive's Base Salary from UT through the Date
of Termination at the rate in effect plus any benefit
awards (including both
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the cash and stock components), bonus payments and
incentive awards which pursuant to the terms of any plans
have been earned or become payable, to the extent not
theretofore paid;
(ii) As payment in lieu of a bonus or other
incentive payment to be paid hereunder or under UT's annual
bonus plan or other incentive or other comparable plan for
the year of termination, an amount equal to the number of
days Executive was employed during the year by UT prior to
the Date of Termination divided by the number of days in
the year multiplied by 100% of the greater of either (a)
the bonus and/or other incentive payments awarded to
Executive for the immediately preceding year, or (b) the
average annual bonus and/or other incentive payments paid
to Executive over the preceding two year period;
(iii) Three (3) times (A) Executive's highest annual
rate of Base Salary from UT in effect during the 12-month
period prior to the Date of Termination, plus (B) the
greater of the bonus and/or other incentive payments
awarded to Executive for the immediately preceding year or
the average bonus and/or other incentive payments awarded
to the Executive for the previous two years.
(iv) The Positive Spread for any non-vested options
held by Executive, payable upon surrender by Executive of
such options.
(b) Loans. Any loans from UT that the Executive had outstanding shall
remain payable according to their terms.
(c) Benefits. UT shall maintain in full force and effect, in
substantially all material respects, all employee benefit plans,
programs and arrangements that the Executive was entitled to
participate in immediately prior to the Date of Termination for
the longer of thirty-six (36) months after the Date of Termination
or the date upon which the Executive receives comparable benefits
from a new employer. If the Executive's participation in any such
plan or program is barred, UT shall arrange to provide comparable
benefits substantially similar to those which the Executive
received under such plans and programs.
(d) Retirement Benefits. In addition to the benefits the Executive is
entitled to receive under any retirement plan in which the
Executive participates on the Date of Termination, UT shall pay
the Executive a cash payment at the Executive's attainment of age
65 (or, if later, the Date of Termination), of an amount equal to
the actuarial equivalent of the retirement pension, if any, the
Executive would have been entitled to receive under the terms of
any plan or program of UT in which Executive was participating at
the time of his termination, without regard to any vesting
requirements under the plan, had the Executive received three
additional years of service following the Date of Termination. The
rate of salary
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for those three additional years of service shall equal the
Executive's Base Salary that was in effect at the Date of
Termination.
(e) Out-Placement Services. UT shall provide the Executive with
Executive out-placement services for a period of not less than
twelve (12) months by entering into a contract with a company
chosen by the Executive specializing in such services
(f) Title to Automobile. Title to the automobile referred to in
Section 3.5 shall be transferred to the Executive within five (5)
days following the Date of Termination.
4.3 Certain Additional Payments by UT.
(a) Anything in this Agreement to the contrary notwithstanding if any
payment or distribution by UT to or for the benefit of Executive
(whether paid or payable or distributed or distributable pursuant
to this terms Agreement or otherwise, but determined without
regard to any additional payments required under this Section 4 (a
"Payment") would be subject to the excise tax imposed by Section
4999 of the code, or any successor Code provision, or any interest
or penalties are incurred by Executive with respect to such excise
tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after
payment by Executive of all taxes (including any interest or
penalties imposed with respect to such tax) including, without
limitation any income and employment taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax, imposed
upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 4(c), all determinations
required to be made under this Section 4, including whether and
when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by a nationally recognized
public accounting firm that is retained by UT (the "Accounting
Firm") which shall provide detailed supporting calculations both
to UT and Executive within fifteen (15) business days of the
receipt of notice from Executive that there has been a Payment, or
such earlier time as is requested by UT (collectively, the
"Determination"). All fees and expenses of the Accounting Firm
shall be borne solely UT. Any Gross-Up determined pursuant to this
Section 4 shall be paid by UT to Executive within five (5) days of
the receipt of the Determination. If the Accounting Firm
determines that no Excise Taxes are payable by Executive, it shall
furnish Executive with a written opinion that failure to report
the Excise Tax on Executive's applicable federal income tax return
would not result in the imposition of a negligence or similar
penalty. The Determination by the
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Accounting Firm shall be binding upon UT and Executive. As a
result of the uncertainty in the application of Section 4999 of
the Code at the time of the Determination, it is possible that
Gross-Up Payments which will not have been made by UT should have
been made ("Underpayments") consistent with the calculations
required to be made hereunder. In the event that UT exhausts its
remedies pursuant to section 4(c) and Executive thereafter is
required to make payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred
and any such Underpayments shall be promptly paid by UT to or for
the benefit of Executive.
(c) Executive shall notify UT in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by
UT of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten (10) business days after
Executive is informed in writing of such claim and shall apprise
UT of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which
Executive gives such notice to UT (or such shorter period ending
on the date that any payment of taxes with respect to such claim
is due). If UT notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim,
Executive shall:
(i) give UT any information reasonably requested by UT
relating to such claim,
(ii) take such action in connection with contesting such
claim as UT shall reasonably request in writing from time
to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by UT,
(iii) cooperate with UT in good faith in order effectively
to contest such claim, and
(iv) permit UT to participate in any proceeding relating to
such claim; provided, however, that UT shall bear and pay
directly all costs and expenses (including attorneys' fees
and any additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold
Executive harmless, on an after-tax basis, for any Excise
Tax or income or employment tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section
4(c), UT shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority in
respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a
refund or contest the
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claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination; before any
administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as UT shall determine;
provided further, that UT directs Executive to pay such
claim and sue for a refund, UT shall advance the amount of
such payments to Executive on an interest-free basis and
shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income or
employment tax (including interest or penalties with
respect thereto) imposed with respect to such advance or
with respect to such advance; and provided further, that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore,
UT's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issued raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by UT
pursuant to this Section 4, Executive becomes entitled to receive,
and receives, any refund with respect to such claim, Executive
shall (subject to UT's complying with the requirements of Section
4) promptly pay to UT the amount of such refund (together with any
interest paid or credited thereon after tax applicable thereto).
If, after the receipt by Executive of an amount advanced by UT
pursuant to Section 4, a determination is made that Executive
shall not be entitled to any refund with respect to such claim and
UT does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
ARTICLE 5
RESTRICTIVE COVENANTS
5.1 Confidentiality. Except as authorized or directed by UT, Executive shall
not, at any time during or subsequent to the term of this Agreement, directly or
indirectly publish or disclose any Confidential Information of UT or of any of
its Affiliates, or confidential information of others that has come into the
possession of UT or of any of its Affiliates, or into Executive's possession in
the course of her employment with UT or any of its Affiliates or of her services
and duties hereunder (whether prior to or during the term of this Agreement), to
any other person or entity, and Executive shall not use any such Confidential
Information for Executive's own personal use or advantage or make it available
to others for use. All Confidential Information, whether oral or written,
regarding the business or affairs of UT or any of its Affiliates, including,
without limitation, information as to their products, services, systems,
designs, inventions, software, finance (including prices, costs and revenues),
marketing plans, programs, methods of operation, prospective and existing
contracts, customers and other business arrangements or
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business plans, procedures, and strategies, shall all be deemed Confidential
Information, except to the extent the same shall have been lawfully and without
breach of confidential obligation made available to the general public without
restriction. UT shall be under no obligation to identify specifically any
information as to which the protection of this Section 5.1 extends by any notice
or other action. Upon expiration or termination of this Agreement for any
reason, Executive shall return all records of Confidential Information,
including all copies thereof in Executive's possession, whether prepared by her
or others, to UT.
5.2 Unfair competition. During the period in which Executive is receiving any
payment under this Agreement and for a period of five (5) years thereafter,
Executive shall not, directly or indirectly, and whether or not for
compensation, as a stockholder owning beneficially or of record more than five
percent (5%) of the outstanding shares of any class of stock of an issuer, or as
an officer, director, employee, consultant, partner, joint venturer, proprietor
or otherwise, engage in or become interested in any Conflicting Organization in
connection with research, development, consulting, manufacturing, purchasing,,
accounting, engineering, marketing, merchandising or selling of any Conflicting
Product or Service. During the period in which Executive is receiving any
payments under this Agreement and for a period of five (5) years thereafter,
Executive shall not, without the prior written consent of UT, solicit or hire or
induce the termination of employment of any employees or other personnel
providing services to UT or any of its Affiliates, for any business activity,
other than a business activity owned or controlled, directly or indirectly, by
UT or any of its Affiliates.
5.3 Injunctive Relief.
(a) Executive acknowledges and warrants that she will be fully able to
earn an adequate livelihood for herself and her dependents if
Section 5.2 should be specifically enforced against her, and that
such Section 5.2 merely prevents unfair competition against UT for
a limited period of time. Executive agrees and acknowledges that,
by virtue of Executive's employment with UT, Executive shall have
access to and maintain an intimate knowledge of UT's activities
and affairs, including Confidential Information and other
confidential matters. As a results of such access and knowledge,
and because of the unique service that Executive is capable of
performing for UT or one of its competitors, Executive
acknowledges that the services to be rendered by Executive
pursuant to this Agreement are of a character giving them a
peculiar value, the loss of which cannot adequately or reasonably
be compensated by money damages. Consequently, Executive agrees
that any breach or threatened breach by Executive of Executive's
obligations under this Article 5 would cause irreparable injury to
UT, and that UT shall be entitled to (i) preliminary and permanent
injunctions enjoining Executive from violating such provisions,
and (ii) money damages in the amount of any fees, compensation,
benefits, profits or other remuneration earned by Executive or any
competitor of UT as a result of such breach, together with
interest, and costs and attorneys' fees expended to collect such
damages or secure such injunctions. Nothing in this Agreement,
however, shall be construed to prohibit UT from pursuing any other
remedy, UT and Executive having agreed that all such remedies
shall be cumulative.
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(b) The restrictions set forth in this Article 5 and the following
Article 6 shall be construed as independent covenants, and shall
survive the termination or expiration of this Agreement, and the
existence of any claim or cause of action against UT, whether
predicated upon this Agreement or otherwise, shall not constitute
a defense to the enforcement by UT of the restrictions contained
in this Article 5 or the following Article 6. Executive hereby
consents and waives any objection to the jurisdiction over her
person or the venue of any courts within the state of Maryland
with respect to any proceedings in law or in equity arising out of
this Article 5 or the following Article 6. If any court of
competent jurisdiction shall hold that any of the restrictions
contained in Section 5.2 are unreasonable as to time, geographical
area or otherwise, said restrictions shall be deemed to be reduced
to the extent necessary in the opinion of such court to make their
application reasonable.
ARTICLE 6
INVENTIONS, WORKS OF AUTHORSHIP,
PATENTS AND COPYRIGHTS
6.1 Ownership of Inventions and Works of Authorship. Executive agrees that
all Inventions made, conceived, discovered, developed or reduced to practice by
Executive and all software and other Works of Authorship created by Executive,
either alone or with others, at any time within or without normal working hours,
during or prior to the term of this Agreement, arising out of Executive's
employment with UT or based upon Confidential Information, or pertinent to any
field of business or research in which, during such employment, UT or any
Affiliate thereof is engaged or (if such is known or ascertainable by Executive)
is considering engaging whether or not patented or patentable, shall be and
remain the sole property of UT or its Affiliates with respect to all rights of
Executive arising from any discovery, conception, development, reduction to
practice, or creation by Executive. UT shall have the full right to assign,
license or transfer all rights thereto.
6.2 Disclosure of Inventions and Works of Authorship. Executive shall
promptly make full disclosure to UT or to an authorized representative thereof
of all information relating to the making, conception, discovery, development,
creation or reduction to practice of inventions, or of software and other Works
of Authorship owned by UT pursuant to Section 6.1 above.
6.3 Patent and Copyright Applications. At the request of UT and at UT's
expense, Executive shall execute such documents and perform such other acts as
UT deems necessary to obtain patents or the like on such Inventions or copyright
registrations for such software and other Works of Authorship in any
jurisdiction or jurisdictions. Such obligations shall continue beyond the term
of this Agreement. Executive further agrees not to file any patent applications
relating to or describing or otherwise describing any Confidential Information
or any such Inventions, or to claim any copyright or file any applications to
register any copyright in such software or other Works of Authorship, except
with the prior written consent of UT.
6.4 Assignment of Inventions and Works of Authorship. Executive agrees to
assign to UT or its Affiliates all of Executive's right, title and interest in
and to any and all such inventions and the patent applications and patents
relating thereto and to the copyright in any and all such
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software and other Works of Authorship and any copyright applications and
registrations relating thereto conceived, reduced to practice, discovered,
created or otherwise developed by Executive and owned by UT pursuant to Section
8.1 above.
ARTICLE 7
DISPUTE RESOLUTION
7.1 General. The parties agree to perform the terms of this Agreement in good
faith, and to attempt to resolve any disputes that may arise between them
through good faith negotiations.
7.2 Binding Arbitration. Failing resolution by good faith negotiation between
the parties as contemplated by Section 7.1, all claims, disputes, and
controversies arising out of or in relation to the performance, interpretation,
application or enforcement of this Agreement, including but not limited to
breach thereof (except any dispute relating to Article 5 or 6 of this
Agreement), not resolved by the parties shall be referred to arbitration before
a single, independent third party arbitrator who will be selected by mutual
agreement of the parties or, if such agreement is not reached within one week of
either party seeking such agreement, then in accordance with Employment Dispute
Resolution Rules of the American Arbitration Association. Judgment upon the
award rendered by the arbitrator may be entered in any court or competent
jurisdiction. Any arbitration pursuant to this Article 7 shall take place in the
State of Maryland, or such other place as the parties shall mutually agree.
ARTICLE 8
MISCELLANEOUS
8.1 Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered, sent by overnight courier,
or mailed by first class, registered, or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram or telecopy, addressed as
follows:
If to Executive:
Martine Rothblatt
2835 N. Hwy A1A, #801
Indiatlantic, FL 32903
If to UT:
United Therapeutics
Attn: General Counsel
1110 Spring Street
Silver Spring, MD 20910
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
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8.2 Entire Agreement. From and after the Effective Date, this Agreement
constitutes the entire agreement between the parties hereto, and expressly
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein.
8.3 Heading. Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in anyway define or affect the
meaning construction or scope of any of the provisions hereof.
8.4 Severability. In the event any provision of this Agreement, or any
portion thereof, is determined by any arbitrator or court of competent
jurisdiction to be unenforceable as written such provision or portion shall be
interpreted to be enforceable. In the event any provision of this Agreement, or
any portion thereof is determined by any arbitrator or court of competent
jurisdiction to be void, the remaining portions of this Agreement shall
nevertheless be binding upon UT and Executive with the sum effect as though the
void provision or portion thereof had been severed and deleted.
8.5 Governing Law. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the substantive laws of the State of Maryland
(excluding the choice of law rules thereof).
8.6 Amendment Modification; Waiver. No amendment, modification or waiver of
the terms of this Agreement shall be valid unless made in writing and duly
executed by Executive and UT. No delay or failure at any time on the part of UT
or Executive in exercising any right, power or privilege under this Agreement,
or in enforcing any provision of this Agreement, shall impair any such right,
power, or privilege, or be construed as a waiver of any default or as any
acquiescence therein, or shall affect the right of UT or Executive thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
8.7 Additional Obligations. Both during and after the term of employment,
Executive shall, upon reasonable notice, furnish UT with such information as may
be in Executive's possession or control, and cooperate with UT, as may
reasonably be requested by UT (and, after the term or employment, with due
consideration for Executive's obligations with respect to any new employment or
business activity) in connection with any litigation or other adversarial
proceeding in which UT or any Affiliate is or may become a party. UT shall
reimburse Executive for all reasonable expenses incurred by Executive in
fulfilling Executive's obligations under this Article 8.7.
8.8 Successors; Binding Agreement
(a) This Agreement shall not be terminated by any merger or
consolidation of UT whereby UT is or is not the surviving or
resulting corporation or as a result of any transfer of all or
substantially all of the assets of UT. In the event of any such
merger, consolidation, or transfer of assets, the provisions of
this Agreement shall be binding upon the surviving or resulting
corporation or the person or entity to which such assets are
transferred.
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(b) UT agrees that concurrently with any merger, consolidation or
transfer of assets referred to in this Section 8.8, it will cause
any successor or transferee unconditionally to assume, by written
instrument delivered to Executive (or his beneficiary or estate),
all of the obligations of UT hereunder. Failure of UT to obtain
such assumption prior to the effectiveness of any such merger,
consolidation, or transfer of assets shall be breach of this
Agreement and shall constitute Good Reason hereunder and shall
entitle Executive to compensation and other benefits from UT in
the same amount and on the same terms as Executive would be
entitled hereunder if Executive's employment were terminated other
than by reason of a Nonqualifying Termination. For purposes of
implementing the foregoing, the date on which any such merger,
consolidation or transfer becomes effective shall be deemed the
date Good Reason occurs and shall be the Date of Termination if
requested by Executive.
(c) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors,
administrator, successors, heirs, distributees, devises and
legatees. If Executive shall die while any amounts would be
payable to Executive hereunder had Executive continued to live,
any such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to such person or
persons appointed in writing by Executive to receive such amounts
or, if no person is so appointed, to Executive's estate.
8.9 Obligation to Make Payments
(a) UT's obligation to make any payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense
or other claim, right or action which UT and/or its Affiliates may
have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of
mitigation of the amounts payable to Executive under any of the
provisions of this Agreement, and such amounts shall not be
reduced whether or not Executive obtains other employment.
(b) If there shall be any dispute between UT and Executive in the
event of any termination of Executive's employment then, until
there is a final, nonappealable determination pursuant to
arbitration declaring that such termination was for Cause, that
the determination by Executive of the existence of Good Reason was
not made in good faith, or that UT is not otherwise obligated to
pay any amount or provide any benefit to Executive and her
dependents or other beneficiaries, as the case may be, under
Article 4, UT shall pay all amounts, and provide all benefits, to
Executive and her dependents or other beneficiaries, as the case
may be, that UT would be required to pay or provide pursuant to
Article 4 as though such termination were by UT without Cause or
by Executive with Good Reason; provided, however, that UT shall
not be required to pay any disputed amounts
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<PAGE> 18
pursuant to this Section 8.9 except upon receipt of an undertaking
by or on behalf of Executive to reply all such amounts to which
Executive is ultimately determined by the arbitrator not to be
entitled.
8.10 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, UT has caused this Agreement to be executed by a duly
authorized officer of UT. Executive has executed this Agreement as of the day
and written below.
<TABLE>
<S> <C>
ACCEPTED AND AGREED TO: UNITED THERAPEUTICS
BY: /s/ Martine Rothblatt BY: /s/ James W. Crow
--------------------------- ------------------------------
Martine Rothblatt James W. Crow
President & Chief Operating Officer
</TABLE>
18
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of July
15, 1996 by and between Lung Rx, Inc., a Delaware corporation having its
principal offices at 1824 R Street, N.W., Washington, D.C. 20009 (the "Company")
and James W. Crow (the "Employee").
WHEREAS, the Company desires to obtain the services of the Employee, and
the Employee is willing to render such services to the Company, upon the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows.
1. Employment. Upon the other terms and conditions hereinafter
stated, the Company agrees to employ the Employee and the Employee agrees to
accept employment by the Company for the term set forth in Section 2 hereof and
in the position and with the duties and responsibilities set forth in Section 3
hereof.
2. Term. The employment of the Employee by the Company will commence
on the date hereof and end on the third anniversary of such date (the "Initial
Term"), and thereafter shall continue from year to year for additional one-year
terms (the "Additional Terms"), unless and until either party shall give notice
of such party's intent to terminate not less than 30 days prior to the end of
the then-current Initial Term or Additional Term, which termination shall be
effective at the expiration of said term, or until sooner terminated as
hereinafter set forth.
3. Position and Duties.
(a) The Employee shall serve as President reporting to Board of
Directors of the Company, with such duties and responsibilities as the Board of
Directors of the Company may from time to time determine and assign to the
Employee. The Employee shall use the Employee's best efforts and full business
time to perform the Employee's duties under this Agreement.
(b) The Employee may remain a resident of North Carolina if he
wishes to do so, based in a Company office to be established out of the
Company's initial capital contribution.
(c) The Employee shall have the authority to hire a Director of
Operations of his choosing, compensation and related employment terms to be
approved by the Company's Board of Directors.
4. Compensation and Related Matters.
(a) For services rendered under this Agreement, the Company
shall pay to the Employee an annual base salary of $150,000 (the "Base Salary"),
subject to increase, as determined by the Board of Directors of the Company, in
its sole discretion, on or before any anniversary date of this Agreement. The
Base Salary shall be payable semi-monthly or in such other installments as shall
be consistent with the Company's payroll procedures. The Company shall deduct
and withhold all necessary social security and withholding taxes and
<PAGE> 2
any other similar sums required by law or authorized by the Employee with
respect to payment of the Base Salary and all other amounts and benefits payable
under this Agreement.
(b) The Employee shall be entitled to participate in any group
life, disability and medical insurance or other benefit plan or arrangement
available generally to the employees of the Company as determined by the Board
of Directors.
5. Expenses. The Employee shall be reimbursed by the Company for
reasonable travel and other expenses, as approved from time to time by the Board
of Directors, which are incurred and accounted for in accordance with the
Company's normal practices.
6. Vacation. The Employee shall be entitled during the term of
employment hereunder to four weeks of vacation, or a pro rata amount thereof in
the event that the term of employment hereunder is less than one year, which
vacation shall be at such time or times and for such period or periods as shall
be mutually agreed upon by the Employee and the Board of Directors. The Employee
shall also be entitled to all public holidays observed by the Company.
7. Termination of Employment.
(a) The Employee's employment hereunder shall terminate upon
the Employee's death.
(b) The Company may terminate the Employee's employment
hereunder under the following circumstances:
(i) If, as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have been unable to perform all
of the Employee's duties hereunder by reason of illness, or physical or mental
disability or other similar capacity, which inability shall continue for more
than four (4) consecutive months, the Company may terminate the Employee's
employment hereunder.
(ii) The Company may terminate the Employee's employment
hereunder for "Cause." For purposes of this Agreement, the Company shall have
"Cause" to terminate the Employee's employment hereunder upon the (A) failure of
the Employee (other than for reasons described in Sections 7(a) and 7(b)(i)
hereof) to perform or observe any of the material terms or provisions of this
Agreement; (B) negligent or unsatisfactory performance of the Employee's duties
under this Agreement and the failure of the Employee, within 30 days after
receipt of notice from the Company setting forth in reasonable detail the nature
of the Employee's negligent or unsatisfactory performance, (i) to provide the
Company with a satisfactory explanation of the Employee's actions (or inaction)
and (ii) to correct to the satisfaction of the Company any identified
deficiencies; (C) misconduct or other similar action on the part of the Employee
that is materially damaging or detrimental to the Company; (D) conviction of the
Employee of a crime involving a felony, fraud, embezzlement or the like; or (E)
misappropriation of the Company funds or misuse of the Company's assets by
Employee.
(c) The Employee may terminate the Employee's employment
hereunder for "Good Reason." For purposes of this Agreement, the Employee shall
have "Good Reason" to terminate the Employee's employment hereunder upon the (i)
failure of the Company to perform or observe any of the material terms or
provisions of the Agreement, and the continued failure of the Company to cure
such default within fifteen (15) days after written notice of such default and
demand for performance has been given to the Company
2
<PAGE> 3
by the Employee, which notice and demand shall describe specifically the nature
of such alleged failure to perform or observe such material terms or provisions;
provided, however, that if cure is impossible within said fifteen (15) day
period, it shall be sufficient for the Company to commence such cure within said
fifteen (15) day period, and pursue such cure diligently to completion within
the shortest possible reasonable time; or (ii) assignment of duties materially
and adversely inconsistent with the Employee's position, duties,
responsibilities and status with the Company without the Employee's consent.
(d) Any termination of the Employee's employment by the Company
or by the Employee (other than pursuant to Section 7(a) hereof) shall be
communicated by written "Notice of Termination" to the other party hereto in
accordance with Section 10(c) hereof, which shall indicate the specific
termination provision in this Agreement relied upon, if any, and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
(e) For purposes of this Agreement, the "Date of Termination"
shall mean (i) if the Employee's employment is terminated by the Employee's
death, the date of the Employee's death; (ii) if the Employee's employment is
terminated pursuant to Section 7(b)(i) hereof, thirty (30) days after the Notice
of Termination; provided, that the Employee shall not have returned to the
performance of the Employee's duties on a full-time basis during such thirty
(30) day period; (iii) if the Employee's employment is terminated pursuant to
Section 7(b)(ii) or 7(c) hereof, the date specified in the Notice of Termination
(which date, in the case of termination of Employee's employment solely pursuant
to clause (B) of Section 7(b)(ii) by reason of inadequate performance, shall not
be sooner than nine months from the date of the Notice of Termination); and (iv)
if the Employee's employment is terminated for any other reason, the date on
which the Notice of Termination is given.
8. Compensation Upon Termination.
(a) If the Employee's employment is terminated by the
Employee's death, the Company shall pay to the Employee's estate or as may be
directed by the legal representatives of such estate, the Employee's full Base
Salary through the Date of Termination at the rate in effect at the time of the
Employee's death and all other unpaid amounts, if any, to which the Employee is
entitled as of such date in connection with any fringe benefits or under any
incentive compensation plan or program of the Company pursuant to Section 4(c)
or 4(d) hereof, at the time such payments are due.
(b) During any period that the Employee fails to perform the
Employee's duties hereunder solely as a result of incapacity due to physical or
mental illness ("disability period"), the Employee shall continue to receive the
Employee's full base salary through the Date of Termination at the rate in
effect at the time the Notice of Termination is given and all other unpaid
amounts, if any, to which the Employee is entitled as of the Date of Termination
in connection with any fringe benefits or under any incentive compensation plan
or program of the Company pursuant to Section 4(c) or 4(d) hereof, at the time
such payments are due; provided that payments so made to the Employee during the
disability period shall be reduced by the sum of the amounts, if any, payable to
the Employee at or prior to the time of any such payment under disability
benefit plans of the Company and which amounts were not previously applied to
reduce any such payment.
(c) If the Employee shall terminate the Employee's employment
other than for Good Reason, or the Company terminates the Employee's employment
for Cause as provided in Section 7(b)(ii) hereof, the Company shall pay the
Employee the Employee's full Base Salary through the Date of Termination at the
rate in effect at the time the Notice of
3
<PAGE> 4
Termination is given, and the Company shall have no further obligations to the
to the Employee under this Agreement.
(d) If the Company shall terminate the Employee's employment
other than for Cause, or the Employee terminates the Employee's employment for
Good Reason as provided in Section 7(c) hereof, the Company shall pay the
Employee (i) the Employee's full Base Salary through the Date of Termination at
the rate in effect at the time the Notice of Termination is given and all other
unpaid amounts, if any, to which the Employee is entitled as of the Date of
Termination in connection with any fringe benefits or under any compensation
plan or program of the Company pursuant to Section 4(c) and 4(d) hereof, at the
time such payments are due; and (ii) the full Base Salary and any other amounts
that would have been payable to Employee under Sections 4(c) (but not Section
4(d)) hereof from the Date of Termination through the Expiration Date at the
such payments are due.
(e) The Employee shall not be required to mitigate amounts
payable pursuant to this Section 8 by seeking other employment or otherwise. If,
however, the Employee shall receive compensation from employment with any other
employer during the relevant period set forth in this Section 8, the payments to
be made under the provisions of this Section 8 shall be correspondingly reduced.
9. Obligation of Confidentiality and Non-Competition. Employee agrees
that Employee has a fiduciary duty to Lung Rx and that Employee shall hold in
confidence and shall not, except in the course of performing Employee's
employment obligations or pursuant to written authorization from Lung Rx, at any
time during or for three years after termination of Employee's relationship with
Lung Rx (a) directly or indirectly reveal, report, publish, disclose or transfer
the Confidential Information or any part thereof to any person or entity; (b)
use any of the Confidential Information or any part thereof for any purpose
other than for the benefit of Lung Rx; (c) assist any person or entity other
than Lung Rx to secure any benefit from the Confidential Information or any part
thereof or (d) solicit (on Employee's behalf or on behalf of any third party)
any employee of Lung Rx for the purpose of providing services or products which
Employee is prohibited from providing hereunder.
Furthermore, Employee agrees that all Confidential Information, as
defined below, shall belong exclusively and without any additional compensation
to Lung Rx. For the purposes of this Agreement, "Confidential Information" shall
mean each of the following: (a) any information or material proprietary to Lung
Rx or designated as confidential either orally or in writing by Lung Rx; and (b)
any information not generally known by non-Lung Rx personnel; and (c) any
information which Employee should know Lung Rx would not care to have revealed
to others or used in competition with Lung Rx; and (d) any information which
Employee made or makes, conceived or conceives, developed or develops or
obtained or obtains knowledge or access through or as a result of Employee's
relationship with Lung Rx (including information received, originated,
discovered or developed in whole or in part by Employee) from the initial date
of Employee's employment with Lung Rx.
Furthermore, Employee agrees (1) not to accept employment, consultancy or
other business relationships with a business which competes with Lung Rx's
business for twelve months following Employee's last receipt of compensation
from Lung Rx, and (2) to the issuance of a Court Order restraining alleged
violation of this section, and to waive any bond requirement that may arise, in
addition to all other remedies available to Lung Rx..
10. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire
agreement between the parties hereto relating to the subject matter hereof, and
this Agreement
4
<PAGE> 5
supersedes all prior understandings and agreements, whether oral or written,
relating to the employment of the Employee by the Company.
(b) Assignment. This Agreement shall not be assignable or
otherwise transferable by either party hereto, but any amounts owing to Employee
upon the Employee's death shall inure to the benefit of the Employee's heirs,
legatees, legal representatives, executor or administrator. Notwithstanding the
foregoing, this Agreement applies with the prior written consent of the
Employee, which consent shall not be unreasonably withheld. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and any
such respective heirs, legatees, executors, administrators, representatives,
successors and assigns.
(c) Notices. All notices, demands, requests or other
communications which may be, or are required to be given, served or sent by any
party to any party pursuant to this Agreement shall be in writing and shall be
mailed by first class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by hand delivery, telegram or telex and
addressed as follows:
If to the Employee: James W. Crow
415 N. Cameron Avenue
Chapel Hill, North Carolina
If to the Company: Lung Rx, Inc.
1824 R Street, N.W.
Washington, D.C. 20009
(d) Amendment; Waiver. This Agreement shall not be amended,
altered, modified or discharged except by an instrument in writing duly executed
by the Employee and the Company. Neither the waiver by the parties hereto of a
breach of, or default under, any of the provisions of this Agreement, nor the
failure of either of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder, shall thereafter be construed as a waiver of any such provisions,
rights or privileges hereunder.
(e) Severability. The invalidity or unenforceabilty of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which shall remain in
full force and effect.
(f) Applicable Law. This Agreement and the rights and
obligations of the parties under this Agreement shall be construed, interpreted
and enforced in accordance with the laws of the District of Columbia, exclusive
of the choice-of-laws rules thereunder.
(g) Survival. It is the express intention and agreement of the
parties hereto that the Special Terms of Conditions of Employment Agreement
referred to in Section 9 hereof shall survive the termination of employment of
the Employee. In addition, all obligations of the Company to make payments
hereunder shall survive any termination of this Agreement on the terms and
conditions set forth.
(h) Execution. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
5
<PAGE> 6
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or
have caused this Agreement to be duly executed on their behalf, as of the date
first above written.
LUNG RX, INC.
/s/ James W. Crow /s/ Martine Rothblatt
- ---------------------------- ---------------------------------
James W. Crow By: Martine Rothblatt
/s/ Lori B. Spivey
- ----------------------------
Witness
Printed: Lori B. Spivey
6
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April
7, 1997 by and between Lung Rx, Inc., a Delaware corporation having its
principal offices at 1826 R Street, N.W., Washington, D.C. 20009 (the "Company")
and Gilles Cloutier (the "Employee").
WHEREAS, the Company desires to obtain the services of the Employee, and
the Employee is willing to render such services to the Company, upon the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows.
1. Employment. Upon the other terms and conditions hereinafter
stated, the Company agrees to employ the Employee and the Employee agrees to
accept employment by the Company for the term set forth in Section 2 hereof and
in the position and with the duties and responsibilities set forth in Section 3
hereof.
2. Term. The employment of the Employee by the Company will commence
on the date hereof and end on the third anniversary of such date (the "Initial
Term"), and thereafter shall continue from year to year for additional one-year
terms (the "Additional Terms"), unless and until either party shall give notice
of such party's intent to terminate not less than 30 days prior to the end of
the then-current Initial Term or Additional Term, which termination shall be
effective at the expiration of said term, or until sooner terminated as
hereinafter set forth.
3. Position and Duties.
(a) The Employee shall serve as Executive Vice President
reporting initially to the President of the Company, with such duties and
responsibilities as the Board of Directors of the Company may from time to time
determine and assign to the Employee. The Employee shall use the Employee's best
efforts and full business time to perform the Employee's duties under this
Agreement.
(b) The Employee will be located in North Carolina at the
Company's R&D office.
4. Compensation and Related Matters.
(a) For services rendered under this Agreement, the Company
shall pay to the Employee an annual base salary of $150,000 (the "Base Salary"),
subject to increase, as
<PAGE> 2
determined by the Board of Directors of the Company, in its sole discretion, on
or before any anniversary date of this Agreement. The Base Salary shall be
payable semi-monthly or in such other installments as shall be consistent with
the Company's payroll procedures. The Company shall deduct and withhold all
necessary social security and withholding taxes and any other similar sums
required by law or authorized by the Employee with respect to payment of the
Base Salary and all other amounts and benefits payable under this Agreement.
(b) The Employee shall be entitled to participate in any group
life, disability and medical insurance or other benefit plan or arrangement
available generally to the employees of the Company as determined by the Board
of Directors.
5. Expenses. The Employee shall be reimbursed by the Company for
reasonable travel and other expenses, as approved from time to time by the Board
of Directors, which are incurred and accounted for in accordance with the
Company's normal practices.
6. Vacation. The Employee shall be entitled during the term of
employment hereunder to four weeks of vacation, or a pro rata amount thereof in
the event that the term of employment hereunder is less than one year, which
vacation shall be at such time or times and for such period or periods as shall
be mutually agreed upon by the Employee and the Board of Directors. The Employee
shall also be entitled to all public holidays observed by the Company.
7. Termination of Employment.
(a) The Employee's employment hereunder shall terminate upon
the Employee's death.
(b) The Company may terminate the Employee's employment
hereunder under the following circumstances:
(i) If, as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have been unable to perform all
of the Employee's duties hereunder by reason of illness, or physical or mental
disability or other similar capacity, which inability shall continue for more
than four (4) consecutive months, the Company may terminate the Employee's
employment hereunder.
(ii) The Company may terminate the Employee's employment
hereunder for "Cause." For purposes of this Agreement, the Company shall have
"Cause" to terminate the Employee's employment hereunder upon the (A) failure of
the Employee (other than for reasons described in Sections 7(a) and 7(b)(i)
hereof) to perform or observe any of the material terms or provisions of this
Agreement; (B) negligent or unsatisfactory performance of the Employee's duties
under this Agreement and the failure of the Employee, within 30 days after
receipt of notice from the Company setting forth in reasonable detail the nature
of the Employee's negligent or unsatisfactory performance, (i) to provide the
Company
2
<PAGE> 3
with a satisfactory explanation of the Employee's actions (or inaction) and (ii)
to correct to the satisfaction of the Company any identified deficiencies; (C)
misconduct or other similar action on the part of the Employee that is
materially damaging or detrimental to the Company; (D) conviction of the
Employee of a crime involving a felony, fraud, embezzlement or the like; or (E)
misappropriation of the Company funds or misuse of the Company's assets by
Employee.
(c) The Employee may terminate the Employee's employment
hereunder for "Good Reason." For purposes of this Agreement, the Employee shall
have "Good Reason" to terminate the Employee's employment hereunder upon the (i)
failure of the Company to perform or observe any of the material terms or
provisions of the Agreement, and the continued failure of the Company to cure
such default within fifteen (15) days after written notice of such default and
demand for performance has been given to the Company by the Employee, which
notice and demand shall describe specifically the nature of such alleged failure
to perform or observe such material terms or provisions; provided, however, that
if cure is impossible within said fifteen (15) day period, it shall be
sufficient for the Company to commence such cure within said fifteen (15) day
period, and pursue such cure diligently to completion within the shortest
possible reasonable time; or (ii) assignment of duties materially and adversely
inconsistent with the Employee's position, duties, responsibilities and status
with the Company without the Employee's consent.
(d) Any termination of the Employee's employment by the Company
or by the Employee (other than pursuant to Section 7(a) hereof) shall be
communicated by written "Notice of Termination" to the other party hereto in
accordance with Section 10(c) hereof, which shall indicate the specific
termination provision in this Agreement relied upon, if any, and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
(e) For purposes of this Agreement, the "Date of Termination"
shall mean (i) if the Employee's employment is terminated by the Employee's
death, the date of the Employee's death; (ii) if the Employee's employment is
terminated pursuant to Section 7(b)(i) hereof, thirty (30) days after the Notice
of Termination; provided, that the Employee shall not have returned to the
performance of the Employee's duties on a full-time basis during such thirty
(30) day period; (iii) if the Employee's employment is terminated pursuant to
Section 7(b)(ii) or 7(c) hereof, the date specified in the Notice of Termination
(which date, in the case of termination of Employee's employment solely pursuant
to clause (B) of Section 7(b)(ii) by reason of inadequate performance, shall not
be sooner than nine months from the date of the Notice of Termination); and (iv)
if the Employee's employment is terminated for any other reason, the date on
which the Notice of Termination is given.
8. Compensation Upon Termination.
(a) If the Employee's employment is terminated by the
Employee's death, the Company shall pay to the Employee's estate or as may be
directed by the legal representatives of such estate, the Employee's full Base
Salary through the Date of
3
<PAGE> 4
Termination at the rate in effect at the time of the Employee's death and all
other unpaid amounts, if any, to which the Employee is entitled as of such date
in connection with any fringe benefits or under any incentive compensation plan
or program of the Company pursuant to Section 4(c) or 4(d) hereof, at the time
such payments are due.
(b) During any period that the Employee fails to perform the
Employee's duties hereunder solely as a result of incapacity due to physical or
mental illness ("disability period"), the Employee shall continue to receive the
Employee's full base salary through the Date of Termination at the rate in
effect at the time the Notice of Termination is given and all other unpaid
amounts, if any, to which the Employee is entitled as of the Date of Termination
in connection with any fringe benefits or under any incentive compensation plan
or program of the Company pursuant to Section 4(c) or 4(d) hereof, at the time
such payments are due; provided that payments so made to the Employee during the
disability period shall be reduced by the sum of the amounts, if any, payable to
the Employee at or prior to the time of any such payment under disability
benefit plans of the Company and which amounts were not previously applied to
reduce any such payment.
(c) If the Employee shall terminate the Employee's employment
other than for Good Reason, or the Company terminates the Employee's employment
for Cause as provided in Section 7(b)(ii) hereof, the Company shall pay the
Employee the Employee's full Base Salary through the Date of Termination at the
rate in effect at the time the Notice of Termination is given, and the Company
shall have no further obligations to the to the Employee under this Agreement.
(d) If the Company shall terminate the Employee's employment
other than for Cause, or the Employee terminates the Employee's employment for
Good Reason as provided in Section 7(c) hereof, the Company shall pay the
Employee (i) the Employee's full Base Salary through the Date of Termination at
the rate in effect at the time the Notice of Termination is given and all other
unpaid amounts, if any, to which the Employee is entitled as of the Date of
Termination in connection with any fringe benefits or under any compensation
plan or program of the Company pursuant to Section 4(c) and 4(d) hereof, at the
time such payments are due; and (ii) the full Base Salary and any other amounts
that would have been payable to Employee under Sections 4(c) (but not Section
4(d)) hereof from the Date of Termination through the Expiration Date at the
such payments are due.
(e) The Employee shall not be required to mitigate amounts
payable pursuant to this Section 8 by seeking other employment or otherwise. If,
however, the Employee shall receive compensation from employment with any other
employer during the relevant period set forth in this Section 8, the payments to
be made under the provisions of this Section 8 shall be correspondingly reduced.
9. Obligation of Confidentiality and Non-Competition. Employee agrees
that Employee has a fiduciary duty to Lung Rx and that Employee shall hold in
confidence and shall not, except in the course of performing Employee's
employment obligations or pursuant to written authorization from Lung Rx, at any
time during or for three years after termination
4
<PAGE> 5
of Employee's relationship with Lung Rx (a) directly or indirectly reveal,
report, publish, disclose or transfer the Confidential Information or any part
thereof to any person or entity; (b) use any of the Confidential Information or
any part thereof for any purpose other than for the benefit of Lung Rx; (c)
assist any person or entity other than Lung Rx to secure any benefit from the
Confidential Information or any part thereof or (d) solicit (on Employee's
behalf or on behalf of any third party) any employee of Lung Rx for the purpose
of providing services or products which Employee is prohibited from providing
hereunder.
Furthermore, Employee agrees that all Confidential Information, as
defined below, shall belong exclusively and without any additional compensation
to Lung Rx. For the purposes of this Agreement, "Confidential Information" shall
mean each of the following: (a) any information or material proprietary to Lung
Rx or designated as confidential either orally or in writing by Lung Rx; and (b)
any information not generally known by non-Lung Rx personnel; and (c) any
information which Employee should know Lung Rx would not care to have revealed
to others or used in competition with Lung Rx; and (d) any information which
Employee made or makes, conceived or conceives, developed or develops or
obtained or obtains knowledge or access through or as a result of Employee's
relationship with Lung Rx (including information received, originated,
discovered or developed in whole or in part by Employee) from the initial date
of Employee's employment with Lung Rx.
Furthermore, Employee agrees (1) not to accept employment, consultancy or
other business relationships with a business which competes with Lung Rx's
business for twelve months following Employee's last receipt of compensation
from Lung Rx, and (2) to the issuance of a Court Order restraining alleged
violation of this section, and to waive any bond requirement that may arise, in
addition to all other remedies available to Lung Rx..
10. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire
agreement between the parties hereto relating to the subject matter hereof, and
this Agreement supersedes all prior understandings and agreements, whether oral
or written, relating to the employment of the Employee by the Company.
(b) Assignment. This Agreement shall not be assignable or
otherwise transferable by either party hereto, but any amounts owing to Employee
upon the Employee's death shall inure to the benefit of the Employee's heirs,
legatees, legal representatives, executor or administrator. Notwithstanding the
foregoing, this Agreement applies with the prior written consent of the
Employee, which consent shall not be unreasonably withheld. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and any
such respective heirs, legatees, executors, administrators, representatives,
successors and assigns.
(c) Notices. All notices, demands, requests or other
communications which may be, or are required to be given, served or sent by any
party to any party pursuant to this Agreement shall be in writing and shall be
mailed by first class, registered or certified
5
<PAGE> 6
mail, return receipt requested, postage prepaid, or transmitted by hand
delivery, telegram or telex and addressed as follows:
If to the Employee: Gilles Cloutier
100 Chestnut Road
Chapel Hill, North Carolina 27514
If to the Company: Lung Rx, Inc.
1826 R Street, N.W.
Washington, D.C. 20009
(d) Amendment; Waiver. This Agreement shall not be amended,
altered, modified or discharged except by an instrument in writing duly executed
by the Employee and the Company. Neither the waiver by the parties hereto of a
breach of, or default under, any of the provisions of this Agreement, nor the
failure of either of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder, shall thereafter be construed as a waiver of any such provisions,
rights or privileges hereunder.
(e) Severability. The invalidity or unenforceabilty of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which shall remain in
full force and effect.
(f) Applicable Law. This Agreement and the rights and
obligations of the parties under this Agreement shall be construed, interpreted
and enforced in accordance with the laws of the District of Columbia, exclusive
of the choice-of-laws rules thereunder.
(g) Survival. It is the express intention and agreement of the
parties hereto that the Special Terms of Conditions of Employment Agreement
referred to in Section 9 hereof shall survive the termination of employment of
the Employee. In addition, all obligations of the Company to make payments
hereunder shall survive any termination of this Agreement on the terms and
conditions set forth.
(h) Execution. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or
have caused this Agreement to be duly executed on their behalf, as of the date
first above written.
LUNG RX, INC.
/s/ Gilles Cloutier /s/ Martine Rothblatt
- -------------------------------- -----------------------------------
Gilles Cloutier By: Martine Rothblatt
/s/ Gail W. Cannon
- -------------------------------
Witness
Printed: Gail W. Cannon
7
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of August
1, 1996 by and between Lung Rx, Inc., a Delaware corporation having its
principal offices at 1824 R Street, N.W., Washington, D.C. 20009 (the "Company")
and Shelmer Blackburn Jr. (the "Employee").
WHEREAS, the Company desires to obtain the services of the Employee, and
the Employee is willing to render such services to the Company, upon the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows.
1. Employment. Upon the other terms and conditions hereinafter
stated, the Company agrees to employ the Employee and the Employee agrees to
accept employment by the Company for the term set forth in Section 2 hereof and
in the position and with the duties and responsibilities set forth in Section 3
hereof.
2. Term. The employment of the Employee by the Company will commence
on the date hereof and end on the third anniversary of such date (the "Initial
Term"), and thereafter shall continue from year to year for additional one-year
terms (the "Additional Terms"), unless and until either party shall give notice
of such party's intent to terminate not less than 30 days prior to the end of
the then-current Initial Term or Additional Term, which termination shall be
effective at the expiration of said term, or until sooner terminated as
hereinafter set forth.
3. Position and Duties.
(a) The Employee shall serve as Director of Operations
reporting to the President of the Company, with such duties and responsibilities
as the President of the Company may from time to time determine and assign to
the Employee. The Employee shall use the Employee's best efforts and full
business time to perform the Employee's duties under this Agreement.
(b) The Employee may remain a resident of North Carolina if he
wishes to do so, based in a Company office to be established out of the
Company's initial capital contribution.
<PAGE> 2
4. Compensation and Related Matters.
(a) For services rendered under this Agreement, the Company
shall pay to the Employee an annual base salary of $100,000 (the "Base Salary"),
subject to increase, as determined by the Board of Directors of the Company, in
its sole discretion, on or before any anniversary date of this Agreement. The
Base Salary shall be payable semi-monthly or in such other installments as shall
be consistent with the Company's payroll procedures. The Company shall deduct
and withhold all necessary social security and withholding taxes and any other
similar sums required by law or authorized by the Employee with respect to
payment of the Base Salary and all other amounts and benefits payable under this
Agreement.
(b) The Employee shall be entitled to participate in any group
life, disability and medical insurance or other benefit plan or arrangement
available generally to the employees of the Company as determined by the Board
of Directors.
5. Expenses. The Employee shall be reimbursed by the Company for
reasonable travel and other expenses, as approved from time to time by the Board
of Directors, which are incurred and accounted for in accordance with the
Company's normal practices.
6. Vacation. The Employee shall be entitled during the term of
employment hereunder to four weeks of vacation, or a pro rata amount thereof in
the event that the term of employment hereunder is less than one year, which
vacation shall be at such time or times and for such period or periods as shall
be mutually agreed upon by the Employee and the Board of Directors. The Employee
shall also be entitled to all public holidays observed by the Company.
7. Termination of Employment.
(a) The Employee's employment hereunder shall terminate upon
the Employee's death.
(b) The Company may terminate the Employee's employment
hereunder under the following circumstances:
(i) If, as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have been unable to perform all
of the Employee's duties hereunder by reason of illness, or physical or mental
disability or other similar capacity, which inability shall continue for more
than four (4) consecutive months, the Company may terminate the Employee's
employment hereunder.
(ii) The Company may terminate the Employee's employment
hereunder for "Cause." For purposes of this Agreement, the Company shall have
"Cause" to terminate the Employee's employment hereunder upon the (A) failure of
the Employee (other than for reasons described in Sections 7(a) and 7(b)(i)
hereof) to perform or observe any of
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<PAGE> 3
the material terms or provisions of this Agreement; (B) negligent or
unsatisfactory performance of the Employee's duties under this Agreement and the
failure of the Employee, within 30 days after receipt of notice from the Company
setting forth in reasonable detail the nature of the Employee's negligent or
unsatisfactory performance, (i) to provide the Company with a satisfactory
explanation of the Employee's actions (or inaction) and (ii) to correct to the
satisfaction of the Company any identified deficiencies; (C) misconduct or other
similar action on the part of the Employee that is materially damaging or
detrimental to the Company; (D) conviction of the Employee of a crime involving
a felony, fraud, embezzlement or the like; or (E) misappropriation of the
Company funds or misuse of the Company's assets by Employee.
(c) The Employee may terminate the Employee's employment
hereunder for "Good Reason." For purposes of this Agreement, the Employee shall
have "Good Reason" to terminate the Employee's employment hereunder upon the (i)
failure of the Company to perform or observe any of the material terms or
provisions of the Agreement, and the continued failure of the Company to cure
such default within fifteen (15) days after written notice of such default and
demand for performance has been given to the Company by the Employee, which
notice and demand shall describe specifically the nature of such alleged failure
to perform or observe such material terms or provisions; provided, however, that
if cure is impossible within said fifteen (15) day period, it shall be
sufficient for the Company to commence such cure within said fifteen (15) day
period, and pursue such cure diligently to completion within the shortest
possible reasonable time; or (ii) assignment of duties materially and adversely
inconsistent with the Employee's position, duties, responsibilities and status
with the Company without the Employee's consent.
(d) Any termination of the Employee's employment by the Company
or by the Employee (other than pursuant to Section 7(a) hereof) shall be
communicated by written "Notice of Termination" to the other party hereto in
accordance with Section 10(c) hereof, which shall indicate the specific
termination provision in this Agreement relied upon, if any, and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
(e) For purposes of this Agreement, the "Date of Termination"
shall mean (i) if the Employee's employment is terminated by the Employee's
death, the date of the Employee's death; (ii) if the Employee's employment is
terminated pursuant to Section 7(b)(i) hereof, thirty (30) days after the Notice
of Termination; provided, that the Employee shall not have returned to the
performance of the Employee's duties on a full-time basis during such thirty
(30) day period; (iii) if the Employee's employment is terminated pursuant to
Section 7(b)(ii) or 7(c) hereof, the date specified in the Notice of Termination
(which date, in the case of termination of Employee's employment solely pursuant
to clause (B) of Section 7(b)(ii) by reason of inadequate performance, shall not
be sooner than nine months from the date of the Notice of Termination); and (iv)
if the Employee's employment is terminated for any other reason, the date on
which the Notice of Termination is given.
8. Compensation Upon Termination.
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<PAGE> 4
(a) If the Employee's employment is terminated by the
Employee's death, the Company shall pay to the Employee's estate or as may be
directed by the legal representatives of such estate, the Employee's full Base
Salary through the Date of Termination at the rate in effect at the time of the
Employee's death and all other unpaid amounts, if any, to which the Employee is
entitled as of such date in connection with any fringe benefits or under any
incentive compensation plan or program of the Company pursuant to Section 4(c)
or 4(d) hereof, at the time such payments are due.
(b) During any period that the Employee fails to perform the
Employee's duties hereunder solely as a result of incapacity due to physical or
mental illness ("disability period"), the Employee shall continue to receive the
Employee's full base salary through the Date of Termination at the rate in
effect at the time the Notice of Termination is given and all other unpaid
amounts, if any, to which the Employee is entitled as of the Date of Termination
in connection with any fringe benefits or under any incentive compensation plan
or program of the Company pursuant to Section 4(c) or 4(d) hereof, at the time
such payments are due; provided that payments so made to the Employee during the
disability period shall be reduced by the sum of the amounts, if any, payable to
the Employee at or prior to the time of any such payment under disability
benefit plans of the Company and which amounts were not previously applied to
reduce any such payment.
(c) If the Employee shall terminate the Employee's employment
other than for Good Reason, or the Company terminates the Employee's employment
for Cause as provided in Section 7(b)(ii) hereof, the Company shall pay the
Employee the Employee's full Base Salary through the Date of Termination at the
rate in effect at the time the Notice of Termination is given, and the Company
shall have no further obligations to the to the Employee under this Agreement.
(d) If the Company shall terminate the Employee's employment
other than for Cause, or the Employee terminates the Employee's employment for
Good Reason as provided in Section 7(c) hereof, the Company shall pay the
Employee (i) the Employee's full Base Salary through the Date of Termination at
the rate in effect at the time the Notice of Termination is given and all other
unpaid amounts, if any, to which the Employee is entitled as of the Date of
Termination in connection with any fringe benefits or under any compensation
plan or program of the Company pursuant to Section 4(c) and 4(d) hereof, at the
time such payments are due; and (ii) the full Base Salary and any other amounts
that would have been payable to Employee under Sections 4(c) (but not Section
4(d)) hereof from the Date of Termination through the Expiration Date at the
such payments are due.
(e) The Employee shall not be required to mitigate amounts
payable pursuant to this Section 8 by seeking other employment or otherwise. If,
however, the Employee shall receive compensation from employment with any other
employer during the relevant period set forth in this Section 8, the payments to
be made under the provisions of this Section 8 shall be correspondingly reduced.
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<PAGE> 5
9. Obligation of Confidentiality and Non-Competition. Employee agrees
that Employee has a fiduciary duty to Lung Rx and that Employee shall hold in
confidence and shall not, except in the course of performing Employee's
employment obligations or pursuant to written authorization from Lung Rx, at any
time during or for three years after termination of Employee's relationship with
Lung Rx (a) directly or indirectly reveal, report, publish, disclose or transfer
the Confidential Information or any part thereof to any person or entity; (b)
use any of the Confidential Information or any part thereof for any purpose
other than for the benefit of Lung Rx; (c) assist any person or entity other
than Lung Rx to secure any benefit from the Confidential Information or any part
thereof or (d) solicit (on Employee's behalf or on behalf of any third party)
any employee of Lung Rx for the purpose of providing services or products which
Employee is prohibited from providing hereunder.
Furthermore, Employee agrees that all Confidential Information, as
defined below, shall belong exclusively and without any additional compensation
to Lung Rx. For the purposes of this Agreement, "Confidential Information" shall
mean each of the following: (a) any information or material proprietary to Lung
Rx or designated as confidential either orally or in writing by Lung Rx; and (b)
any information not generally known by non-Lung Rx personnel; and (c) any
information which Employee should know Lung Rx would not care to have revealed
to others or used in competition with Lung Rx; and (d) any information which
Employee made or makes, conceived or conceives, developed or develops or
obtained or obtains knowledge or access through or as a result of Employee's
relationship with Lung Rx (including information received, originated,
discovered or developed in whole or in part by Employee) from the initial date
of Employee's employment with Lung Rx.
Furthermore, Employee agrees (1) not to accept employment, consultancy or
other business relationships with a business which competes with Lung Rx's
business for twelve months following Employee's last receipt of compensation
from Lung Rx, and (2) to the issuance of a Court Order restraining alleged
violation of this section, and to waive any bond requirement that may arise, in
addition to all other remedies available to Lung Rx..
10. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire
agreement between the parties hereto relating to the subject matter hereof, and
this Agreement supersedes all prior understandings and agreements, whether oral
or written, relating to the employment of the Employee by the Company, except
only for the following: Employee shall be elected each year to serve as
Secretary of the Board of Directors until such time as he is elected to serve as
a member of the Board of Directors.
(b) Assignment. This Agreement shall not be assignable or
otherwise transferable by either party hereto, but any amounts owing to Employee
upon the Employee's death shall inure to the benefit of the Employee's heirs,
legatees, legal representatives, executor or administrator. Notwithstanding the
foregoing, this Agreement applies with the prior written consent of the
Employee, which consent shall not be unreasonably withheld. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and
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<PAGE> 6
any such respective heirs, legatees, executors, administrators, representatives,
successors and assigns.
(c) Notices. All notices, demands, requests or other
communications which may be, or are required to be given, served or sent by any
party to any party pursuant to this Agreement shall be in writing and shall be
mailed by first class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by hand delivery, telegram or telex and
addressed as follows:
If to the Employee:
If to the Company: Lung Rx, Inc.
1824 R Street, N.W.
Washington, D.C. 20009
(d) Amendment; Waiver. This Agreement shall not be amended,
altered, modified or discharged except by an instrument in writing duly executed
by the Employee and the Company. Neither the waiver by the parties hereto of a
breach of, or default under, any of the provisions of this Agreement, nor the
failure of either of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder, shall thereafter be construed as a waiver of any such provisions,
rights or privileges hereunder.
(e) Severability. The invalidity or unenforceabilty of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which shall remain in
full force and effect.
(f) Applicable Law. This Agreement and the rights and
obligations of the parties under this Agreement shall be construed, interpreted
and enforced in accordance with the laws of the District of Columbia, exclusive
of the choice-of-laws rules thereunder.
(g) Survival. It is the express intention and agreement of the
parties hereto that the Special Terms of Conditions of Employment Agreement
referred to in Section 9 hereof shall survive the termination of employment of
the Employee. In addition, all obligations of the Company to make payments
hereunder shall survive any termination of this Agreement on the terms and
conditions set forth.
(h) Execution. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
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<PAGE> 7
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or
have caused this Agreement to be duly executed on their behalf, as of the date
first above written.
LUNG RX, INC.
/s/ Shelmer D. Blackburn, Jr./ 7 July 96 /s/ Martine Rothblatt
- ---------------------------------------- ---------------------
Shelmer Blackburn, Jr. By: Martine Rothblatt
/s/ James W. Crow
- ----------------------------
Witness
Printed: James W. Crow
7
<PAGE> 1
FFVC Lease Agreement
EXHIBIT 10.7
NORTH CAROLINA
DURHAM COUNTY
FIRST FLIGHT VENTURE CENTER
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease or Lease Agreement"), made and entered into this
1st day of July, 1997, by and between the North Carolina Technological
Development Authority, Inc., a North Carolina non-profit corporation ("LESSOR"),
and LUNG Rx, Inc. ("LESSEE");
WITNESSETH:
WHEREAS the Lessor manages the First Flight Venture Center, a small
business incubator the mission of which is to increase the number of successful
technology-based companies starting in or relocating to the Research Triangle
Park area by providing business space and services on a temporary basis during
the early stages of company development or expansion; and
WHEREAS it is the philosophy of Lessor that a company as described above
should occupy space in a small business incubator for no more than two years;
and
WHEREAS the Lessee wishes to occupy space in the First Flight Venture
Center for purposes consistent with the mission and philosophy described above;
and
WHEREAS the parties hereto have mutually agreed to the terms of this Lease
Agreement as hereinafter set out and the undersigned individuals are authorized
to enter into this agreement on behalf of Lessor and Lessee.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
contained herein, the parties hereto do hereby agree as follows:
1. AGENT(S). The duly authorized person(s) or entity/entities who shall have
the authority to act on behalf of the Lessor or Lessee, as the case may be,
in connection with all matters relating to this lease, are those initial
agents as are identified below:
For the Lessor:
President
North Carolina Technological Development Authority, Inc.
2 Davis Drive
Post Office Box 13169
Research Triangle Park, North Carolina 27709
<PAGE> 2
For the Lessee:
Shelmer Blackburn
LUNG Rx
2. LEASED PREMISES. Upon the terms, provisions, and conditions hereof, Lessor
does hereby let and lease unto Lessee and Lessee hereby takes and leases
from Lessor certain space in Durham County, North Carolina, more
particularly described as approximately 800 square feet of interior space
("Leased Premises") in the First Flight Venture Center, located at 2 Davis
Drive, Research Triangle Park, North Carolina 27709 ("Building"), as shown
in a floor plan marked Exhibit "A", which is attached to and hereby made a
part of this Lease Agreement. The use and occupancy by Lessee of the Leased
Premises shall include the non-exclusive right to use the parking areas,
service roads, sidewalks, and other areas owned by the Lessor adjacent to
the Buildings, subject to reasonable restrictions on such use as may be
promulgated by Lessor.
3. TERM. The term of this Lease Agreement shall be for a period of six (6)
months commencing on the date first above written and ending at 11:50 p.m.
on December 31, 1997, unless otherwise terminated or extended as set forth
in this Lease Agreement. Upon the conclusion of the term hereof, unless
either party has delivered to the other party notice of non-extension at
least thirty (30) days prior to such conclusion of the term, such term
shall be automatically extended for a period of six (6) months, subject,
however, to a maximum term of this Lease Agreement of two (2) years from
the commencement date of this Lease Agreement.
4. USAGE. The Leased Premises may be used by the Lessee for (a) research and
development activities directly related to, and necessary for, Lessee's
business, and (b) general office use necessary for Lessee's business.
Lessee shall not use the Leased Premises or fail to maintain them in any
manner constituting a violation of any ordinance, statute or regulation, or
order of any governmental authority nor will Lessee maintain or permit any
nuisance to occur on the Leased Premises. Lessee shall use, maintain and
occupy the Leased Premises in a careful, safe, and proper manner, and shall
not commit waste thereon. Lessee shall not use the Leased Premises in a
manner so as to cause any fire or other hazard or impair the validity of
any policy of insurance now or hereafter taken out upon the Leased Premises
by Lessor, and if any such act or action on Lessee's part increases the
rate of premium of any policy of insurance (in addition to all other
remedies given to Lessor herein), Lessee shall pay to Lessor the amount by
which such rate or premium is increased by Lessee's conduct aforesaid.
5. RENTAL.
(a) Base Rental. As base rental for the Leased Premises, Lessee shall pay
to Lessor the sum of One thousand one hundred twenty one and 40/100
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(1,121.40) per month for the term and fraction of the term hereof. In
the event the term of this Lease Agreement is extended pursuant to the
provisions of Section 3 hereof, the base rental for each such six (6)
month extension of the term shall be one hundred five percent (105%)
of the base rental for the immediately preceding term (whether such
immediately preceding term be the initial term or an extension of the
initial term). The base rental per square foot of any additional space
brought under this Lease Agreement, whether by verbal or written
agreement or by occupancy thereof by Lessee, shall be equal to the
base rental per square foot of the space then under this Lease
Agreement, subject to adjustment in the manner provided herein. A pro
rate amount of the monthly base rental shall be due and payable at the
start of any partial month during the term hereof or if occupancy for
the permitted use shall occur prior to the commencement date hereof.
The monthly base rent shall be payable in advance on the first day of
each month during the term hereof.
(b) Other Provisions. Except as specifically provided in this Lease, all
rent and sums to be paid to Lessor under the Lease are to paid without
offset, abatement or deduction. Other remedies for nonpayment of rent
notwithstanding, if any monthly rental is not received by Lessor
within five (5) days of the date when due or if any other payment due
Lessor by Lessee is not received by Lessor on or before the fifth
(5th) day following the date it was due, a late charge of five percent
(5%) of such past due amount shall become due and payable in addition
to such amounts owned under this Lease.
6. SECURITY DEPOSITS. To assure adherence to the terms and conditions of this
Lease, Lessee has paid to Lessor a sum of $1,281.00 as a Security Deposit.
The Security Deposit shall be used for the payment of any uninsured damages
to the Leased Premises, exclusive of normal wear and tear, which occur
during the term of this Lease which are caused by or result from the
wrongful or negligent act or omission of the tenant. No interest shall be
paid on the Security Deposit. The balance of the Security Deposit will be
returned to the Lessee within thirty (30) days of the payment of all
amounts due under this lease agreement.
7. LESSEE PARTICIPATION IN PLANNING ACTIVITIES. As a condition of this Lease,
Lessee agrees to devote such time as may be reasonably requested during the
term of the Lease, to participating in Lessor's planning activities related
to the organization, provision of services and operation procedures of the
First Flight Venture Center. Lessee further agrees to participate in tenant
meetings which may from time to time be called by the management of the
First Flight Venture Center, it being agreed that reasonable notice, when
possible, for such meetings is the responsibility of management.
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8. REPORTING REQUIREMENTS. Lessee, as a company accessing First Flight Venture
Center services and facilities for a limited time during the high-growth
stage of development, will report to Lessor on a quarterly basis. Initial
report, due at the beginning of occupancy, will take the form of a business
plan including Lessee's current structure, personnel, product, market and
opportunity together with a pert chart outlining development and growth
expectations over a minimum two year period (including personnel and
facility needs). Subsequent reports will update and supplement the initial
report, and must include number of Lessee employees, grant and investment
revenue figures, sales revenue figures, and documentation and explanation
of significant changes in strategy for growth. Lessor agrees that reports
are confidential and information contained therein will be used only in an
aggregate form for purposes of measuring incubator performance and for the
purpose of assisting Lessee in achieving independence from the incubator
environment. Lessor may require, and Lessee agrees, to continue reporting
for up to 48 months after leaving occupancy at the First Flight Venture
Center.
9. LESSOR IMPROVEMENTS. Lessor shall, at the beginning of the Lease term, have
the Leased Premises and common areas in the Building in a condition
reasonably satisfactory to Lessee; including repairs, painting,
partitioning, remodeling, plumbing, and electrical wiring suitable for the
purpose for which the Leased Premises will be used by Lessee. By executing
this Lease Agreement Lessee acknowledges that Lessee has inspected the
Leased Premises and common areas in the Building and finds them to be in
condition satisfactory to Lessee with respect to repairs, painting,
partitioning, remodeling, plumbing, and electrical wiring.
10. ALTERATIONS. Lessee shall make no alterations or additions to the Leased
Premises without the prior written consent of Lessor. At the time such
consent is granted, the writing shall state whether Lessee may or shall
remove such alteration or addition or whether such alteration or addition
shall become the property of the Lessor. Lessee shall indemnify and save
harmless Lessor from all loss, cost or expense in connection with the
construction or installation of alterations or additions. In the event
Lessee is permitted or required to remove any such alterations or
additions, such removal shall be completed prior to the expiration of the
term of this Lease Agreement and any damage to the Leased Premises caused
by said removal shall be repaired by Lessee.
11. BUILDING SERVICES.
(a) Utility Infrastructure: For the Leased Premises and common areas in
the Building, Lessor shall provide 1) heating and cooling facilities,
2) existing electrical facilities, and 3) lighting fixtures and
sockets;
(b) Janitorial Service: Lessor shall provide janitor service, consisting
only of routine dusting, vacuum cleaning or dust-mopping of floors.
Lessor shall
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also provide for the disposal of routine office garbage and trash as
is reasonably created by the Lessee in the normal course of its
business;
(c) Common Area Access: Lessor shall furnish to Lessee, and its agents,
employees and invitees, subject to reasonable restrictions on the use
thereof as may be promulgated by Lessor, non-exclusive access to
common areas in the Building, including the main foyer, the lunch room
and kitchen, and toilet facilities adjacent to the common areas. By
the execution of this Lease Agreement, Lessee acknowledges that Lessee
has inspected the Leased Premises and common areas and finds the
Leased Premises and common areas to be adjacent with respect to the
recited equipment, facilities, and fixtures;
(d) Parking: Lessor shall provide to Lessee one (1) unassigned parking
space per employee of Lessee;
(e) Conference Rooms: Lessor shall provide to Lessee reasonable use of the
Building's conference room facilities on a first-scheduled,
first-served basis in accordance with the policies specified by
Lessor;
(f) Business Equipment Access: Lessor shall provide to Less use of, on a
reasonable per use charged basis as specified by Lessor, the
Building's business equipment, including facsimile machine, copier and
AV equipment on a first-scheduled, first-served basis in accordance
with the policies specified by Lessor;
(g) Receptionist Service: Lessor shall provide to Lessee, during normal
business hours, telephone answering and message service in accordance
with the policies and restrictions specified by Lessor;
(h) Laboratory Equipment: Lessor provides on an "as is" basis such
laboratory equipment as is currently in the lease space. Lessee
assumes responsibility for the maintenance and repair of equipment for
the duration of time that this lease remains in effect.
12. UTILITIES AND ENERGY. Lessor shall furnish heat and air-conditioning to the
Leased Premises to provide conditions required, in Lessor's judgment, for
comfortable occupancy of the Leased premises under normal business
operations during the usual seasons thereof. Air-conditioning will be
available daily from 8:30 a.m. to 5:00 p.m., weekends and holidays
excepted, during the usual season thereof. Whenever heat generating
machines or equipment are used in the Leased Premises which affect the air
temperature otherwise maintained by the air-conditioning system, Lessor
shall have the right to require Lessee to discontinue the use thereof
unless Lessee shall agree to reimburse Lessor for its cost of furnishing
and installing supplementary air-conditioning equipment for the Leased
Premises and to pay for the cost of the operation and maintenance of such
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equipment. Lessee shall give Lessor or its representative prompt written
(and, in the case of an emergency, oral) notice of any accidents to, or
defects in, any heating, air-conditioning, electrical or water system,
pipe, apparatus or equipment in the Building. Lessee shall not use any
method of heat or air-conditioning other than that approved by Lessor.
Lessor will provide after hours heat and air-conditioning upon Lessee's
request. Lessee must request such additional service 24 hours in advance in
such manner as is specified by Lessor, and the charges therefore will be on
an hourly basis and will be determined by Lessor.
13. RIGHT OF ENTRY. Lessor reserves and shall at all times have the right to
re-enter the Leased Premises to inspect the same, to supply any service to
be provided by Lessor to Lessee thereunder, to show the Leased Premises to
prospective tenants, to post notices of non-responsibility, and to alter,
improve or repair the Leased Premises and any portion of the Building
without abatement of rent, and may for that purpose, erect, use and
maintain scaffolding, pipes, conduits and other necessary structures in and
through the Leased Premises where required by the character of their work
to be performed, provided entrance to the Leased Premises shall not be
denied Lessee, and further provided that the business of Lessee shall not
be interfered with unreasonably. Lessee hereby waives any claim for damages
for any injury or inconvenience to or interference with Lessee's business,
any loss of occupancy or quiet enjoyment of the Leased Premises, and any
other loss occasioned thereby. For each of the aforesaid purposes, Lessor
shall at all times have and retain a key with which the unlock all the
doors in, upon or about the Leased Premises, excluding Lessee's vaults and
safes or special security areas (which must be designated in advance by
Lessee, and approved in writing by Lessor) and Lessor shall have the right
to use any and all means which Lessor may deem necessary or proper to open
such doors in an emergency in order to obtain entry to any portion of the
Leased Premises. Any entry to the Leased Premises or portions thereof
obtained by Lessor by any such means, or otherwise, shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry
into, or a detainer of, the Leased Premises, or an eviction, actual or
constructive, of Lessee from the Leased Premises or any portions thereof.
Lessee shall permit Lessor (or its designees) to enter the Leased Premises
to erect, use, maintain, replace and repair pipes, cables, conduits,
plumbing, vents, and telephone, electric and other wires or the items in,
to and through the Leased Premises, as and to the extent that Lessor may
now or hereafter deem it necessary or appropriate for the proper operation
and maintenance of the Building or any other portion of the Leased
Premises. In the event Lessor needs access to any floor duct or duct in the
walls or ceiling, Lessor's liability for carpet or wall covering or ceiling
tile replacement shall be limited to replacement of the piece removed to
gain such access. All such work shall be done, so far as practicable, in
such manner as to minimize interference with Lessee's use of the Leased
Premises.
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14. MAINTENANCE AND REPAIRS. Lessor shall keep the Leased Premises, common
areas in the Building, and parking area and grounds adjacent thereto in
good repair and tenantable condition, to the end that all facilities are
kept in operative condition. Maintenance shall include, but not be limited
to, furnishing and replacing electrical light fixture ballasts, air
conditioning and ventilating equipment filter pads, if applicable, and
broken glass, pavement repair and snow and ice removal in parking areas;
and regular grounds maintenance. Lessor reserves the right to enter and
inspect the Leased Premises, at reasonable times, and to fulfill its
maintenance obligation and to make necessary repairs or improvements to the
Leased Premises and the Building.
15. TAXES AND ASSESSMENTS. Lessor shall, for each year during the term of this
Lease Agreement, pay all ad valorem taxes, assessments, and charges levied
or assessed upon the Building by any governmental body.
16. FIRE AND OTHER CASUALTY. If at any time during the term of this Lease
Agreement the Leased Premises shall be totally destroyed by fire or other
casualty; or if the Leased Premises or portion of the common area of
Building should be so damaged so that rebuilding cannot reasonably be
completed within one hundred twenty (120) working days, then this Lease
Agreement may be terminated at the option of Lessee or Lessor, and if the
damage or destruction was without fault of Lessee the rent shall be abated
for the unexpired portion of the Lease. In the event of partial destruction
or damage by fire or other casualty, without fault of Lessee, so as to
render the Leased Premises untenantable in whole or in part, there shall be
an apportionment of the said rent until damage has been repaired.
17. EMINENT DOMAIN. If the whole of the Leased Premises, or such portion
thereof which will make the Leased Premises untenantable for the purpose
herein leased, shall be condemned or acquired by any legally constituted
authority for any public use or purpose, then this Lease Agreement shall
terminate and the rent shall be abated for the unexpired portion of the
Lease.
18. INSURANCE.
(a) Lessee shall maintain, at its sole cost and expense, (i) general
liability insurance during the term of this lease Agreement, in which
the limits of public liability shall not be less than One Million
Dollars ($1,000,000.00), with limits of at least Fifty Thousand
Dollars ($50,000) single limit bodily injury for any number of persons
injured or killed in one occurrence and One Hundred Thousand Dollars
($100,000) property damage (or such higher amounts as Lessor shall
from time to time determine), and (ii) fire and lightning insurance,
extended coverage, vandalism and malicious mischief, theft and
mysterious disappearance endorsements, covering the contents of the
Leased Premises and all alterations, additions and
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<PAGE> 8
leasehold improvements made by or for Lessee in the amount of their
full replacement value. All of such policies shall cover both Lessor
and Lessee, as their interest may appear, and all insurers thereon
shall agree not to cancel or change same without at least thirty (30)
days prior written notice to Lessor. A current certificate of Lessee's
insurers evidencing such insurance shall be furnished to Lessor no
later than thirty (30) days from the commencement date of this Lease,
and shall be updated by Lessee as appropriate t verify uninterrupted
coverage at all times during the duration of this Lease Agreement.
(b) Lessor shall maintain, at its sole cost and expense, fire and extended
coverage insurance as well as vandalism and malicious mischief
insurance on the Leased Premises and Building only, and will not be
required to protect Lessee's property on the Leased Premises in the
event of damage however caused. Lessor shall maintain, at its sole
cost and expense, general liability insurance during the term of this
lease Agreement, in which the limits of public liability shall not be
less than One Million Dollars ($1,000,000.00).
(c) Whenever (i) any loss, cost, damage or expense resulting from any
peril described in part (a)(ii) of this section is incurred by any
party to this Lease in connection with the Leased Premises, any part
or contents thereof, and (ii) such party is then covered in whole or
in part by insurance with respect to such loss, cost damage or
expense, then the party so insured hereby releases the other party
from any liability it may have on account of such loss, cost, damage
or expense to the extent of any amount recovered by reason of such
insurance and waives any right of subrogation which might otherwise
exist in or accrue to any person on account thereof, provided that
such release of liability and waiver of the right of subrogation shall
not be operative in any case where the effect thereof is to invalidate
such insurance coverage (or increase the cost thereof, unless the
other party reimburses the insured for any cost increase). If Lessee
fails to maintain in force any insurance required by this Lease to be
carried by it, then for purposes of this waiver of subrogation it
shall be deemed to have been fully insured and to have recovered the
entire amount of its loss.
19. INDEMNIFICATION. Lessee shall indemnify Lessor against and hold Lessor
harmless from any and all liability arising from or out of or in any manner
connected with Lessee's use or occupancy of the Leased Premises or the
operation of any business thereon, except as to any and all such liability
arising from or out of the acts or neglect of Lessor, its employees, agents
or representatives acting for or on behalf of Lessor. Lessor shall
indemnify Lessee against and hold Lessee harmless from and against any and
all liability arising from or out of or in any manner connected with any
property owned by Lessor other than the Leased Premises, except as to any
and all such liability arising from or out of the acts or
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<PAGE> 9
neglect of Lessee, its employees, agents or representatives acting for or
on the behalf of Lessee.
20. ENVIRONMENTAL.
(a) Lessee shall not cause or permit any hazardous or toxic substances,
materials, or waste ("Hazardous Substances") to be used, generated,
stored or disposed of in, on or under, or transported to or from the
Leased Premises ("Hazardous Substances Activities") unless (i) such
Hazardous Substances are necessary for Lessee's business and (ii)
Lessee first obtains the written consent of Lessor. If these
conditions are satisfied, Lessee shall at all times and in all
respects comply with all local, state, and federal laws, ordinances,
regulations and orders relating to Hazardous Substances ("Hazardous
Substances Law").
(b) Lessee shall indemnify, defend (by counsel acceptable to Lessor),
protect, and hold Lessor harmless from and against forfeitures,
losses, costs (including clean-up costs) or expenses (including
attorney's fees, consultant's fees and expert's fees) for the death of
or injury to any person or damage to any property whatsoever, arising
from or caused in whole or in part, directly or indirectly, by (i) the
presence in, on, under, or about the Leased Premises of any Hazardous
Substances brought on the premises by Lessee; (ii) any discharge or
release in or from the Leased Premises of any Hazardous Substances
brought on the premises by Lessee; (iii) Lessee's use, storage,
transportation, generation, disposal, release or discharge of
Hazardous Substances to, in, on, under, about or from the Leased
Premises; or (iv) Lessee's failure to comply with any Hazardous
Substances Law. Lessee's obligations under this section shall survive
the expiration or earlier termination of the term of this Lease.
21. ASSIGNMENT AND SUBLETTING. Lessee shall not assign, pledge, mortgage or
otherwise encumber this Lease, or further sublet any part or all of the
Leased Premises, by operation of law or otherwise, without the prior
written approval by Lessor. Notwithstanding Lessor's consent to any of the
foregoing, Lessee shall remain liable to Lessor for the payment of rental
then due and thereafter to become due and the performance of all other
obligations of Lessee thereunder for the balance of the term hereof.
Lessor's consent to any of the foregoing shall not release or waive the
prohibition against them thereafter or constitute a consent to any other
assignment, pledge, mortgage, encumbrance, transfer or sublease. If this
Lease be assigned, or if the Leased Premises or any part thereof be
subleased or occupied by anybody other than Lessee, whether with or without
Lessor's consent, Lessor may collect from the assignee, sublessee or
occupant, any rental or other charges payable of Lessee under this Lease,
and apply the amount collected to the rental and other charges here
reserved, but such collection by Lessor shall not be deemed acceptance of
assignee, sublessee or occupant nor a
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release of Lessee from the performance by Lessor of this Lease. Lessor
shall be entitled to all profit received by Lessee as a result of any
assignment or subletting of this Lease. If Lessee is a corporation or
partnership, then any transfer of this Lease by merger, consolidation,
reorganization, liquidation or any change in the ownership of, or power to
vote, the majority of its outstanding voting stock or partnership interests
shall constitute an assignment of this Lease for the purposes of this
section and other relevant sections herein. Lessor may assign this Lease
without the consent to Lessee.
22. MISCELLANEOUS POLICIES/PROHIBITIONS. Lessee, its agents, employees and
invitees, shall comply with the following terms and conditions of tenancy
during the term of this Lease.:
(a) Smoking Prohibition: No smoking shall be allowed anywhere within or
about the Leased Premises or the Building, except in such areas as may
be designated at the sole discretion of Lessor.
(b) Proper Use: No animals, birds or other pets, and no bicycles, or other
vehicles shall be brought or kept in or about the Building,
temporarily or otherwise, except at such areas as Lessor may
designate. The Leased Premises shall not be used for cooking, lodging
purposes or for the storage of merchandise or other materials.
(c) Nuisance Prohibition: Lessee, its agents, employees and invitees,
shall at all times refrain from making loud, unseemly or improper
noises or sounds or vibrations in the Leased Premises or elsewhere in
the Building, and from in any other manner annoying, disturbing, or
interfering with other lessees or their employees and invitees.
(d) Freight and Package Delivery: Freight, business equipment, furniture,
merchandise, and other large or bulky articles shall be delivered to
and removed from the Building through such entrance, and in such
manner and at such times as may be designated by Lessor. All damage to
the Building or exterior property caused by the moving or carrying of
articles therein or thereon shall be paid for by Lessee. Lessor shall
not be responsible for damage to any property of Lessee delivered to
or left in or handled anywhere in the Building by any representative
of Lessor delivered to or left in or handled anywhere in the Building
by any representative of Lessor as an accommodation to Lessee, Lessor
being under no obligations to accept delivery of, or move or handle,
any property of Lessee.
(e) Recycling: Lessee shall establish and enforce a policy within his own
company for the recycling of plain white paper, assorted paper,
aluminum cans, magazines and newspapers, utilizing the recycling bins
provided by Lessor.
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23. DEFAULT AND REMEDIES.
(a) Default of Lessee. Failure to perform any act to be performed by
Lessee hereunder or to comply with any condition or covenant contained
herein shall be deemed a default by Lessee. In the event of Lessee's
default as provided above and the continuance of such a default after
ten (10) days written notice is given to Lessee by Lessor, which
notice shall state with specificity the nature of the default, such
notice not be necessary in the event of a default due to the
nonpayment of rent, Lessor may exercise all rights and remedies
available to a Lessor under North Carolina law, including without
limitation the following:
(i) Lessor may terminate this Lease, in which event Lessee shall
immediately surrender the Lease Premises to Lessor, and if Lessee
fails to surrender the Leased Premises, Lessor may, without
prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Leased
Premises, by picking or changing locks if necessary, and lock
out, expel, or remove Lessee and any other person who may be
occupying all or any part of the Leased Premises without being
liable for prosecution of any claim for damages. Lessee shall pay
Lessor on demand the amount of all loss and damage which Lessor
may suffer by reason of the termination of the Lease under this
subsection, whether through inability to relet the Leased
Premises on satisfactory terms or otherwise. Lessor shall not be
considered to have terminated this Lease unless written notice of
such termination shall have been delivered to Lessee;
(ii) Without terminating this Lease, enter upon and take possession of
the Leased Premises, by picking or changing locks if necessary,
and lock out, expel or remove Lessee and any other person who may
be occupying all or any part of the Leased Premises without being
liable for any claim for damages, and relet the Leased Premises
on behalf of Lessee and receive directly the rent by reason of
the reletting. Lessee shall pay Lessor on demand any deficiency
that may arise by reason of any reletting of the Leased Premises;
further, Lessee shall reimburse Lessor for any expenditures made
by it for remodeling or repairing in order to relet the Leased
Premises; or
(iii) Without terminating this Lease, enter upon the Leased Premises,
by picking or changing locks if necessary, without being liable
for prosecution of any claim for damages, and do whatever Lessee
is obligated to do under the terms of this Lease, with Lessee
remaining liable to Lessor for all amounts payable to Lessor by
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Lessee under this Lease. Lessee shall reimburse Lessor on demand
for any expenses which Lessor may incur in effecting compliance
with Lessee's obligations under this Lease; further, Lessee
agrees that Lessor shall not be liable for any damages resulting
to Lessee from effecting compliance with Lessee's obligations
under this subsection caused by the negligence of Lessor or
otherwise.
(d) Default of Lessor. Lessor shall be in default thereunder in the event
of the failure of Lessor to correct a condition or to cure a breach of
this Lease within a reasonable time of receiving written notice of the
condition or breach from Lessee. In the event of a default by Lessor
thereunder, Lessor's sole remedy shall be to recover of Lessor any
loss or damage suffered by Lessee which are a direct result of such
default.
(e) Costs and Expenses. Each party hereto shall be liable for and shall
pay any and all expenses, including reasonable attorneys fees,
incurred by the other party hereto in enforcing its rights thereunder
in connection with any default by the other party hereto of the terms,
covenants, and conditions contained in this Lease Agreement.
24. WAIVER. No waiver of any covenant or condition or the breach of any
covenant or condition of this Lease Agreement shall be taken to constitute
a waiver of any subsequent breach of such covenant or condition, nor
justify or authorize a non-observance on any other occasion of such
covenant or condition, nor shall the acceptance of rent by Lessor at any
time when Lessee is in default of any covenant or condition hereof be
construed as a waiver of such default or Lessor's right to terminate this
Lease Agreement on account of such default.
25. SURRENDER. Upon the expiration or other termination of this Lease
Agreement, Lessee shall quit and surrender to Lessor the Leased Premises,
together with all other property affixed to the Leased Premises (with the
exception of trade fixtures), broom clean, and in good order and condition,
ordinary wear and tear and damage by the elements, fire or other
unavoidable casualty excepted. Any damage to the Leased Premises by removal
of any property of Lessee shall be promptly repaired by Lessee to the
satisfaction of Lessor. Lessee shall remove all property of Lessee, and
failing to do so, Lessor may cause all of said property to be removed at
the expense of Lessee, and Lessee shall pay all costs and expenses thereby
incurred. Lessee's obligation to observe or perform this covenant shall
survive the expiration or other termination of this Lease Agreement.
26. HOLDOVER. Lessee shall pay Lessor for each day Lessee retains possession of
the Leased Premises or any part thereof after termination hereof, by lapse
of time or otherwise, at two (2) times the daily fixed rental for the last
period prior to the date of such termination, and also pay all damages
sustained by Lessor by reason of such retention, or, if Lessor gives
written notice to Lessee of Lessor's election
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thereof, such holding over shall constitute an extension of this Lease for
a period from month to month, on the terms and conditions of this Lease.
This provision shall not be deemed to waive Lessor's rights to re-entry or
any other right thereunder or at law.
27. COVENANT OF QUIET ENJOYMENT. Lessor agrees that so long as Lessee shall not
be in default as provided herein, Lessee shall have the peaceable and quiet
enjoyment of possession of the Leased Premises without any manner of
hindrance from Lessor or any persons lawfully claiming under Lessor.
28. LESSEE'S RIGHT TO TERMINATE. Lessor acknowledges that Lessee may terminate
this lease at any time with thirty (30) days written notice to Lessor. In
the event of termination in this manner, Lessee shall pay Lessor all
amounts due for service fees and rental fees through the entire thirty day
period regardless of whether or not leased premises are surrendered before
the thirty day period expires.
29. LESSOR'S RIGHT TO RENEW OR TERMINATE. This Lease Agreement will
automatically renew for six month intervals, at Lessor's sole discretion,
for up to a two-year period of total occupancy, at which time this
agreement will automatically renew on a month to month basis. In the event
that Lessor chooses not to renew, thirty days written notice of nonrenewal
will be provided to Lessee by Lessor. All other terms and conditions of
this Agreement will remain in full effect at all times during renewal
periods.
30. NOTICES. All notices herein provided to be given, or which may be given, by
either party to the other, shall be deemed to have been fully given when
made in writing and deposited in the United States mail, certified, postage
prepaid, and addressed as follows:
If to Lessor, to:
North Carolina Technological Development Authority, Inc.
Post Office Box 13169
Research Triangle Park, NC 27709
If to Lessee, to:
Shelmer Blackburn
LUNG Rx
Post Office Box 13169
Research Triangle Park, NC 27709
Nothing herein contained shall preclude the giving of such notice by
personal service. The address to which notices shall be mailed as foresaid
to either party may be changed by written notice.
31. ENTIRE AGREEMENT. This Agreement is the sole and total agreement between
the parties with respect to the subject matter hereof, and no agreement,
understanding,
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or operating procedure shall be binding upon the parties with respect to
the Leased Premises unless contained herein, expressly referenced herein,
or made applicable by reason of State law, policy, or regulation.
IN TESTIMONY WHEREOF this Lease Agreement has been executed by the parties
hereto, in duplicate originals, as of the date first above written.
LESSOR: North Carolina Technological Development Authority, Inc.
By: /s/ John C. Hogan
---------------------
John Hogan
Facility Manager
(Corporate Seal)
LESSOR: North Carolina Technological Development Authority, Inc.
By: /s/ John Ciannamea
----------------------
John Ciannamea, President
LESSEE: LUNG Rx
By: /s/ James W. Crow
---------------------
President
By: /s/ Shelmer Blackburn, Jr., 4 June '97 (Corporate Seal)
----------------------------
Secretary
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CONFIDENTIAL TREATMENT REQUESTED
FOR PORTIONS OF THIS DOCUMENT
EXHIBIT 10.8
EXCLUSIVE LICENSE AGREEMENT
THIS AGREEMENT effective as of this 3rd day of December, 1996, between LUNG
RX, Inc., a corporation organized and existing under the laws of the State of
Delaware, with its principal place of business at 100 Europa Drive, Suite 599,
Chapel Hill, North Carolina 27514 (hereinafter referred to as "LUNG RX") and
Pharmacia & Upjohn Company, a corporation organized and existing under the laws
of the State of Delaware, with its principal office at 7000 Portage Road,
Kalamazoo, Michigan 49001 (hereinafter referred to as "P&U").
WHEREAS, P&U holds valuable patent rights pertaining to
9-deoxy-13,14-dihydra-2',
a-methano-3-oxa-4,5,6-trinor-3,7-(1',3"-interphenylene)-PGF, and the
pharmaceutically acceptable salts and esters thereof (hereinafter referred to as
"Compound");
WHEREAS, P&U is willing to license Compound to a party wishing to develop
it; WHEREAS, LUNG RX has the capability and know-how to develop Compound and is
desirous of licensing it from P&U;
WHEREAS, P&U (formerly Upjohn) and Glaxo Wellcome (formerly Wellcome
Foundation Limited), entered into a Basic Agreement dated December 14, 1976
(hereinafter referred to as the "Basic Agreement") relating to Compound;
WHEREAS, P&U and Glaxo Wellcome entered an agreement on 10 February 1993
for the further development of Compound (hereinafter referred to as "Development
Agreement"); and
WHEREAS, Development Agreement has now terminated and LUNG RX wishes to
develop Compound, using data and know-how generated under the Development
Agreement.
<PAGE> 2
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE 1. DEFINITIONS
As used in this Agreement, the following terms, whether used in the
singular or the plural, shall have the following meanings:
1.1 "Affiliate" means any corporation or non-corporate business entity
which controls, is controlled by, or is under common control with a party to
this Agreement. A corporation or non-corporate business entity shall be regarded
as in control of another corporation if it owns or directly or indirectly
controls at least forty percent (40%) of the voting stock of the other
corporation, or (a) in the absence of the ownership of at least forty percent
(40%) of the voting stock of a corporation, or (b) in the case of a
non-corporate business entity, if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
corporation or non-corporate business entity, as applicable.
1.2 "Agreement" means this exclusive license agreement.
1.3 "Compound" means (a)9-deoxy-13,14-dihydra-2,9a-methano-3-oxa-4,
56-trinor-3,7-(1',3"-interphenylene)-PGF, formerly referred to by the parties as
C/A 585 or U-62840, and (b) the pharmaceutically acceptable salts and esters
thereof.
1.4 "Dollars" or "$" means United States dollars.
1.5 "Effective Date" means the date set forth at the beginning of this
Agreement.
1.6 "Europe" means all countries which are Member States, from time to time
of the European Community.
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1.7 "FDA" means the United States Food and Drug Administration.
1.8 "IND" means an Investigational New Drug Application or its equivalent.
1.9 "Know-How" means all data, information, know-how, methods, procedures,
and processes and materials, including samples, whether or not patentable, which
are possessed by P&U as of the Effective Date of this Agreement and which
relates to the manufacture, use or sale of a Compound or a Product, including
but not limited to, biological, chemical, biochemical, toxicological,
pharmacological, metabolic, formulation, clinical, analytical and stability
information and data.
1.10 "Milestone Country" means any one of the following countries: the
United States, the United Kingdom, Japan, France, Italy, Spain, Germany or
Canada.
1.11 "NDA" means a New Drug Application or its equivalent.
1.12 "Net Sales" with respect to any Product containing a Compound as the
sole active ingredient, means the gross sales (i.e., gross invoice prices) of
such Product billed by LUNG RX and its sublicensees to Third Party customers,
less
(i) actual credited allowances to such Third Party customers for
spoiled, damaged, outdated and returned Product and for retroactive price
reductions,
(ii) the amounts of trade and cash discounts not already credited to
such Third Party customers at the time of invoice,
(iii) all transportation and handling charges, sales taxes, excise
taxes, use taxes and import/export duties actually paid, and
(iv) all other allowances and adjustments actually credited to
customers (including, but not limited to rebates paid to Third Party payors),
whether during a specific royalty period or not.
3
<PAGE> 4
1.13 "Net Sales" with respect to any Product containing one or more active
ingredient(s) in addition to a Compound means gross sales of such Product billed
by LUNG RX and its sublicensees to Third Party customers, less the allowances,
adjustments, reductions, discounts, taxes, duties, rebates, and other charges
referred to in Section 1.12 above credited against sales of such Product
multiplied by a fraction the numerator of which shall be the manufacturing or
acquisition cost of all the active therapeutic ingredients in such Product,
including the Compound, such costs to be determined by LUNG RX, or its
sublicensees in accordance with such party's customary accounting procedures.
1.14 "Orphan Indication" means an indication to treat a disease or
condition that meets the definition stated in the Orphan Drug Act of 1983, to
include primary pulmonary hypertension.
1.15 "Non-Orphan Indication" means any indication to treat a disease or
condition which does not meet the definition stated in the Orphan Drug Act of
1983, to perhaps include secondary pulmonary hypertension, peripheral vascular
disease, congestive heart failure and chronic obstructive pulmonary disease.
1.16 "Patent Rights" means all United States and foreign patents and patent
applications listed in Appendix A attached hereto and made a part hereof and any
and all patents that may issue from said patent applications and all other
patent applications now or hereafter owned by P&U, alone or jointly with LUNG RX
which are filed or are entitled to priority or benefit of an application filed
prior to the Effective Date and, which claim inventions relating to the
Compound, a Product, the preparation of either, or relating to the Know-How,
together with any and all patents that have issued or in the future issue
therefrom; including any and all reissues, extensions, substitutions,
confirmations, registrations, revalidations, renewals,
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<PAGE> 5
supplementary protection certificates, additions, continuations,
continuations-in-part or divisions of or to any of the aforesaid patent
applications and patents.
1.17 "Phase III Pivotal Trial" means a clinical study of a Product carried
out by or under the control of LUNG RX as a Phase III clinical trial which is
designed to demonstrate the efficacy of the chronic administration of such
Product as a treatment for any disease or condition.
1.18 "Conclusion of Pivotal Phase III Trial" means sixty (60) days after
completion of the treatment of one hundred percent (100%) of the specified
number of patients described in the protocol for such study and the analysis of
the data collected during the study.
1.19 "Product" means any Compound or any pharmaceutical product containing
a Compound as the sole therapeutically active ingredient, or containing, in
addition to a Compound, one or more other therapeutically active ingredients.
1.20 "Registration" in relation to any Product means such approvals by
government authorities in a country of or community or association of countries
included in the Territory (including, where applicable, price approvals) as may
be legally required before such Product may be commercialized in such country.
1.21 "Territory" means the entire world.
1.22 "Third Party" means any party other than P&U or LUNG RX, or LUNG RX's
Affiliates or sublicensees.
1.23 "Valid Claim" means a claim of an issued and unexpired patent included
within the Patent Rights which has not been held unenforceable, unpatentable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed with in the time allowed for appeal,
and which has not been admitted to be invalid or unenforceable through reissue
or disclaimer or otherwise.
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<PAGE> 6
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
Each party warrants and represents to the other that it has the full right
to enter into this Agreement, and that, to the best of its knowledge, there are
no agreements, commitments or obstacles, technical or legal, including patent
rights of others which could prevent it from carrying out all of its obligations
hereunder, including, in the case of P&U, its grant to LUNG RX of the license
described in Section 3.1. P&U warrants to LUNG RX that, to the best of its
knowledge, the use of the Know-How and Patent Rights by or for LUNG RX, its
Affiliates and sublicensees under the terms and conditions contemplated by this
Agreement will not infringe upon any Third Party's know-how, patent or other
intellectual property rights in the Territory or constitute misuse of
confidential information by LUNG RX, it Affiliates or sublicensees, or Third
Parties acting on their behalf. P&U further warrants that Appendix A is a
complete list as of the Effective Date of all patents and patent applications
included in the Patent Rights.
ARTICLE 3. GRANT
3.1 Grant. P&U hereby grants LUNG RX an exclusive license, with a right to
sublicense, under the Patent Rights and Know-How to make, have made, use and
sell Products in the Territory.
3.2 Covenant Not to Sue. P&U agrees that during the term of this Agreement,
it will not assert nor cause to be asserted against LUNG RX or its sublicensees
any patent not included in the Patent Rights that is or might be infringed by
reason of LUNG RX or its sublicensees' exercise of rights under the license
granted to LUNG RX hereunder.
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ARTICLE 4. SALE OF INTERMEDIATES
In conducting research on the Compound LUNG RX shall obtain certain
intermediates of the Compound and other materials related to the Compound
(collectively, the "Intermediates") from Glaxo Wellcome under terms and
conditions worked out between them.
ARTICLE 5. LICENSE FEE: MILESTONE PAYMENTS
5.1 License Fee. In partial consideration of the rights granted to LUNG
RX by P&U under Article 3 hereof, LUNG RX will pay P&U a nonrefundable license
fee of [ ] within thirty (30) days after execution of this Agreement by both
parties.
5.2 Milestone Payments.
(a) LUNG RX will pay P&U a milestone payment ("Milestone Payment")
during development of the first Orphan Indication in the amount specified below
no later than thirty (30) days after the occurrence of the corresponding event
designated below unless LUNG RX shall have given P&U notice of the termination
of this Agreement on or before expiration of such thirty (30) days:
<TABLE>
<CAPTION>
Milestone Event Milestone Payment
First Orphan Indication [ ]
- ----------------------- ---------------------
<S> <C>
The date the first NDA is filed in a Milestone
Country by LUNG RX or its sublicensees for the
first Product. [ ]
Approval of the first NDA in a Milestone Country. [ ]
One year from marketing commencement in a Milestone
Country. [ ]
Total Milestone Payments _______________
[ ]
</TABLE>
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<PAGE> 8
(b) LUNG RX will pay P&U a milestone payment ("Milestone Payment")
during development of the first Non-Orphan Indication in the amount specified
below no later than thirty (30) days after the occurrence of the corresponding
event designated below unless LUNG RX shall have given P&U notice of the
termination of this Agreement on or before expiration of such thirty (30) days:
<TABLE>
<CAPTION>
Milestone Event Milestone Payment
First Non-Orphan Indication [ ]
- --------------------------- ---------------------
<S> <C>
The date the first IND is filed in a Milestone
Country. [ ]
The conclusion of a pivotal Phase III clinical trial
in a Milestone Country. [ ]
The date the first NDA is filed in a Milestone
Country by LUNG RX or its sublicensees for the
first Product. [ ]
Approval of the first NDA in a Milestone Country. [ ]
Total Milestone Payments _______________
[ ]
</TABLE>
(c) All Milestone Payments payable pursuant to clauses (a) and (b) of
Section 5.2 shall be nonrefundable and only the Milestone Payment for a
Non-Orphan Indication due upon the first NDA approval in a Milestone Country
(i.e., the [ ] Milestone Payment) shall be fully creditable against earned
royalties payable hereunder pursuant to Article 6.
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ARTICLE 6. ROYALTIES
6.1 In consideration of the license granted to LUNG RX hereunder, LUNG RX
shall pay or cause to be paid to P&U royalty equal to (a)
(i) [ ] for Net Sales of the Product in the Territory, less than [ ],
and
(ii) [ ] of the Net Sales of a Product in a country of the Territory,
so long as the manufacture, sale or use of such Product in such country would,
but for the license granted herein, infringe a Valid Claim; or (b) [ ] of the
Net Sales of Product in a country of the Territory for sales or uses of such
Product other than those described in clause (a)(i) or (a)(ii) of this Section
6.1 for a period of ten (10) years commencing on the date of first commercial
sale of the first Product sold in a Milestone Country. Notwithstanding the
foregoing, with respect to Europe only, LUNG RX's obligation to pay royalties
payable on Net Sales of a given Product by virtue of clause (b) of Section 6.1
shall cease as of the date on which the Know-How embodied in such Product
becomes published or generally known to the public through no fault on the part
of LUNG RX or its Affiliates or sublicensees.
6.2 Accrual of Royalties. No royalty shall be payable on a Product made,
sold, or used for tests or development purposes or distributed as samples. No
royalties shall be payable on sales among LUNG RX and its sublicensees, but
royalties shall be payable on subsequent sales by LUNG RX or its sublicensees to
a Third Party. No multiple royalty shall be payable because the manufacture, use
or sale of a Product is covered by more than one Valid Claim or is subject to
both Know-How and a Valid Claim.
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<PAGE> 10
6.3 Third-Party Royalties. If LUNG RX or its sublicensees determine, at
LUNG RX's or its sublicensees' discretion, that it is necessary to pay royalties
or other fees to any Third Party in order to market or develop a Product in a
given country of the Territory, LUNG RX may deduct such royalties from royalties
thereafter due P&U with respect to Net Sales of such Product in such country,
but in no event shall the royalties due P&U on such Net Sales of such Product in
such country on account of any reduction pursuant to this Section 6.3 be thereby
reduced to less than [ ] of Net Sales of Product for which royalties are payable
pursuant to clause (a) of Section 6.1 hereof or [ ] of Net Sales of Product for
which royalties are payable pursuant to clause (b) of Section 6.1 hereof.
6.4 Compulsory Licenses. Should a compulsory license be granted to a Third
Party under the applicable laws of any country in the Territory under the Patent
Rights licensed hereunder to LUNG RX, the royalty rate payable hereunder for
sales of Products in such country shall be adjusted to match any lower royalty
rate granted to such Third Party for such country.
6.5 Commercial Hardship. If in any country of the Territory LUNG RX can
demonstrate that for any reason beyond its or its sublicensees' control the
royalty payable hereunder by LUNG RX causes or may cause LUNG RX a significant
reduction in its or their sales of Product in that country, or otherwise causes
or may cause hardship in the promotion or sale of Product in a country, the
parties shall meet and in good faith endeavor to agree on a reduction in the
royalty rate payable in that country. The negotiated royalty rate will be one
which places LUNG RX or its sublicensees in a position to market competitively
the Product in such country.
6.6 Reduction in Royalty Due to Invalid Claim. In the event that all
applicable claims of a patent included within the Patent Rights under which LUNG
RX is selling or actively
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<PAGE> 11
developing a Product shall be held invalid or not infringed by a court of
competent jurisdiction in a given country of the Territory, whether or not there
is a conflicting decision by another court of competent jurisdiction in such
country, LUNG RX may cease payment of royalties which would have otherwise been
due hereunder on Net Sales of Product covered by such claims in such country
until such judgment shall be finally reversed by an unappealed or unappealable
decree of a court of competent jurisdiction of higher dignity in such country;
provided, however, that if such judgment is finally reversed by an unappealed or
unappealable decree of a court of competent jurisdiction, the former royalty
payments shall be resumed and the royalty payments not therefore made shall
become due and payable.
6.7 Most Favored Licensee. Should LUNG RX's exclusive license hereunder
become nonexclusive in any country of the Territory due to LUNG RX's failure to
perform the obligations set forth in Article 9 or for any reason whatsoever and
should P&U thereafter grant to a Third Party a license for the Products in such
country containing more favorable terms than those granted to LUNG RX, then in
such event, P&U promptly shall notify LUNG RX and LUNG RX shall have the benefit
of such more favorable terms.
ARTICLE 7. ROYALTY REPORTS AND ACCOUNTING
7.1 Royalty Reports; Records. During the term of this Agreement, LUNG RX
shall furnish or cause to be furnished to P&U on a semiannual basis a written
report or reports covering LUNG RX's fiscal half year (currently ending on or
about the last day of February and August; each such fiscal half year being
sometimes referred to herein as a royalty period) showing (a) the Net Sales of
all Products in the Territory during the reporting period; (b) the royalties,
payable in Dollars, which shall have accrued hereunder in respect of such sales
with a
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<PAGE> 12
summary computation of such royalties; (c) withholding taxes, if any, required
by law to be deducted in respect of such sales; and (d) the exchange rates used
in determining the amount of Dollars. With respect to sales of Products invoiced
in Dollars, the Net Sales and royalty payable shall be expressed in Dollars.
With respect to sales of Products invoiced in a currency other than Dollars, the
Net Sales and royalty payable shall be expressed in the domestic currency of the
party making the sale together with the Dollar equivalent of the royalty
payable, calculated using the simple average of the exchange rates published in
the Midwest Edition of The Wall Street Journal. If any sublicensee makes any
sales invoiced in a currency other than its domestic currency, the Net Sales
shall be converted to its domestic currency in accordance with the sublicense's
normal accounting principles. LUNG RX's shall have the option of making any
royalty payment directly to P&U. LUNG RX sublicensees or its sublicensee making
any royalty payment shall furnish to the other party appropriate evidence of
payment of any tax or other amount deducted from any royalty payment. Reports
shall be due on the ninetieth (90th) day following the close of each respective
fiscal half year. In case no royalty is due for any royalty period hereunder,
LUNG RX shall so report. LUNG RX shall keep accurate records in sufficient
detail to enable the royalties payable hereunder to be determined.
7.2 Right to Audit. Upon written request of P&U, at P&U's expense and not
more than once in each fiscal year nor more than once in respect of any LUNG RX
fiscal year, LUNG RX shall permit an independent public accountant, selected by
P&U but not regularly employed by P&U and acceptable to LUNG RX, which
acceptance shall not be unreasonably refused, to have access during normal
business hours to those records of LUNG RX as may be reasonably necessary to
verify the accuracy of the royalty reports hereunder in respect of any fiscal
year ending not more than twenty-four (24) months prior to the date of such
request. LUNG RX shall
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<PAGE> 13
include in each sublicense granted by it pursuant to this Agreement a provision
requiring the sublicensee to keep and maintain records of sales made pursuant to
such sublicense and to grant access to such records by P&U's independent
accountant. Upon the expiration of twenty-four (24) months following the end of
any fiscal year, the calculation of royalties payable with respect to such year
shall be binding and conclusive upon P&U, unless (a) an audit requested by P&U
prior to expiration of such twenty-four (24) month period has not yet been
completed, or (b) P&U has notified LUNG RX that such audit has revealed a
discrepancy regarding such calculation prior to the expiration of such
twenty-four (24) month period; and LUNG RX and its sublicensees shall be
released from any liability or accountability with respect to royalties for such
fiscal year. The report prepared by such independent accountants, a copy of
which promptly shall be provided to LUNG RX, shall disclose only the amount of
any underpayment or overpayment of royalties, if any, without disclosure of or
reference to supporting documentation. If such independent public accountant's
report shows any underpayment of royalties, LUNG RX shall remit or shall cause
its sublicensees to remit to LUNG RX the amount of such underpayment within
thirty (30) days after P&U's receipt of such report. Any overpayment of
royalties shall be creditable against future royalties payable in subsequent
royalty periods. In the event this Agreement is terminated or expires before
such overpayment is fully credited, P&U shall pay LUNG RX the portion of such
overpayment not credited within thirty (30) days after termination or expiration
hereof.
7.3 Confidentiality of Records. P&U agrees that all information subject to
review under this Article 6 or under any sublicense agreement is confidential
and that P&U and its accountant shall retain all such information in confidence.
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<PAGE> 14
ARTICLE 8. ROYALTY AND OTHER PAYMENTS
Royalties shown to have accrued by each royalty report provided for under
Article 7 of this Agreement shall be due and payable on the date such royalty
report is due. Payment of royalties in whole or in part may be made in advance
of such due date.
ARTICLE 9. DEVELOPMENT AND MARKETING PROGRAM
9.1 Diligence Obligations. Subject to the provisions of Section 9.2 below
and in complete fulfillment of its development and marketing obligations
hereunder and any such obligations implied by law, LUNG RX will undertake the
activities set forth in this Article 9.
9.2 Development Program. LUNG RX shall, at its expense, use its best
efforts (a) to conduct a research and development program in the United States
relating to the use of a Product for treatment of at least one indication (the
"Development Program"); and (b) if, in LUNG RX's opinion, the results of the
Development Program so justify, to seek Registration for such Product in the
United States. For purposes of this Agreement, "best efforts" shall mean that
LUNG RX shall use reasonable efforts consistent with those used by it in its
research and development projects with its own products deemed to have
comparable commercial potential. The Development Program shall include such
product development work as LUNG RX may, in its sole discretion, consider
necessary for such Registration.
9.3 Business Judgment. LUNG RX's obligation to conduct a Development
Program specified in Section 9.2 above and its obligation to market a Product in
a country of the Territory upon obtaining Registration are expressly conditioned
on the continuing absence of any event or condition (such as, but not limited
to, a regulatory action affecting the Product or the existence of
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<PAGE> 15
an issue relating to the safety or efficacy of the Product, the introduction of
a therapy which has superior safety and/or efficacy, or the existence of any
circumstances, economic or otherwise, which make the development or marketing of
the Product, in LUNG RX's judgment, commercially unrewarding) that would suggest
to LUNG RX, in exercising prudent and reasonable business judgment, that
development or marketing of the Product should be suspended or stopped
altogether, and LUNG RX's obligation to develop or market the Product shall be
suspended so long as any such condition or event exists.
9.4 Fulfillment; Conversion. Subject to the provisions of Section 9.3
above, LUNG RX's best efforts obligation set forth in this Article 8 and implied
by law shall be deemed to have been fulfilled if LUNG RX (a) files an NDA for
registration of a Product in the United States within [ ] after the
Effective Date, and (b) commences marketing such Product in the United States
within [ ] following approval of an NDA by the FDA. The time periods specified
in clause (a) and (b) shall each be subject to up to four (4) six (6) month
extensions at LUNG RX's election, by payment to P&U of [ ] for each such
extension, in such payments to be made within the first thirty (30) days of each
such extension and to be creditable against the payment of royalties by LUNG RX
pursuant to Section 6.1 hereof. In the event LUNG RX fails to meet either
deadline specified in clause (a) or (b) above, P&U may, upon at least sixty (60)
days' prior written notice, convert the exclusive license granted to LUNG RX
hereunder to a nonexclusive license, unless within such sixty (60) day period,
LUNG RX meets such deadline. The foregoing conversion remedy shall be P&U's sole
and exclusive remedy for LUNG RX's failure to meet such deadline.
9.5 Non-United States Development. No later than receipt of approval in the
United States of an NDA for a Product or prior thereto in its discretion, LUNG
RX shall use reasonable
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<PAGE> 16
efforts (a) to obtain Registration, itself or through a sublicensee, for such
Product in such other countries of the Territory as LUNG RX deems appropriate,
and (b) upon obtaining Registration for the Product in a particular country, to
proceed in due course with the commercial introduction and marketing of such
Product in such country.
9.6 Progress Reports. So long as LUNG RX is conducting one or more
Development Programs hereunder, LUNG RX will provide annual reports to P&U
summarizing in reasonable detail LUNG RX's activities related to the development
of a Product and securing of the requisite marketing approvals during the annual
period covered by such report.
9.7 Severability of Obligations. The parties agree that LUNG RX's
obligations pursuant to this Article 9 shall be severable with regard to
obligations within the United States and to obligations in other countries in
the Territory. Any remedies available to P&U for LUNG RX's lack of diligence
with regard to its obligations within the United States shall be limited to
affecting LUNG RX's rights within the United States; any remedies available to
P&U for LUNG RX's lack of diligence with regard to obligations in countries
other than the United States shall be limited to affecting LUNG RX's rights
outside of the United States.
ARTICLE 10. PATENT RIGHTS
10.1 Patent Prosecution and Maintenance. P&U shall use its best efforts to
prosecute any patent applications within the Patent Rights, to obtain patents
thereon and to maintain such patents; provided, however, that P&U shall have the
right to discontinue the prosecution of such patent application or to abandon
any such patent. If P&U decides to abandon or allow to lapse any patent
application or patent within the Patent Rights in any country of the Territory,
P&U shall inform LUNG RX at least thirty (30) days prior to such abandonment or
lapse and LUNG
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<PAGE> 17
RX shall be given the opportunity to prosecute such patent application and/or
maintain such patent at its expense, and shall be entitled to deduct from
royalties or any other payments due P&U hereunder, LUNG RX's or its
sublicensees' out-of-pocket expenses in prosecuting or maintaining patent
protection in such country.
10.2 Status of Patent Rights. Within thirty (30) days after the Effective
Date and each anniversary thereof, P&U shall advise LUNG RX as to the current
status of any patent applications and patents included within the Patent Rights
and, to the extent it has not previously done so, shall provide LUNG RX with
relevant documentation relating to such patent applications and patents
including, but not limited to, copies thereof.
ARTICLE 11. INFRINGEMENT
11.1 Applicability. Except as otherwise provided in Article 17, the
provisions of this Article 11 shall govern the parties' rights and obligations,
as between themselves, with respect to actions against Third Parties for
infringement of patents licensed under this Agreement.
11.2 Third Party Infringement. In the event that any person other than LUNG
RX or any of its sublicensees, shall sell a Product and thereby infringe or
induce infringement of a Valid Claim with respect to a Product licensed to LUNG
RX hereunder and P&U shall fail, within sixty (60) days after P&U otherwise
learns of such infringement or after receipt of notice from LUNG RX advising P&U
of the infringement of such patent, either (a) to terminate such infringement,
or (b) to institute an action to prevent continuation thereof, and thereafter,
to prosecute such action diligently, then LUNG RX or an Affiliate or sublicensee
of LUNG RX shall have the right to do so at its own expense. P&U will cooperate
with LUNG RX or its Affiliates or sublicensees in their respective efforts,
including being joined as a party to such
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<PAGE> 18
action, if necessary. Any damages or costs recovered by P&U in connection with
any action filed by it hereunder, after first reimbursing P&U for its
out-of-pocket costs and expenses of litigation, shall be equally divided by P&U
and LUNG RX. Any damages or costs recovered in connection with any action filed
by LUNG RX, its Affiliate or sublicensees hereunder shall be retained by LUNG RX
or its Affiliates or sublicensees.
11.3 Reduction in Payments Due to Infringement. Notwithstanding the
provisions of Article 5, in the event of any such infringement by a Third Party
and notice by LUNG RX pursuant to Section 11.2, if P&U shall fail within sixty
(60) days either to terminate such infringement or to institute an action to
prevent continuation thereof and thereafter to prosecute such action diligently,
LUNG RX's royalty obligations hereunder with respect to such country or
countries shall be reduced by [ ] until the termination of such infringement in
such country or countries. If neither LUNG RX nor any LUNG RX sublicensee is
selling any Product in such country or countries, LUNG RX may deduct [ ] of the
expenses incurred in instituting and prosecuting such action from other payments
due to P&U hereunder. Upon termination of such infringement, LUNG RX's
obligations to pay royalties shall resume, but no back royalties shall be
payable.
ARTICLE 12. CONFIDENTIALITY
12.1 Treatment of Confidential Information. Except as otherwise provided in
this Article 12, during the term of this Agreement and for a period of five (5)
years thereafter,
(a) P&U will retain in confidence and use only for purposes of this
Agreement any information, data, and materials supplied by P&U or on behalf of
P&U to LUNG RX under this Agreement; and
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<PAGE> 19
(b) LUNG RX will retain in confidence and use only for purposes of this
Agreement any information, data, and materials supplied by LUNG RX or on behalf
of LUNG RX to P&U under this Agreement.
For purposes of this Article 12, all such information and data which a
party is obligated to retain in confidence shall be called "Information". All
information disclosed in written form will be marked "Confidential" or with a
similar designation.
12.2 Right to Disclose. To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement or any rights which survive termination or expiration hereof, LUNG RX
may disclose Information to its Affiliates, sublicensees, consultants, outside
contractors, clinical investigators or other Third Parties on condition that
such entities or persons agree (a) to keep the information confidential for the
same time periods and to the same extent as LUNG RX is required to keep the
Information confidential, and (b) to use the Information only for such purposes
as LUNG RX is entitled to use the Information. Each party or its Affiliates or
sublicensees may disclose such Information to government or other regulatory
authorities to the extent that such disclosure (i) is reasonably necessary to
obtain patents or authorizations to conduct clinical trials with and to market
commercially the Products provided such party is otherwise entitled to engage in
such activities under this Agreement; or (ii) is otherwise legally required.
12.3 Release From Restrictions. The foregoing obligations in respect of
disclosure and use of Information shall not apply to any part of such
Information that (a) is or becomes patented, published or otherwise part of the
public domain other than by acts of the party obligated not to disclose such
Information (for purposes of this Article 12, the "receiving party") or its
Affiliates or sublicensees in contravention of this Agreement; or (b) is
disclosed to the receiving party or its
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<PAGE> 20
Affiliates or sublicensees by a Third Party, provided such Information was not
obtained by such Third Party directly or indirectly from the other party under
this Agreement; or (c) prior to disclosure under this Agreement, was already in
the possession of the receiving party or its Affiliates or sublicensees,
provided such Information was not obtained, directly or indirectly, from the
other party under this Agreement; or (d) results from research and development
by the receiving party or its Affiliates or sublicensees independent of
disclosures from the other party under this Agreement.
12.4 Confidentiality of Agreement. Except as otherwise required by law or
the terms of this Agreement or mutually agreed upon by the parties hereto, each
party shall treat as confidential the terms, conditions and existence of this
Agreement, except that LUNG RX may disclose such terms and conditions and the
existence of this Agreement to its Affiliates and sublicensees.
ARTICLE 13. TERM; TERMINATION
13.1 Term; Termination. Unless terminated sooner pursuant to Sections 13.2
or 13.3 below, this Agreement shall become effective as of the Effective Date
and shall continue in full force and effect until the expiration of LUNG RX's
obligation to pay royalties hereunder. Upon expiration or termination of this
Agreement, the rights and obligations of the parties shall cease, except as
follows:
(a) Upon expiration or termination for any reason, the obligations of
confidentiality and use of Information under Article 12 shall survive for the
period provided therein;
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(b) Upon expiration or termination for any reason, the right of LUNG RX
to continue to use the Know-How (subject to the fulfillment, in the case of
termination, of all of its royalty and other related obligations hereunder) to
which it is licensed under this Agreement shall survive.
(c) Upon termination by LUNG RX pursuant to Section 13.3, all license
rights of LUNG RX pursuant to Section 13.3, all license rights of LUNG RX shall
survive, subject to the fulfillment of all of its royalty obligations hereunder,
if any; and
(d) Expiration or termination of this Agreement shall not relieve the
parties of any obligation accruing prior to such termination.
13.2 LUNG RX's Right to Terminate. LUNG RX may terminate this Agreement at
any time upon at least sixty (60) days' prior written notice to P&U. Such
termination may be made with respect to one or more countries of the Territory
without affecting the rest of this Agreement or the licenses granted hereunder
in any other country of the Territory.
13.3 Bankruptcy; Uncured Breach. Either party may terminate this Agreement
upon the occurrence of any of the following:
(a) Upon or after the bankruptcy, insolvency, dissolution or wind up of
the other party (other than dissolution or winding up for the purposes of
reconstruction or amalgamation); or
(b) Upon or after the breach of any material provision of this
Agreement by the other party if the breach is not cured within ninety (90) days
after written notice thereof to the party in default.
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ARTICLE 14. TRANSFER OF KNOW-HOW
Within sixty (60) days following the Effective Date and as far as it has
not already done so, P&U will supply LUNG RX with all available Know-How it
possesses. In addition, P&U agrees to provide such technical assistance as LUNG
RX may reasonably request to enable it to utilize the Know-How; provided,
however, that it is understood that LUNG RX will obtain the majority of the
Know-How from Glaxo Wellcome which Glaxo Wellcome obtained or generated under
the 1993 Development Agreement. P&U will also grant LUNG RX a right of reference
under its Drug Master File No. 6804 at the U.S. FDA for Compound.
ARTICLE 15. ASSIGNMENT
This Agreement may not be assigned or otherwise transferred by LUNG RX
without the written consent of P&U; provided, however, that LUNG RX may, without
such consent, assign this Agreement in connection with the transfer or sale of
all or substantially all of its business to which this Agreement pertains or in
the event of its merger or consolidation with another company. Any purported
assignment in violation of the preceding sentence shall be void. Any permitted
assignee shall assume all obligations of its assignor under this Agreement. No
assignment shall relieve either party of responsibility for the performance of
any accrued obligation which such party then has hereunder.
ARTICLE 16. NOTIFICATION AND AUTHORIZATION UNDER DRUG
COMPETTION AND PATENT TERM RESTORATION ACT
16.1 Notices Relating to the Act. P&U shall notify LUNG RX of (a) the
issuance of each U.S. patent included within the Patent Rights, giving the date
of issue and patent number for
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each such patent, and (b) each notice pertaining to any patent included within
the Patent Rights which P&U receives as patent owner pursuant to the Drug Price
Competition and Patent Term Restoration Act of 1984 (hereinafter called the
"Act"), including, but not necessarily limited to, notices pursuant to ss.ss.
101 and 103 of the Act from persons who have filed an abbreviated NDA ("ANDA")
or a "paper" NDA. Such notices shall be given promptly, but in any event within
ten (10) days of each such patent's date of issue or receipt of each such notice
pursuant to the Act, whichever is applicable.
16.2 Authorizations Relating to Patent Term Extension. P&U hereby
authorized LUNG RX (a) to include in any NDA for a Product, as LUNG RX may deem
appropriate under the Act, a list of patents included within the Patent Rights
that relate to such Product and such other information as LUNG RX in its
reasonable discretion believe is appropriate to be filed pursuant to the Act;
(b) notwithstanding the provisions of Article 10, to commence suit for any
infringement of the Patent Rights under ss. 271(e)(2) of Title 35 of the United
States Code occasioned by the submission by a Third Party of an Abbreviated New
Drug Application ("ANDA") or a paper NDA for a Product pursuant to ss.ss. 101 or
103 of the Act; and (c) in consultation with P&U, to exercise any rights that
may be exercisable by P&U as patent owner under the Act to apply for an
extension of the term of any patent included within the Patent Rights, as LUNG
RX in its discretion deems appropriate. In the event that applicable law in any
other country of or community or associations of countries in the Territory
hereafter provides for the extension of the term of any patent included in the
Patent Rights in such country; upon request by LUNG RX, P&U shall obtain such
extension or, in lieu thereof, authorize LUNG RX, or if requested by LUNG RX,
its sublicensees to apply for such extension, in consultation with P&U. P&U
agrees to cooperate with LUNG RX or its sublicensees, as applicable, in the
exercise
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of the authorization granted herein or which may be granted pursuant to this
Section 16.2 and will execute such documents and take such additional action as
LUNG RX may reasonably request in connection therewith, including, if necessary,
permitting itself to be joined as a proper party in any suit for infringement
brought by LUNG RX under clause (b) above. Counsel shall be selected by LUNG RX.
In the event, LUNG RX decides not to commence suit for infringement under clause
(b) above, LUNG RX will notify P&U of its decision within thirty (30) days so
that P&U may institute such litigation itself, if it wishes, at its own cost and
expense.
ARTICLE 17. REGISTRATION OF LICENSE
LUNG RX may, at its expense, register the license granted under this
Agreement in any country of, or community or association of countries in, the
Territory where the use, sale or manufacture of a Product in such country would
be covered by a Valid Claim. Upon request by LUNG RX, P&U agrees promptly to
execute any "short form" licenses in a form submitted to it by LUNG RX from time
to time in order to effect the foregoing registration in such country.
ARTICLE 18. FORCE MAJEURE
Neither party shall be held liable or responsible to the other party nor be
deemed to have defaulted under or breached this Agreement for failure or delay
in fulfilling or performing any term of this Agreement when such failure or
delay is caused by or results from fire, floods, embargoes, government
regulations, prohibitions or interventions, war, acts of war (whether war be
declared or not), insurrections, riots, civil commotions, strikes, lockouts,
acts of God or any other cause beyond the reasonable control of the affected
party.
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ARTICLE 19. SEVERABILITY
Both parties hereby expressly agree and contract that it is the intention
of neither party to violate any public policy, statutory or common laws, rules,
regulations, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries, that if any
word, sentence, paragraph, clause or combination thereof in this Agreement is
found by a court or executive body with judicial powers having jurisdiction over
this Agreement or any of the parties hereto in a final unappealed order, to be
in violation of any such provisions in any country or community or association
of countries, such words, sentences, paragraphs, clauses or combination shall be
inoperative in such country or community or association of countries and the
remainder of this Agreement shall remain binding upon the parties hereto.
ARTICLE 20. NOTICES
Any notice required or permitted to be given hereunder shall be in writing
and shall be deemed to have been properly given if delivered in person, or if
mailed by registered or certified mail (return receipt requested), postage
prepaid, or by telex or facsimile (and promptly confirmed by such registered or
certified mail), to the addresses given below or such other addresses as may be
designated in writing by the parties from time to time during the term of this
Agreement. Any notice sent by registered or certified mail as aforesaid shall be
deemed to have been given when mailed.
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In the case of P&U:
Pharmacia & P&U Company
7000 Portage Road
Kalamazoo, Michigan 49001
Attention: Business Development
Facsimile No.: (616) 833-4775
In the case of LUNG RX:
Lung RX
100 Europa Drive
Suite 599
Chapel Hill, North Carolina 27514
Attention: Mr. James W. Crow, C.E.O.
Facsimile No.: (919) 942-3421
ARTICLE 21. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Michigan, exclusive of its choice-of-law rules.
ARTICLE 22. ENTIRE AGREEMENT; MODIFICATION
This Agreement contains the entire understanding of the parties with
respect to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly merged in
and made a part of this Agreement. The parties hereto may alter any of the
provisions of this Agreement, but only by a written instrument duly executed by
both parties hereto.
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ARTICLE 23. WAIVER
The failure of a party to enforce at any time for any period any of the
provisions hereof shall not be construed as a waiver of such provisions or of
the rights of such party thereafter to enforce each such provisions.
ARTICLE 24. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same document.
ARTICLE 25. CAPTIONS
The captions to the several Articles and Sections hereof are not a part of
this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles and Sections hereof.
IN WITNESS HEREOF, the parties have executed this Agreement as of the
Effective Date.
PHARMACIA & UPJON COMPANY LUNG RX, INC.
/s/ Douglas R. Morton /s/ James W. Crow
- ------------------------------ ------------------------------
Douglas R. Morton James W. Crow
11/25/96 3 December `96
- ------------------------------ ------------------------------
Vice President, Research President and C.E.O.
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CONFIDENTIAL TREATMENT REQUESTED
FOR PORTIONS OF THIS DOCUMENT
EXHIBIT 10.9
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is effective as of the 31st day of January, 1997,
by and among The Wellcome Foundation Ltd. Of Glaxo Wellcome House, Berkeley
Avenue, Greenford, Middlesex, UB6 ONN ("WFL"), and Glaxo Wellcome Inc., having
an address at Five Moore Drive, Research Triangle Park, North Carolina 27709
("GWUSA" and together with WFL, "GW') and Lung Rx, Inc., having an address at
100 Europa Drive, Suite 599, Chapel Hill, North Carolina 27154 ("Lung Rx").
WHEREAS, GW owns all right, title and interest in certain patent rights and
has the right to use certain know-how relating to the Compound (as herein
defined) in the Territory (as herein defined);
WHEREAS, Lung Rx desires to obtain an assignment of such patent rights and
know-how in order to make, have made, use and sell products containing the
Compound; and
WHEREAS, GW is willing to make such an assignment to Lung Rx;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants set forth herein, the parties hereto mutually agree as follows:
ARTICLE 1 - DEFINITIONS
As used in this Agreement, the following terms, whether used in the
singular or the plural, shall have the following meanings:
1.1 "Affiliate" means any corporation or non-corporate entity which
controls, is controlled by, or is under common control with a party to this
Agreement. A corporation or non-corporate entity shall be regarded as in control
of another corporation if it owns or directly or indirectly controls at least
forty percent (40%) of the voting stock of the other corporation, or (i) in the
absence of the ownership of at least forty percent (40%) of the voting stock of
a corporation or (ii) in the case of a non-corporate entity, if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation or non-corporate entity, as
applicable.
1.2 "Agreement" means this Assignment Agreement.
1.3 "Compound" means (a) 9-deoxy-13, 14-dihydra-2', 9a-methano-3-oxa-
4,5,6.4 trinor-3, 7-(1',3'-interphenylene)-PGF, referred to by the parties as
15AU81, and (b) the pharmaceutically acceptable salts and esters thereof.
1.4 "Dollars" or "S" means United States dollars.
1.5 "Effective Date" means the date appearing at the beginning of this
Agreement.
<PAGE> 2
1.6 "FDA" means the United States Food and Drug Administration or any
successor entity.
1.7 "IND" means an Investigational New Drug application or any equivalent
successor application.
1.8 "Know-How" means all technical information and data, whether or not
patentable, which is owned by GW or which GW has the right to use and assign as
of the Effective Date and which relates solely to the Compound, the IND filed
with respect thereto, and its use as described in the claims of the patents and
patent applications listed in Appendix I attached hereto and made a part hereof
or any other patents or patent applications comprising the Patent Rights, it
being understood that a substantial portion of the foregoing has been disclosed,
by GW to Lung Rx prior to the Effective Date. Know-How shall include, without
limitation, the information and data described in Appendix II attached hereto
and made a part hereof.
1.9 "NDA" means a New Drug Application or any equivalent successor
application.
1.10 "Net Sales," with respect to any Product containing the Compound as
the sole active ingredient, means the gross sales (i.e., gross invoice prices)
of such Product billed by Lung Rx and its licensees to Third Party customers,
less: (i) actual credited allowances to such Third Party customers for spoiled,
damaged, outdated and returned Product and for retroactive price reductions in
lieu of returned Product; (ii) customary trade and cash discounts, to the extent
such trade and cash discounts are not deducted by Lung Rx or its licensees at
the time of invoice in order to arrive at the gross invoice prices; (iii) all
transportation and handling charges, sates taxes, excise taxes, use taxes or
import/export duties actually paid; and (iv) all other invoiced allowances and
adjustments actually credited to customers including, but not limited to,
rebates paid to Third Party payors, whether during the specific royalty period
or not.
1.11 "Net Sales," with respect to any Product containing one or more active
ingredients in addition to the Compound, means the gross sales of such Product
billed by Lung Rx and its licensees to Third Party customers, less all the
allowances, adjustments, reductions, discounts, taxes, duties and other charges
referred to in Section 1.10, multiplied by a fraction, the numerator of which
shall be the manufacturing cost or acquisition cost, as applicable, of the
Compound included in such Product and the denominator of which shall be the
manufacturing cost or acquisition cost, as applicable, of all active ingredients
in such Product, including the Compound. In no event, however, shall the
foregoing fraction be less than one-half (1/2)
1.12 "Patent Rights" means all domestic and foreign patents and patent
applications listed in Appendix I attached hereto and made a part hereof, and
any extensions, continuations, continuations-in-part, divisions, substitutions,
foreign equivalents, renewals or reissues thereof.
1.13 "Product" means any pharmaceutical product containing the Compound as
an active ingredient.
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1.14 "Registration" means, in relation to any Product, such approvals by
government authorities as may be legally required before such Product may be
commercialized in the Territory.
1.15 "Territory" means the entire world.
1.16 "Third Party" means any party other than Lung Rx, GW, their respective
Affiliates and Lung Rx' licensees.
1.17 "Valid Claim" means a claim of an issued and unexpired patent included
within the Patent Rights which has not been held unenforceable, unpatentable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal, and
which has not been admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise.
ARTICLE 2 - WARRANTIES
2.1 Warranties by GW - GW represents and warrants to Lung Rx that:
(i) GW is the sole owner of the Patent Rights and has the right and
authority to use the Know-How and to assign the Patent Rights and the Know-How;
and
(ii) As of the Effective Date, GW is not aware of any action or claim
of infringement brought by a Third Party under any Third Party patent, trade
secret or other Third Party proprietary right in respect of GW's exploitation of
the Patent Rights or use of the Know-How.
2.2 Warranties of Each Party - Each party hereto represents and warrants to
the other that:
(i) it is free to enter into this Agreement and to carry out its
obligations hereunder, including, in the case of GW, the right to make the
assignment made by it pursuant to Article 3 hereof
(ii) this Agreement constitutes its legal, valid and binding
obligation; and
(iii) execution, delivery and performance of this Agreement will not
constitute a violation or breach of any agreement or contract to which it is a
party or by which it is bound or the terms of any judicial or administrative
decree or order to which it is subject.
2.3 Disclaimers by GW - Other than the warranties set forth in Sections 2.1
and 2.2, GW makes no representation and extends no warranties whatsoever, either
express or implied: (i) that the Patent Rights and Know-How may be utilized to
create any Product; or (ii) that a Product manufactured, used, sold or otherwise
marketed under the Patent Rights and Know-How, or a method provided or practiced
in accordance with the Patent Rights and Know-How, shall be free from
infringement of any United States or other patent, whether presently issued or
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<PAGE> 4
which may issue in the future. GW makes no representations and extends no
warranties, either express or implied, that any Know-How comprises inventions
which will mature into issued United States or foreign patents having valid and
enforceable claims. Lung Rx acknowledges that GW has not designed any Product
and that, as between Lung Rx and GW, Lung Rx shall bear all responsibility for
the design, development, manufacture and marketing of Products. Lung Rx further
acknowledges that GW has made no warranties or representations to Lung Rx
regarding the usefulness or confidential nature of the Know-How.
ARTICLE 3 - ASSIGNMENT; LICENSES
3.1 Lung Rx Assignment - In consideration of One Dollar ($1.00), the
receipt of which is hereby acknowledged, and subject to Sections 3.3 and 3.4
hereof, GW hereby assigns to Lung Rx all right, title and interest in and to the
Patent Rights and the Know-How. GW will, where appropriate, execute all
necessary documents to effect such assignment and to perfect relevant patent
rights upon the reasonable written request of Lung Rx.
3.2 Lung Rx License - GW hereby grants Lung Rx a non-exclusive,
royalty-free license in the Territory to any GW patents not included in the
Patent Rights, the infringement of which is necessary to carry out the making,
using, selling or importation of Product, the sale of which Product is subject
to the payment of royalties under Section 4.1 hereof.
3.3 Limitation on Assignment - Except as provided in Section 3.2, the
assignment made pursuant to Section 3.1 shall not include rights under any
patents, patent applications, know-how or other intellectual property of GW or
its Affiliates other than the Patent Rights and Know-How.
3.4 Reservation of Rights - GW hereby reserves the perpetual, royalty-free
right to practice the Patent Rights and to use the Know-How for research and
development purposes only.
ARTICLE 4 - ROYALTIES
4.1 Earned Royalties
(i) Subject to the terms hereof, Lung Rx shall pay GW, an Net Sales of
Products in the Territory in excess of [ ] per annum (the "Threshold Amount"), a
royalty often [ ] on Net Sales by Lung Rx, its Affiliates and Third Party
licensees in the Territory. Royalties shall be paid in respect of Net Sales in
the Territory in excess of the Threshold Amount for a period of ten years from
the date of first commercial sale of Product in the Territory. Thereafter
royalties shall be paid in respect of a given Product only so long as the
manufacture, sale or use of such Product in the Territory would, but for the
assignment made herein, infringe a Valid Claim or any period of orphan drug or
other exclusivity granted by the FDA or other government agency with respect to
any Product ("Exclusivity Period"). Notwithstanding the foregoing, in the event
the Patent Rights and any Exclusivity Periods expire prior to the end of
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such ten (10) year period, the royalty rate set forth above shall be reduced to
[ ] or the remainder of such ten (10) year period.
(ii) If Lung Rx grants any licenses hereunder, then in addition to the
royalties payable pursuant to Subsection 4.1(i), Lung Rx shall pay GW [ ] of all
consideration payable by each licensee, within thirty (30) days after receipt by
Lung Rx of payment from such licensee.
4.2 Accrual of Royalties - No royalty shall be payable on a Product made,
sold, or used for tests or development purposes or distributed as samples,
provided such samples are not furnished in consideration of monies paid to Lung
Rx. No royalties shall be payable on sales among Lung Rx and its licensees, but
royalties shall be payable on the initial subsequent sale by Lung Rx or its
licensees to a Third Party. No multiple royalty shall be payable because the
manufacture, use or sale of a Product is covered by more than one Valid Claim or
is subject to both Know-How and a Valid Claim.
4.3 Third Party Royalties - If Lung Rx or its licensees determine, after
discussion with GW, that it or they are required to pay royalties to any Third
Party because the manufacture, use or sale of the Compound infringes any patent
or other intellectual property rights of such Third Party in the Territory, Lung
Rx or its licensees may deduct from royalties thereafter due to GW with respect
to Net Sales of the Product containing such Compound up to [ ] of the royalties
or such other fees paid to such Third Party, subject to the limitation in the
immediately following sentence. In no event shall the royalties due to GW on
such Net Sales of such Product on account of any reduction pursuant to this
Section 4.3 be thereby reduced by more than [ ] of the royalties which otherwise
would have been due hereunder on such Net Sales of such Product in the
Territory.
4.4 Limitation on Royalty Reductions - After Net Sales exceed the Threshold
Amount, in no event shall any reductions in royalties afforded by any provision
of this Agreement, when taken alone or in combination, result in GW's receiving
less than [ ] of Net Sales in any calendar year.
ARTICLE 5 - ROYALTY REPORTS AND ACCOUNTING
5.1 Royalty Reports: Records - Lung Rx shall notify GW promptly when Lung
Rx or its licensees commence selling any Products in the Territory. Within sixty
(60) days after the end of the calendar quarter in which Lung Rx or its
licensees commence selling any Product and within sixty (60) days after the end
of each calendar quarter thereafter, Lung Rx shall furnish to GW a written
report or reports covering each calendar quarter (a "royalty period") showing
(i) the Net Sales of all Products in the Territory during the royalty period;
(ii) the royalties, payable in Dollars, which shall have accrued hereunder in
respect of such sales; (iii) withholding taxes, if any required by law to be
deducted in respect of such sales; and (iv) the exchange rates, if any, used in
determining the amount of Dollars. With respect to sales of Products invoiced in
Dollars, the Net Sales and royalties payable shall be expressed in Dollars With
respect to sales of Products invoiced in a currency other than Dollars, the Net
Sales and royalties payable shall be
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expressed in the domestic currency of the party making the sale together with
the Dollar equivalent of the royalty payable, calculated using the simple
average of the exchange rates published in the New York Times on the last day of
each month during the royalty period. If any licensee makes any sales invoiced
in a currency other than Dollars, the Net Sales shall be converted to Dollars in
accordance with the licensee's normal accounting principles. Lung Rx shall
furnish to GW appropriate evidence of payment of any tax or other amount
required by applicable laws or regulations to be deducted from any royalty
payment. Lung Rx shall keep accurate records in sufficient detail to enable the
royalties payable hereunder to be determined. Lung Rx shall be responsible for
all royalties and late payments that are due to GW but have not been paid by
Lung Rx' licensees.
5.2 Right to Audit - Upon the written request of GW, at least ten (10)
business days in advance, at GW's expense and not more than once in each
calendar year, Lung Rx shall permit an independent public accountant, selected
by GW, and acceptable to Lung Rx, which acceptance shall not be unreasonably
refused, to have access during normal business hours to those records of Lung Rx
as may be reasonably necessary to verify the accuracy of the royalty reports
furnished by Lung Rx to GW pursuant to Section 5.1 of this Agreement in respect
of any calendar year ending not more than thirty-six (36) months prior to the
date of such request. Lung Rx shall include in each license granted by it
pursuant to this Agreement a provision requiring the licensee to keep and
maintain records of sales made pursuant to such license and to grant access to
such records by GW's independent public accountant. If such independent public
accountant's report shows any underpayment of royalties, within thirty (30) days
after Lung Rx' receipt of such report, Lung Rx shall remit to GW (i) the amount
of such underpayment and (ii) if such underpayment exceeds five percent (5%) of
the total royalties owed to GW for the calendar year then being audited, the
reasonable and necessary fees and expenses of such independent public
accountant performing the audit, subject to reasonable substantiation thereof.
Any overpayment of royalties shall be fully creditable against future royalties
payable to GW in subsequent royalty periods.
5.3 Confidentiality of Records - GW agrees that all information subject to
review under this Article 5 or under any license agreement granted pursuant to
this Agreement is confidential and that it and its accountant shall retain all
such information in confidence.
ARTICLE 6 - ROYALTY AND OTHER PAYMENTS
6.1 Payment Due Dates - Royalties shown to have accrued in each royalty
report provided for under Article 5 of this Agreement shall be due and payable
on the date such royalty report is due. Payment of royalties in whole or in part
may be made in advance of such due date.
6.2 Interest - Royalties and other payments required to be paid by Lung Rx
pursuant to this Agreement shall, if overdue, bear interest at a per annum rate
of twelve percent (12%) or the maximum rate allowed by raw, whichever is less,
until paid. The payment of such interest shall not preclude GW from exercising
any other rights it may have because any payment is overdue.
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ARTICLE 7 - DEVELOPMENT AND COMMERCIALIZATION PROGRAM
7.1 GW Right of First Refusal - Notwithstanding anything in this Agreement
to the contrary, in the event that Lung Rx shall decide to license any aspect of
the commercialization of any Product anywhere in the Territory, or be solicited
by a Third Party to grant such a license, Lung Rx shall give GW an exclusive
option and right of first refusal to negotiate a license agreement covering such
matters with Lung Rx. GW shall have sixty (60) days from receipt of written
notice from Lung Rx of its intent to enter into a license agreement, which such
notice shall describe in reasonable detail the material terms of any proposed
license to a Third Party, to deliver its decision as to whether it shall
exercise such option and right. Upon Lung Rx' receipt of written notice from GW
of its desire to enter into negotiations, the parties shall have one hundred
twenty (120) days, or such longer period as the parties shall mutually agree
(the "Negotiation Period"), to negotiate in good faith and enter into a
definitive license agreement. The terms of such agreement shall be commercially
reasonable under the circumstances; then in existence. In the event that GW
shall decline to exercise its option or right hereunder or the: parties fail in
good faith enter into a license agreement prior to the expiration of the
Negotiation Period. Lung Rx shall be free to enter into a license agreement
covering the same matters with a Third Party, provided, however that the
material terms of any such agreement shall no more favorable than the terms
offered to GW.
7.2 Progress Reports - Until commercial introduction of the first Product.
Lung Rx shall provide a semiannual report to GWUSA summarizing Lung Rx'
activities related to the development of the Products and securing of the
requisite registrations during .the semiannual period covered by such report.
ARTICLE 8 - PATENT RIGHTS
8.1 Patent Prosecution Costs - GW shall have no responsibility to maintain
or take any other action concerning the Patent Rights. Lung Rx expressly
acknowledges and agrees that it shall be solely responsible for such activities.
8.2 Patent Prosecution Costs - Lung Rx shall reimburse GW for the
reasonable out-of-pocket expenses incurred by GW to prosecute or maintain any of
the Patent Rights during the period this Agreement was under negotiation by the
parties.
ARTICLE 9 - INDEMNIFICATION: INSURANCE
9.1 Indemnification by Lung Rx - Subject to GW's compliance with its
obligations set forth in Section 9.3 below, Lung Rx agrees to indemnify and hold
GW, its Affiliates, and its and their directors, officers, employees and agents
harmless from and against any liabilities or damages or expenses in connection
therewith (including reasonable attorneys' fees and costs and other expenses of
litigation) resulting from (i) claims arising out of Lung Rx1 or its licensees'
testing, use manufacture or sale of the Products; (ii) the breach by Lung Rx of
any of its warranties. representations or covenants contained in this Agreement;
or (iii) the successful enforcement (i.e., a judgment issued by a court of
competent jurisdiction against Lung Rx,
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unappealable or unappealed by Lung Rx within the time allowed therefor) by GW of
its indemnification rights set forth in clauses (i) and (ii) of this Section
9.1.
9.2 Indemnification by GW - Subject to Lung Rx' compliance with its
obligations set forth in Section 9.3 below, GW agrees to indemnify and hold Lung
Rx, its Affiliates and its and their directors, officers, employees and agents
harmless from and against any liability, or damages or expenses in connection
therewith (including reasonable attorneys' foes and costs and other expenses of
litigation) resulting from (i) the breach by GW of any of its representations,
warranties or covenants contained in this Agreement; or (ii.) the successful
enforcement (i.e., a judgment issued by a court of competent jurisdiction
against GW, unappealable or unappealed by GW within the time allowed therefor)
by Lung Rx of its indemnification rights set forth in clause (i) of this Section
9.2.
9.3 Indemnification Procedures - A party (the "indemnitee") which intends
to claim indemnification under this Article 9 shall promptly notify the other
party (the "indemnitor) in writing of any action, claim or liability in respect
of which the indemnitee or any of its Affiliates, directors, officers, employees
or agents intend to claim such indemnification. The indemnitee shall permit, and
shall cause its Affiliates, directors, officers, employees and agents to permit,
the indemnitor, at its discretion, to settle any such action; claim or liability
and. agrees to the complete control of such defense or settlement by the
indemnitor provided, however, that such settlement does not adversely affect the
indemnitee's rights hereunder or impose any obligations on the indemnitee in
addition to those set forth herein in order for it to exercise such rights. No
such action, claim or liability shall be settled without the prior written
consent of the indemnitor and the indemnitor shall not be responsible for any
legal fees or other costs incurred other than as provided herein. The indemnitee
and its Affiliates, directors, officers, employees and agents shall cooperate
fully with the indemnitor and its legal representatives in the investigation and
defense of any action, claim or liability covered by this indemnification. The
indemnitee shall have the right, but not the obligation, to be represented by
counsel of its own selection and expense.
9.4 Insurance
(i) Lung Rx shall take out and maintain, at its own expense, during the
term of this Agreement, and for a minimum of two (2) years following the
expiration, termination or cancellation of this Agreement, product liability
coverage from an insurance company or companies reasonably satisfactory to GW.
During the clinical development of Products, such coverage shall be at least
$2,000,000 per occurrence. Promptly upon commercial introduction of the initial
Product, the parties shall negotiate in good faith an increase in such coverage.
The insurance policy relating to such coverage shall name GW as additional
insured by way of endorsement or otherwise as its interests may appear.
(ii) Within thirty (30) days after the Effective Date, Lung Rx shall
cause to be delivered to GW an insurance certificate evidencing the insurance
coverage required by Subsection 9.4(i). Such insurance certificate shall name GW
as additional insured as its interests
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may appear and shall include a certification that such insurance coverage
includes contractual coverage for Lung Rx' liability under this Agreement.
ARTICLE 10 - CONFIDENTIALITY
10.1 Treatment of Confidential Information - Except as otherwise provided
in Article 10, during the term of this Agreement and for a period of five (5)
years thereafter:
(i) Lung Rx will retain in confidence and use only for purposes of
this Agreement any information and data supplied GW to Lung Rx
under this Agreement; and
(ii) GW wiIl retain in confidence and use only for purposes Agreement
:any information and data supplied by or on for purposes of this
by or on behalf of Lung Rx to GW under this Agreement.
For purposes of this Agreement, all such information and data which a party
is obligated to retain in confidence shall be called "information."
10.2 Right to Disclose - To the extent it is seasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement or any rights which survive termination or expiration hereof, a party
may disclose Information to its Affiliates, licensees, consultants, outside
contractors and clinical investigators on condition that such entities or
persons agree (I) to keep the Information confidential for at least the same
time periods and to the same extent as each party is required to keep the
Information confidential and (ii) to use the Information only for such purposes
as such party is entitled to use the Information. Each party or its Affiliates
or, if applicable, the licensees may disclose such Information to government or
other regulatory authorities to the extent that such disclosure 9a) is
reasonably necessary to obtain patents or authorizations, to conduct clinical
trials and to market commercially the Product, provided such party is otherwise
entitled to engage in such activities under this Agreement or (b) is otherwise
required by applicable laws or regulations.
10.3 Release From Restrictions - The obligation not to disclose Information
shall not apply to any part of such Information that (i) is or becomes patented,
published or otherwise part of the public domain other than by acts of the party
obligated not to disclose such Information (for purposes of this Article 10, the
"receiving party") or its Affiliates or licensees in contravention of this
Agreement; or (ii) is disclosed to the receiving party or its Affiliates or
licensees by a Third Party, provided such Information was not obtained by such
Third Party directly or indirectly from the other party under this Agreement; or
(iii) prior to disclosure under this Agreement, was already in the possession of
the receiving party or its Affiliates or licensees, provided such Information
was not obtained, directly or indirectly, from the other party under this
Agreement; or (iv) results from research and development by the receiving party
or its Affiliates or licensees independent of disclosures from the other party
under this Agreement.
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<PAGE> 10
10.4 Confidentiality of Agreement - Except as otherwise required by
applicable jaw-or regulation or permitted by the terms of this Agreement or
otherwise mutually agreed upon by the-parties hereto, each party shall treat as
confidential the terms, conditions and existence of this Agreement.
Notwithstanding the foregoing, a party may disclose such terms, conditions and
existence to an Affiliate or, in the case of Lung Rx, a licensee, which agrees
to be bound by the terms of this Section 10.4 to the same extent as such party.
Notwithstanding the foregoing, Lung Rx may disclose the terms of this Agreement
for the purpose of obtaining debt and/or equity financing.
10.5 Publications.- Except for such disclosure as is deemed necessary, in
the reasonable judgment of the responsible party, to comply with applicable law
or regulation, no announcement, news release, public statement, publication or
other public presentation relating to the existence of this Agreement, the
subject matter herein, or either party's performance hereunder (collectively, a
"Publication") will be made without the other party's prior approval. Each party
agrees to submit each Publication it proposes to make to the other party for
purposes of such other party's review and comment or, if required pursuant to
this Subsection 10.5, approval. Each party further agrees to respond as promptly
as reasonably practicable but, in any event, within ten (10) days following
receipt from the other party of such proposed Publication, and likewise agrees
that it will not unreasonably withhold approval of such Publication. Lung Rx
will develop, subject to the reasonable prior approval of GW, publication and
communication literature which credits GW as the pharmaceutical company
currently marketing FLOLAN(R) and dedicated to the discovery, development and
marketing of additional lifesaving medicines for the treatment of PPH patients.
ARTICLE 11 - TERM; TERMINATION
This Agreement shall become effective as of the-Effective Date and shall
continue in-full force and-effect until the expiration of Lung Rx' obligation to
pay royalties hereunder. Upon expiration or-termination of this Agreement with
respect to all countries within the Territory, the rights and obligations of the
parties shall cease, except as follows:
(i) the rights and obligations of the parties under Article 9 shall
survive termination or expiration;
(ii) upon expiration or termination for any reason, the obligations of
confidentiality and use of Information under Article 10 shall
survive for the period-provided therein; and
(iii) expiration or termination of this Agreement shah not relieve the
other obligation accruing prior to such termination.
ARTICLE 12 - DELIVERY OF KNOW-HOW
To the extent it has not previously done so, within ninety (90) days
following the Effective Date, GW shall supply Lung Rx with all the Know-How. GW
shall, upon request by
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Lung Rx which must be given, if at, all within sixty (60) days after delivery of
one (1) day of consultation regarding the use or application of the Know-How at
GW's Research Triangle Park, North Carolina facilities. GW shall not be
obligated to provide any consultation other than as set forth in this Article
12. GW shall have no responsibility for the accuracy or use by any person of any
portion of the Know-How.
ARTICLE 13 - ASSIGNMENT
This Agreement may not be assigned or otherwise transferred by Lung Rx
without the written consent of GW; provided, however, that Lung Rx may, without
such consent, assign this Agreement in connection with the transfer or sale of
all or substantially all of its business or in the event of its merger or
consolidation with another company. Any purported assignment in violation of the
preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. No assignment shall relieve
Lung Rx of responsibility for the performance of any accrued obligation which
Lung Rx then has hereunder.
ARTICLE 14 - FORCE MAJEURE
A party shall not be held liable or responsible to another party nor be
deemed to have defaulted under or breached this Agreement for failure or delay
in fulfilling or performing nay term of this Agreement, other than an obligation
to make a payment, when such failure or delay is caused by or results from
fires, floods, embargoes, government regulations, prohibitions or interventions,
wars, acts of war (whether war be declared or not), insurrections, riots, civil
commotions, strikes, lockouts, acts of God, or any other cause beyond the
reasonable control of the affected party.
ARTICLE 15 - SEVERABILITY
Each party hereby expressly agrees and contracts that it is not the
intention of any party to violate any public policy, statutory or common laws,
rules, regulations, treaty or decision of any government agency or executive
body thereof of any country or community or association of countries; that if
any word, sentence, paragraph, clause or combination thereof in this Agreement
is found by a court or executive body with judicial powers having jurisdiction
over this Agreement or any of the parties hereto in a final unappealed order, to
be in violation of any such provisions in any country or community association
of countries, such words, sentences, paragraphs, clauses or combination shall be
inoperative in such country or community or association of countries and the
remainder of this Agreement shall remain binding upon the parties hereto.
ARTICLE 16 - NOTICES
Any notice required or permitted to be given hereunder shall be in writing
and shall be deemed to have been properly given if delivered in person, or if
mailed by registered or certified mail (return receipt requested), postage
prepaid, or by facsimile (and promptly confirmed by such
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registered or certified mail), to the addresses given below or such other
addresses as may be designated in writing by the parties from time to time
during the term of this Agreement. Any notice sent by registered or certified
mail as aforesaid shall be deemed to have been given when mailed.
In the case of Lung Rx:
Lung Rx, Inc.
100 Europa Drive, Suite 599
Chapel Hill, North Carolina 27514
Attention: President
Facsimile No.: (919) 942-342~
In the case of GW:
Glaxo Wellcome Inc.
Five Moore Drive
Research Triangle Park, NC 27709
Attention: Corporate Secretary
Facsimile No.: (919) 549-9074
ARTICLE 17 - INDEPENDENT CONTRACTORS
The relationship between GW and Lung Rx is that of independent contractors.
Neither party has any actual or apparent authority, express or implied, to act
on behalf of the other party or to bind the other party to any obligations.
Neither party shall be deemed to be an agent or servant of the other party or a
partner or venturer with the other party. GW shall not control, or have any
right to control, the manner, method and means by which Lung Rx makes, has made,
uses, sells, leases or otherwise provides or markets its products and services.
Neither party shall have the right to utilize the name, patent rights, know-how,
trademarks or service marks of the other party to this Agreement, except, in the
case of the patent Rights and Know-How, as otherwise expressly assigned pursuant
to Section 3.1.
ARTICLE 18 - GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina, exclusive of its choice-of-law rules.
ARTICLE 19 - ENTIRE AGREEMENT; MODIFICATION
This Agreement contains the entire understanding of the parties with
respect to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly merged in
and made a part of this Agreement. The parties
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hereto may alter any of the provisions of this Agreement, but only by a written
instrument duly executed by both parties hereto.
ARTICLE 20 - WAIVER
The failure of a party to enforce at any time for any period any of the
provisions hereof shall not be construed as a waiver of such provisions or of
the rights of such party thereafter to enforce each such provision.
ARTICLE 21 - COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same document.
ARTICLE 22 - CAPTIONS
The captions to the several Articles and Sections hereof are not a part of
this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles and Sections hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
LUNG RX, INC. GLAXO WELLCOME INC.
By:/s/ James W. Crow By: /s/ Robert M. Bell
----------------------------- -------------------------------
Name: James W. Crow Name: Robert M. Bell, Ph.D.
------------------------- -------------------------------
Title: President Title: Vice President, Research,
------------------------- -------------------------------
Glaxo Wellcome Inc.
-------------------------------
THE WELLCOME FOUNDATION LTD.
By:/s/ Simon Bicknell
-----------------------------
Name: Simon Bicknell
-------------------------
Title: Assistant Secretary
-------------------------
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<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
FOR PORTIONS OF THIS DOCUMENT
EXHIBIT 10.10
COOPERATION AND STRATEGIC
ALLIANCE AGREEMENT
This Cooperation and Strategic Alliance Agreement (this "Agreement) is
entered into as of September 3, 1997, by and between LRX Pharmaceuticals, Inc.,
a Delaware corporation ("LRX"), and MiniMed Inc., a Delaware corporation
("MiniMed").
RECITALS
A. LRX has rights to, and is further developing, a pharmaceutical compound
for the treatment of certain pulmonary hypertension and other vascular
conditions.
B. MiniMed is a leader in the design, development, manufacturing and
marketing of advanced microinfusion systems for delivery of a variety of drugs.
C. MiniMed and LRX wish to cooperate in the development, establishment and
worldwide delivery of therapies for the treatment of targeted medical conditions
by taking advantage of the respective technologies and other resources and
assets of MiniMed and LRX, on the terms and subject to the conditions of this
Agreement.
AGREEMENT
In consideration of the terms and conditions contained herein, and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows.
1. DEFINITIONS.
(a) "Affiliate" means any person, directly or indirectly, controlling,
controlled by or under common control with any other person. "Control" shall
mean the direct or indirect ownership of 50% or more of the voting interest in,
or 50% or more of the interest in the income
<PAGE> 2
of, such other person, or the ability to appoint, elect or direct at least 50%
of the governing body of any such person.
(b) "Alliance Coordinator" means the person designated by a Party pursuant
to Section 3(e) of this Agreement, to be the primary contact person for such
Party for purposes of this Agreement.
(c) "FDA" means the United States Food and Drug Administration, and any
successor entity that may be established hereafter which has substantially the
same authority or responsibility currently vested in the United States Food and
Drug Administration.
(d) "15-AU" means that certain prostacyclin analog licensed exclusively to
LRX and being developed by LRX for treatment of targeted medical conditions,
particularly, primary pulmonary hypertension ("PPH"), secondary pulmonary
hypertension ("SPH"), and peripheral vascular disease ("PVD").
(e) "Governing Rules" means the general guidelines established by the
Managing Committee pursuant to Section 3(d) of this Agreement, which will be
used to guide generally the activities of the Managing Committee and the Parties
which are undertaken pursuant to this Agreement.
(f) "Joint Intellectual Property" means any intellectual property rights
which arise from the joint activities conducted pursuant to this Agreement, and
which shall be jointly owned as set forth in Section 7 of this Agreement.
(g) "Law" means any local, state or federal rule, regulation, statute or
law relevant to the activities undertaken pursuant to this Agreement or
applicable to either of the Parties with respect to any matters set forth
herein.
(h) "Losses" means any liabilities, damages, costs or expenses, including
without limitation, reasonable attorneys' fees (including the allocable cost of
in-house counsel), which arise from any claim, lawsuit, demand or other action
by any Party other than one of the Parties or an Affiliate of one of the
Parties.
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(i) "Managing Committee" means the committee established pursuant to
Section 3 which is responsible for the development and oversight of all
activities pursuant to this Agreement, in accordance with the terms of this
Agreement.
(j) "MiniMed Products" means any products, supplies or other goods which
are designed, developed, manufactured or marketed by MiniMed, whether existing
on the date of this Agreement or subsequently developed, acquired or otherwise
obtained by MiniMed.
(k) "Party" or "Parties" means MiniMed or LRX, or MiniMed and LRX,
collectively, as appropriate.
(1) "Senior Management Representative" means an executive officer of each
Party designated to facilitate the resolution of disputes hereunder, as
described in Section 3 of this Agreement.
(m) "Target Therapy" means a comprehensive health care therapy which
utilizes 15-AU and MiniMed Products and which is to be delivered through the
cooperative efforts of the Parties as contemplated by this Agreement.
2. GENERAL AGREEMENT.
MiniMed and LRX shall collaborate and cooperate in the design, development
and implementation of therapies for the treatment of PPH, SPH and PVD, utilizing
MiniMed Products and 15-AU, as set forth herein. The specific terms regarding
the scope and type of the collaborative efforts (including, without limitation,
the economic terms with respect to the parties), shall be determined from time
to time in accordance with Sections 3 and 4 of this Agreement. In addition to
PPH, SPH, and PVD, LRX and MiniMed may, in their discretion and subject to
mutual agreement, identify other medical conditions to be targeted by the
Parties hereunder.
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<PAGE> 4
3. MANAGING COMMITTEE.
(a) MiniMed and LRX shall establish a Managing Committee hereunder, which
shall consist of two (2) representatives from each of MiniMed and LRX. The
initial designees are set forth in Schedule A hereto. MiniMed and LRX may each
from time to time replace its respective representatives on the Managing
Committee, in its sole and absolute discretion, by notice to the other Party.
(b) It is among the objectives of the Parties to design, develop and
implement the Target Therapy in a reasonably practicable fashion, subject,
however, to the respective corporate regulatory, financial and other obligations
and considerations of each of the Parties from time to time determined. To
achieve this objective, the Managing Committee shall be responsible for
establishing an implementation strategy to carry out the intent of this
Agreement, and ultimately to commercialize the Target Therapy.
(c) The Managing Committee shall meet at such times and places as it shall
determine appropriate to carry out its responsibilities hereunder. Such meetings
may be in person or by means of telephonic communication. Either Party may
designate an alternate member of the Managing Committee to act on behalf of a
member on a temporary or interim basis, in the reasonable discretion of such
Party. Either Party, through its Managing Committee members, may call a meeting
of the Managing Committee by giving written notice thereof to the members of the
other Party.
(d) The Managing Committee shall establish guidelines to govern the
strategic activities, co-development and related activities of the Parties; the
Managing Committee shall also establish such guidelines with respect to
operational matters at such time as the Target Therapy is commercialized or in a
pre-commercial phase, as contemplated by this Agreement. All such guidelines
shall be subject to the qualification of Section 3(g) hereof. The Managing
Committee shall be responsible for taking such other actions as may be provided
for or contemplated by this Agreement, subject at all times to the requirements
of Section 3(g), including the establishment and implementation of the
"Governing Rules."
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(e) The Parties shall each name one (1) of its Managing Committee members
as its Alliance Coordinator, who shall be the primary contact for purposes of
this Agreement, except to the extent the parties may otherwise agree. Either
Party may change its designation of Alliance Coordinator, in its sole and
absolute discretion, upon written notice to the other Party.
(f) If a disagreement arises between the Parties as to any matters within
the scope of this Agreement, either Party may give written notice to the other.
If the Alliance Coordinators are unable to resolve the dispute satisfactorily,
despite their good faith efforts, within (30) days of receipt of such notice,
either Alliance Coordinator may request a meeting of the Managing Committee,
which will, in good faith, diligently seek to resolve the dispute. If the
Managing Committee is unable to resolve the dispute, notwithstanding the
exercise of good faith efforts, within (30) days after such meeting, then,
unless otherwise agreed by the Alliance Coordinators, the matter shall
thereafter formally be referred to a Senior Management Representative of each of
the Parties, the initial designations of which are set forth in Schedule A.
Either Party may, in its sole discretion, change its designee of the Senior
Management Representative by written notice to the other. Except as expressly
provided in the immediately following sentence, neither Party shall initiate any
formal action against the other including, without limitation, the formal
commencement of arbitration proceedings or the formal filing of legal action,
until at least thirty (30) days have elapsed since the first communication
between the Senior Management Representatives hereunder. Notwithstanding the
foregoing, either Party may initiate proceedings to seek injunctive relief
before the time period otherwise required hereunder shall elapse, if such Party
in good faith believes that it will suffer irreparable harm without the
initiation of such proceedings.
(g) Notwithstanding anything to the contrary contained in this Agreement,
the authority of the Managing Committee shall at all times be subject to the
respective requirements and obligations of the quality systems and regulatory
policies and procedures, and internal corporate governance requirements, of each
of LRX and MiniMed. The Managing Committee shall establish Governing Rules,
which shall serve as guidelines for the general activities under this Agreement,
which Governing Rules shall supplement the terms hereof, but which procedures
and systems shall satisfy and be consistent with the respective policies,
procedures, and systems
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<PAGE> 6
of MiniMed and LRX. In that regard, the Parties shall reasonably cooperate in an
attempt to assure their respective systems do not unduly impede the carrying out
of the intent of this Agreement. Without limiting the generality of the
foregoing, the operations and authority of the Managing Committee shall be
consistent with the underlying corporate policies of each of MiniMed and LRX
with respect to the operation of clinical trials and studies, regulatory studies
relating to development, promotion, worldwide distribution and servicing of the
delivery of the Target Therapy, quality assurance activities, medical device and
adverse event reporting requirements, patent strategies, and the like. The
Managing Committee shall establish a proposed approach for the Governing Rules
within ninety (90) days of the execution of this Agreement that shall consider
the relevant respective obligations of the parties.
4. JOINT ACTIVITIES
The Parties shall diligently pursue the design, development and ultimate
commercialization of the Target Therapy as from time to time determined by
Managing Committee, and the Managing Committee shall develop a comprehensive
plan with respect to such activities. It is the intention of the Parties that
they will cooperate jointly in such activities, as from time to time mutually
determined by the Managing Committee and agreed to by the Parties. The Parties
currently contemplate that the joint pursuit of the Target Therapy may be
developed in one or more phases. The Parties further contemplate preliminarily
that the respective responsibilities of the Parties will be as described in
Schedule B hereto, it being understood by the Parties, however, that such
schedule reflects only the initial understanding of the Parties, and the
Managing Committee shall be responsible for finalizing such strategy in a
definitive manner.
It is the intention of the Parties that they will participate in the
investment, contribution, commitment and risks associated with the design,
development and commercialization of the Target Therapy. Accordingly, the
parties intend generally to allocate the financial costs and profits of the
Target Therapy commercialized hereunder. It is currently contemplated, however,
that: (i) MiniMed shall be responsible generally for all development and
regulatory expenses relating to the MiniMed Products, and (ii) LRX shall be
responsible for all development and
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<PAGE> 7
regulatory expenses relating to 15-AU. The Parties may from time to time agree
to allocate such costs and expenses differently in certain circumstances.
In furtherance of the foregoing, the Parties intend to establish an
appropriate strategy to carry out the intent of the cooperative relationship
contemplated hereby, and intend to consider appropriate provisions for revenue
sharing, which may include, without limitation, the following: (i) determination
of an appropriate transfer price for 15-AU (in circumstances in which the
Managing Committee determines that MiniMed is the appropriate party to undertake
distribution, and on such terms as the Parties may agree), (ii) allocation for
costs and expenses associated with formulation and packaging of 15-AU and, to
the extent required, the MiniMed Products, (iii) costs associated with the
delivery of the Target Therapy, (iv) costs associated with clinical and
technical support associated with the Target Therapy and (v) an appropriate
formula or basis to determine the profits derived from the delivery of the
Target Therapy.
Notwithstanding the foregoing, however, the parties recognize and agree
that an unanticipated disparity may occur or eventuate in the actual
contribution of each Party with respect to the design, development, distribution
and commercialization of the Target Therapy. With respect thereto, to the extent
a Party in good faith concludes that the financial return to such Party is
inconsistent with this Agreement and the reasonable expectations of such Party,
then it may give notice thereof to the other Party (which shall include
supporting documentation for its position), to be reviewed and considered by the
other Party. The Parties shall engage in good faith negotiations relative to the
financial arrangement then applicable as between the Parties with respect to the
Target Therapy to the extent a notice is given as contemplated by this
provision.
5. REPRESENTATIONS AND WARRANTIES.
(a) MiniMed Representations and Warranties. MiniMed represents and warrants
to LRX as follows:
(i) MiniMed is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, is duly
qualified to do
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<PAGE> 8
business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership of its
property makes such qualification necessary, except where the failure to so
qualify or be in good standing would not have a material adverse effect on
MiniMed or its ability to perform hereunder.
(ii) MiniMed has the full power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated herein. The
execution, delivery and performance of this Agreement have been duly and
validly authorized and approved by all necessary corporate action on the
part of MiniMed. This Agreement has been duly executed and the provisions
hereof constitute the valid and legally binding obligations of MiniMed and
do not require the consent, approval or authorization of, or registration,
qualification, designation, declaration or filing with, any person, public
or governmental authority or other entity, except for any of the foregoing
which have been received or obtained or, either individually or in the
aggregate, do not and would not have a material adverse effect upon MiniMed
or its ability to perform its obligations hereunder.
(iii) The execution and delivery of this Agreement by MiniMed, and the
performance of its obligations hereunder, are not in violation or breach
of, and will not conflict with or constitute a default under, the
Certificate of Incorporation or Bylaws of MiniMed, or any material
agreement, contract, commitment or obligation to which MiniMed is a Party
or by which it is bound, and will not conflict with or violate any
applicable Law or any order or decree of any governmental agency or court
having jurisdiction over MiniMed or its assets or properties.
(iv) MiniMed has and, at the time the Targeted Therapy is
commercialized will have, all right, title and interest in and to the
MiniMed Products used in connection with the Targeted Therapy.
(b) LRX- Representations and Warranties. LRX represents and warrants to
MiniMed as follows:
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<PAGE> 9
(i) LRX is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, is duly
qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of its business or the ownership
of its property makes such qualification necessary, except where the
failure to so qualify or be in good standing would not have a material
adverse effect on LRX or its ability to perform hereunder.
(ii) LRX has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated herein. The
execution, delivery and performance of this Agreement have been duly and
validly authorized and approved by all necessary corporate action on the
part of LRX. This Agreement has been duly executed and the provisions
hereof constitute the valid and legally binding obligations of LRX and do
not require consent, approval or authorization of, or registration,
qualification, designation, declaration or filing with, any person, public
or governmental authority or other entity, except for any of the foregoing
which have been received or obtained or, either individually or in the
aggregate, do not and would not have a material adverse effect upon LRX or
its ability to perform its obligations hereunder.
(iii) The execution and delivery of this Agreement by LRX, and the
performance of its obligations hereunder, are not in violation or breach
of, and will not conflict with or constitute a default under, the Articles
or Certificate of Incorporation or Bylaws of LRX, or any material
agreement, contract, commitment or obligation to which LRX is a Party or by
which it is bound, and will not conflict with or violate any applicable Law
or any order or decree of any governmental agency or court having
jurisdiction over LRX or its assets or properties.
(iv) LRX has and, at the time the Targeted Therapy is commercialized
will have, the sole and exclusive right to exploit 15-AU for the Targeted
Therapy, which right is not subject to any restrictions or encumbrances
whatsoever.
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<PAGE> 10
6. COMPLIANCE WITH LAWS.
In performing their obligations hereunder, MiniMed and LRX shall comply in
all material respects with all Laws regarding or relevant to the performance of
their respective obligations hereunder, except for any noncompliance which,
individually or in the aggregate, do not and would not have a material adverse
affect upon either Party hereto, or the agreements contemplated hereby. Without
limiting the generality of the foregoing, each Party shall comply in all
respects with all of the rules, regulations, statutes and laws under the
jurisdiction of the FDA, comparable regulatory bodies of any state or any
foreign jurisdiction, or such other regulatory authority which may from time to
time exercise jurisdiction over the activities of either MiniMed or LRX, or
which affect, impact or otherwise relate to this Agreement or the activities
conducted hereunder or contemplated hereby. MiniMed and LRX shall cooperate with
each other during any inspection, investigation or other inquiry by any
governmental agency exercising any such jurisdiction or authority, including
providing appropriate information and/or documentation, as may be lawfully
requested by such governmental entity. Notwithstanding the foregoing, each Party
expressly reserves its rights to in good faith challenge the activities of any
such governmental agency, to the extent such Party deems appropriate. Further
notwithstanding the foregoing, neither MiniMed nor LRX shall be under any
obligation to disclose information hereunder if, and to the extent, such Party
in good faith is seeking to protect the attorney-client privilege with respect
to any such activity or event.
7. INTELLECTUAL PROPERTY.
(a) Joint Developments. Each Party shall disclose to the other any and all
useful ideas, concepts, methods, procedures, processes, improvements, invention,
discoveries, and the like which arise from the joint activities conducted by the
Parties hereunder ("Discoveries") of any nature, made, conceived or first
reduced to practice as result of the Parties' activities hereunder relating to
the delivery of the Target Therapy. The Parties shall jointly own any and all
rights, title and interest in and to all Discoveries that are a result of this
Agreement, and such property shall constitute Joint Intellectual Property
hereunder. The parties contracting for any work performed under this Agreement
by a subcontractor or contract employee shall ensure all
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<PAGE> 11
Discoveries vest with LRX and MiniMed. The Parties shall in good faith consider
the inclusion of procedures relative to patent filings and related matters with
respect to Discoveries which constitute Joint Intellectual Property, which
procedures would be considered for inclusion in the Governing Rules.
(b) Sole Property. All existing LRX intellectual property (including all
aspects of 15-AU), and all intellectual property developed solely by or on
behalf of LRX independent from activities pursuant to this Agreement (which must
be independently verifiable), shall be and remain the sole and exclusive
property of LRX. All existing MiniMed intellectual property (including all
aspects of the MiniMed Products), and all intellectual property developed solely
by or on behalf of MiniMed independent from activities undertaken pursuant to
this Agreement (which must be independently verifiable), shall be and remain the
sole and exclusive property of MiniMed.
8. COVENANT NOT TO COMPETE; EXCLUSIVITY.
(a) Except as provided for herein, during the term of this Agreement, the
Parties shall deal exclusively with one another with respect to the delivery of
the Target Therapy, subject to the inclusion of additional collaborative parties
as the Parties may from time to time agree.
(b) Except as provided in subsection (d) below, during the term of this
Agreement and for a period of one (1) year thereafter, LRX shall not, without
the prior written consent of MiniMed, enter into any agreement or arrangement
with any person or entity with respect to the design, development or
distribution of 15-AU for administration in a comprehensive subcutaneous,
intravenous or transdermal medication delivery system.
(c) Except as provided in subsection (d) below, during the term of this
Agreement and for a period of one (1) year thereafter, MiniMed shall not,
without the prior written consent of LRX, enter into any agreement or
arrangement with any person or entity with respect to the infusion of a
medicinal compound for the treatment of PPH or SPH.
(d) Notwithstanding the foregoing, the Parties acknowledge that unforeseen
circumstances may eventuate wherein a Party is materially and adversely affected
because of the
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exclusivity and noncompetition provisions contained herein. In the event such
were to occur, the Parties so affected may terminate its obligations hereunder
with respect to therapy delivery relative to PPH and/or SPH, in which case the
terminating party shall be obligated to pay the other party royalties of [ ] of
the net proceeds. For purposes herein, "Net Proceeds" shall mean the gross
revenue derived from sales of 15-AU for the treatment of PPH or SPH (in the
event LRX is the terminating party) or sales of the MiniMed Products (relative
to delivery of therapy to treat PPH or SPH), less (i) applicable taxes and other
governmental charges, (ii) allowances for credits, returns, discounts, rebates,
cancellations, and (iii) actual freight costs. The obligation to pay such
royalties shall terminate on the sixth (6th) anniversary of the date the FDA
grants a new drug approval. The non-terminating party shall have reasonable
audit rights to verify such royalty payments, which shall be paid quarterly
(within 60 days of the end of each calendar quarter), and all be accompanied by
a royalty report setting forth the basis for the royalty calculation.
9. TERM, EXTENSION AND TERMINATION.
(a) Term. The term of this Agreement shall commence as of the date hereof
and continue until the date seven (7) years after the FDA grants a New Drug
Approval for 15-AU to be used in the Target Therapy hereunder ("Initial Term"),
unless sooner terminated as set forth herein. Unless sooner terminated in
accordance with the terms of this Agreement, the term of this Agreement shall
automatically be extended for additional successive 12-month periods, unless a
Party gives notice of nonrenewal at least six (6) months prior to the end of the
Initial Term or any renewal term.
(b) Termination.
(i) Breach. If a Party materially defaults in its performance of any
of its material obligations under this Agreement, and such default is not
cured or resolution of a disputed breach pursuant to Subsection 3(f) is not
demanded within sixty (60) days of written notice of such default by the
other Party, this Agreement may be terminated at the end of such 60-day
period by the Party not in default by written notice of termination to
12
<PAGE> 13
the defaulting Party, such written notice to be given not later than
seventy-five (75) days after the first written notice.
(ii) Bankruptcy. In the event of the institution by or against either
Party of insolvency, receivership or bankruptcy proceedings or any other
proceedings for the settlement of a Party's debts which are not dismissed
within sixty (60) days, or upon a Party's making an assignment for the
benefit of creditors, or upon a Party's dissolution or ceasing to do
business, the other Party may terminate this Agreement upon written notice.
(c) Effect of Termination. The provisions of Section 8 (Covenant Not to
Compete), Section 10 (Confidentiality), Section 11 (Indemnification), and
Section 12 (General), shall survive the termination of this Agreement.
10. CONFIDENTIALITY
(a) Disclosure of Confidential Information. Except as otherwise expressly
provided in this Agreement or as may be agreed to by the Managing Committee in
writing, both MiniMed and LRX shall retain in confidence and not use for its own
benefit (other than as expressly contemplated by this Agreement) all
confidential and proprietary information received from the other as a result of
this Agreement during the term of this Agreement and continuing thereafter for a
period of five (5) years after termination. Such information may, however, be
disclosed insofar as such disclosure is necessary (where possible, with adequate
safeguards for confidentiality) to allow either Party to defend against
litigation, to file and prosecute patent applications or to comply with
governmental regulations, or rules or regulations of applicable self-regulatory
organizations (including, without limitation, any exchange or stock market on
which the securities of a Party are listed or traded, or qualified for trading),
or otherwise as required by Law. Such obligation of confidentiality and non-use
shall also not apply to information which: (i) is in the public domain as of the
date of receipt, (ii) comes into the public domain through no fault of the Party
claiming waiver, (iii) was known by the Party claiming waiver prior to
disclosure, as shown by such Party's written records, (iv) is disclosed to the
Party claiming waiver by a third party having a lawful right to make such
disclosure, (v) is independently developed by the Party claiming waiver, or (vi)
disclosed to a third party that has
13
<PAGE> 14
agreed in writing to be bound by obligations of confidentiality similar to those
set forth herein. Nothing contained herein shall prevent either Party from
disclosing information to its Affiliates or to the FDA or other regulatory
authorities where necessary.
(b) Press Release and Public Announcements. MiniMed and LRX shall not issue
any press release or public announcement with respect to this Agreement without
the prior consent of the other Party as to the form and content of such release,
except for any such release or announcement that may be required by Law or the
rules or regulations of any exchange on which the securities of a Party are
listed, traded or qualified for trading. To the extent practical, the parties
shall consult with each other in advance as to the form, content and timing of
all releases or announcements. It is the present intention of the parties to
issue a joint press release announcing the execution of this Agreement.
(c) Existing Mutual Nondisclosure Agreement. The Mutual Nondisclosure
Agreement entered into by the Parties and effective as of March 18, 1997 is
superseded by Section 10 of this Agreement; provided, however, that any
confidential information disclosed by one Party to the other pursuant to such
Mutual Nondisclosure Agreement shall be treated as if it had been disclosed
after the Effective Date of this Agreement shall therefore be subject to the
terms of this Section.
11. INDEMNIFICATION.
(a) Indemnification by MiniMed. MiniMed shall indemnify, defend and hold
LRX harmless from and against any and all Losses resulting from or arising out
of the negligence or willful misconduct of MiniMed in the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, MiniMed shall indemnify, defend and hold LRX harmless from and
against Losses relating to product liability claims solely with respect to
MiniMed Products which are designed, developed and manufactured solely and
independently by MiniMed.
(b) Indemnification by LRX. LRX shall indemnify, defend and hold MiniMed
harmless from and against any Losses resulting from or arising out of negligence
or willful
14
<PAGE> 15
misconduct of LRX in performing its obligations under Agreement. Without
limiting the generality of the foregoing, LRX shall indemnify, defend and hold
MiniMed harmless from and against any Losses resulting solely from any design
defect or other claim with respect to AU-15.
(c) Indemnification Procedures. A Party seeking indemnification (the
"Indemnified Party") pursuant to this Section 11 shall notify, in writing, the
other Party (the "Indemnifying Party") within fifteen (15) days of the assertion
of any claim or discovery of any fact upon which the Indemnified Party intends
to base a claim for indemnification. An Indemnified Party's failure to so notify
the Indemnifying Party shall not, however, relieve the Indemnifying Party from
any liability under this Agreement to the Indemnified Party with respect to such
claim except to the extent that such Indemnifying Party is actually denied,
during the period of delay in notice, or materially prejudiced with respect to,
the opportunity to remedy or otherwise mitigate the event or activity(ies)
giving rise to the claim for indemnification and thereby suffers or otherwise
incurs additional quantifiable damages as a result of such failure. The
Indemnifying Party, while reserving the right to contest its obligations to
indemnify hereunder, shall be responsible for the defense of any claim, demand,
lawsuit or other proceeding in connection with which the Indemnified Party
claims indemnification hereunder. The Indemnified Party shall have the right at
its own expense to participate jointly with the Indemnifying Party in the
defense of any such claim, demand, lawsuit or other proceeding, but with respect
to any issue involved in such claim, demand, lawsuit or other proceeding with
respect to which the Indemnifying Party has acknowledged its obligation to
indemnify the Indemnified Party hereunder, the Indemnifying Party shall have the
right to select counsel, settle, or otherwise dispose of or handle such claim,
demand, lawsuit or other proceeding on such terms as the Identifying Party shall
deem appropriate, subject to any reasonable objection of the Indemnified Party.
(d) Insurance. The Parties, through the Managing Committee, shall pursue
purchase of appropriate liability insurance which would jointly insure both of
the Parties for the activities undertaken pursuant to this Agreement, to the
extent such insurance is available to the Parties on commercially reasonable
terms. The Managing Committee shall in good faith determine the most efficient
and effective way to obtain such insurance and shall in good faith negotiate an
appropriate allocation of the cost of acquiring any such insurance.
15
<PAGE> 16
12. GENERAL.
(a) Entire Agreement. This Agreement, including any Schedules, Exhibits and
Appendices, constitutes the entire agreement and understanding relating to the
subject matter of this Agreement and supersedes all previous communications,
proposals, representations and agreements, whether oral or written, including
that certain Letter Agreement between the parties dated May 20, 1997 relating to
the subject matter of this Agreement.
(b) Counterparts and Headings. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument. Headings of sections and subsections
of this Agreement are for convenience only and the construction of this
Agreement shall not be affected by reference to such headings.
(c) Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if personally delivered or mailed by first class
certified or registered mail, postage prepaid, hand delivered, or sent by
telecopy or by reputable courier. Notices sent by U.S. mail shall be deemed
delivered three (3) days after deposit with postal authorities or upon confirmed
delivery if personally delivered, sent by confirmed fax or courier service.
Unless otherwise specified in writing, the mailing addresses of the parties
shall be as described below:
For LRX: LRX Pharmaceuticals, Inc.
2 Davis Drive
Research Triangle Park, North Carolina 27709
Attention: President
Fax Number: (202) 518-8200
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<PAGE> 17
For MiniMed: MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: President
Fax Number: (818) 362-6928
Copy to: General Counsel at same address
Fax Number (818) 367-1460
(d) Amendment and Waiver. This Agreement may be modified, amended and
supplemented only by written agreement signed by the Parties. The waiver by any
Party to this Agreement of any breach or violation of any provision of this
Agreement by the other Party shall not operate or be construed to be a waiver of
any subsequent breach or violation of the same or any other provision of this
Agreement.
(e) Assignment. Neither Party may assign its rights and obligations under
this Agreement without the prior written consent of the other Party. This
Agreement shall be binding upon, and inure to the benefit of, the legal
successors to the Parties hereto.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
(g) Partial Invalidity. If any provision of this Agreement is held to be
invalid, then the remaining provisions shall nevertheless remain in full force
and effect. The Parties agree to renegotiate in good faith any term held invalid
and be bound by the mutually agreed substitute provision.
(h) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
17
<PAGE> 18
provisions of this Agreement. When this Agreement uses the word "including" such
word shall be deemed to be followed by the words "without limitation."
(i) Force Majeure. Both Parties to this Agreement shall be excused from the
performance of their obligations hereunder if such performance is prevented by
force majeure and the nonperforming Party promptly provides notice of the
prevention to the other Party. Such excuse shall be continued so long as the
condition constituting force majeure continues and the nonperforming Party takes
reasonable efforts to remove the condition. For purposes of this Agreement,
"force majeure" shall include conditions beyond the control of the Parties and
not resulting from the negligence of the Party seeking excuse, including an act
of God, war, civil commotion, epidemic, failure or default of public utilities
or common carriers, destruction of production facilities or materials by fire,
earthquake, storm or like catastrophe.
(j) Independent Contractors. The relationship of LRX and MiniMed
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to give either Party the power to
direct and control the day-to-day activities of the other or allow one Party to
create or assume any obligation on behalf of the other of any purpose
whatsoever.
(k) Limitation of Liability. Except as may be elsewhere herein specifically
provided for, neither Party shall be liable to the other for indirect, special,
incidental, consequential or punitive damages, or for any lost profits of the
other Party, however caused and on any theory of liability, arising out of the
performance or failure to perform any obligations set forth herein.
IN WITNESS WHEREOF, this Agreement is executed and effective as of the date
first above written.
LRX PHARMACEUTICALS, INC. MINIMED INC.
/s/ GILLES CLOUTIER /s/ ERIC S. KENTOR
- -------------------------- -------------------
Gilles Cloutier, Ph.D. Eric S. Kentor
Executive Vice President Senior Vice President
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<PAGE> 19
SCHEDULE B
The following sets forth the allocation of responsibilities between the Parties
with respect to the development and ultimate commercialization of the delivery
of the Target Therapy. While the following sets forth the current intention of
the Parties, the Parties further recognize and agree that the actual development
of the Target Therapy, and, assuming such developmental efforts are successful,
the ultimate commercialization thereof, remains subject to a number of
contingencies and considerations, some of which are not at this time
predictable. Accordingly, the following only expresses the present intention of
the Parties, and it is anticipated to be subject to further refinement,
clarification, modification and other considerations prior to definitive
implementation. In this regard, the Management Committee should recognize that,
with regard to this 15-AU pulmonary hypertension project, the expertise of LRX
is in the fields of CMC and clinical development of pharmaceuticals while the
expertise of MiniMed is in the field of drug delivery.
Subject to the foregoing, the Parties currently contemplate that the Target
Therapy may be developed in one or more phases, which may include or address,
without limitation, the following:
(a) Cooperative efforts between the Parties relating to the formulation of
15-AU for delivery via the MiniMed Products, including, without limitation,
chemical stability, concentration, preservative, and materials compatibility
issues.
(b) Clinical research, including the design, development, implementation
and analysis of clinical trials and protocols, feasibility studies and similar
studies from time to time agreed to by the Parties. It is currently contemplated
that MiniMed will be responsible for distribution of the Target Therapy system
in clinical trials conducted in North America and Europe. The parties will
evaluate the appropriate mechanism for the compounding and distribution vehicle
for 15-AU in connection with such clinical activities. The Parties will evaluate
personnel and other resources necessary to conduct clinical trials, including
consideration of utilizing MiniMed
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<PAGE> 20
SCHEDULE B (CONTINUED)
personnel in Europe and/or the United States or, alternatively, contracting with
an independent clinical research organization to conduct the trials; the
ultimate structure of such trials, and financial responsibility, shall be
determined by the Managing Committee.
(c) Strategies and physical requirements for the manufacture, packaging,
storage, and shipment of 15-AU relative to the Target Therapy, and related
activities constituting pharmacy services.
(d) Market research activities.
(e) Patent strategies with respect to any Joint Intellectual Property.
(f) Strategies and activities relative to the requisite regulatory
approvals and post-market regulatory compliance for the components of the Target
Therapy. Currently, the Parties generally anticipate that LRX will be
responsible for the regulatory approval of 15-AU and MiniMed will generally be
responsible for the regulatory approval of the MiniMed Products relative to the
Target Therapy. Notwithstanding the foregoing, however, the Managing Committee
may from time to time determine joint regulatory strategies which may include
joint or coordinated meetings and/or submissions to the FDA and other
appropriate regulatory authorities.
(g) Market development activities, which may include, without limitation,
educational and other programs for health care professionals and third
parties-payors, and related marketing activities which may include, without
limitation, activities directed to patients, health care professionals and third
party payors. It is currently anticipated that MiniMed will assume primary
responsibility for this function.
(h) Clinical and technical services to provide support relative to the
delivery systems for the Target Therapy, which may be based upon the current
MiniMed model of providing 24-hour clinical services and technical services for
the MiniMed products. The Parties currently
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SCHEDULE B (CONTINUED)
anticipate that a system will be developed whereby adverse drug events relative
to 15-AU will generally be the responsibility of LRX, and the need for a system
whereby such adverse events which come to the attention of MiniMed shall be
reported to LRX; similarly, to the extent LRX becomes aware of any adverse
events involving the MiniMed Products, a companion communication system may be
developed.
(i) Sales and related worldwide distribution activities relating to the
Target Therapy. Currently, the Parties envision that it is in their mutual best
interest to package and commercialize the Target Therapy as a comprehensive
product. Accordingly, it is anticipated that MiniMed shall generally assume
primary responsibility for the sales, marketing and related activities with
respect to the distribution and commercial activities of the Target Therapy,
which is anticipated to include component elements of each of the Party's
products.
(j) Warranty, product service and similar matters relative to the component
elements of the Target Therapy.
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<PAGE> 22
September 3, 1997
LRX Pharmaceuticals, Inc.
1826 R Street, N.W,
Washington D.C. 20009
Re: Letter Agreement
Ladies and Gentlemen:
Reference is made to that certain Cooperation and Strategic Alliance Agreement
(the "Agreement") of even date between LRX Pharmaceuticals, Inc., a Delaware
corporation ("LRX") and MiniMed Inc., a Delaware corporation ("MiniMed").
Capitalized terms used but not otherwise described herein have the meanings set
forth in the Agreement. The purpose of this Letter Agreement is to memorialize
certain agreements and understandings between LRX and MiniMed which relate to
the Agreement but which supplement the terms thereof.
Pursuant to the Agreement, it is anticipated that the Parties will participate
in the economic costs and returns/profits of the Target Therapy commercialized
under the Agreement, pursuant to an allocation to be agreed upon through the
developmental process and ultimate commercialization of the Target Therapy. In
the event that the Parties are not able to agree on provisions for revenue
sharing for PPH and SPH, then the Parties shall allocate revenues such that
MiniMed shall receive the greater of (a) [ ] of revenues derived from
commercialization of the Target Therapy or (b) [ ] per patient per year.
The Parties recognize and agree that the flexibility of economic terms
contemplated by the Agreement are appropriate, and the Parties shall endeavor to
cooperate in good faith to allocate revenues on the basis of the criteria set
forth in the Agreement. The allocation set forth in this Letter Agreement
provides a mechanism by which the Parties shall allocate revenues if,-despite
good faith efforts, the Parties are unable to so agree.
The Parties further agree that the Managing Committee shall establish a mutually
agreeable, reasonable criteria whereby the Agreement shall be subject to
termination in the event the Target Therapy (a) is determined not to be
clinically feasible, (b) does not receive regulatory approval or (c) otherwise
is not commercially viable. Such provisions shall be deemed to be an amendment
to the Agreement.
If this letter is in agreement with your understanding of our discussions on the
subject, please so indicate by countersigning below where your name appears.
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Thank you for your continued cooperation in connection with this matter. We look
forward to a long and mutually rewarding business arrangement.
Sincerely,
MINIMED INC.
By: /s/ Eric S. Kentor Date: 9/3/97
---------------------------------- -------------------
Eric S. Kentor
Senior Vice President
ACCEPTED AND AGREED TO:
LRX Pharmaceuticals, Inc.
By: /s/ Gilles Cloutier Date: 9/4/97
---------------------------------- -------------------
Gilles Cloutier, Ph.D.
Executive Vice President for
Business Development
23
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
FOR PORTIONS OF THIS DOCUMENT
EXHIBIT 10.11
EXCLUSIVE LICENSE AGREEMENT
This Exclusive License Agreement ("Agreement") is effective as of September 16,
1998 (the "Effective Date"), by and between United Therapeutics Corporation, a
Delaware corporation, having an address at 68 T.W. Alexander Drive, Research
Triangle Park, North Carolina 27709, USA ("UT"), and Toray Industries, Inc., a
Japanese corporation, having an address at 2-1, Nihonbashi-Muromachi 2-chome,
Chou-ku, Tokyo 103-8666, Japan ("Toray").
WHEREAS, Toray owns all right, title and interest in certain patent rights,
trademark and the right to use certain know-how relating to the Product (as
herein defined) in the Territory (as herein defined);
WHEREAS, UT desires to obtain an exclusive license of such patent rights,
trademark and know-how in order to develop, use and sell the Product within the
Territory; and
WHEREAS, Toray is willing to grant such an exclusive license to UT according to
the terms and conditions herein below.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and
covenants set forth in this Agreement, the parties to this Agreement mutually
agree as follows.
1. Definitions. As used in this Agreement, the following terms, whether used
in the singular or the plural, shall have the following meanings:
a. "Affiliate" means any corporation or non-corporate entity which
controls, is controlled by, or is under common control with a party to this
Agreement. A corporation or non-corporate entity shall be regarded as in
control of another corporation if it owns or directly or indirectly controls at
least fifty percent (50%) of the voting stock of the other corporation, or (i)
in the absence of the ownership of at least fifty percent (50%) of the voting
stock of a corporation or (ii) in the case of a non-corporate entity, if it
possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of such corporation or non-corporate entity, as
applicable
b. "Dollars" or "$" means United States dollars.
c. "FDA" means the United States Food and Drug Administration or any
successor entity.
d. "Indication" means Pulmonary Vascular Disease, including Pulmonary
Hypertension.
e. "Improvements" means modifications, variations and revisions of the
Know-How as well as all processes, machines, manufactures or compositions of
matter directly pertaining to the Patent Rights.
f. "Patent Rights" means all domestic and foreign patents and patent
applications listed
<PAGE> 2
in Appendix A attached hereto and made a part hereof, and any Improvements,
extensions, continuations, continuations-in-part, divisions, substitutions,
foreign equivalents, renewals, modifications, variations, new models, or
reissues thereof; as well as all processes, machines, manufactures or
compositions of matter directly pertaining to the patents which come into
existence during the term of this Agreement.
g. "Know-How" means all technical information and data, including but not
limited to ideas, concepts, methods, procedures, processes, compounds,
inventions, discoveries, whether or not patentable, which are owned by Toray,
or which Toray has the right to use and license as of the Effective Date and
which relates to the Product and its use as described in the claims of the
patents and patent applications listed in Appendix A attached hereto and made a
part hereof; or any other patents or patent applications comprising the Patent
Rights.
h. "Trademark" means the trademark selected by both parties and registered
by Toray for the Product in accordance with Section 6.b.
i. "Product" means immediate release (not sustained or controlled) oral
formulation of TRK-100 (Beraprost Sodium) which includes what has been
developed in the USA by HMR.
j. "Licensed Technology" means, collectively, the Product, the Patent
Rights, the Trademark, the Know-How and the Improvements.
k. "Net Sales", with respect to any Product, means the gross sales
(i.e., gross invoice prices) of such Product billed by UT or its distributor to
final wholesaler or, if and when UT or its distributor sells the Product
directly to hospital, clinic, HMO Hospital Management Organization) or other
end users (hereinafter collectively referred to as the "End Users", and final
wholesaler or the End Users, as the case may be, being hereinafter referred to
the "Third Party Customers"), the gross sales of such Product billed by UT or
its distributor to the End Users, less : (i)actual credited allowances to the
Third Party Customers for spoiled, damaged, out dated and returned Product and
for retroactive price reductions in lieu of returned Product; (ii)customary
trade and cash discount, to the extent such trade and cash discounts are not
deducted by UT at the time of invoice in order to arrive at the gross invoice
prices; (iii)all transportation, packaging, handling and insurance charges,
sales taxes, excise taxes, use taxes or import/export duties actually paid;
(iv)any tax or other government charge on the sale, transportation, or delivery
of Product; and (v)all other invoiced allowances and adjustments actually
credited the Third Party Customers including, but not limited to, rebates paid
to the Third Party Customers, whether during the specific royalty period or
not. All the deduction shall be reasonable, customary and certified with
evidence. In this Section 1k, final wholesaler means the firm, corporation or
individual which sells Product directly to the End Users.
l. "NDA" means a New Drug Application or any equivalent successor
application.
m. "Registration" means, in relation to any Product, such approvals by
government authorities as may be legally required before such Product may be
commercialized in the Territory.
<PAGE> 3
n. "Territory" means the United States of America and Canada.
o. "Third Party" means any party other than UT and Toray.
p. "Valid Claim" means a claim of an issued and unexpired patent included
within the Patent Rights which has not been held unenforceable, unpatentable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal,
and which has not been admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise.
2. Grant of Exclusive License.
a. Grant. Toray hereby grants to UT an exclusive license, without a right
to sublicense, under the Licensed Technology to develop, use, import, offer for
sale and sell Products in the Territory for use in treatment of the Indication.
b. Covenant Not to Sue. Toray agrees that it will not assert nor cause to
be asserted against UT any patent not included in the Patent Rights that is or
might be infrin8ed by reason of UT exercise of rights under the license granted
to UT hereunder.
3. Consideration for the Grant.
a. License Fees. In consideration for the exclusive license granted to UT
under this Agreement, UT shall on execution of this Agreement:
1. pay to Toray a non-refundable license fee of [ ];
2. deliver to Toray a certificate representing [ ] shares of UT
common stock; and
3. execute and deliver to Toray a Stock Option Grant issuing to Toray
options to acquire [ ] shares of UT common stock at a purchase price of [ ]
per share, exercisable by Toray upon the date of UT's first filing of an NDA in
the United States for the Product.
b. Milestone Payments. As further consideration for the exclusive license
granted to UT under this Agreement, UT shall make the following payments upon
completion of the following milestones:
1. UT shall pay to Toray a non-refundable milestone payment of
[ ] in cash upon UT's written notice to Toray that it is proceeding with
its first Phase III Studies.
2. UT shall pay to Toray a non-refundable milestone payment of
[ ] in cash upon UT's first filing of an NDA in the United States for the
Product.
<PAGE> 4
3. UT shall pay to Toray a non-refundable milestone payment of [ ] in
cash upon the date of first FDA approval of the Product.
c. Purchase of Product.
1. UT shall purchase commercial Product according to United States current
OMP solely from Toray during the term of this Agreement. UT shall neither
manufacture Product nor purchase Product from a Third Party. Toray will be
responsible for the manufacture and delivery to UT of the amount of United
States current OMP Product that UT reasonably requires from time to time during
the term of this Agreement.
2. Toray will supply commercial Product to UT at the prices which are
inclusive of all costs and revenues) including but not limited to) costs of
formulation, manufacture, bulk materials, as well as a royalty stream on Net
Sales. The price of the Product shall be the sum of(1) and (2), in which (1) is
"Tile Amount" per 120 micrograms determined by using the following formula and
(2) is $ 1.00 per 320 micrograms:
(a) If Net Sales within the Territory are below [ ], then The Amount
shall be the greater of either the amount per 120 micrograms converted from [
] of Net Sales or Japanese Yen [ ] per 120 micrograms.
(b) If Net Sales within the Territory are between [ ] and [ ], then The
Amount shall be (i) the amount determined according to (a) above for the
portion up to [ ], plus (ii) the greater of either the amount per 120
micrograms convened from [ ] of the portion of over [ ] of the Net Sales or
Japanese Yen [ ] per 120 micrograms.
(c) If Net Sales within the Territory are between [ ] and [ ], then The
Amount shall be (i) the amount determined according to (b) above for the portion
up to [ ], plus (ii) the greater of either the amount per 120 micrograms
converted from [ ] of the portion or over [ ] of the Net Sales- ~ Japanese Yen
[ ] per 120 micrograms.
(d) If Net Sales within the Territory are over [ ], then The Amount shall
be (i) the amount determined according to (c) above for the portion up to [ ],
plus (ii) the greater of either the amount per 120 micrograms converted from [ ]
of the portion of over [ ] of the Net Sales or Japanese Yen [ ] per 120
micrograms.
Toray and UT shall consult with each other and decide provisional sales
price of the Product sold to UT for the next sales year, and after the said
sales year) adjust the amount already paid by UT on the basis of provisional
sales price in the said sales year (hereinafter referred to as "Paid Price") by
defining and paying or paying back the difference between the Paid Amount and
the total amount calculated according to the above method for the Product sold
to UT in the said sales year.
<PAGE> 5
3. In the event that UT determines after discussion with Toray, that
(a) UT is required to pay royalties to any Third Party because the
development, manufacture, use or sale of the Product infringes any patent or
other intellectual property rights of such Third Party in the Territory; or
(b) the development, manufacture, use or sale of the Product in any
country in the Territory no longer infringes a Valid Claim with respect to any
Product and Third Party starts the sale of the same compound with Beraprost in
chemical structure in the Territory; or
(c) a compulsory license has been granted to a Third Party under the
applicable laws of any country in the Territory under the Licensed Technology
licensed to UT hereunder Third Party starts the sale of the same compound with
Beraprost in chemical structure in the Territory; or
(d) the price for Product under this Paragraph 3(c) causes or may cause UT
a significant reduction in its sales of Product in any country in the
Territory;
then, in any such event, UT and Toray shall meet and in good faith endeavor to
agree on how to deal with the situation in order to place UT in a position to
market competitively the Product in such country.
4 Payment for Product shall be made in Dollars by UT in accordance with
the terms and conditions as designated by the mutual agreement of UT and Toray.
d. Minimum Annual Product Net Sales. UT shall be responsible for
achieving minimum annual Product Net Sales as determined in advance by mutual
agreement of Toray and UT for the duration of this Agreement . Toray and UT
agree that the minimum Net Sales amount for the first two commercial sales
years shall be [ ] and [ ] respectively. In the event that UT is
unable to meet any minimum annual Net Salts amount as designated by the parties
for a period of two consecutive years, then Toray may convert the exclusive
license granted under this Agreement to be non-exclusive, in which event UT
shall thereafter share the Product marketing rights approved by the FDA with
such Third Party designated by Toray.
e. Non-Competition. UT shall not engage in the development of an
immediate release (not sustained or controlled) orally available stable
prostacyclin analog compound including UT-15 for the duration of this Agreement
plus five years. Notwithstanding the foregoing, in the event that immediate
release TRK- 100 (Beraprost Sodium) failure has been demonstrated in clinical
trials) then the period of noncompetition shall only extend for six months
after the date the failure was demonstrated.
4. Development and Commercialization Program.
<PAGE> 6
a. UT shall be responsible for all costs and expenses for obtaining
regulatory approval and commercializing Products for treatment of the
Indication, including all costs of clinical trials. UT will solely and
exclusively own all regulatory applications and approvals obtained by UT with
respect to Products. UT will closely consult with Toray with regard to its
participation in important clinical development meetings.
b. UT and Toray shall establish a Management Committee, comprised of two
persons from UT and two persons from Toray, which will meet at least once a
year at each party's expense to coordinate the development and marketing of
Products under this Agreement, to determine the Product development schedule,
and to take such other actions as required under this Agreement.
1. The initial Product development schedule, subject to revision by the
Management Committee, is as follows:
Action Date
- ------ ----
Orphan-IND QIS) [ ]
Phase II start [ ]
Phase III start [ ]
NDA filing [ ]
FDA approval [ ]
In the event that the Product development schedule falls more than six months
behind the above initial development schedule, then Toray may at its discretion
terminate this Agreement without any additional penalty to UT.
2. The initial quantity of Product provided by Toray to UT free of charge
for use in clinical studies, subject to revision by the Management Committee,
is up to 100g. The Management Committee will decide from time to time the
appropriate product sample requirements and the price on quantities exceeding
100g, to support UT's development and commercialization approval of the
Product.
c. Toray shall provide UT on a timely basis and without charge all
information concerning the Product which is available to Toray and which is
reasonably required by UT to fulfill its obligations under this Agreement,
including but not limited to, information relating to preclinical and clinical
research, safety, use, pharmacokinetics and efficacy, access through Toray to
HMR European data and authority to use and submit such data to the FDA to the
extent legally required, etc. In the event that UT uses information from other
licensees of Toray, UT will be responsible for payment of reasonable
compensation to such licensee through Toray.
d. UT shall disclose to Toray on a timely basis and without charge all
Product information (including but not limited to, clinical studies, ADR, GCP,
preparation for registration, NDA filing, FDA approval, US market PMS, safety
issues) which UT acquires or will acquire during the term of this Agreement UT
agrees that Toray may use such information
<PAGE> 7
outside the Territory free of charge. In the event that Toray grants the right
to use such information to a Third Party except Yamanouchi Pharmaceutical Co.,
LTD. and Kaken Pharmaceutical Co., LTD. outside the Territory or uses such
information itself within the Territory, Toray will be responsible for payment
of reasonable compensation to UT
e. Neither UT nor Toray shall appoint a Third Party to promote or
distribute Product under UT's marketing rights approved by the FDA, without the
other's approval. Notwithstanding the foregoing, in the event that UT fails to
achieve at least [ ] annual Net Sales of Product in each year in and
after the third fill sales year, then the Management Committee shall have the
right, after frill discussion, to appoint a promoting company. In the event
that the Management Committee is unable to reach agreement on the identity of
such Third Party promoting company, Toray shall have the right to appoint such
company.
f. In the event that UT desires to market and/or advertise the Product
for off-label use, UT shall discuss with Toray such off-label use and get the
approval of it from Toray in advance.
5. Rights of First Refusal.
a. Toray agrees to enter into a separate negotiation with UT for the first
refusal right to co-promote the non-immediate release formulation of TRK-100
(Beraprost Sodium) for the Indication when it is developed or marketed in the
Territory.
b. Toray agrees to enter into a separate negotiation with UT for the first
refusal right to develop and sell the Product in other therapeutic areas than
the medication, including peripheral vascular disease in the Territory.
c. Toray agrees to enter into a separate negotiation with UT for the first
opportunity to develop and sell the Product in Mexico once Toray's other
licensee indicates that it does not want to commence development in Mexico.
d. UT agrees to enter into a separate negotiation with Toray for the first
refusal right to develop and sell in Japan up to two compounds which UT is
developing or will develop and which UT has the right to license or sublicense.
6. Intellectual Property.
a. Patents. Toray will be responsible for taking all necessary action
to maintain and/or extend the Patents Right in the Territory. UT will render
reasonable assistance to Toray in this effort.
b. Trademarks. UT will be responsible for selecting an enforceable
trademark(s) for the Product acceptable to Toray and Toray will be responsible
for registering and maintaining such registrations within all countries in the
Territory. UT will market the Product using such trademark(s) to identify the
Product within the Territory. Toray hereby grants to UT the exclusive right to
use the trademark within the Territory during the term of this Agreement.
<PAGE> 8
7. Warranties.
a. Toray represents and warrants to UT that: (i) Toray is the sole owner
of the Licensed Technology and has the exclusive right and authority to use the
Know-How and to license the Patent Rights and the Know-How; (ii) as of the
Effective Date, Toray is not aware of any action or threatened claim of
infringement brought by a Third Party under any Third Party intellectual
property right in respect of Toray's exploitation of the Licensed Technology;
and (iii) Toray will make available to UT all material technical information in
its possession or of which it is aware that is pertinent to development and
commercialization of the rights licensed under this Agreement.
b. Toray and UT each represents and warrants to the other that: (i) it is
free to enter into this Agreement and to carry out its obligations hereunder;
(ii) this Agreement constitutes its legal, valid and binding obligation; and
(iii) execution, delivery and performance of this Agreement will not constitute
a violation or breach of any agreement or contract to which it is a party or by
which it is bound or the terms of any judicial or administrative decree or
order to which it is subject.
8. Indemnification. UT agrees to indemnify and hold Toray, its Affiliates,
and its and their directors, officers, employees and agents harmless from and
against any liabilities or damages or expenses in connection therewith
(including reasonable attorney's fees and costs and other expenses of
litigation) resulting from Third Party claims arising out of UT's clinical
development of Products, defectiveness of Product PPI (information to doctors,
pharmacists and patients), and the use, storage or sales of the Product within
the Territory
9. Confidentiality
a. Treatment of Confidential Information. Except as otherwise provided in
this Section 9.a, during the term of this Agreement and thereafter: for a
period of seven (7) years
1. UT will retain in confidence and use only for purposes of this
Agreement any information and data supplied by or on behalf of Toray to UT
under this Agreement; and
2. Toray will retain in confidence and use only for purposes of this
Agreement any information and data supplied by or on behalf of UT to Toray
under this Agreement.
For purposes of this Agreement, all such information and data which a Party is
obligated to retain in confidence shall be called "Information."
b. Right to Disclose. To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement or any rights which survive termination or expiration hereof, a party
may disclose Information to its Affiliates, licensees, consultants, outside
contractors and clinical investigators on condition that such entities or
persons agree (i)
<PAGE> 9
to keep the Information confidential for at least the same time periods and to
the same extent as each party is required to keep the Information confidential
and (ii) to use the Information only for such purposes as such party is
entitled to use the Information. Each party or its Affiliates may disclose
such Information to government or other regulatory authorities to the extent
that such disclosure (a) is reasonably necessary to obtain patents or
authorizations, to conduct clinical trials and to market commercially the
Product, provided such party is otherwise entitled to engage in such activities
under this Agreement, or (b) is otherwise required by applicable laws or
regulations.
c. Release from Restrictions. The obligation not to disclose Information
shall not apply to any part of such Information that (i) is or becomes
patented, published or otherwise part of the public domain other than by acts
of the party obligated not to disclose such Information (for purposes of this
Section 9, the "Receiving Parry"') or its Affiliates or licensees in
contravention of this Agreement, or (ii) is disclosed to the Receiving Party or
its Affiliates or licensees by a Third Party, provided such Information was not
obtained by such Third Party directly or indirectly from the other party under
this Agreement; or (iii) prior to disclosure under this Agreement, was already
in the possession of the Receiving Party or its Affiliates or licensees,
provided such Information was not obtained, directly or indirectly, from the
other party under this Agreement; or (iv) results from research and development
by the Receiving party or its Affiliates or licensees independent of
disclosures from the other party under this Agreement.
d. Publications. No announcement, news release, public statement,
publication or other public presentation relating to the existence of this
Agreement, the subject matter herein, or either party's performance hereunder
including any written or oral publication, any manuscript, abstract or the like
which includes data or any other information generated and provided by the
development effort hereunder, shall be made without the other party's prior
approval as to form and content. An acceptable joint press release announcing
the execution of this Agreement is required to be agreed by both Parties.
10. Term and Termination.
a. Term and Expiration. This Agreement shall become effective as of the
Effective Date and shall continue in full force and effect until that date ten
years after FDA approval of the Product. UT may extend the term of this
Agreement by successive one-year periods by giving written notice of each such
extension to Toray no later than two-hundred ten (210) days prior to the end of
the term set forth in the previous sentence or the end of each extension
one-year period with written consent of Toray, which shall not be withheld
without reasonable reason.
b. Termination.
1. Product Development Delay. In the event that the Product development
schedule falls six months or more behind the schedule initially determined
under Section 4.b.1 by the Management Committee without a reasonable
justification, then Toray may terminate this Agreement as provided in Section
4.b.1.
<PAGE> 10
2. Infringement. UT may terminate this Agreement if a court of competent
jurisdiction from which no further appeal can be taken has entered a final
order indicating that the Licensed Technology infringes the rights of a Third
Party.
3. Default. If a party materially defaults in its performance of any of
its material obligations under this Agreement, and such default is not cured
within sixty (60) days of written notice of such default by the other party,
this Agreement may be terminated at the end of such 60-day period by the party
not in default by written notice of termination to the defaulting party, such
written notice to be given not later than seventy-five (75) days after the
first written notice. Termination under this provision does not limit any
remedies for breach.
4. Bankruptcy. In the event of the institution by or against either party
of insolvency, receivership or bankruptcy proceedings or any other proceedings
for the settlement of a party's debts which are not dismissed within sixty (60)
days, or upon a party's making an assignment for the benefit of creditors, or
upon a party's dissolution or ceasing to do business, the other party may
terminate this Agreement upon written notice.
5. Mergers and Acquisitions ("M&A") If M&A is anticipated, in which UT
merges a Third Party company or is merged by a Third Party company, or acquires
more than 50% of the shares of a Third Party company or more than 50% of the
shares of UT is acquired by a Third Party ("M&A"), and if such M&A is
anticipated to affect badly the development and marketing of the Product, then
UT agrees that, in order to minimize the inconvenience of Toray caused by such
M&A, UT shall promptly inform Toray thereof and in good faith endeavor to agree
with Toray about how to continue the development and marketing of the Product.
If UT and Toray can not reach an agreement about how to continue the
development and marketing of the Product according to this Agreement, then
Toray has a right to terminate this Agreement. For the purposes of this Section
10.b.5, "to affect badly the development and marketing of the Product" means
"to result in UT actually missing a milestone date in this Agreement, or
failing to achieve a minimum Net Sales specified in this Agreement".
Furthermore, if the M&A is reasonably expected to result in access to any
information defined in Section 9 by a Third Party with very competitive
products or pipelines to the Product Beraprost), then, prior to the M&A, UT
shall reach agreement with Toray on how to prevent such access to any
Information. No such M&A shall be completed until reasonable measures are in
place to prevent access to Information as a result of any M&A by any Third
Party with very competitive products or pipelines to the Product (Beraprost).
c. Continuing Obligations. Upon expiration or termination of this
Agreement with respect to all countries within the Territory, the rights and
obligations of the parties shall cease, except as follows.
1 the rights and obligations of the Parties under Section 8 shall
survive termination or expiration,
2. upon expiration or termination for any reason, the obligations of
<PAGE> 11
confidentiality and use of Information under Section 9 shall survive for the
period provided therein; and
3. expiration or termination of this Agreement shall not relieve the
parties of any other obligation accruing prior to such termination.
d. Outstanding Inventory. Only upon termination of this Agreement caused
by the reason not attributable to UT, UT shall have the right and option to
sell any completed inventory of Product, as if licensed under this Agreement,
which remains on hand as of thc date of the termination, so long as UT pays to
Toray as required under this Agreement.
11. General.
a, Entire Agreement. This Agreement constitutes the entire agreement
and understanding relating to the subject matter of this Agreement and
supersedes all previous communications, proposals, representations and
agreements, whether oral or written relating to the subject matter of this
Agreement.
b. Assignment. This Agreement is personal to UT and neither this
Agreement nor any particular rights or obligations under this Agreement may be
assigned or otherwise transferred by UT without the prior written consent of
Toray. Any purported assignment in violation of the preceding sentence shall be
void and shall constitute a material default of this Agreement.
c. Force Majeure. A party shall not be held liable or responsible to
another party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement
when such failure or delay is caused by or results from fires, floods,
embargoes, government regulations, prohibitions or interventions, wars, acts of
war (whether war be declared or not), insurrections, riots, civil commotion's,
strikes, lockouts, acts of God, or any other cause beyond the reasonable
control of the affected party.
d. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if personally delivered or mailed by first class
certified or registered mail, postage prepaid, hand delivered, or sent by
telecopy or by reputable overnight courier service which requires signature
upon delivery. Notices sent by U.S. mail shall be deemed delivered three days
after deposit with postal authorities or upon confirmed delivery if personally
delivered, sent by confirmed fax or courier service. Unless otherwise
specified in writing, the mailing addresses of the Parties shall be as
described below:
For UT: United Therapeutics Corporation
68 T.W. Alexander Drive
P0 Box 14186
Research Triangle Park, NC 27709, USA
Attention; Dr. Gilles Cloutier, Ph.D.
<PAGE> 12
Fax Number: 919-485-8352
For Toray: Toray Industries, Inc.
2-1,Nihonbashi-Muromachi 2-chome, Chou-ku, Tokyo 103-8666, JAPAN
Attention: Dr. Masanobu Naruto, Ph.D.
Pharmaceuticals Planning Department.
Fax Number: 81-3-3245-5421
e. Amendment and Waiver. This Agreement may be modified, amended and
supplemented only by written agreement signed by the parties. The waiver by
any party to this Agreement of any breach or violation of any provision of this
Agreement by the other party shall not operate or be construed to be a waiver
of any subsequent breach or violation of the same or 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 New York applicable to contracts
between residents of New York which are wholly executed and performed in New
York, except that questions affecting the validity, construction and effect of
any patent shall be determined by the laws of the country in which the patent
was granted.
g. Arbitration All claims, controversies, disputes or differences
arising between Toray and UT in connection with, arising from, or with respect
to this Agreement, which shall not be resolved within thirty (30) days after
either party notify the other in writing of such claim, controversy, dispute or
difference, shall be submitted for arbitration to the American Arbitration
Association on demand of Toray and shall be submitted for arbitration to the
Japan Commercial Arbitration Association on demand of UT. Such arbitration
proceedings shall be conducted in Washington D.C., USA in accordance with the
then current Commercial Arbitration Rules of the American Arbitration
Association if initiated by Toray and shall be conducted in Tokyo, Japan in
accordance with the then current Commercial Arbitration Rules of the Japan
Commercial Arbitration Association if initiated by UT. The award and decision
of the arbitrator(s) shall be conclusive and binding upon all parties hereto
and judgment upon the award may be entered into any court of general
jurisdiction. This Agreement to arbitrate shall continue in full force and
effect subsequent to and notwithstanding the expiration or termination of this
Agreement.
h. Partial Invalidity. If any provision of this Agreement is found to be
invalid, illegal, or otherwise unenforceable, then the remaining provisions
shall nevertheless remain in full force and effect and shall not be affected by
the modification of striking of the involved or unenforceable provision. The
parties agree to renegotiate in good faith any term held invalid and be bound
by the mutually agreed substitute provision.
j. Independent Contractors. The relationship between Toray and UT is that
of independent contractors. Neither party has any actual or apparent
authority, express or implied, to act on behalf of the other party or to bind
the other party to any obligations. Neither party shall be deemed to be an
agent or servant of the other party or a partner or venturer with the other
party.
<PAGE> 13
IN WITNESS WHEREOF, this Agreement is executed and effective as of the date
first above written.
TORAY INDUSTRIES, INC. UNITED THERAPEUTICS CORPORATION
/s/ Kiyoteru Wakasugi /s/ Martine Rothblatt
- ----------------------- ----------------------
By: Kiyoteru Wakasugi By: Martine Rothblatt
Managing Director of the Board Chief Executive Officer
Date: Sept. 16, 1998 Date: Sept. 24, 1998
----------------- ------------------
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
FOR PORTIONS OF THIS DOCUMENT
EXHIBIT 10.12
EXCLUSIVE LICENSE AGREEMENT
This Exclusive License Agreement ("Agreement") is made this 30th day of
October, effective as of the date of the last signature below (the "Effective
Date"), by and between United Therapeutics Corporation, a Delaware corporation,
having an address at 1826 R Street, N.W., Washington, D.C. 20009 ("UT"), and
Cortech, Inc., a Delaware corporation, having an address at 6850 N. Broadway,
Denver, Colorado 80221 ("Cortech").
WITNESSETH:
WHEREAS, Cortech owns or has rights in certain technology relating to
CE-1037, a serine-elastase inhibitor as described in Exhibit A attached hereto.
WHEREAS, UT desires to obtain an exclusive license under Cortech's rights
in such technology to develop and commercialize products for use in the Field.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the terms defined in this Article 1 shall
have the respective meanings set forth below:
1.1 "Advisory Committee" shall mean the committee composed of
representatives of Cortech and UT described in Section 3.4.1 below.
1.2 "Affiliate" shall mean, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by, or is under common
control with, such Person. A Person shall be regarded as in control of another
Person if it owns, or directly or indirectly controls, at least fifty percent
(50%) of the voting stock or other ownership interest of the other Person, or if
it directly or indirectly possesses the power to direct or cause the direction
of the management and policies of the other Person by any means whatsoever.
1.3 "Consideration" shall mean any cash or non-cash consideration of any
kind whatsoever, whether tangible or intangible, direct or indirect.
1.4 "Cortech Future Improvements" shall mean all improvements to the
Licensed Compound for use in the Field, including without limitation, all data,
know-how, methods, compositions or information, whether or not patentable, which
Cortech develops pursuant to its
<PAGE> 2
obligations under Sections 3.4 and 3.7 of this Agreement during the term of this
Agreement and in which Cortech has an ownership or licensable interest; all to
the extent and only to the extent that that Cortech has the right to grant
licenses, immunities or other rights thereunder during the term of this
Agreement.
1.5 "Dollars" or "$" means United States dollars.
1.6 "FDA" shall mean the United States Food and Drug Administration or any
successor entity.
1.7 "Field" shall mean the treatment of all indications other than the
treatment of dermatological conditions through the use of a topical preparation
administered to the skin.
1.8 "First Commercial Sale" shall mean, with respect to any Product, the
first sale for use or consumption by the general public of such Product. A
transfer of the Product by UT or its sublicensees (a) solely for research and
development purposes and for the purpose of directly enabling UT and its
permitted sublicensees to research and develop Products under this Agreement and
(b) prior to UT's receipt of approval of an NDA by the FDA (or from the
governing health authority of any other country) for use of such Product in
humans, shall not be considered a First Commercial Sale.
1.9 "Law" means any local, state or federal rule, regulation, statute or
law relevant to the activities undertaken pursuant to this Agreement or
applicable to either of the parties with respect to any matters set forth
herein.
1.10 "Licensed Compound" means CE-1037, a serine-elastase inhibitor with
such biochemical structure as described in Exhibit A, and all salts and esters
thereof that are claimed under the Licensed Patent Rights.
1.11 "Licensed Know-How" shall mean all information and data (i) which are
not generally known including, but not limited to, formulae, procedures,
protocols, techniques and results of experimentation and testing, (ii) which are
set forth on Exhibit B attached hereto, (iii) which are necessary or useful for
UT to make, use, develop, sell or seek regulatory approval to market a Product,
and (iv) in which Cortech has an ownership or licensable interest in the
Licensed Know-How as of the date of this Agreement.
1.12 "Licensed Patent Rights" shall mean (a) all issued patents and patent
applications set forth in Exhibit B attached hereto which are owned by or
licensed to Cortech which claim (i) a Product, (ii) the process of manufacture
or use of a Product or (iii) a congener described within the patents or patent
applications set forth in Exhibit B, together with any and all patents that
issue or in the future issue therefrom, including utility and design patents and
certificates of invention, and (b) all divisionals, continuations, reissues,
renewals and extensions to any such patents and patent applications.
2
<PAGE> 3
1.13 "Licensed Technology" shall mean, collectively, the Licensed Compound,
Licensed Patent Rights, Licensed Know-How, Cortech Inventions, Joint Inventions
and the Cortech Future Improvements. Without expanding the foregoing and
notwithstanding anything to the contrary in this Agreement, the foregoing shall
not include any technology, know-how, patent rights, trade secrets, information,
data, inventions, improvements or any intellectual property rights arising from
or relating to (a) Cortech's current or future oral elastase program or (b) the
treatment of dermatological conditions through the use of a topical preparation
administered to the skin.
1.14 "NDA" shall mean a New Drug Application or any equivalent successor
application.
1.15 "Net Sales" shall mean, with respect to any Product, the invoiced
sales price of such Product billed to independent customers who are not
Affiliates, less to the extent included in the invoiced sales price, (a)
credits, allowances, discounts and rebates to, and chargebacks from the account
of, such independent customers for spoiled, damaged, out-dated, rejected or
returned Product; (b) actual shipping and handling, freight and insurance costs
incurred in transporting such Product in final form to such customers; (c) cash,
quantity and trade discounts; and (d) sales, use, value-added and other taxes or
governmental charges incurred in connection with the exportation or importation
of such Product in final form.
1.16 "Orphan Indication" shall mean diseases or conditions affecting
200,000 or fewer people in the United States.
1.17 "Person" shall mean an individual, corporation, partnership, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.18 "Product" shall mean any product for use in the Field which contains,
incorporates, is based upon or is derived in whole or in part from the Licensed
Compound.
1.19 "Royalty Term" shall mean, with respect to each Product in each
country, the period of time equal to the longer of (a) ten (10) years from the
date of the First Commercial Sale of such Product in such country or (b) if the
manufacture, use, import, offering for sale or in sale of such Product in such
country was at the time of the First Commercial Sale in such country covered by
a Valid Patent Claim, the term for which such Valid Patent Claim remains in
effect and would, if in an issued patent, be infringed but for the license
granted by this Agreement.
1.20 "Third Party" shall mean any Person other than Cortech, UT and their
respective Affiliates.
1.21 "Valid Patent Claim" shall mean either (a) a claim of an issued and
unexpired patent included within the Licensed Patent Rights, which has not been
held permanently revoked, unenforceable, unpatentable or invalid by a decision
of a court or other governmental agency of competent jurisdiction, unappealable
or unappealed within the time allowed for appeal, and
3
<PAGE> 4
which has not been admitted to be invalid or unenforceable through reissue or
disclaimer or otherwise or (b) a claim of a pending patent application included
within the Licensed Patent Rights, which claim has not been abandoned or finally
disallowed without the possibility of appeal or refiling of such application.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Each party hereby represents and warrants to the other party as
follows:
2.1.1 Corporate Existence and Power. Such party (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
state in which it is incorporated; (b) has the corporate power and authority and
the legal right to own and operate its property and assets, to lease the
property and assets it operates under lease, and to carry on its business as it
is now being conducted and (c) is in compliance with all requirements of
applicable law, except to the extent that any noncompliance would not have a
material adverse effect on the properties, business, financial or other
condition of it and would not materially adversely affect its ability to perform
its obligations under this Agreement.
2.1.2 Authorization and Enforcement of Obligations. Such party (a) has
the corporate power and authority and the legal right to enter into this
Agreement and to perform its obligations hereunder and (b) has taken all
necessary corporate action on its part to authorize the execution and delivery
of this Agreement and the performance of its obligations hereunder. This
Agreement has been duly executed and delivered on behalf of such party, and
constitutes a legal, valid, binding obligation, enforceable against such party
in accordance with its terms.
2.1.3 No Consents. All necessary consents, approvals and authorizations
of all governmental authorities and other Persons required to be obtained by
such party in connection with this Agreement have been obtained.
2.1.4 No Conflict. As of the Effective Date, the execution and delivery
of this Agreement and the performance of such party's obligations hereunder (a)
do not conflict with or violate any requirement of applicable laws or
regulations, and (b) do not conflict with, or constitute a default under, any
contractual obligation of it.
2.2 Warranties by Cortech. Cortech represents and warrants to UT as of the
Effective Date that to Cortech's actual knowledge:
2.2.1 Cortech is the sole and exclusive licensor or licensee of the
Licensed Technology and has the right to grant the licenses hereunder;
4
<PAGE> 5
2.2.2 Cortech has provided UT access to all information reasonably
available to Cortech which materially addresses the safety profile of compound
CE-1037; and
2.2.3 Cortech is not aware of (a) any pending or threatened claims of
litigation brought by a Third Party under any Third Party patent, trade secret
or other Third Party intellectual property right regarding the Licensed
Technology or compound CE-1037 or (b) any federally-funded research that
directly led to the development of the Licensed Patent Rights or the Licensed
Compound.
2.2.4 Except for arrangements already in place pursuant to which rights
will be transferred by Cortech to UT under this Agreement, Cortech is not aware
of any required third party patent or other intellectual property licenses to
make, sell, use, offer for sale or import compound CE-1037.
2.2.5 Cortech has provided UT with copies of all material agreements
relating to CE-1037, as listed on the attached Exhibit H, and this Agreement is
subject to all relevant provisions of such agreements.
2.2.6 If Cortech receives a notice of default ("Notice of Default")
under Section 5.2 of the License Agreement dated November 2, 1998 between
Cortech and Hoechst Marion Roussel, Inc. ("HMR") relating to elastase inhibitors
(the "HMR Agreement"), Cortech shall notify UT in writing within two (2)
business days.
2.3 Warranties by UT. UT represents and warrants to Cortech that as of the
Effective Date:
2.3.1 UT will use commercially reasonable good faith efforts and
resources to research, develop, seek regulatory approval, commercialize and
market Products for one or more indications; and
2.3.2 UT has delivered to Cortech (i) a complete and correct copy of
UT's Certificate of Incorporation and By-laws, each as amended to date (which
Certificate of Incorporation and By-laws so delivered are in full force and
effect);
2.3.3 UT has the requisite corporate power and authority and has taken
all corporate action necessary in order to execute and deliver the Warrant (as
defined below) and to consummate the transactions contemplated thereby;
2.3.4 The Warrant is a valid and binding agreement of UT enforceable
against UT in accordance with its terms;
2.3.5 No notices, reports or other filings are required to be made by
UT with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained
5
<PAGE> 6
by UT from, any governmental entity in connection with the execution and
delivery of the Warrant by UT and the consummation by UT of the transactions
contemplated thereby;
2.3.6 The execution and delivery of the Warrant by UT do not, and the
consummation of the transactions contemplated thereby by UT will not, constitute
or result in (i) a breach or violation of, or a default under, the Certificate
of Incorporation or By-Laws of UT or (ii) a breach or violation of, a default
under, the acceleration of or the creation of a lien, pledge, security interest
or other encumbrance on assets (with or without the giving of notice or the
lapse of time) pursuant to, any provision of any contract, agreement, lease,
note, or mortgage, indenture, arrangement or other obligation of UT (or by which
its assets or properties are bound) or any law, ordinance, rule or regulation or
judgment, decree, order, award or governmental or non-governmental permit or
license to which UT (or its assets or properties) is subject;
2.3.7 The authorized capital stock of UT consists of fifty million
(50,000,000) shares of common stock, par value $0.01 per share ("Common Stock"),
and ten million (10,000,000) shares of preferred stock, par value $0.01 per
share ("Preferred Stock"). As of the date hereof, (i) twenty-eight million four
hundred and fourteen thousand nine hundred and thirteen (28,414,913) shares of
Common Stock and no shares of Preferred Stock were issued and outstanding, (ii)
no shares of Common Stock were held by UT in its treasury, (iii) five million
(5,000,000) shares of Common Stock were reserved for issuance pursuant to
outstanding stock options to purchase shares of Common Stock ("Stock Options")
granted pursuant to UT's Employee Stock Option Plan and an additional one
million (1,000,000) shares of Common Stock were reserved for the grant of other
Stock Options.
2.3.8 All outstanding shares of Common Stock are, and all shares of
Common Stock to be issued upon any exercise of the Warrant will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights;
2.3.9 As of the date hereof, except for the Warrant and as disclosed in
Section 2.3.7, there are no options, warrants, calls, rights, commitments or
agreements of any character to which UT is a party or by which it is bound
obligating UT to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of UT or obligating UT to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement;
2.3.10 UT has provided Cortech with (i) UT's audited balance sheet as
of December 31, 1997 and the related statements of operations, changes in
stockholders' equity and cash flows for the period June 26, 1996 to December 31,
1996 and year then ended, and (ii) UT's unaudited balance sheet as of August 31,
1998 and the related statements of operations, changes in stockholders' equity
and cash flows for the one month and eight-month period then ended (the audited
balance sheet at December 31, 1997 is hereinafter referred to as the "BALANCE
SHEET," and all such financial statements are hereinafter referred to
collectively as the "FINANCIAL STATEMENTS");
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2.3.11 The audited Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved and are in accordance with UT's
books and records, and fairly present the financial position of UT and the
results of its operations as of the date and for the periods indicated thereon,
subject in the case of the unaudited portion of the Financial Statements to (i)
normal year-end audit adjustments which will not be material and (ii) the
absence of certain footnote disclosures;
2.3.12 At the date of the Balance Sheet (the "BALANCE SHEET DATE") and
as of the date hereof, UT had and has no liabilities or obligations, secured or
unsecured (whether accrued, absolute, contingent or otherwise - collectively,
"LIABILITIES") not reflected on the Balance Sheet except for Liabilities (i) as
may have arisen in the ordinary course of business prior to the date of the
Balance Sheet and which, under GAAP, would not have been required to be
reflected on the Balance Sheet and (ii) incurred in the ordinary course of
business since the date of the Balance Sheet which are usual and normal in
amount, but in any event not greater than $50,000.00 in the aggregate (inclusive
of clauses (i) and (ii));
2.3.13 On or about July 31, 1998, UT closed a private placement of
Common Stock resulting in gross proceeds to UT of not less than $5,000,000.00 at
a selling price of not less than $3.00 per share of Common Stock; and
2.3.14 There are no schedules of exceptions to any of the private
placements or stock offerings conducted by UT as of the date of this Agreement
which have not been provided to Cortech and UT is not aware of any material
information which has not been provided to Cortech which would reasonably be the
subject of inclusion on a schedule of exceptions with respect to the Warrant.
2.3.15 In connection with the private placements or stock offerings
conducted by UT as of the date of this Agreement, no third party has been
granted any material rights in connection with the stock which is the subject of
such private placements or stock offerings not granted to Cortech with respect
to the Warrant. UT has shared information with Cortech regarding warrant grants
as set forth in Exhibit G.
2.3.16 Any and all financial information or financial data pertaining
to UT, at the time such information or data was furnished by or on behalf of UT
to Cortech, does not contain any untrue statement of a material fact and does
not omit to state any material fact necessary to make any statement, in light of
the circumstances under which such statement was made, not misleading.
2.4 Disclaimer by Cortech. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 2,
CORTECH MAKES NO OTHER REPRESENTATIONS, WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE LICENSED TECHNOLOGY OR THE LICENSED COMPOUND AND CORTECH
DISCLAIMS ALL OTHER REPRESENTATIONS, WARRANTIES, EXPRESS AND IMPLIED, INCLUDING
WITHOUT
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LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND NONINFRINGEMENT. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 2,
CORTECH MAKES NO REPRESENTATION AND EXTENDS NO WARRANTIES WHATSOEVER, EITHER
EXPRESS OR IMPLIED, (A) THAT THE LICENSED TECHNOLOGY MAY BE UTILIZED TO CREATE
ANY PRODUCT, (B) THAT THE LICENSED TECHNOLOGY OR A PRODUCT MANUFACTURED, USED,
SOLD OR OTHERWISE MARKETED UNDER THE LICENSED TECHNOLOGY SHALL BE FREE FROM
INFRINGEMENT OF ANY THIRD PARTY PATENT (WHETHER PRESENTLY ISSUED OR WHICH MAY
ISSUE IN THE FUTURE) OR OTHER INTELLECTUAL PROPERTY RIGHT OR (C) THAT THE
LICENSED TECHNOLOGY COMPRISES INVENTIONS WHICH WILL MATURE INTO ISSUED PATENTS
HAVING VALID AND ENFORCEABLE CLAIMS OR (D) THAT THE LICENSED TECHNOLOGY
COMPRISES PATENTS WHICH WILL REMAIN VALID AND ENFORCEABLE.
ARTICLE 3
DEVELOPMENT AND COMMERCIALIZATION PROGRAM
3.1 Research and Development Efforts. UT shall use its commercially
reasonable efforts to develop and conduct such research, development and
preclinical and human clinical trials to obtain all regulatory approvals to
manufacture, market and commercialize such Products as UT determines are
commercially reasonably feasible, and diligently obtain necessary approvals to
commence marketing and market each such Product in such countries as UT
determines are commercially feasible; provided however, that UT shall have the
right to distribute (without receipt of Consideration and without payment of a
royalty to Cortech) in any calendar year for compassionate purposes to indigent
patients, an aggregate of up to ten percent (10%) of the total number of
Products sold in units (with the receipt of Consideration) in such calendar year
by UT, its Affiliates and sublicensees. UT, at its sole expense, shall fund the
costs of all such research, development, preclinical and clinical trials,
regulatory approval, manufacture of the Products and commercialization and
marketing of the Products. UT shall use its commercially reasonable efforts to
conduct such research, development, clinical trials, manufacturing and
commercialization and marketing of Products pursuant to the development plan and
timeline attached hereto as Exhibit C. UT will solely and exclusively own all
regulatory applications and approvals obtained by UT with respect to Products.
3.2 Records. UT shall maintain records, in sufficient detail and in good
scientific manner appropriate for patent purposes, which shall reflect all work
done and results achieved in the performance of its research and development
regarding the Licensed Technology and the Products (including all data in the
form required under all applicable laws and regulations).
3.3 Reports. On a yearly basis, within ninety (90) days following the end
of each calendar year during the term of this Agreement, UT shall prepare and
deliver to Cortech a
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written report which shall describe, in reasonably sufficient detail (a) the
research performed by UT to date employing the Licensed Technology, (b) the
progress of the development and testing of Products in clinical trials and (c)
the status of obtaining the necessary approvals to market Products. In addition,
UT shall use its best efforts to provide Cortech with a minimum of three (3)
months' advance written notice of the contemplated filing of an Investigational
New Drug application ("IND") in the United States (or similar application in any
other country), written notice of all other regulatory filings and submissions
prior to the date of such submissions, and written notice of all approvals
obtained promptly after obtaining such approvals. UT shall keep Cortech
reasonably apprised of all written information or feedback provided by
regulatory authorities to UT during the term of this Agreement.
3.4 Advisory Committee.
3.4.1 Composition of the Advisory Committee. The Advisory Committee
shall be comprised of two (2) named representatives of Cortech and two (2) named
representatives of UT. Each party shall appoint its respective representatives
to the Advisory Committee from time to time, and may substitute one or more of
its representatives, in its sole discretion, effective upon notice to the other
party of such change. Notwithstanding anything to the contrary in this
Agreement, if Cortech is unable, for any material reason, to appoint such
representatives to the Advisory Committee or to participate in such Advisory
Committee meetings, such inability shall not be considered a breach of this
Agreement by Cortech.
3.4.2 Meetings. The Advisory Committee shall meet not less than once
each calendar quarter during the term of this Agreement on such dates and at
such times and places as agreed to by Cortech and UT, alternating between
Cortech's principal offices and UT's principal offices, or such other locations
as the parties shall agree, unless both parties mutually determine that a
meeting should not take place. At such meetings, the Advisory Committee shall
discuss UT's research, development and commercialization efforts under this
Agreement and establish priorities therefor, and shall discuss any actual
regulatory filings regarding Products together with any anticipated regulatory
filings with respect to possible Products. Each party shall bear its own
expenses in connection with travel and attendance at such meetings.
3.5 Purchase of Compound. UT, at UT's sole expense, shall have the right to
purchase the compound CE-1037 from Cortech's existing inventory in such
intermediate and bulk forms, amounts and prices set forth on Exhibit D hereto.
From time to time, upon the request of UT, Cortech may sell to UT additional
amounts of compound CE- 1 03 7 in such form and in such amounts as UT requests
and Cortech agrees to provide to UT; provided however, that (a) such compound
CE-1037 is reasonably available to Cortech in the forms and amounts requested by
UT and (b) Cortech shall have no obligations regarding Cortech's ability to
supply compound CE-1037 to UT or with respect to the quality, quantity,
viability or purity of compound CE-1037. UT will be solely responsible for all
costs and expenses relating to shipping, handling and delivery of compound
CE-1037 to UT. UT shall have the right to purchase the Licensed Compound from a
cGMP supplier, provided that, the royalty reduction under Section 5.7 shall not
apply to any royalty paid by UT to such supplier.
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3.6 Cessation of Development by UT. UT may choose to discontinue
development of Products under this Agreement at any time without penalty upon
written notice to Cortech if, in UT's commercially reasonable discretion, the
Products do not satisfy the clinical needs for UT's targeted clinical
indications; provided that, upon such discontinuation of development by UT (a)
all rights and licenses to the Licensed Technology granted by Cortech to UT
under this Agreement shall terminate and revert to Cortech; and (b) Cortech
shall have an unrestricted royalty-free exclusive license (with the right to
grant sublicenses) to conduct research and development and to make, use, sell,
offer for sale and import products (the "Cortech Products") utilizing or
incorporating inventions, improvements, compositions, know-how, data,
information, materials, regulatory filings and any intellectual property arising
out of or relating to UT's performance under this Agreement or UT's use of the
Licensed Technology (collectively, the "UT Improvements"). Upon such
discontinuation, UT shall promptly provide and deliver to Cortech the UT
Improvements. If such discontinuation of Product development by UT occurs during
or after UT's initiation of Phase III clinical studies, the license to Cortech
under subparagraph (b) above shall bear a [ ] royalty on Net Sales of Cortech
Products by Cortech to Third Parties, on a country-by-country basis, for the
longer of (x) ten (10) years from the date of Cortech's first commercial sale of
Cortech Products or (y) if the manufacture, use, import, offering for sale or
sale of Cortech Products was at the time of Cortech's first commercial sale of
Cortech Products covered by a patent owned by UT, the term for which such patent
remains in effect and would, if in an issued patent, be infringed. UT shall
promptly provide Cortech with all UT Improvements within thirty (30) days after
UT's discontinuation of Product development.
3.7 Cortech Obligations.
3.7.1 Within thirty (30) days following the execution of this
Agreement, Cortech shall supply UT with the information, items and other
materials relating to the Licensed Technology set forth on Exhibit E attached
hereto.
3.7.2 Cortech shall, upon the reasonable request of UT and subject to
the availability of Cortech personnel, provide UT with such reasonable
assistance and consultation that is mutually agreed to by Cortech and UT
regarding the Licensed Compound and the Licensed Technology, such agreement of
Cortech not to be unreasonably withheld or delayed. UT shall compensate Cortech
for such assistance and consultation at an hourly rate which shall be agreed to
by the parties in good faith. UT shall also reimburse Cortech for all reasonable
costs and expenses incurred by Cortech in connection with Cortech's assistance
and consultation under this Section 3.7.2. Cortech makes no representations,
warranties or covenants regarding the assistance or consulting services (if any)
provided by Cortech to UT under this Section 3.7.2.
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ARTICLE 4
LICENSE GRANT
4.1 Licensed Technology. Cortech hereby grants to UT and its Affiliates a
worldwide, exclusive, royalty-bearing license (with the right to grant
sublicenses as set forth in Section 4.2 below) under the Licensed Technology to
develop, make, have made, use, import, offer for sale and sell Products for use
in the Field.
4.2 Sublicenses. UT shall have the right to grant sublicenses under the
licenses in Section 4.1 above to any Third Party or Affiliate. UT shall deliver
a copy of each sublicense under this Agreement to Cortech promptly after
execution of the same. Each sublicense shall be subject to the terms and
conditions of this Agreement.
4.3 Cortech Future Improvements. Cortech shall notify UT within ninety (90)
days of Cortech's development (if any) of a Cortech Future Improvement.
ARTICLE 5
LICENSE FEES, ROYALTIES AND MILESTONE PAYMENTS
5.1 License Fees, Common Stock, Warrants. In consideration for the
exclusive license granted to UT herein, UT shall on the Effective Date:
5.1.1 Pay to Cortech a non-refundable license fee of [ ];
5.1.2 Execute and deliver to Cortech the Stock Purchase Warrant (the
"Warrant") attached hereto as Exhibit F which provides for the issuance to
Cortech of warrants to acquire three hundred and fifty thousand (350,000) shares
of UT common stock. The Warrant shall be exercisable by Cortech twenty-four (24)
months after the Effective Date (the "Warrant Exercise Date") at a purchase
price as described in Exhibit F, provided that, UT, using its commercially
reasonable discretion, has not terminated all research, development and
commercialization efforts regarding the Licensed Compound and the Products as
set forth in Section 3.6 above prior to the Warrant Exercise Date. UT's
execution and delivery of the Warrant shall be a condition precedent to this
Agreement.
5.2 Royalty. In further consideration for the exclusive license granted to
UT herein, during the Royalty Term, UT shall pay to Cortech the following
royalties:
5.2.1 A royalty of [ ] of Net Sales of Products (or Consideration
received) by UT, its Affiliates and sublicensees, where Net Sales (or
Consideration received) for the quarter in which such royalties are due are [ ]
or less;
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5.2.2 A royalty of [ ] Of Net Sales of Products (or Consideration
received) by UT, its Affiliates and sublicensees, where Net Sales (or
Consideration received) for the quarter in which such royalties are due are
greater than [ ] but less than [ ]; and
5.2.3 A royalty of [ ] of Net Sales of Products (or Consideration
received) by UT, its Affiliates and sublicensees, where Net Sales (or
Consideration received) for the quarter in which such royalties are due are
greater than [ ].
5.3 Accrual of Royalties. No royalty shall be payable on a Product
distributed to Third Parties solely for marketing and advertising purposes or as
a sample for testing or evaluation purposes; provided however, that UT shall be
obligated to pay royalties as set forth in Section 5.2 above if UT receives
Consideration for such distribution. No multiple royalty shall be payable on a
Product because the manufacture, use or sale of such Product is covered by more
than one Licensed Patent Right.
5.4 General Milestone Payments. As further consideration for the exclusive
license granted to UT under this Agreement, UT shall pay Cortech a
non-refundable milestone payment of [ ] on the earlier of (a) enrollment of the
first patient in the first clinical study in any country, using the Licensed
Compound, which is designed and "statistically powered" to demonstrate a
beneficial effect on a primary efficacy endpoint, or (b) the date two (2) years
and six (6) months after the Effective Date; provided that, with respect to this
clause (b), (i) a governmental regulatory agency has not imposed a material
restriction on UT's Product regulatory approval activities under this Agreement,
which restriction has delayed or prevented UT from commencing such clinical
trial, (ii) a governmental regulatory agency has not required UT to materially
change the development plan and timeline set forth in Exhibit C, which change
has delayed or prevented the commencement of such clinical trial or (iii)
negative or equivocal study results have not arisen which necessitate a material
and significant change in the development plan and timeline set forth in Exhibit
C, which change has delayed or prevented the commencement of such clinical
trial, and provided further in any event, such milestone payment shall be due
and payable as set forth in clause (a) above.
5.5 Milestone Payments for Orphan Indications. As further consideration for
the exclusive license granted to UT under this Agreement, UT shall pay Cortech
the following non-refundable milestone payments upon the first occurrence of
each event set forth below with respect to the first Product developed by or for
UT for an Orphan Indication which achieves such milestone set forth below:
5.5.1 [ ] upon filing an NDA in the United States;
5.5.2 [ ] upon the filing of a marketing authorization
application (MAA) in any country outside of
the United States;
5.5.3 [ ] upon receipt of the required marketing
approval from the FDA;
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5.5.4 [ ] upon receipt of MAA approval from the
governing health authority of any country
(other than the United States); and
5.5.5 [ ] on the date which is one year after the
date of UT's First Commercial Sale.
5.6 Milestone Payments for Non-Orphan Indications. As further consideration
for the exclusive license granted to UT under this Agreement, UT shall pay
Cortech the following non-refundable milestone payments upon the first
occurrence of each event set forth below with respect to the first Product
developed by or for UT for a non-Orphan Indication which achieves such milestone
set forth below:
5.6.1 [ ] upon commencement of Phase III clinical
trials in the United States (or their
equivalent in any other country);
5.6.2 [ ] upon filing an NDA in the United States;
5.6.3 [ ] upon the filing of an MAA in any country
outside the United States;
5.6.4 [ ] upon receipt of the required marketing
approval from the FDA; and
5.6.5 [ ] upon receipt of MAA approval from the
governing health authority of any country
(other than the United States).
5.7 Third Party Royalties. If UT is required during any quarter, with
respect to any Product in any country, to pay to Third Parties a royalty greater
than [ ] of Net Sales (the "Threshold Royalty") in order to exercise its rights
hereunder to practice any process or method, or to make, use or sell any
composition which is the subject of a Valid Claim in such country, the royalties
owning from UT to Cortech shall be offset as set forth below.
5.7.1 If such Net Sales of Products by UT, its Affiliates and
sublicensees are equal to or greater than [ ] for such quarter, then UT shall
have the right to credit the amount of such Third Party royalty payments in such
country against the royalties owing to Cortech under Section 5.2 above as set
forth in this Section 5.7.1. If the royalties payable by UT to such Third
Parties in such country exceeds the Threshold Royalty, the royalties payable by
UT to Cortech under Section 5.2 above for Products sold by UT in such country
shall be reduced by [ ] for each [ ] royalty payable by UT over the Threshold
Royalty; provided however that such royalty reductions shall not exceed [ ]. By
way of explanation and illustration only, if during a quarter UT has total
quarterly Net Sales greater than [ ] and UT is required in a particular country
to pay to Third Parties a total aggregate royalty of [ ] of Net Sales in such
country, the royalties owed by UT to Cortech for UT's Net Sales in such country
would be reduced by a total of [ ] (i.e., a [ ] reduction in the royalties
payable to Cortech for each [ ] royalty payable to the Third Parties over the
Threshold Royalty, up to a maximum reduction of [ ], and the total royalty
amount payable by UT to Cortech in such country would be equal to [ ] instead of
[ ].
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5.7.2 If such Net Sales of Products by UT, its Affiliates and
sublicensees are equal to or greater than [ ] but less than [ ] for such
quarter, then UT shall have the right to credit the amount of such Third Party
royalty payments in such country against the royalties owing to Cortech under
Section 5.2 above as set forth in this Section 5.7.2. If the royalties payable
by UT to such Third Parties in such country exceeds the Threshold Royalty, the
royalties payable by UT to Cortech under Section 5.2 above for Products sold by
UT in such country shall be reduced by [ ] for each [ ] royalty payable by UT
over the Threshold Royalty; provided however that such royalty reductions shall
not exceed [ ].
5.7.3 If such Net Sales of Products by UT, its Affiliates and
sublicensees are less than [ ] for such quarter, then UT shall have the right to
credit the amount of such Third Party royalty payments in such country against
the royalties owing to Cortech under Section 5.2 above as set forth in this
Section 5.7.3. If the royalties payable by UT to such Third Parties in such
country exceeds the Threshold Royalty, the royalties payable by UT to Cortech
under Section 5.2 above for Products sold by UT in such country shall be reduced
by [ ] for each [ ] royalty payable by UT over the Threshold Royalty; provided
however that such royalty reductions shall not exceed [ ].
5.8 HMR Agreement. In the event that Cortech fails to cure a Notice of
Default within forty-five (45) days of receipt, upon UT's written request,
Cortech shall assign the HMR Agreement to UT. In the event that such an
assignment is made, Cortech shall provide a credit to UT against the royalties
UT is required to pay to Cortech under Section 5.2 above equivalent to twice the
amount of the reasonable and direct expenses incurred by UT as a result of the
assignment, including but not limited to, payment of royalties to HMR required
under the Agreement.
ARTICLE 6
ROYALTY REPORTS AND ACCOUNTING
6.1 Reports, Exchange Rates. UT shall notify Cortech in writing promptly
upon the First Commercial Sale of a Product by UT, its Affiliates or its
sublicensees. During the term of this Agreement following the First Commercial
Sale of a Product, UT shall furnish to Cortech a quarterly written report
showing in reasonably specific detail, on a country by country basis, (a) the
gross sales of each Product sold by UT, its Affiliates and its sublicensees
during the reporting period and the calculation of Net Sales from such gross
sales; (b) the royalties payable in Dollars, if any, which shall have accrued
hereunder based upon Net Sales of each Product; (c) the withholding taxes, if
any, required by law to be deducted in respect of such sales, (d) the date of
the First Commercial Sales of each Product in each country during the reporting
period; and (e) the exchange rates used in determining the amount of Dollars.
With respect to sales of Products invoiced in Dollars, the gross sales, Net
Sales, and royalties payable shall be expressed in Dollars. With respect to
sales of Products invoiced in a currency other than Dollars, the gross sales,
Net Sales and royalties payable shall be expressed in the domestic currency of
the party
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making the sale together with the Dollar equivalent of the royalty payable. The
Dollar equivalent shall be calculated using the average exchange rate (local
currency per US$1) published in The Wall Street Journal Western Edition, under
the heading "Currency Trading," on each of the last business day of each month
during the applicable calendar quarter. Reports shall be due on the
seventy-fifth (75th) day following the close of each quarter. UT, its Affiliates
and its sublicensees shall keep complete and accurate records in sufficient
detail to properly reflect all gross sales and Net Sales and to enable the
royalties payable hereunder to be determined.
6.2 Audits.
6.2.1 Upon the written request of Cortech, and not more than twice in
each calendar year, UT shall permit an independent certified public accounting
firm of globally recognized standing, selected by Cortech, at Cortech's expense,
to have access during normal business hours to such of the records of UT as may
be reasonably necessary to verify the accuracy of the royalty reports hereunder
for the last three (3) full fiscal years prior to the date of such request. The
accounting firm shall disclose to Cortech or its licensors only whether the
records are correct or not and the specific details concerning any
discrepancies. No other information shall be shared.
6.2.2 If such accounting firm concludes that additional royalties were
owed during such period, UT shall pay the additional royalties within thirty
(30) days of the date Cortech delivers to UT such accounting firm's written
report so concluding. The fees charged by such accounting firm shall be paid by
Cortech; provided however, if the audit discloses that the royalties payable by
UT for the audited period are more than one hundred five percent (105%) of the
royalties actually paid for such period, then UT shall pay the reasonable fees
and expenses charged by such accounting firm.
6.2.3 UT shall include in each permitted sublicense granted by it
pursuant to this Agreement a provision requiring the sublicensee to make reports
to UT, to keep and maintain records of sales made pursuant to such sublicense
and to grant access to such records by Cortech's independent accountant to the
same extent required of UT under this Agreement. Upon the expiration of
twenty-four (24) months following the end of any year, the calculation of
royalties payable with respect to such year shall be binding and conclusive upon
Cortech and UT, its Affiliates and sublicensees.
6.3 Confidential Financial Information. Cortech shall treat all financial
information subject to review under this Article 6 or under any sublicense
agreement as confidential, and shall cause its accounting firm to retain all
such financial information in confidence.
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ARTICLE 7
PAYMENTS
7.1 Payment Terms. Royalties shown to have accrued by each royalty report
provided for under Article 6 above shall be due and payable on the date such
royalty report is due. Payment of royalties in whole or in part may be made in
advance of such due date.
7.2 Payment Method. Except as provided in this Section 7.2, all payments by
UT to Cortech under this Agreement shall be paid in Dollars, and all such
payments shall be originated from a United States bank located in the United
States and made by bank wire transfer in immediately available funds to such
account as Cortech shall designate before such payment is due. Upon Cortech's
election made in writing not less than thirty (30) days prior to any payment
date, UT shall pay all royalties owing to Cortech hereunder in the currency in
which such royalties accrued, without conversion into Dollars.
7.3 Exchange Control. If at any time legal restrictions prevent the prompt
remittance of part or all royalties with respect to any country where the
Product is sold, payment shall be made through such lawful means or methods as
Cortech reasonably shall determine.
7.4 Withholding Taxes. All amounts owing from UT to Cortech under this
Agreement are net amounts, and shall be grossed-up to account for any
withholding taxes, value-added taxes or other materially similar taxes, levies
or charges with respect to such amounts, other than United States taxes, payable
by UT, its Affiliates or sublicensees, or any taxes required to be withheld by
UT, its Affiliates or sublicensees having a permanent establishment in any
country or otherwise being subject to taxation by such country (except solely by
reason of the license granted under this Agreement).
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ARTICLE 8
INFRINGEMENT ACTIONS BY THIRD PARTIES
If UT, or any of its Affiliates, sublicensees or customers shall be sued by
a Third Party for infringement of a Third Party's patent because of the
manufacture, use or sale of Products, UT shall promptly notify Cortech in
writing of the institution of such suit. If the alleged infringing process,
method or composition is claimed under the Licensed Patent Rights, UT shall
promptly cease the manufacture, use, sale, offering for sale or importation of
the allegedly infringing process, method or composition claimed under the
Licensed Patent Rights and UT shall have the right, subject to the reasonable
approval of Cortech, to control the defense of such suit at UT's own expense, in
which event Cortech shall have the right to be represented by advisory counsel
of its own selection, at its own expense, and shall cooperate fully in the
defense of such suit and furnish to UT all evidence and assistance in its
control. If UT does not elect within thirty (30) days after such notice to so
control the defense of such suit, Cortech may undertake such control at its own
expense, and UT shall then have the right to be represented by advisory counsel
of its own selection, at its own expense, and UT shall cooperate fully in the
defense of such suit and otherwise furnish to Cortech all evidence and
assistance in UT's control. The party controlling the suit may not settle the
suit or otherwise consent to an adverse judgment in such suit that diminishes
the rights or interests of the non-controlling party without the express written
consent of the non-controlling party. Any judgments, settlements or damages
payable with respect to legal proceedings covered by this Article 8 shall be
paid by the party which controls the litigation.
ARTICLE 9
CONFIDENTIALITY
9.1 Confidential Information. During the term of this Agreement, and for a
period of five (5) years following the expiration or earlier termination hereof,
each party shall maintain in confidence all information of the other party
(including samples) disclosed by the other party and identified as, or
acknowledged to be, confidential (the "Confidential Information"), and shall not
use, disclose or grant the use of the Confidential Information except on a
need-to-know basis to those directors, officers, affiliates, employees,
permitted licensees, permitted assignees and agents, consultants, lawyers,
bankers, clinical investigators or contractors, to the extent such disclosure is
reasonably necessary in connection with such party's activities as expressly
authorized by this Agreement. To the extent that disclosure is authorized by
this Agreement, prior to disclosure, each party hereto shall obtain agreement of
any such Person to hold in confidence and not make use of the Confidential
Information for any purpose other than those permitted by this Agreement. Each
party shall notify the other promptly upon discovery of any unauthorized use or
disclosure of the other party's Confidential Information.
9.2 Permitted Disclosures. The confidentiality obligations contained in
Section 9.1 above shall not apply to the extent that (a) any receiving party
(the "Recipient") is required (i) to
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disclose information by law, order or regulation of a governmental agency or a
court of competent jurisdiction, or (ii) to disclose information to any
governmental agency for purposes of obtaining approval to test or market a
product, provided in either case that the Recipient shall provide written notice
thereof to the other party and sufficient opportunity to object to any such
disclosure or to request confidential treatment thereof, or (b) the Recipient
can demonstrate that (i) the disclosed information was public knowledge at the
time of such disclosure to the Recipient, or thereafter became public knowledge,
other than as a result of actions of the Recipient in violation hereof; (ii) the
disclosed information was rightfully known by the Recipient (as shown by its
written records) prior to the date of disclosure to the Recipient by the other
party hereunder; (iii) the disclosed information was disclosed to the Recipient
on an unrestricted basis from a source unrelated to any party to this Agreement
and not under a duty of confidentiality to the other party or (iv) the disclosed
information was independently developed by the Recipient without use of the
Confidential Information disclosed by the other party.
9.3 Terms of this Agreement. Except as otherwise provided in Section 9.2
above and subject to either party's reporting obligations under applicable state
and federal laws, Cortech and UT shall not disclose any terms or conditions of
this Agreement to any Third Party without the prior consent of the other party.
Notwithstanding the foregoing, prior to execution of this Agreement, UT and
Cortech shall agree upon the substance of information that can be used to
describe the terms of this transaction in a press release or other similar
publication, and UT and Cortech may disclose such information, as modified by
mutual agreement from time to time, without the other party's consent.
9.4 Publication. Neither party shall submit for written or oral publication
or presentation any manuscript, abstract, writing, printed material or the like
which includes data or any other information generated and provided solely by
the other party without first obtaining the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed, provided,
however, that valid commercial reasons may exist for withholding such consent.
Nothing contained herein shall be construed as precluding either party from
making, in its discretion, any disclosures of information of any type which
relate to the safety, efficacy, toxicology or pharmacokinetic characteristics of
the Products to the extent that either party may be required by law to make
disclosures of such information.
ARTICLE 10
PATENTS
10.1 Ownership of Inventions and Patents. The entire right and title in all
inventions, discoveries, improvements or other technology for the manufacture or
use of a Product, and all methods and processes relating thereto, whether or not
patentable, and any patent applications or patents based thereon, made or
conceived during and pursuant to the obligations of the parties set forth in
this Agreement (collectively, the "Inventions") (a) by employees or others
acting solely on behalf of Cortech or its Affiliates shall be owned solely by
Cortech (the "Cortech
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Inventions"), (b) by employees or others acting solely on behalf of UT, its
Affiliates or its sublicensees shall be owned solely by UT (the "UT
Inventions"), and (c) by employees or others acting jointly on behalf of Cortech
and UT or their respective Affiliates and sublicensees, shall be owned jointly
by Cortech and UT (the "Joint Inventions"). Each party promptly shall disclose
to the other party the making, conception or reduction to practice of Inventions
by employees or others acting on behalf of such party. Cortech and UT each
hereby represents that all employees and other Persons acting on its behalf in
performing its obligations under this Agreement shall be obligated under a
binding written agreement to assign to it, or as it shall direct, all Inventions
made or developed by such employees or other Persons; provided however that in
the case of an arrangement between UT and a university whereby Inventions arise
during the course of such university's performance of research or development
work with respect to a Product, UT shall have the right to enter into a binding
written agreement with such university for such Inventions to be either assigned
to UT or exclusively licensed to UT (on a worldwide basis with the right to
sublicense) by such university, provided that, all university employees
performing such research or development are under binding written agreements
with such university to assign to such university all Inventions made or
developed by such university employees.
10.2 Prosecution and Maintenance. Cortech and UT each shall have the right,
at its discretion and using commercially reasonable practices, control the
prosecution, grant and maintenance of its patent rights on its Inventions, and
to select all patent counsel or other professionals to advise, represent or act
for it in all matters relating to the prosecution and maintenance of its patent
rights on its Inventions. All costs incurred in connection therewith shall be
borne by the party taking action with respect to such patent rights on such
Inventions. UT shall control the prosecution, grant and maintenance of patent
rights regarding Joint Inventions, and UT and Cortech shall bear all costs
incurred in connection therewith. With respect to the costs of prosecution and
maintenance, Cortech shall bear [ ] of such costs and UT shall bear [ ] of such
costs. UT shall inform Cortech at regular intervals, or on request, about the
status of joint patent applications or joint patents for which it is
responsible.
In the event that Cortech or UT elects not to file a patent application or
decides to abandon any pending application or granted patent under its patent
rights (or Cortech, in the case of the Licensed Patent Rights), the UT
Inventions or the Joint Inventions in any country, it shall provide adequate
notice to the other party and give the other party the opportunity to file or
maintain such application or patent at its own expense; provided, however, that
except for the right to file and maintain such patent rights, the ownership
rights of Cortech and UT to such patent rights shall not be affected by reason
of this paragraph.
10.3 Cooperation. Each party shall make available to the other party or its
authorized attorneys, agents, consultants or representatives, if available, such
information necessary or appropriate to enable the appropriate party (at the
appropriate party's cost and expense) to file, prosecute and maintain patent
applications and resulting patents with respect to Inventions, as set forth in
Section 10.2 above, for a period of time reasonably sufficient for such party to
obtain the assistance it needs from such personnel. Where appropriate, each
party shall sign or cause to have signed all documents relating to said patent
applications or patents at no charge to the other.
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10.4 No Other Technology Rights. Except as otherwise provided in this
Agreement, under no circumstances shall a party, as a result of this Agreement,
obtain any ownership interest or other right in any technology, Licensed
Technology, Licensed Compound, know-how, patents, pending patent applications,
products, compounds, materials, vaccines, antibodies, cell lines or cultures, or
animals of the other party, including items owned, controlled or developed by
the other, or transferred by the other to such party at any time pursuant to
this Agreement. It is understood and agreed by the parties that this Agreement
does not grant to either party any license or other right in basic technology of
the other party except to the extent necessary to enable the parties to carry
out their obligations under this Agreement or the research, development,
commercialization and marketing of Products.
10.5 Notification of Infringement. Each party shall notify the other party
of any significant and continuing infringement known to such party of any joint
patent rights on Joint Inventions or patent rights of the other party and shall
provide the other party with the available evidence, if any, of such
infringement.
10.6 Enforcement of Licensed Patent Rights and Joint Inventions. UT, in the
case of Joint Inventions and Cortech, in the case of Licensed Patent Rights (the
"Enforcing Party") shall in good faith use its commercially reasonable
discretion and efforts to enforce such patent rights against infringers, and to
consult with the other party both prior to and during such enforcement.
The Enforcing Party shall have six (6) months from the date of receipt of
notice under this Section 10.6 to abate the infringement, or to file suit
against at least one of the infringers, at its sole expense, following
consultation with the other party; provided, however, that within thirty (30)
days after receipt of notice from the party whose patent rights allegedly are
being infringed of its intent to file such suit, the other party shall have the
right to fund up to one-half (1/2) of the costs of such suit.
If the Enforcing Party does not within six (6) months of receipt of such
notice, abate the infringement or file suit to enforce the patent rights against
at least one infringing party in a country, the other party shall have the right
to take whatever action it deems appropriate in its own name or, if required by
law, in the name of the party whose patent rights allegedly are being infringed,
to enforce the patent rights, provided that, the foregoing provisions of this
sentence shall not apply if the board of directors of UT or Cortech, in their
commercially reasonable discretion, has made a good faith determination that
such infringement should not be abated and provided, further, that, within sixty
(60) days after receipt of notice of the other party's intent to file such suit,
the Enforcing Party shall have the right to jointly prosecute such suit and to
fund up to one-half (1/2) the costs of such suit.
The party controlling the action may not settle the action or otherwise
consent to an adverse judgment in such action that diminishes the rights or
interests of the non-controlling party without the express written consent of
the non-controlling party. All monies recovered upon the final judgment or
settlement of any such suit shall be shared, after reimbursement of
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expenses, by Cortech and UT pro rata according to the respective percentages of
costs borne by each party in such suit pursuant to this Section 10.6.
Notwithstanding the foregoing, Cortech and UT shall fully cooperate with each
other in the planning and execution of any action to enforce the patent rights.
ARTICLE 11
INDEMNITY
11.1 Indemnity.
11.1.1 By Cortech. Cortech shall indemnify and hold UT harmless, and
hereby forever releases and discharges UT, from and against all losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) resulting from all claims, demands, actions and other proceedings by any
Third Party to the extent arising from (a) the breach of any representation,
warranty or covenant of Cortech under this Agreement or (b) the gross negligence
or willful misconduct of Cortech in the performance of its obligations and its
permitted activities under this Agreement.
11.1.2 By UT. UT shall indemnify and hold Cortech harmless, and hereby
forever releases and discharges Cortech, from and against all losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) resulting from all claims, demands, actions and other proceedings by any
Third Party to the extent arising from (a) the breach of any representation,
warranty or covenant of UT under this Agreement, (b) the research, development,
manufacturing, commercialization or marketing of Products (without regard to
culpable conduct), or (c) the gross negligence or willful misconduct of UT or
its Affiliates or sublicensees in the performance of its or their obligations,
and its or their permitted activities under this Agreement.
11.2 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article 11 shall promptly notify the other party (the
"Indemnitor") of any claim, demand, action or other proceeding for which the
Indemnitee intends to claim such indemnification, The Indemnitor shall have the
right to participate in, and to the extent the Indemnitor so desires jointly
with any other indemnitor similarly noticed, to assume the defense thereof with
counsel selected by the Indemnitor; provided, however, that the Indemnitee shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the Indemnitor, if representation of the Indemnitee by the counsel retained
by the Indemnitor would be inappropriate due to actual or potential differing
interests between the Indemnitee and any other party represented by such counsel
in such proceedings. The indemnity obligations under this Article 11 shall not
apply to amounts paid in settlement of any claim, demand, action or other
proceeding if s settlement is effected without the prior express written consent
of the Indemnitor, which consent shall not be unreasonably withheld or delayed.
The failure to deliver notice to the Indemnitor within a reasonable time after
notice of any such claim or demand, or the commencement any such action
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or other proceeding, if prejudicial to its ability to defend such claim, demand,
action or other proceeding, shall relieve such Indemnitor of any liability to
the Indemnitee under this Article 11 with respect thereto, but the omission so
to deliver notice to the Indemnitor shall not relieve it of any liability that
it may have to the Indemnitee otherwise than under Article 11. The Indemnitor
may not settle or otherwise consent to an adverse judgment in such claim,
demand, action or other proceeding, that diminishes the rights or interests of
Indemnitee without the prior express written consent of the Indemnitee, which
consent shall be unreasonably withheld or delayed. The Indemnitee, its employees
and agents, shall reasonably cooperate with the Indemnitor and its legal
representatives in the investigation of any claim, demand, action or other
proceeding covered by this Article 11.
11.3 Insurance. UT, at its own expense, shall maintain comprehensive
general liability insurance, including contractual liability insurance and
product liability insurance against claims regarding the research, development,
manufacture, commercialization or marketing of the Products under this
Agreement. UT shall maintain such insurance for so long as it continues to
research, develop, manufacture, commercialize, market, use or sell Products, and
thereafter for so long as it customarily maintains insurance for itself covering
similar activities with its other similar products. During the clinical
development of Products, such coverage shall be at least [ ] per occurrence.
Promptly upon commercial introduction of the initial Product, the parties shall
negotiate in good faith the level to which UT shall increase such insurance
coverage.
ARTICLE 12
TERMINATION
12.1 Expiration. Subject to the provisions of Sections 12.2 and 12.3 below,
this Agreement shall expire on the expiration of UT's obligation to pay
royalties to Cortech under Section 5.2 above.
12.2 Termination for Cause
12.2.1 By Either Party. Except as otherwise provided in Article 13,
either party may terminate this Agreement upon or after the breach of any
material provision of this Agreement by the other party if the other party has
not cured such breach within thirty (30) day after notice thereof by the
non-breaching party.
12.2.2 By Cortech. Except as otherwise provided in Article 13, Cortech
may terminate this Agreement if UT has not commenced Phase II clinical trials of
a Product within two (2) years and six (6) months after the Effective Date,
provided that, (a) a governmental regulatory agency has not imposed a material
restriction on UT's Product regulatory approval activities under this Agreement,
which restriction has delayed or prevented the commencement of such clinical
trial, or (b) negative or equivocal study results have not arisen which
necessitated
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a material and significant change in the development plan and timeline set forth
in Exhibit C, which change delayed or prevented the commencement of such
clinical trial.
12.2.3 By UT. UT may terminate this Agreement at any time and without
penalty, if UT, using commercially reasonable efforts, is unable to develop and
commercialize Products.
12.3 Bankruptcy. In the event of the institution by or against either party
of insolvency, receivership or bankruptcy proceedings or any other proceedings
for the settlement of such party's debts which are not dismissed within sixty
(60) days, or upon such party's making an assignment for the benefit of
creditors, or upon such party's dissolution or ceasing to do business, the other
party shall have the right to terminate this Agreement upon written notice to
the other party.
12.4 Effect of Expiration or Termination. Expiration or termination of this
Agreement shall not relieve the parties of any obligation accruing prior to such
expiration or termination, and the provisions of Section 6.2 and Articles 9, 10
and 11 shall survive the expiration or termination of this Agreement. Except in
the cases of a termination of this Agreement (a) by Cortech due to a material
breach of this Agreement by UT or (b) in connection with a Product's
infringement on the intellectual property rights of a Third Party, upon any
termination of this Agreement, UT shall have the right and option to promptly
sell any remaining UT inventories of Product using UT's best efforts.
ARTICLE 13
FORCE MAJEURE
Neither party shall be held liable or responsible to the other party nor be
deemed to have defaulted under or breached this Agreement for failure or delay
in fulfilling or performing any term of this Agreement to the extent, and for so
long as, such failure or delay is caused by or results from causes beyond the
reasonable control of the affected party including but not limited to fire,
floods, embargoes, war, acts of war (whether war be declared or not),
insurrections, riots, commotions, strikes, lockouts or other labor disturbances,
acts of God or acts, omissions or delays in acting by any governmental authority
or other party.
ARTICLE 14
MISCELLANEOUS
14.1 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the parties hereto to the other
party shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery, U.S. first class mail or
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courier), U.S. first class mail or courier, postage prepaid (where applicable),
addressed to such other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to the addressor
and (except as otherwise provided in this Agreement) shall be effective upon
receipt by the addressee.
If to Cortech: Cortech, Inc.
6850 North Broadway
Denver, Colorado 80221
Attention: President
with a copy to: Dechert Price & Rhoads
Princeton Pike Corp. Center
997 Lennox Drive, Building 3
Lawrenceville, NJ 08648
Attention: Allen Bloom, Esq.
If to UT: United Therapeutics Corporation
2 Davis Drive
Research Triangle Park
North Carolina 27709
Attention: President
with a copy to: Mahon Patusky Rothblatt & Fisher
1735 Connecticut Avenue, N.W.
Third Floor
Washington, D.C. 20009
Attention: Paul A. Mahon, Esq.
14.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles thereof.
14.3 Assignment. UT shall not assign its rights or obligations under this
Agreement, in whole or in part, by operation of law or otherwise, without the
prior written consent of Cortech; provided however, that either party may,
without such consent, assign this Agreement and its rights and obligations
thereunder in connection with the transfer or sale of all or substantially all
of its business, or in the event of its merger, consolidation, change in control
or similar transaction. Any purported assignment in violation of this Section
14.3 shall be void.
14.4 Waivers and Amendments. No change, modification, extension,
termination or waiver of this Agreement, or any of the provisions herein
contained, shall be valid unless made in writing and signed by duly authorized
representatives of the parties hereto.
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14.5 Entire Agreement. This Agreement embodies the entire understanding
between the parties and supersedes any prior understanding and agreements
between and among them respecting the subject matter hereof. There are no
representations, agreements, arrangements or understandings, oral or written,
between the parties hereto relating to the subject matter of this Agreement
which are not fully expressed herein.
14.6 Severability. Any of the provisions of this Agreement which are
determined to be invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the remaining
provisions hereof and without affecting the validity or enforceability of any of
the terms of this Agreement in any other jurisdiction.
14.7 Waiver. The waiver by either party hereto of any right hereunder or
the failure to perform or of a breach by the other party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.
14.8 Construction. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
14.9 Independent Contractors. The relationship between Cortech and UT is
that of independent contractors. Neither party has any actual or apparent
authority, express or implied, to act on behalf of the other party or to bind
the other party to any obligations. Neither party shall be deemed to be an agent
or servant of the other party or a partner or venturer with the other party.
Neither party shall control, or have any right to control, the manner, method
and means by which the other party makes, has made, uses, sells, leases or
otherwise provides or markets its products and services.
14.10 LIMITATION OF LIABILITY. EXCEPT AS MAY BE ELSEWHERE HEREIN
SPECIFICALLY PROVIDED FOR, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, OR FOR ANY
LOST PROFITS OF THE OTHER PARTY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY,
ARISING OUT OF THE PERFORMANCE OR FAILURE TO PERFORM ANY OBLIGATIONS SET FORTH
HEREIN.
14.11 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth below.
CORTECH, INC.
/s/ Diarmuid Boran
-----------------------------
Diarmuid Boran
Chief Operating Officer
Dated: 11/4/98
--------------------
UNITED THERAPEUTICS CORPORATION
/s/ Martine A. Rothblatt
-----------------------------
Martine A. Rothblatt
Chief Executive Officer
Dated: 10/30/98
--------------------
26
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
FOR PORTIONS OF THIS DOCUMENT
EXHIBIT 10.13
EXCLUSIVE LICENSE AND DISTIBUTION AGREEMENT
This Exclusive License and Distribution Agreement ("Agreement") is made and
entered into this 4th day of February, 1999, by and among Global Medical
Enterprises Ltd., a British Virgin Islands corporation ("GMEL/BVI"), Global
Medical Enterprises Ltd., LLC, a California limited liability company having a
principal place of business at 16161 Ventura Boulevard, Suite 706, Encino,
California 91436 (hereinafter referred to as "GMEL/LLC") and United Therapeutics
Corporation, a corporation organized and existing under the laws of the State of
Delaware having a principal place of business at 1110 Spring Street, Silver
Spring, Maryland 20910 (hereinafter referred to as "UT").
RECITALS
WHEREAS, GMEL/BVI has obtained an exclusive license from Pacific
Pharmaceutical Co., Ltd. (hereinafter referred to as "Pacific"), attached at
Appendix A and incorporated herein, to commercialize Ketotop, an advanced
medicinal patch with analgesic efficacy, described in Appendix B attached hereto
and incorporated herein, in certain parts of the world, including the Territory
(as defined hereinafter); and
WHEREAS, GMEL/BVI has assigned the United States rights under the Pacific
Agreement to GMEL/LLC under the Assignment and Assumption Agreement dated July
24, 1998, described in Appendix A and incorporated herein; and
WHEREAS, UT desires to obtain an exclusive license under both GMEL, BVI's
rights to Ketotop and GMEL/LLC's rights to Ketotop in order to obtain regulatory
approvals, market and distribute Ketotop in the Territory for all indications.
NOW, THEREFORE, in consideration of the foregoing promises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the terms defined in this Article 1 shall
have the respective meanings set forth below:
1.1 "Affiliate" shall mean, with respect to any Person, any other Person
which controls, is controlled by, or is under common control with, such Person.
A Person shall be regarded as in control of another Person if it owns, or
controls, at least fifty percent (50%) of the voting stock or other ownership
interest of the other Person, or if it posesses the power to direct or cause the
direction of the management and policies of the other Person by any means
whatsoever.
<PAGE> 2
1.2 "cGMP" means the United Stated Food and Drug Administration "current
Good Manufacturing Practices" as defined in 21 C.F.R parts 210-211.
1.3 "Dollars" or "$" means United States dollars.
1.4 "Effective Date" means the date appearing at the beginning of this
Agreement.
1.5 "FDA" means the United States Food and Drug Administration or any
successor entity.
1.6 "Field" shall mean the treatment of all indications for which the
Product (as defined hereinafter) offers therapeutic effectiveness.
1.7 "First Commercial Sale" shall mean, with respect to any Product, the
first sale for use or consumption by the general public of such Product. A
transfer of the Product by UT or its permitted sublicensees solely for the
purpose of directly enabling UT and its permitted sublicensees to obtain
approval of an NDA by the FDA (or similar approvals from the governing health
authority of any other country within the Territory) shall not be considered a
First Commercial Sale.
1.8 "GMEL" shall mean both GMEL/BVI and GMEL/LLC, to the extent of their
respective interests in the subject matter hereof, unless otherwise indicated
herein.
1.9 "IND" means an Investigational New Drug application or its equivalent
successor application.
1.10 "NDA" means a New Drug Application or any equivalent successor
application.
1.11 "Person" shall mean an individual, corporation, partnership, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority, or any other form of entity not specifically listed herein.
1.12 "Product" shall mean "Ketotop", an advanced medicinal patch with
analgesic efficacy as described in the attached Appendix B incorporated herein,
and any derivatives, successors, improvements, modifications, variations,
revisions thereof to which GMEL has the right to distribute pursuant to its
agreement with Pacific.
1.13 "Registration" shall mean, in relation to any Product, such approvals
by government authorities as may be legally required before such Product may be
commercialized.
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1.14 "Territory" unless otherwise indicated herein shall mean (i) the
United States of America, its territories and possessions under the grant from
GMEL, LLC, together with (ii) Canada, Mexico, Central America (Belize, Costa
Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) and the Caribbean
nations under the grant from GMEL, BVI.
1.15 "Third Party" shall mean any Person other than GMEL and its Affiliates
and UT and its Affiliates and permitted sublicensees.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 By Both Parties. Each party represents and warrants to the other that
it has the full right to enter into this Agreement, this Agreement constitutes
its legal, valid and binding obligation, and that, to the best of its knowledge,
there are no agreements, commitments or obstacles, technical or legal, including
patent rights of others, which could prevent it from carrying out all of its
obligations hereunder, including, in the case of GMEL, its grant to UT of the
license described in Section 3.1 below.
2.2 By GMEL. GMEL represents and warrants to UT that:
2.2.1 GMEL has the sole and exclusive right to distribute the Product
within the Territory.
2.2.2 As of the Effective Date, to the best of GMEL's knowledge, there
are no (i) pending or threatened claims or litigation brought by a Third Party
under any Third Party patent, trade secret or other Third Party proprietary
right in respect of GMEL's distribution of the Product or as a result of
Pacific's manufacture or distribution of the Product, (ii) basis upon which sale
of the Product under this Agreement would infringe on the rights of Third
Parties; or (iii) licenses or other restrictions on the ability to usesell or
otherwise distribute the Product.
2.2.3 GMEL has made or will make available to UT all material technical
information in its possession or of which it is aware that is pertinent to
development, regulatory approval and commercialization of the Product and GMEL
shall use its best efforts to ensure that Pacific will assist GMEL in achieving
GMEL's obligations hereunder.
2.2.4 The price that GMEL pays to Pacific for Products under Article V
of this Agreement shall be the true and accurate price reflecting all refunds,
rebates, discounts, offsets and any other consideration of any kind paid or
transferred by or on behalf of Pacific to GMEL or at GMEL's direction. In the
event that any such compensation has been paid or transferred to or at GMEL's
direction, GMEL shall promptly notify UT in order to adjust payments UT has made
or will make pursuant to Article V of this Agreement.
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<PAGE> 4
2.3 By UT. UT warrants to GMEL that it will use its best efforts to
develop, seek regulatory approval, commercialize and market Products within the
Territory for one or more indications within the Field and that UT is adequately
capitalized to undertake the obligations under this Agreement.
ARTICLE 3
GRANT
3.1 Grant. GMEL hereby grants to UT and its Affiliates an exclusive license
and exclusive distributorship (with the right to grant sublicenses and
subdistributorships as set forth in Section 3.2 below) to use, import, offer for
sale and sell Products in the Territory for use in the Field. Notwithstanding
anything to the contrary herein, UT shall not have the right to manufacture or
have others manufacture the Product.
3.2 Sublicenses and Subdistributorships. Subject to GMEL's prior written
consent, which consent shall not be unreasonably withheld or delayed, UT may
grant sublicenses and subdistributorships under the grant in Section 3.1 above
to any Third Party or Affiliate. UT shall deliver a copy of each sublicense and
subdistributorship under this Agreement to GMEL promptly after execution of the
same. Each sublicensee and subdistributor shall be subject to the terms and
conditions of this Agreement.
ARTICLE 4
DEVELOPMENT AND COMMERCIALIZATION PROGRAM
4.1 Development and Commercialization by UT.
4.1.1 Development Program. Subject to the satisfactory performance of
GMEL's obligations under Section 4.3 below, UT shall, at its sole expense, use
its best efforts to conduct research, development and clinical trials to obtain
the necessary regulatory approvals to import, market and commercialize such
Products as UT determines are commercially feasible for at least one indication,
and diligently obtain necessary approvals to commence marketing and market one
or more Products in the United States and Canada and such other countries of the
Territory as UT determines are commercially feasible (hereinafter the
"Development Program").
4.1.2 Development Milestones. The Development Program shall achieve the
following key milestones in the United States:
IND Submission by [ ]
NDA Submission by [ ]
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NDA Approval by [ ]
In the event that UT is unable to meet any of the above key milestones, GMEL
may, in its sole discretion, terminate this Agreement; provided, however, that
UT's inability to meet any key milestone is not the result of (i) the imposition
by a governmental regulatory agency of a material restriction on UT's Product
regulatory approval activities under this Agreement, which restriction has
delayed or prevented the Development Program, (ii) the requirement of a
governmental regulatory agency that UT materially change the Development Program
and timeline, (iii) negative or equivocal study results which necessitate a
material and significant change in the Development Program and timeline, which
change has delayed the Development Program, or (iv) delays in the performance of
GMEL's obligations under Section 4.3 below. In the event that UT's inability to
meet any key milestone is the result of (i) - (iii) above, then in such event,
GMEL and UT shall reasonably extend the key milestones accordingly. In the event
that UT's inability to meet any key milestone is the result of (iv) above, then
in such event, the above milestone dates shall be extended by a day for each day
of delay.
4.1.3 Regulatory Efforts. UT shall have the final authority to make all
clinical and regulatory decisions in its sole and reasonable discretion and UT
shall solely and exclusively own all regulatory applications, approvals and
clinical data obtained by UT with respect to Products. Notwithstanding the
foregoing, UT shall closely consult with GMEL with regard to its participation
in important clinical development meetings.
4.1.4 Marketing and Distribution. Subject to GMEL's prior written
consent, which consent shall not be unreasonably withheld or delayed, UT may
contract with a drug marketing organization that has demonstrated competence and
ability, based on sales in excess of $25 million annually for similar products,
to market and distribute Products throughout the Territory.
4.1.5 Records. UT shall maintain records, in sufficient detail and in
good scientific manner, which shall reflect all work done and results achieved
in the performance of its research and development regarding the Products
(including all data in the form required under all applicable laws and
regulations.)
4.1.6 Reports. So long as UT is engaged in the Development Program, UT
will provide semi-annual reports to GMEL within sixty (60) days following the
end of every two calendar quarters, summarizing in reasonable detail UT's
activities related to the development of a Product and securing of the requisite
marketing approvals during the period covered by such report. In addition, UT
shall provide GMEL with written notice of all regulatory filings and submissions
prior to the date of such submissions, and written notice of all approvals
obtained promptly after obtaining such approvals. UT shall keep GMEL reasonably
apprised of all written information or feedback provided by regulatory
authorities to UT during the term of this Agreement.
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4.1.7 Compliance with Laws. UT shall comply with all applicable
international, national, state, regional and local laws and regulations in
performing its duties hereunder and in any of its dealings with respect to the
Product.
4.1.8 Costs. Any and all costs associated with the clinical
development, regulatory approval, and commercialization of the Product shall be
borne solely by UT.
4.2 Advisory Committee.
4.2.1 Composition of the Advisory Committee. The Advisory Committee
shall be comprised of two representatives of GMEL and two representatives of UT.
The initial representatives for GMEL shall be Tom Kim and Dr. Howard Fullman.
The initial representatives for UT shall be Martine Rothblatt and Dr. Gilles
Cloutier. Each party may substitute one or more of its representatives, in its
sole dicretion, effective upon agreement of the other party of such change, such
agreement not to be unreasonably withheld or delayed.
4.2.2 Meetings. The Advisory Committee shall meet not less than twice
each year during the term of this Agreement on such dates and at such time and
places as agreed to by the parties, alternating between GMEL's principal offices
and UT's principal offices, or such other locations as the parties shall agree,
unless both parties mutually determine that a meeting should not take place. At
such meetings, the Advisory Committee shall discuss UT's research and
prospective development and commercialization efforts under this Agreement, UT's
requirements from GMEL and Pacific, any actual regulatory filings regarding
Products together with any anticipated regulatory filings with respect to
possible products, pricing of Product both to UT and to patients, UT's fiscal
status, patent filings, and, in general, shall coordinate the development and
marketing of Products. The Advisory Committee shall also review on an ongoing
basis the viability and economic expectations of the commercialization effort in
countries within the Territory. Each party shall bear its own expenses in
connection with travel and attendance at such meetings.
4.3 GMEL Obligations.
4.3.1 Clinical Supplies. GMEL, at its sole expense, shall be
responsible for providing UT with an adequate and timely supply of the Products
for use during clinical trials.
4.3.2 Information. GMEL, at its sole expense, shall be responsible for
the timely delivery to UT of all pre-clinical information available to GMEL and
reasonably necessary to support UT's preparation and filing of an IND with the
FDA including, but not limited to, information relating to acute toxicity and
repeat-dose toxicity, and the translation into English of summaries of all
foreign language reports. In addition, GMEL shall provide UT on a timely basis
and without charge all information concerning the Product which is available to
GMEL and which is reasonably required by UT to fulfill its obligations under
this Agreement, including but not limited to, information, compilations,
analyses, reports,
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studies, data, copies of regulatory filings and proceedings which GMEL and
Pacific have developed or acquired which may be related to the licensed rights
and which concerns or relates to preclinical and clinical research, safety, use,
efficacy, and copies of findings or reports which are required by the FDA or
similar regulatory agencies.
4.3.3 Cooperation. GMEL shall, upon the request by UT, provide UT with
reasonable assistance and consultation regarding the Product, including
reasonable access to sample materials and data. GMEL shall ensure the
cooperation of Pacific with the FDA's normal and customary requirements for the
approval of drugs such as Ketotop.
4.3.4 cGMP Requirements. GMEL shall exercise its best efforts to ensure
that Pacific provides a manufacturing process and facility for the Licensed
Products that complies with United States cGMP requirements during the term of
this Agreement.
4.4 Registration of License. UT may, at its expense, register the exclusive
license granted under this Agreement in any country, or community or association
of countries, where the use, sale or manufacture of a Product in such country
would be covered by a Valid Patent Claim. Upon request of UT, GMEL agrees
promptly to execute any "short form" licenses in a form submitted to it by UT
from time to time in order to effect the foregoing registration in such country.
ARTICLE 5
PAYMENTS TO GMEL
5.1 Purchase of Product.
5.1.1 Exclusive Source. In partial consideration for the exclusive
license granted to UT herein, UT shall purchase U.S. cGMP commercial Product
solely from GMEL during the term of this Agreement following the First
Commercial Sale of Product by UT, its Affiliates or permitted sublicensees. UT
shall neither manufacture Product nor purchase Product from a Third Party
without the prior written consent of GMEL. GMEL shall be responsible for the
timely delivery to UT of the amount of U.S. cGMP Product that UT reasonably
requires from time to time during the term of this Agreement. UT shall notify
GMEL in writing promptly upon the First Commercial Sale of a Product by UT, its
Affiliates or its sublicensees in each country of the Territory.
5.1.2 Purchase by UT.
5.1.2.1 Purchase. In further consideration of the exclusive
license granted herein and the performance of GMEL's obligations under Section
4.3 above, and following the First Commercial Sale of Product by UT, its
Affiliates or permitted sublicensees, GMEL shall timely deliver to UT such
amounts of cGMP commercial Product ordered by UT which GMEL will obtain from
Pacific pursuant to the pricing schedule
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issued by Pacific to GMEL attached at Appendix C to this Agreement and
incorporated herein (the "Pacific Price").
5.1.2.2 Pricing.
5.1.2.2.1 United States. UT shall purchase from GMEL/ LLC
Products for distribution within the United States of America, its territories
and possessions, at a [ ] mark-up over the Pacific Price for all prescription
sales and at a [ ] mark-up over the Pacific Price for all Over the Counter (OTC)
sales.
5.1.2.2.2 Canada. UT shall purchase from GMEL/BVI Products for
distribution within Canada at a [ ] mark-up over the Pacific Price for all
prescription sales and at a [ ] mark-up over the Pacific PRICE for all Over the
Counter (OTC) sales.
5.1.2.2.3 Other Countries. For all countries in the Territory
other than the United States, its territories and possessions, and Canada, the
Advisory Committee shall determine the terms upon which UT and GMEL/BVI shall
form a joint venture to commercialize Products in each country of the Territory,
recognizing that the spirit is to consider the parties as equal venturers. In
determining the terms of each such joint venture, including without limitation
provisions relating to the payment of expenses of the venture (including the
cost of Products purchased from Pacific) and the calculation and division of
profits, the Advisory Committee shall take into account relevant market and
financial information relating to the commercialization of comparable products
in each country.
5.1.2.3 Pricing Stability. The Pacific Price in Appendix C shall
be the base price upon which the above escalating cost of Products purchased by
UT will be calculated. Notwithstanding the foregoing, the Pacific Price shall be
adjusted on each anniversary of the NDA Approval based upon an actual, direct
and verifiable increase or decrease in Pacific's cost of goods sold for Products
sold to GMEL in the preceding annual period. GMEL shall exercise its best
efforts to negotiate with Pacific such annual price adjustments so that the
maximum increase or decrease in the adjusted Pacific Cost in any annual
adjustment shall not exceed (i) [ ] above or below the Pacific Price set for the
preceding annual period (the "Annual Cap") and (ii) the total of all annual
adjustments to the Pacific Price shall not exceed a [ ] increase over the term
of this Agreement (the "Term Cap"). The parties shall closely consult with each
other and Pacific and review relevant documentation to ensure that each annual
adjustment of the Pacific Price is fair and reasonable given the underlying
costs of goods, currency fluctuations, and other variables in pricing imported
pharmaceuticals.
5.1.3 Shipping. All Products shall be shipped by GMEL F.O.B. GMEL's
point of shipment. UT shall be responsible for and shall pay any sales, use,
excise or other taxes directly relating to the importation and transfer of
Products (excluding income taxes
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and similar for which GMEL shall be solely responsible) imposed by the laws of
any jurisdiction on GMEL's sale of Products to UT.
5.2 Pricing Adjustment. Notwithstanding any other provision of this
Agreement to the contrary, in the event that UT determines, after discussion
with GMEL, that
(i) it or they are required to pay royalties to any Third Party because
the development, use or sale of the Product infringes any patent or other
intellectual property rights of such Third Party in the Territory; or
(ii) the development, use or sale of the Products in any country in the
Territory no longer infringes a valid patent claim or any period of orphan drug
or other exclusivity granted by the FDA or other government agency with respect
to any Product; or
(iii) a compulsory license to manufacture and/or distribute Products
has been granted to a Third Party under the applicable laws of any country in
the Territory; or
(iv) the price for Product under Section 5.1.2 causes or may cause UT a
significant reduction in its sales of Product in any country in the Territory;
then, in any such event, UT and GMEL shall meet and in good faith endeavor to
agree on an appropriate and reasonable reduction in the pricing of the Product
under Section 5.1.2.2 in order to place UT in a position to market competitively
the Product in such country.
5.3 Payment.
5.3.1 United States and Canada. Payment for Products to GMEL/ LLC under
Section 5.1.2.2.1 above and payment for Products to GMEL/BVI under Section
5.1.2.2.2 above shall be made in Dollars by irrevocable 30-day sight letter of
credit confirmed by a first class international bank following the date of
delivery of Products to UT or at UT's request. All such payments shall be free
of set-off, counter-claims or any taxes imposed by the laws of any jurisdiction
and shall be made in accordance with written instructions from GMEL.
5.3.2 Other Countries. Payment for Products to GMEL/BVI under Section
5.1.2.2.3 above shall be made in such manner as determined by the Advisory
Committee.
5.4 Exchange Control. If at any time legal restrictions prevent the prompt
remittance of part or all royalties with respect to any country where the
Product is sold, payment shall be made through such lawful means or methods as
UT reasonably shall determine.
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ARTICLE 6
PROHIBITED SALES AND ADDITIONAL RIGHTS
6.1 Prohibited Sales. UT shall not sell, directly or indirectly, any of the
Products outside the Territory or sell any of the Products to any Person whom UT
knows, or reasonably should know, will resell the Products outside the Territory
or who will ship the Products from the Territory.
6.2 Third Party Distribution. To the extent that GMEL has the right to
distribute Products in any countries outside of the Territory as of the date
hereof, UT may present to GMEL potential Third Parties which are qualified to
distribute Products in any such country. Upon the presentation by UT of a
detailed proposal identifying a qualified Third Party distributor, reasonably
acceptable to GMEL, with whom UT desires to partner to distribute Products in
countries outside of the Territory, GMEL and UT shall negotiate in good faith to
extend the Territory to include such countries and Third Party distributors.
6.3 Right of First Refusal. Notwithstanding anything in this Agreement to
the contrary, in the event that, subsequent to the date hereof, GMEL shall
acquire from Pacific the right to distribute the Product in any countries
outside of the Territory and shall decide to license any aspect of the
commercialization of the Product in any such country to a Third Party, GMEL
shall give UT an exclusive option and right of first refusal to negotiate a
license agreement covering such matters with UT; provided, however, that such
option and right shall not be granted in cases where Pacific requires GMEL to
license to a particular Third Party other than UT or its Affiliates. UT shall
have sixty (60) days from receipt of written notice from GMEL of its intent to
enter into a license agreement, which notice shall describe in reasonable detail
the material terms of any proposed license to a Third Party, to deliver its
decision as to whether it shall exercise such option and right. Upon GMEL's
receipt of written notice from UT of its desire to enter into negotiations, the
parties shall have one hundred twenty (120) days, or such longer period as the
parties shall mutually agree (the "Negotiation Period"), to negotiate in good
faith and enter into a definitive license agreement. The terms of such agreement
shall be commercially reasonable under the circumstances then in existence. In
the event that UT shall decline to exercise its option or right hereunder or the
parties fail in good faith to enter into a license agreement prior to the
expiration of the Negotiation Period, GMEL shall be free to enter into a license
agreement covering the same matters with a Third Party, provided, however that
the material terms of any such agreement shall be no more favorable than the
terms offered to UT.
6.4 Medicinal Patch. To the extent that GMEL has rights in and to the use
of the medical patch other than in connection with the delivery of ketoprofen,
UT shall have the right to present to GMEL proposals it develops for the use of
such patch for the delivery of other drugs and for other indications. Upon the
presentation by UT of a detailed proposal identifying a proposed drug and
indication(s), GMEL and UT shall negotiate in good faith to exclusively license
the medicinal patch for such other drugs and indications.
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ARTICLE 7
CONFIDENTIALITY
7.1 Confidential Information. During the term of this Agreement, and for a
period of five (5) years following the expiration or earlier termination hereof,
each party shall maintain in confidence all information of the other party
(including samples) disclosed by the other party and identified as, or
acknowledged to be, confidential (the "Confidential Information"), and shall not
use, disclose or grant the use of the Confidential Information except on a
need-to-know basis to those directors, officers, affiliates, employees,
permitted licensees, permitted assignees and agents, consultants, lawyers,
bankers, clinical investigators or contractors, to the extent such disclosure is
reasonably necessary in connection with such party's activities as expressly
authorized by this Agreement. To the extent that disclosure is authorized by
this Agreement, prior to disclosure, each party hereto shall obtain agreement of
any such Person to hold in confidence and not make use of the Confidential
Information for any purpose other than those permitted by this Agreement. Each
party shall notify the other promptly upon discovery of any unauthorized use or
disclosure of the other party's Confidential Information.
7.2 Permitted Disclosures. The confidentiality obligations contained in
Section 7.1 shall not apply to the extent that (i) any receiving party (the
"Recipient") is required (a) to disclose information by law, order, or
regulation of a government agency or a court of competent jurisdiction, or (b)
to disclose information to any governmental agency for purposes of obtaining
approval to test or market a product, provided in either case that the Recipient
shall provide written notice thereof to the other party and sufficient
opportunity to object to any such disclosure or to request confidential
treatment thereof; or (ii) the Recipient can demonstrate that (a) the disclosed
information was public knowledge at the time of such disclosure to the
Recipient, or thereafter became public knowledge, other than as a result of
action of the Recipient in violation hereof; (b) the disclosed information was
rightfully known by the Recipient (as shown by its written records) prior to the
date of disclosure to the Recipient by the other party hereunder; (c) the
disclosed information was disclosed to the Recipient on an unrestricted basis
from a source unrelated to any party to this Agreement and not under a duty of
confidentiality to the other party; or (d) the disclosed information was
independently developed by the Recipient without use of Confidential Information
disclosed by the other party.
7.3 Terms of this Agreement. Except as otherwise provided in Section 7.2
above and subject to either party's reporting obligations under applicable state
and federal laws, GMEL and UT shall not disclose any terms or conditions of this
Agreement (or GMEL's agreement with Pacific) to any Third Party without the
prior written consent of the other party. Notwithstanding the foregoing, GMEL
and UT shall agree upon the substance of information that can be used to
describe the terms of this transaction in a press release or other similar
publication, and UT and GMEL may disclose such information, as modified by
mutual agreement from time to time, without the other party's consent.
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7.4 Publication. From time to time it may be to the mutual interest of the
parties to publish articles relating to data generated or analyzed as a part of
this Agreement. Neither party shall submit for written or oral publication or
presentation any manuscript, abstract, writing, printed material or the like
which includes data or any other information generated and provided solely by
the other party without first obtaining the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed, provided
however, that valid commercial reasons may exist for withholding such consent.
Nothing contained herein shall be construed as precluding either party from
making, in its discretion, any disclosures of information of any type which
relate to the safety, efficacy, toxicology, or pharmacokinetic characteristics
of the Products to the extent that either party may be required by law to make
disclosures of such information.
ARTICLE 8
INTELLECTUAL PROPERTY RIGHTS
8.1 Trademarks.
8.1.1 Ownership. UT acknowledges that Pacific owns the "Ketotop"
trademarks and all goodwill associated with or symbolized by the trademarks and
that GMEL has been granted the right to use Pacific's trademarks solely in
connection with the distribution, sale and promotion of the Product in the
Territory. GMEL hereby grants to UT a royalty-free license to use the trademarks
free of charge in connection with the regulatory approval process, distribution,
sale and promotion of the Products in the Territory during the terms of this
Agreement. Upon expiration or earlier termination of this Agreement, UT shall
cease using the trademarks and shall remove all references to said mark from its
stationary, advertising and all other property in its possession or control and
shall cease using said mark in any other manner, other than in connection with
the disposition of outstanding inventory under Section 10.5 below.
8.1.2 Registration. Unless otherwise agreed to by the parties, UT shall
be responsible for taking all necessary action to register and maintain
trademark protection for Ketotop trademarks in Pacific's name within all
countries in the Territory at UT's sole expense. UT shall use its best efforts
to provide GMEL with written notice of (i) all trademark filings and submissions
in countries within the Territory prior to the date of such submissions, and
(ii) all approvals obtained promptly after obtaining such approvals. UT shall
keep GMEL reasonably apprised of all written information or feedback provided by
trademark authorities to GMEL during the term of this Agreement.
8.2 Patents. GMEL and/or Pacific will be responsible for taking all
necessary action to maintain and/or extend patent registrations relating to
Products in the Territory. UT will render reasonable assistance to GMEL in this
effort. GMEL shall use its best eforts to provide UT with written notice of (i)
all patent filings and submissions in countries within the Territory prior to
the date of such submissions, and (ii) all approvals obtained promptly after
obtaining such approvals. GMEL shall keep UT reasonably apprised of all written
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information or feedback provided by patent authorities to GMEL during the term
of this Agreement.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnity.
9.1.1 By GMEL. GMEL shall indemnify and hold UT and its directors,
officers, employees and agents harmless, and hereby forever releases and
discharges UT, from and against all losses, liabilities, damages and expenses
(including reasonable attorney's fees and costs) resulting from all claims,
demands, actions and other proceedings by any Third Party to the extent arising
from (i) the breach of any representation, warranty or covenant of GMEL under
this Agreement or (ii) the gross negligence or willful misconduct of GMEL in the
performance of its obligations and its permitted activities under this
Agreement.
9.1.2 By UT. UT shall indemnify and hold GMEL and its trustees,
directors, officers, employees and agents harmless, and hereby forever releases
and discharges GMEL, from and against all losses, liabilities, damages and
expenses (including reasonable attorney's fees and costs) resulting from all
claims, demands, actions and other proceedings by any Third Party to the extent
arising from (i) the breach of any representation, warranty or covenant of UT
under this Agreement, (ii) the research, development, commercialization or
marketing of Products (without regard to culpable conduct), or (iii) the gross
negligence or willful misconduct of UT or its Affiliates or permitted
sublicensees in the performance of its or their obligations and its or their
permitted activities under this Agreement.
9.2 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article 9 shall promptly notify the other party (the
"Indemnitor") in writing of any claim, demand, action or other proceeding for
which the Indemnitee intends to claim such indemnification. The Indemnitor shall
have the right to participate in, and to the extent the Indemnitor so desires
jointly with any other Indemnitor similarly noticed, to assume the defense
thereof with counsel selected by the Indemnitor; provided, however, that the
Indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitor, if representation of the Indemnitee by
the counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between the Indemnitee and any other party
represented by such counsel in such proceedings. The indemnity obligations under
this Article 9 shall not apply to amounts paid in settlement of any claim,
demand, action or other proceeding if such settlement is effected without the
prior express written consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. The failure to deliver notice to the
Indemnitor within a reasonable time after notice of any such claim or demand, or
the commencement of any such action or other proceeding, if prejudicial to its
ability to defend such claim, demand, action, or other
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proceeding, shall relieve such Indemnitor of any liability to the Indemnitee
under this Article 9 with respect thereto, but the omission to so deliver notice
to the Indemnitor shall not relieve it of any liability that it may have to the
Indemnitee otherwise than under this Article 9. The Indemnitor may not settle or
otherwise consent to an adverse judgment in any such claim, demand, action or
other proceeding, that diminishes the rights or interests of the Indemnitee
without the prior express written consent of the Indemnitee, which consent shall
not be unreasonably withheld or delayed. The Indemnitee, its employees and
agents, shall reasonably cooperate with the Indemnitor and its legal
representatives in the investigation of any claim, demand, action or proceeding
covered by this Article 9.
9.3 Insurance. UT, at its own expense, shall maintain comprehensive general
liability insurance, including product liability insurance, against claims
regarding the research, development, commercialization or marketing of the
Products under this Agreement. UT shall maintain such insurance for so long as
it continues to research, develop, commercialize, and market Products, and
thereafter for so long as it customarily maintains insurance for itself covering
similar activities with its other similar products. During the clinical
development of Products, such coverage shall be at least $2,000,000 per
occurrence. Promptly upon commercial introduction of the Product, the parties
shall negotiate in good faith the level to which UT shall increase such
insurance coverage.
ARTICLE 10
TERMINATION
10.1 Term and Expiration. Subject to the provisions of Sections 10.2, 10.3,
10.4 and Article 11 below, this Agreement shall become effective as of the
Effective Date and shall expire on July 23, 2008, unless earlier terminated
pursuant to the terms of this Agreement and to the terms of the Pacific
Agreement. In the event that GMEL is able to extend the term of its agreement
with Pacific which it will endeavor to do with its best efforts, GMEL shall
renew this Agreement on the same terms and conditions herein for such additional
period of time as Pacific grants to GMEL under its agreement with GMEL.
10.2 Termination for Cause.
10.2.1 Breach. Except as provided elsewhere in this Agreement, either
party may terminate this Agreement upon or after the breach of any material
provision of this Agreement by the other party if the other party has not cured
such breach within sixty (60) days after notice thereof by the non-breaching
party. In the event that this Agreement is terminated as the result of a
material breach by GMEL/BVI, then in such event, GMEL/BVI grants to UT the
exclusive right to all of GMEL/BVI's rights under the Pacific Agreement so that
UT may continue its commercialization efforts hereunder, provided however, that
UT shall be obligated to perform all corresponding obligations GMEL/BVI has
under the Pacific Agreement. In the event that this Agreement is terminated as
the result of a material breach by GMEL/LLC, then in such event, GMEL/LLC grants
to UT the exclusive right to all of GMEL/LLC's rights under its Assignment and
Assumption Agreement with
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GMEL/BVI so that UT may continue its commercialization efforts hereunder,
provided however, that UT shall be obligated to perform all corresponding
obligations GMEL/LLC has under its Assignment and Assumption Agreement with
GMEL/BVI.
10.2.2 Regulatory and Material Adverse Change. UT may terminate this
Agreement at its sole option upon thirty (30) days written notice to GMEL in the
event that in UT's commercially reasonable discretion either (i) the Product is
unlikely to achieve contemplated regulatory approval within the development
milestones provided under Section 4.1.2 above through no fault of UT, or (ii) a
material adverse change has occured in UT's financial expectations for its
return on investment in commericalizing the Product hereunder through no fault
of UT.
10.3 Bankruptcy. In the event of the institution by or against either party
of insolvency, receivership, bankruptcy proceedings, or any other proceedings
for the settlement of a party's debts which are not dismissed within sixty (60)
days, or upon a party's making an assignment for the benefit of creditors, or
upon a party's dissolution or ceasing to do business, the other party may
terminate this Agreement upon written notice.
10.4 Effect of Expiration or Termination. Expiration or termination of this
Agreement shall not relieve the parties of any obligation accruing prior to such
expiration or termination, and the provisions of Articles 7, 8, and 9 shall
survive the expiration or termination of this Agreement.
10.5 Outstanding Inventory. Upon any termination of this Agreement, UT
shall have the right and option to sell any completed inventory of Product, as
if licensed under this Agreement, which remains on hand as of the date of the
termination, so long as UT pays to GMEL as required under this Agreement.
ARTICLE 11
FORCE MAJEURE
Neither party shall be held liable or responsible to the other party nor be
deemed to have defaulted under or breached this Agreement for failure or delay
in fulfilling or performing any term of this Agreement to the extent, and for so
long as, such failure or delay is caused by or results from causes beyond the
reasonable control of the affected party including but not limited to fire,
floods, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotions, strikes lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or other party. When such circumstances arise, the
parties shall discuss what, if any modification of the terms of this Agreement
may be required to arrive at an equitable solution.
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ARTICLE 12
MISCELLANEOUS
12.1 Notices. Any consent, notice or report required or permitted to be
given under this Agreement by one of the parties hereto to the other party shall
be in writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery, first class mail, or courier, postage prepaid where
applicable), addressed to such other party at its address indicated below, or to
such other address as the addressee shall have last furnished in writing to the
addressor and, except as otherwise provided in this Agreement, shall be
effective upon receipt by the addressee.
If to GMEL/BVI: Global Medical Enterprises, Ltd.
c/o Global Medical Enterprises, Ltd., LLC
16161 Ventura Boulevard
Suite 706
Encino, California 91436
Attention: Howard J. Fullman, M.D.
Phone Number: (818) 981-1211
Fax Number: (818) 981-2408
If to GMEL/LLC: Global Medical Enterprises, Ltd., LLC
16161 Ventura Boulevard
Suite 706
Encino, California 91436
Attention: Howard J. Fullman, M.D.
Phone Number: (818) 981-1211
Fax Number: (818) 981-2408
If to UT: United Therapeutics Corporation
1110 Spring Street
Silver Spring, Maryland 20910
Attention: Gilles Cloutier, Ph.D.
Phone Number: (301) 608-9292
Fax Number: (301) 608-9291
12.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to conflicts
of laws principles thereof, except that questions affecting the validity,
construction and effect of any patent shall be determined by the laws of the
country in which the patent was granted.
12.3 Assignment. Neither party may assign its rights and obligations under
this Agreement, in whole or in part, by operation of law or otherwise, without
the prior written consent of the other party, provided however, that either
party may, without such consent, assign this Agreement to a wholly-owned
subsidiary. Any purported assignment in violation of this Section 12.3 shall be
void. No assignment shall relieve either party of
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responsibility for the performance of any accrued obligation which the such
party then has hereunder.
12.4 Waivers and Amendments. No change, modification, extension,
termination or waiver of this Agreement, or any of the provisions herein
contained, shall be valid unless made in writing and signed by duly authorized
representatives of the parties.
12.5 Entire Agreement. This Agreement constitutes the entire understanding
between the parties and supersedes any prior understanding and agreements
between them respecting the subject matter hereof, including the Letter of
Agreement dated September 8, 1998 with respect North American Marketing Rights
in Ketotop, which is hereby terminated. There are no representations,
agreements, arrangements or understandings, oral or written, between the parties
relating to the subject matter of this Agreement which are not fully expressed
in this Agreement. This Agreement shall be binding upon, and inure to the
benefit of, the legal successors to the parties hereto.
12.6 Severability. If any provision of this Agreement is found to be
invalid or unenforceable in any jurisdiction, it shall be ineffective to the
extent of such invalidity or unenforeceability in such jurisdiction, without
rendering invalid or unenforceable the remaining provisions hereof and without
affecting the validity or unenforceability of any of the terms of this Agreement
in any other jurisdiction. The parties agree to renegotiate in good faith any
term held invalid and be bound by the mutually agreed substitute provision.
12.7 Waiver. The waiver by either party of any right hereunder or the
failure to perform or of a breach by the other party shall not be deemed a
waiver of any other right under this Agreement or of any other breach or failure
by said party whether of a similar nature or otherwise.
12.8 Construction. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event of an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or buden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
12.9 Settlement of Disputes.
12.9.1 All disputes arising between the parties in connection with this
Agreement shall be resolved exclusively by arbitration in Los Angeles,
California in accordance with the rules of the American Arbitration Association,
and judgment upon the award entered by the arbitrator(s) may be enetered in any
court having jurisdiction thereof.
12.9.2 If any arbital or judicial proceedings shall be commenced to
enforce this Agreement or any abitral award issued pursuant to this Section
12.9, the prevailing party in such proceedings shall be entitled to recover the
reasonable attorneys'
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fees, costs and expenses incurred by the prevailing party in connection with
such proceedings.
12.10 Independent Contractors. The relationship between GMEL and UT is that
of independent contractors. Neither party has any actual or apparent authority,
express or implied, to act on behalf of the other party or to bind the other
party to any obligations. Neither party shall be deemed to be an agent or
servant of the other party or a partner or venturer with the other party.
Neither party shall control, or have any right to control, the manner, method,
an means by which the other party makes, has made, uses, sells, leases or
otherwise provides or markets its products and services.
12.11 LIMITATION OF LIABILITY. EXCEPT AS MAY BE ELSEWHERE HEREIN
SPECIFICALLY PROVIDED FOR, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, OR FOR ANY
LOST PROFITS OF THE OTHER PARTY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY,
ARISING OUT OF THE PERFORMANCE OR FAILURE TO PERFORM ANY OBLIGATIONS SET FORTH
HEREIN.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Global Medical Enterprises, Ltd.
/s/ Tom Kim
--------------------------------
Tom Kim
Chairman
Date: February 5, 1999
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Global Medical Enterprises, Ltd., LLC
/s/ Howard J. Fullman
--------------------------------
Howard J. Fullman, M.D.
President and CEO
Date: February 5, 1999
UNITED THERAPEUTICS CORPORATION
/s/ Gilles Cloutier
--------------------------------
Gilles Cloutier, Ph.D.
Executive Vice President and COO
Date: February 4, 1999
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<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
FOR PORTIONS OF THIS DOCUMENT
EXHIBIT 10.14
EXCLUSIVE LICENSE AGREEMENT
This Exclusive License Agreement ("Agreement") is effective as of March
15, 1999 (the "Effective Date"), by and between United Therapeutics Corporation,
a Delaware corporation, having an address at 68 T.W. Alexander Drive, Research
Triangle Park, North Carolina 27709, USA ("UT"), and Toray Industries, Inc., a
Japanese corporation, having an address at 2-1, Nihonbashi-Muromachi 2-chome,
Chou-ku, Tokyo 103-8666, Japan ("Toray").
WHEREAS, Toray owns all right, title and interest in certain patent
rights, trademark and the right to use certain know-how relating to the Product
(as herein defined) in the Territory (as herein defined);
WHEREAS, Toray granted UT an exclusive license of patent rights,
trademark and know-how in order to develop, use and sell the Product within the
Territory for use in treatment of Pulmonary Vascular Disease, including
Pulmonary Hypertension, under the Exclusive License Agreement dated September
16, 1998 ("PH Agreement").
WHEREAS, UT also desires to obtain an exclusive license of such patent
rights, trademark and know-how in order to develop, use and sell the Product
within the Territory for use in treatment of the Indication (as herein defined);
and
WHEREAS, Toray is willing to grant such an exclusive license to UT
according to the terms and conditions herein below.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants set forth in this Agreement, the parties to this Agreement
mutually agree as follows.
1. DEFINITIONS. As used in this Agreement, the following terms, whether used
in the singular or the plural, shall have the following meanings:
a. "Affiliate" means any corporation or non-corporate entity which
controls, is controlled by, or is under common control with a party to this
Agreement. A corporation or non-corporate entity shall be regarded as in control
of another corporation if it owns or directly or indirectly controls at least
fifty percent (50%) of the voting stock of the other corporation, or (i) in the
absence of the ownership of at least fifty percent (50%) of the voting stock of
a corporation or (ii) in the case of a non-corporate entity, if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation or non-corporate entity, as
applicable.
b. "Dollars" or "$" means United States dollars.
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c. "FDA" means the United States Food and Drug Administration or any
successor entity.
d. "Indication" means Peripheral Vascular Disease.
e. "Improvements" means modifications, variations and revisions of
the Know-How as well as all processes, machines, manufactures or compositions of
matter directly pertaining to the Patent Rights.
f. "Patent Rights" means all domestic and foreign patents and patent
applications listed in Appendix A attached hereto and made a part hereof, and
any Improvements, extensions, continuations, continuations-in-part, divisions,
substitutions, foreign equivalents, renewals, modifications, variations, new
models, or reissues thereof, as well as all processes, machines, manufactures or
compositions of matter directly pertaining to the patents which come into
existence during the term of this Agreement.
g. "Know-How" means all technical information and data, including but
not limited to ideas, concepts, methods, procedures, processes, compounds,
inventions, discoveries, whether or not patentable, which are owned by Toray, or
which Toray has the right to use and license as of the Effective Date and which
relates to the Product and its use as described in the claims of the patents and
patent applications listed in Appendix A attached hereto and made a part hereof,
or any other patents or patent applications comprising the Patent Rights.
h. "Trademark" means the trademark selected by both parties and
registered by Toray for the Product in accordance with Section 6.b.
i. "Product" means immediate release (not sustained or controlled)
oral formulation of TRK-100 (Beraprost Sodium) which includes what has been
developed in the USA by HMR.
j. "Licensed Technology" means, collectively, the Product, the Patent
Rights, the Trademark, the Know-How and the Improvements.
k. "Net Sales", with respect to any Product, means the gross sales
(i.e., gross invoice prices) of such Product billed by UT or its distributor to
final wholesaler or, if and when UT or its distributor sells the Product
directly to hospital, clinic, HMO (Hospital Management Organization) or other
end users (hereinafter collectively referred to as the "End Users", and final
wholesaler or the End Users, as the case may be, being hereinafter refereed to
the "Third Party Customers") , the gross sales of such Product billed by UT or
its distributor to the End Users, less : (i)actual credited allowances to the
Third Party Customers for spoiled, damaged, out dated and returned Product and
for retroactive price
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reductions in lieu of returned Product; (ii)customary trade and cash discount,
to the extent such trade and cash discounts are not deducted by UT at the time
of invoice in order to arrive at the gross invoice prices; (iii)all
transportation, packaging, handling and insurance charges, sales taxes, excise
taxes, use taxes or import/export duties actually paid; (iv)any tax or other
government charge on the sale, transportation, or delivery of Product; and
(v)all other invoiced allowances and adjustments actually credited the Third
Party Customers including, but not limited to, rebates paid to the Third Party
Customers, whether during the specific royalty period or not. All the deduction
shall be reasonable, customary and certified with evidence. In this Section 1.k,
final wholesaler means the firm, corporation or individual which sells Product
directly to the End Users.
l. "NDA" means a New Drug Application or any equivalent successor
application.
m. "Registration" means, in relation to any Product, such approvals
by government authorities as may be legally required before such Product may be
commercialized in the Territory.
n. "Territory" means the United States of America and Canada.
o. "Third Party" means any party other than UT and Toray .
p. "Valid Claim" means a claim of an issued and unexpired patent
included within the Patent Rights which has not been held unenforceable,
unpatentable or invalid by a decision of a court or other governmental agency of
competent jurisdiction, unappealable or unappealed within the time allowed for
appeal, and which has not been admitted to be invalid or unenforceable through
reissue, disclaimer or otherwise.
q. "IND" means Investigational New Drug.
r. "Other Product" means non-immediate release formulation
(including, but not limited to, oral and dermal) of TRK-100 (Beraprost Sodium).
2. GRANT OF EXCLUSIVE LICENSE.
a. Grant. Toray hereby grants to UT an exclusive license, without a
right to sublicense, under the Licensed Technology to develop, use, import,
offer for sale and sell Products in the Territory for use in treatment of the
Indication.
b. Covenant Not to Sue. Toray agrees that it will not assert nor
cause to be asserted against UT any patent not included in the Patent Rights
that is or might be infringed by reason of UT exercise of rights under the
license granted to UT hereunder.
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c. Other Formulation UT and Toray understand that the FDA orphan drug
exclusivity of the Product for the Indication has no effect for Toray and
Toray's licensee to develop, manufacture, use, import, offer for sale and sell
the Other Product in the Territory. UT and Toray understand that all orphan drug
exclusivity are only for the same molecule, the same delivery and the same
pharmokinetics (i.e.generic of the Product).
In the event that Toray and Toray's licensee have any difficulties from
the laws, the regulations or the guidelines in the Territory to develop,
manufacture, use, import, offer for sale and sell the Other Product because of
UT's orphan drug exclusivity of the Product, then UT shall cooperate with Toray
to make possible for Toray and Toray's licensee to develop, manufacture, use,
import, offer for sale and sell the Other Product in the Territory.
3. CONSIDERATION FOR THE GRANT.
a. License Fees. In consideration for the exclusive license granted
to UT under this Agreement, UT shall, on the day on which UT concludes that all
the information related to the Indication is provided by Toray to UT for IND
filing, or on thirty (30) days after the effective date of this Agreement,
whichever comes earlier:
1. pay to Toray a non-refundable license fee of $100,000; and
2. deliver to Toray a certificate representing [ ]
shares of UT common stock.
b. Milestone Payments. As further consideration for the exclusive
license granted to UT under this Agreement, UT shall make the following payments
upon completion of the following milestones:
1. UT shall pay to Toray a non-refundable milestone payment of
[ ] in cash upon UT's written notice to Toray that it is proceeding with its
first Phase III Studies.
2. UT shall pay to Toray a non-refundable milestone payment of
[ ] in cash upon UT"s first filing of an NDA in the United States for the
Product.
3. UT shall pay to Toray a non-refundable milestone payment of
[ ] in cash and upon the date of first FDA approval of the Product.
c. Purchase of Product.
1. UT shall purchase commercial Product according to United
Statescurrent GMP solely from Toray during the term of this Agreement. UT shall
neither
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manufacture Product nor purchase Product from a Third Party. Toray will
be responsible for the manufacture and delivery to UT of the amount of United
States cGMP Product that UT reasonably requires from time to time during the
term of this Agreement.
2. Toray will supply commercial Product to UT at the prices
which are inclusive of all costs and revenues, including but not limited to,
costs of formulation, manufacture, bulk materials, as well as a royalty stream
on Net Sales. The price of the Product shall be the sum of (1) and (2), in which
(1) is "The Amount" per 120 micrograms determined by using the following formula
and (2) is [ ] per 120 micrograms:
(a) If Net Sales within the Territory are below [ ],
then The Amount shall be the greater of either the amount per 120 micrograms
converted from [ ] of Net Sales or Japanese Yen [ ] per 120 micrograms.
(b) If Net Sales within the Territory are between [ ]
and [ ], then The Amount shall be (i) the amount determined according to (a)
above for the portion up to [ ], plus (ii) the greater of either the amount
per 120 micrograms converted from [ ] of the portion of over [ ] of the Net
Sales or Japanese Yen [ ] per 120 micrograms.
(c) If Net Sales within the Territory are between [ ]
and [ ], then The Amount shall be (i) the amount determined according to (b)
above for the portion up to [ ], plus (ii) the greater of either the amount
per 120 micrograms converted from [ ] of the portion of over [ ] of the Net
Sales or Japanese Yen [ ] per 120 micrograms.
(d) If Net Sales within the Territory are over [ ]
then The Amount shall be (i) the amount determined according to (c) above for
the portion up to [ ], plus (ii) the greater of either the amount per 120
micrograms converted from [ ] of the portion of over [ ] of the Net Sales or
Japanese Yen [ ] per 120 micrograms.
In the event the Product for both Pulmonary Vascular Disease and
the Indication is approved, the price of the Product for Pulmonary Vascular
Disease is calculated according to the above formulation and Net Sales includes
Net Sales of the Product for Pulmonary Vascular Disease. In such case, the
provision of the Section 3. c. 2. of PH Agreement shall not be applied. Toray
and UT shall consult with each other and decide provisional sales price of the
Product sold to UT for the next sales year, and after the said sales year,
adjust the amount already paid by UT on the basis of provisional sales price in
the said sales year (hereinafter referred to as "Paid Price") by defining and
paying or paying back the difference between the Paid Amount and the total
amount calculated according to the above method for the Product sold to UT in
the said sales year.
3. In the event that UT determines, after discussion with
Toray that
(a) UT is required to pay royalties to any Third Party
because the
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<PAGE> 6
development, manufacture, use or sale of the Product infringes any patent or
other intellectual property rights of such Third Party in the Territory; or
(b) the development, manufacture, use or sale of the
Product in any country in the Territory no longer infringes a Valid Claim with
respect to any Product and Third Party starts the sale of the same compound with
Beraprost in chemical structure in the Territory; or
(c) a compulsory license has been granted to a Third Party
under the applicable laws of any country in the Territory under the Licensed
Technology licensed to UT hereunder Third Party starts the sale of the same
compound with Beraprost in chemical structure in the Territory; or
(d) the price for Product under this Paragraph 3(c) causes
or may cause UT a significant reduction in its sales of Product in any country
in the Territory; then, in any such event, UT and Toray shall meet and in good
faith endeavor to agree on how to deal with the situation in order to place UT
in a position to market competitively the Product in such country.
4. Payment for Product shall be made in Dollars by UT in
accordance with the terms and conditions as designated by the mutual agreement
of UT and Toray.
d. Minimum Annual Product Net Sales. UT shall be reponsible for
achieving minimum annual Product Net Sales as determined in advance by mutual
agreement of Toray and UT for the duration of this Agreement . Toray and UT
agree that the minimum Net Sales amount for the first two commercial sales years
shall be [ ] and [ ] respectively. In the event that UT is unable
to meet any minimum annual Net Sales amount as designated by the parties for a
period of two consecutive years, then Toray may convert the exclusive license
granted under this Agreement to be non-exclusive, in which event UT shall
thereafter share the Product marketing rights approved by the FDA with such
Third Party designated by Toray.
e. Non-Competition. UT shall not engage in the development of an
immediate release (not sustained or controlled) orally available stable
prostacyclin analog compound including UT-15 for the duration of this Agreement
plus five years. Notwithstanding the foregoing, in the event that immediate
release TRK-100 (Beraprost Sodium) failure has been demonstrated in clinical
trials, then the period of non-competition shall only extend for six months
after the date the failure was demonstrated.
4. DEVELOPMENT AND COMMERCIALIZATION PROGRAM.
a. UT shall be responsible for all costs and expenses for obtaining
regulatory approval and commercializing Products for treatment of the
Indication, including all costs of clinical trials. UT will solely and
exclusively own all regulatory applications and approvals
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obtained by UT with respect to Products. UT will closely consult with Toray with
regard to its participation in important clinical development meetings.
b. UT and Toray shall establish a Management Committee, comprised of
two persons from UT and two persons from Toray, which will meet at least once a
year at each party's expense to coordinate the development and marketing of
Products under this Agreement, to determine the Product development schedule,
and to take such other actions as required under this Agreement.
1. The initial Product development schedule, subject to
revision by the Management Committee, is as follows:
<TABLE>
<CAPTION>
Action Date
------ ----
<S> <C>
Orphan-IND (US) [ ]
Phase II start [ ]
Phase III start [ ]
NDA filing [ ]
FDA approval [ ]
</TABLE>
In the event that the Product development schedule falls more than six months
behind the above initial development schedule, then Toray may at its discretion
terminate this Agreement without any additional penalty to UT.
2. The initial quantity of Product provided by Toray to UT
free of charge for use in clinical studies, subject to revision by the
Management Committee, is up to 100g. The Management Committee will decide from
time to timethe appropriate product sample requirements and the price on
quantities exceeding 100g, to support UT's development and commercialization
approval of the Product.
c. Toray shall provide UT on a timely basis and without charge all
information concerning the Product which is available to Toray and which is
reasonably required by UT to fulfill its obligations under this Agreement,
including but not limited to, information relating to preclinical and clinical
research, safety, use, pharmacokinetics and efficacy, access through Toray to
HMR European data and authority to use and submit such data to the FDA to the
extent legally required, etc. In the event that UT uses information from other
licensees of Toray, UT will be responsible for payment of reasonable
compensation to such licensee through Toray.
d. UT shall disclose to Toray on a timely basis and without charge
all Product information (including but not limited to, clinical studies, ADR,
GCP, preparation for registration, NDA filing, FDA approval, US market, PMS,
safety issues) which UT acquires or will acquire during the term of this
Agreement. UT agrees that Toray may use such information outside the Territory
free of charge. In the event that Toray grants the right to use such information
to a Third Party except Yamanouchi Parmaceutical Co.,LTD. and
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<PAGE> 8
Kaken Parmaceutical Co.,LTD. outside the Territory or uses such information
itself and grants the right to use such Information to a Third Party within the
Territory, Toray will be responsible for payment of reasonable compensation to
UT.
e. Neither UT nor Toray shall appoint a Third Party to promote or
distribute Product under UT's marketing rights approved by the FDA, without the
other's approval. Notwithstanding the foregoing, in the event that UT fails to
achieve at least [ ] annual Net Sales of Product in each year in and after the
third full sales year, then the Management Committee shall have the right, after
full discussion, to appoint a promoting company. In the event that the
Management Committee is unable to reach agreement on the identity of such Third
Party promoting company, Toray shall have the right to appoint such company.
f. In the event that UT desires to market and/or advertise the
Product for off-label use, UT shall discuss with Toray such off-label use and
get the approval of it from Toray in advance .
5. RIGHTS OF FIRST REFUSAL.
a. Toray agrees to enter into a separate negotiation with UT for the
first refusal right to co-promote the non-immediate release formulation of
TRK-100 (Beraprost Sodium) for the Indication when it is developed or marketed
in the Territory.
b. Toray agrees to enter into a separate negotiation with UT for the
first refusal right to develop and sell the Product in other therapeutic areas
than the Indication in the Territory.
c. Toray agrees to enter into a separate negotiation with UT for the
first opportunity to develop and sell the Product in Mexico once Toray's
other licensee indicates that it does not want to commence development in
Mexico.
d. UT agrees to enter into a separate negotiation with Toray for the
first refusal right to develop and sell in Japan up to two compounds which UT is
developing or will develop and which UT has the right to license or sublicense.
6. INTELLECTUAL PROPERTY.
a. Patents. Toray will be responsible for taking all necessary action
to maintain and/or extend the Patents Right in the Territory. UT will render
reasonable assistance to Toray in this effort.
b. Trademarks. UT will be responsible for selecting an enforceable
trademark(s) for the Product acceptable to Toray and Toray will be responsible
for registering and maintaining such registrations within all countries in the
Territory. UT will market the Product
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using such trademark(s) to identify the Product within the Territory. Toray
hereby grants to UT the exclusive right to use the trademark within the
Territory during the term of this Agreement.
7. WARRANTIES.
a. Toray represents and warrants to UT that: (i) Toray is the sole
owner of the Licensed Technology and has the exclusive right and authority to
use the Know-How and to license the Patent Rights and the Know-How; (ii) as of
the Effective Date, Toray is not aware of any action or threatened claim of
infringement brought by a Third Party under any Third Party intellectual
property right in respect of Toray's exploitation of the Licensed
Technology; and (iii) Toray will make available to UT all material technical
information in its possession or of which it is aware that is pertinent to
development and commercialization of the rights licensed under this Agreement.
b. Toray and UT each represents and warrants to the other that: (i)
it is free to enter into this Agreement and to carry out its obligations
hereunder; (ii) this Agreement constitutes its legal, valid and binding
obligation; and (iii) execution, delivery and performance of this Agreement will
not constitute a violation or breach of any agreement or contract to which it is
a party or by which it is bound or the terms of any judicial or administrative
decree or order to which it is subject.
8. INDEMNIFICATION. UT agrees to indemnify and hold Toray, its Affiliates,
and its and their directors, officers, employees and agents harmless from and
against any liabilities or damages or expenses in connection therewith
(including reasonable afforney's fees and costs and other expenses of
litigation) resulting from Third Party claims arising out of UT's clinical
development of Products, defectiveness of Product PPI (information to doctors,
pharmacists and patients), and the use, storage or sales of the Product within
the Territory.
9. CONFIDENTIALITY.
a. Treatment of Confidential Information. Except as otherwise
provided in this Section 9.a, during the term of this Agreement and for a period
of seven (7) years thereafter:
1. UT will retain in confidence and use only for purposes of
this Agreement any information and data supplied by or on behalf of Toray to UT
under this Agreement; and
2. Toray will retain in confidence and use only for purposes
of this Agreement any information and data supplied by or on behalf of UT to
Toray under this Agreement.
For purposes of this Agreement, all such information and data which a Party is
obligated to retain in confidence shall be called "Information."
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b. Right to Disclose. To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement or any rights which survive termination or expiration hereof, a party
may disclose Information to its Affiliates, licensees, consultants, outside
contractors and clinical investigators on condition that such entities or
persons agree (i) to keep the Information confidential for at least the same
time periods and to the same extent as each party is required to keep the
Information confidential and (ii) to use the Information only for such purposes
as such party is entitled to use the Information. Each party or its Affiliates
may disclose such Information to government or other regulatory authorities to
the extent that such disclosure (a) is reasonably necessary to obtain patents or
authorizations, to conduct clinical trials and to market commercially the
Product, provided such party is otherwise entitled to engage in such activities
under this Agreement, or (b) is otherwise required by applicable laws or
regulations.
c. Release from Restrictions. The obligation not to disclose
Information shall not apply to any part of such Information that (i) is or
becomes patented, published or otherwise part of the public domain other than by
acts of the party obligated not to disclose such Information (for purposes of
this Section 9, the "Receiving Party") or its Affiliates or licensees in
contravention of this Agreement, or (ii) is disclosed to the Receiving Party or
its Affiliates or licensees by a Third Party, provided such Information was not
obtained by such Third Party directly or indirectly from the other party under
this Agreement; or (iii) prior to disclosure under this Agreement, was already
in the possession of the Receiving Party or its Affiliates or licensees,
provided such Information was not obtained, directly or indirectly, from the
other party under this Agreement; or (iv) results from research and development
by the Receiving party or its Affiliates or licensees independent of disclosures
from the other party under this Agreement.
d. Publications. No announcement, news release, public statement,
publication or other public presentation relating to the existence of this
Agreement, the subject matter herein, or either party's performance hereunder
including any written or oral publication, any manuscript, abstract or the like
which includes data or any other information generated and provided by the
development effort hereunder, shall be made without the other party's prior
approval as to form and content. An acceptable joint press release announcing
the execution of this Agreement is required to be agreed by both Parties.
10. TERM AND TERMINATION.
a. Term and Expiration. This Agreement shall become effective as of
the Effective Date and shall continue in full force and effect until that date
ten years after FDA approval of the Product. UT may extend the term of this
Agreement by successive one-year periods by giving written notice of each such
extension to Toray no later than two-hundred ten (210) days prior to the end of
the term set forth in the previous sentence or the end of each extension
one-year period with written consent of Toray, which shall not be withheld
without reasonable reason.
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b. Termination.
1. Product Development Delay. In the event that the Product
development schedule falls six months or more behind the schedule initially
determined under Section 4.b.1 by the Management Committee without a reasonable
justification, then Toray may terminate this Agreement as provided in Section
4.b.1.
2. Infringement. UT may terminate this Agreement if a court
of competent jurisdiction from which no further appeal can be taken has entered
a final order indicating that the Licensed Technology infringes the rights of a
Third Party.
3. Default. If a party materially defaults in its performance
of any of its material obligations under this Agreement, and such default is not
cured within sixty (60) days of written notice of such default by the other
party, this Agreement may be terminated at the end of such 60-day period by the
party not in default by written notice of termination to the defaulting party,
such written notice to be given not later than seventy-five (75) days after the
first written notice. Termination under this provision does not limit any
remedies for breach.
4. Bankruptcy. In the event of the institution by or against
either party of insolvency, receivership or bankruptcy proceedings or any other
proceedings for the settlement of a party's debts which are not dismissed within
sixty (60) days, or upon a party's making an assignment for the benefit of
creditors, or upon a party's dissolution or ceasing to do business, the other
party may terminate this Agreement upon written notice.
5. Mergers and Acquisitions. ("M&A"). If M&A is anticipated,
in which UT merges a Third Party company or is merged by a Third Party company,
or acquires more than 50 % of the shares of a Third Party company or more than
50% of the shares of UT is acquired by a Third Party ("M&A"), and if such M&A is
anticipated to affect badly the development and marketing of the Product, then
UT agrees that, in order to minimize the inconvenience of Toray caused by such
M&A, UT shall promptly inform Toray thereof and in good faith endeavor to agree
with Toray about how to continue the development and marketing of the Product.
If UT and Toray can not reach an agreement about how to continue the development
and marketing of the Product according to this Agreement, then Toray has a right
to terminate this Agreement. For the purposes of this Section 10.b.5, " to
affect badly the development and marketing of the Product" means "to result in
UT actually missing a milestone date in this Agreement, or failing to achieve a
minimum Net Sales specified in this Agreement". Furthermore, if the M&A is
reasonably expected to result in access to any Information defined in Section 9
by a Third Party with very competitive products or pipelines to the Product
(Beraprost), then, prior to the M&A, UT shall reach agreement with Toray on how
to prevent such access to any Information. No such M&A shall be completed until
reasonable measures are in place to prevent access to Information as a result of
any M&A by any Third Party with very competitive products or pipelines to the
Product (Beraprost)."
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c. Continuing Obligations. Upon expiration or termination of this
Agreement with respect to all countries within the Territory, the rights and
obligations of the parties shall cease, except as follows:
1. the rights and obligations of the Parties under Section 8
shall survive termination or expiration;
2. upon expiration or termination for any reason, the
obligations of confidentiality and use of Information under Section 9 shall
survive for the period provided therein; and
3. expiration or termination of this Agreement shall not
relieve the parties of any other obligation accruing prior to such termination.
d. Outstanding Inventory. Only upon termination of this Agreement
caused by the reason not attributable to UT, UT shall have the right and option
to sell any completed inventory of Product, as if licensed under this Agreement,
which remains on hand as of the date of the termination, so long as UT pays to
Toray as required under this Agreement.
11. GENERAL.
a. Entire Agreement. This Agreement constitutes the entire agreement
and understanding relating to the subject matter of this Agreement and
supersedes all previous communications, proposals, representations and
agreements, whether oral or written relating to the subject matter of this
Agreement.
b. Assignment. This Agreement is personal to UT and neither this
Agreement nor any particular rights or obligations under this Agreement may be
assigned or otherwise transferred by UT without the prior written consent of
Toray. Any purported assignment in violation of the preceding sentence shall be
void and shall constitute a material default of this Agreement.
c. Force Majeure. A party shall not be held liable or responsible to
another party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from fires, floods, embargoes,
government regulations, prohibitions or interventions, wars, acts of war
(whether war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts, acts of God, or any other cause beyond the reasonable control
of the affected party.
d. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if personally delivered or mailed by first class
certified or registered mail, postage prepaid, hand delivered, or sent by
telecopy or by reputable overnight courier service which requires signature
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<PAGE> 13
upon delivery. Notices sent by U.S. mail shall be deemed delivered three days
after deposit with postal authorities or upon confirmed delivery if personally
delivered, sent by confirmed fax or courier service. Unless otherwise specified
in writing, the mailing addresses of the Parties shall be as described below:
For UT: United Therapeutics Corporation
68 T.W. Alexander Drive
PO Box 14186
Research Triangle Park, NC 27709, USA
Attention: Dr. Gilles Cloutier, Ph.D.
Fax Number: 919-485-8352
For Toray: Toray Industries, Inc.
2-1, Nihonbashi-Muromachi 2-chome,
Chou-ku, Tokyo 103-8666, JAPAN
Attention: Dr. Masanobu Naruto, Ph.D.
Pharmaceuticals Planning Department.
Fax Number: 81-3-3245-5421
e. Amendment and Waiver. This Agreement may be modified, amended and
supplemented only by written agreement signed by the parties. The waiver by any
party to this Agreement of any breach or violation of any provision of this
Agreement by the other party shall not operate or be construed to be a waiver of
any subsequent breach or violation of the same or 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 New York applicable to contracts
between residents of New York which are wholly executed and performed in New
York, except that questions affecting the validity, construction and effect of
any patent shall be determined by the laws of the country in which the patent
was granted.
g. Arbitration. All claims, controversies, disputes or differences
arising between Toray and UT in connection with, arising from, or with respect
to this Agreement, which shall not be resolved within thirty (30) days after
either party notify the other in writing of such claim, controversy, dispute or
difference, shall be submitted for arbitration to the American Arbitration
Association on demand of Toray and shall be submitted for arbitration to the
Japan Commercial Arbitration Association on demand of UT. Such arbitration
proceedings shall be conducted in Washington D.C., USA in accordance with the
then current Commercial Arbitration Rules of the American Arbitration
Association if initiated by Toray and shall be conducted in Tokyo, Japan in
accordance with the then current Commercial Arbitration Rules of the Japan
Commercial Arbitration Association if initiated by UT. The award and decision of
the arbitrator(s) shall be conclusive and binding upon all parties hereto and
judgment upon the award may be entered into any court of general jurisdiction.
This Agreement to arbitrate shall
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continue in full force and effect subsequent to and notwithstanding the
expiration or termination of this Agreement.
h. Partial Invalidity. If any provision of this Agreement is found
to be invalid, illegal, or otherwise unenforceable, then the remaining
provisions shall nevertheless remain in full force and effect and shall not be
affected by the modification of striking of the involved or unenforceable
provision. The parties agree to renegotiate in good faith any term held invalid
and be bound by the mutually agreed substitute provision.
i. Independent Contractors. The relationship between Toray and UT is
that of independent contractors. Neither party has any actual or apparent
authority, express or implied, to act on behalf of the other party or to bind
the other party to any obligations. Neither party shall be deemed to be an agent
or servant of the other party or a partner or venturer with the other party.
IN WITNESS WHEREOF, this Agreement is executed and effective as of the
date first above written.
<TABLE>
TORAY INDUSTRIES, INC. UNITED THERAPEUTICS CORPORATION
<S> <C>
/s/ Kiyoteru Wakasugi /s/ Martine Rothblatt
- ------------------------------------------ -------------------------------------------
By: Kiyoteru Wakasugi Martine Rothblatt
Managing Director of the Board Chief Executive Officer
Date: March 15, 1999 Date: March 15, 1999
------------------------------------- --------------------------------
</TABLE>
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<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
FOR PORTIONS OF THIS DOCUMENT
EXHIBIT 10.15
MANUFACTURING AGREEMENT
AGREEMENT dated as of February 11, 1998 by and between UNITED THERAPEUTICS
CORPORATION ("UNITED THERAPEUTICS"), a Delaware corporation with principal
offices at 1826 R Street NW, Washington DC 20009 and Steroids, Ltd. ("STEROIDS")
an Illinois corporation with principal offices at 2201 West Campbell Park Drive,
Chicago, Illinois 60612.
WHEREAS, STEROIDS has the expertise, personnel, and facilities for the
manufacture of active pharmaceutical ingredients (API's), and desires to provide
such service to contracting parties;
WHEREAS, UNITED THERAPEUTICS has worldwide exclusive rights to make and
sell the stable prostacyclin analog formerly known as 15AU81 and now known as
UT-15;
WHEREAS, UNITED THERAPEUTICS and STEROIDS are parties to an agreement
("EXISTING AGREEMENT') consisting of STEROIDS' Proposal for Process Development
Program for Synthesis of 15AU81 dated February 7, 1997, and UNITED THERAPEUTICS'
acceptance of STEROIDS' aforementioned proposal, dated March 14" 1997, and of
STEROIDS' proposal for process development dated November 4, 1997 and UNITED
THERAPEUTICS' acceptance of STEROIDS' proposal dated November 11, 1997 and of
STEROIDS' letter quotation for the cGMP synthesis of 300 grams of 15AU81 dated
October 8, 1997 and UNITED THERAPEUTICS's acceptance of STEROIDS' proposal dated
October 21, 1997.
NOW, THEREFORE, STEROIDS and UNITED THERAPEUTICS wish to continue, expand
and further formalize their EXISTING AGREEMENT with this Manufacturing Agreement
and thus hereby agree as follows:
1. DEFINITIONS
The Defined terms used in this Agreement shall have the following meanings:
1.01 "Affiliate" means (a) any company owned or controlled to the extent of
more than fifty percent (50%) of its issued and voting capital by a party to
this Agreement and any other company so owned or controlled, directly or
indirectly, by any such company or the owner of any such company, or (b) any
partnership, joint venture or other entity directly or indirectly controlled by,
controlling, or under common control of, to the extent of more than fifty
percent (50%) of voting power, or otherwise having power to control its general
activities, a party to this Agreement, but in each case only for so long as such
ownership or control shall continue.
1.02 "API" means the active pharmaceutical ingredient manufactured by
STEROIDS in accordance with the procedures developed under Exhibit A and
provided to UNITED THERAPEUTICS pursuant to this Agreement.
<PAGE> 2
1.03 "Confirmed Purchase Order" means a purchase order issued by UNITED
THERAPEUTICS and received by STEROIDS for the manufacturing of the API, for
which a completion date has been scheduled.
1.04 "CDER" means FDA's Center for Drugs Evaluation and Research.
1.05 "API Substance" means the chemical entity UT-15.
1.06 "FDA" means the U.S. Food and Drug Administration.
1.07 "Facility" means STEROIDS' or its authorized agent's manufacturing
facility.
1.08 "Manufacturing Date" means scheduled date on which STEROIDS intends to
begin manufacturing UNITED THERAPEUTICS' API pursuant to a Confirmed Purchase
Order.
1.09 "Good Manufacturing Practices" or "GMP" means current good
manufacturing practices, as specified in regulations promulgated from time to
time by the FDA for the manufacture and testing of pharmaceutical materials and
the corresponding requirements of the European Union, Member States of the
European Union, and Canada.
1.10 "Incoming Acceptance Test" means those analytical tests requested by
UNITED THERAPEUTICS to be performed on a received shipment of API, which tests
will be identified by a separate letter between the parties.
1.11 "Lot" means the API produced in a single production run, which may be
contained in one or more containers thereof.
1.12 "New Procedure" means a method, process, or test that is not included
within STEROIDS' SOPS, but which is requested by UNITED THERAPEUTICS in writing
that STEROIDS perform.
1.13 "Sensitive Regulatory Submission Period" means the period between six
(6) months prior and subsequent to a defining date set forth by UNITED
THERAPEUTICS, in which period UNITED THERAPEUTICS intends to file an
Investigational New Drug amendment or a NDA.
1.14 "SOPS" means written standard operating procedures and methods of
STEROIDS.
2. MANUFACTURE, STORAGE AND DISTRIBUTION OF API.
The following provisions relate to the manufacture, storage and
distribution of API for UNITED THERAPEUTICS by STEROIDS.
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<PAGE> 3
2.01 Terms of Supply. The following terms relate to categories of
manufacturing:
2.01.1 Subject to the terms and conditions hereof, during the Term and
any Renewal Terms of the Agreement, STEROIDS agrees to provide and
UNITED THERAPEUTICS agrees to accept from STEROIDS manufacturing
services provided that such services are performed in accordance with
STEROIDS' SOPS and UNITED THERAPEUTICS's written instructions,
including, but not limited to those contained in Exhibit A.
2.01.2 Subject to the terms and conditions of this Agreement, during
the Term and any Renewal Terms of this Agreement, STEROIDS agrees to
sell and UNITED THERAPEUTICS agrees to purchase from STEROIDS API
manufactured under this Agreement in accordance with the terms of
Attachment A:
2.02 Terms of Storage and Distribution. The following terms relate to
storage and distribution of API:
2.02.1 STEROIDS will maintain the appropriate storage conditions
throughout holding and shipping of the manufactured API in accordance
with Sections 7.01 and 7.02, and UNITED THERAPEUTICS's written
instructions.
2.02.2 UNITED THERAPEUTICS will be responsible for order entry and
return material authorization, including all costs attendant thereto.
Such costs include, but are not limited to return postage,
telephone-related services, storage of returned API and other
material, and disposal of returned API and other material.
2.02.3 STEROIDS will only ship API Substance per written instructions
from UNITED THERAPEUTICS, via Facsimile and confirming originals.
STEROIDS will track all shipments, and record and maintain GMP
documentation, including Lot traceability.
(a) STEROIDS may ship API Substance for testing purposes pursuant to
written requests by UNITED THERAPEUTICS.
2.02.4 If requested, STEROIDS will conduct shipping validation in
accordance with a plan to be developed jointly with UNITED
THERAPEUTICS and written by STEROIDS, including a cost estimate. Upon
the conclusion of the shipping validation, STEROIDS will prepare and
submit a report detailing the shipping validation program and its
results. STEROIDS will invoice UNITED THERAPEUTICS therefore at
STEROIDS' reasonable cost.
2.02.5 Unless otherwise instructed by UNITED THERAPEUTICS, STEROIDS
will dispose of all returned API and invoice UNITED THERAPEUTICS for
STEROIDS' cost of disposal; however, costs of handling and disposing
API returned due to an FDA or UNTIED THERAPEUTICS mandated recall of
an entire Lot of API Substance will be invoiced to UNITED THERAPEUTICS
at
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<PAGE> 4
STEROIDS' cost plus [ ]. The cost of return shipping will be invoiced
to UNITED THERAPEUTICS at STEROIDS' cost. Labor and costs relating to
investigation of returned API Substance are not included in this
Agreement.
3. PAYMENT FOR SERVICES
STEROIDS will invoice UNITED THERAPEUTICS for charges related to
manufacturing API as specified in the Proposal in Attachment A with a goal of [
] per kilogram. Payment for services will be in accordance with Attachment A.
Payments shall be due within 30 days of receipt of STEROIDS invoice.
3.01 Late Payments. For any payment owed under this Agreement and not
received by the applicable Due Date, interest will accrue at the monthly rate of
1.5% (18% per year) calculated on daily outstanding balance, and compounded
monthly, on all outstanding balances starting from the applicable Due Date. Any
subsequent payments received will first be applied to the outstanding interest
and then to any then current balance. UNITED THERAPEUTICS agrees to pay for the
costs of collecting any payments due STEROIDS under this Agreement, including
the costs of reasonable collection costs and attorney's fees. If UNITED
THERAPEUTICS does not pay an invoice in full, including interest charges, after
three (3) months of mailing, then UNITED THERAPEUTICS will be in breach of this
Agreement and STEROIDS, at its discretion, may terminate this Agreement under
the provisions of Section 11. 03 hereof.
4. SUPERVISION BY UNITED THERAPEUTICS
4.01 UNITED THERAPEUTICS will be responsible for Quality Control testing
and approval/release of the API unless otherwise provided in writing.
4.02 The following employee of UNITED THERAPEUTICS is hereby designated as
having the responsibility for Quality Control and Quality Assurance and ensuring
that STEROIDS' activities hereunder are carried out in accordance with UNITED
THERAPEUTICS's written instructions and GMP:
Name: Shelmer D. Blackburn, Jr.
Title: Director of Operations
Address: UNITED THERAPEUTICS CORPORATION
2 Davis Drive
Research Triangle Park, NC 27709
Telephone: 919-485-8350
Other employees of UNITED THERAPEUTICS may be designated from time to time,
provided STEROIDS is notified in advance in writing of his or her name, title,
address and telephone number. At no time, however, shall there be more than two
UNITED THERAPEUTICS employees sharing this responsibility.
4.03 The individual(s) designated by UNITED THERAPEUTICS pursuant to
Section 4.02 shall carry out his/her responsibilities through periodic on-site
visits, observation of
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<PAGE> 5
STEROIDS' Facility and activity therein through its observation window,
telephonic reports and written memoranda. UNITED THERAPEUTICS will continue to
monitor STEROIDS' operations as they relate to API by conducting periodic audits
of STEROIDS' facility to assure ongoing compliance with UNITED THERAPEUTICS's
written instructions and GMP. Such individuals as designated shall use due
diligence and best efforts in conducting such Quality Control activities so as
not to delay STEROIDS ability to release Bulk Substance or Product and secure
payment therefore on a regularly scheduled basis.
5. STANDARD OPERATING PROCEDURES AND FORMS
5.01 All activities conducted hereunder by STEROIDS will be conducted in
accordance with Standard Operating Procedures prepared by STEROIDS that comply
with Sections 7.01 and 7.02, and any other written specifications or procedures
provided by UNITED THERAPEUTICS and accepted by STEROIDS.
5.02 STEROIDS agrees that for each Lot of API filled and packaged
hereunder, STEROIDS will complete and furnish to UNITED THERAPEUTICS one (1)
copy of the Batch production records, the originals of which will be retained by
STEROIDS to the extent required by federal regulation. Both parties acknowledge
that such records will include in-process test data for each Lot.
5.02.1 The aforementioned original Batch production records shall be
retained as noted herein, and while so retained shall be available for
inspection by regulatory authorities, UNITED THERAPEUTICS, and UNITED
THERAPEUTICS' authorized representatives,
5.02.2 Sections 5.02 and 5.02.1 shall survive termination of this
Agreement for such period as such records are required to be
maintained by federal regulation.
5.03 STEROIDS and UNITED THERAPEUTICS both agree to maintain a complete
record of information for each Lot and Batch for the period required by law,
including the information referred to in Section 5.02. Each of STEROIDS and
UNITED THERAPEUTICS acknowledges that maintenance of summaries of such
information, as opposed to complete copies of the original records themselves,
will not constitute fulfillment of the obligation referred to in the immediately
preceding sentence.
6. PERMISSION TO INSPECT
6.01 STEROIDS hereby agrees and acknowledges that upon prior reasonable
written notice it will permit authorized representatives of the FDA or
comparable foreign regulatory authority, including, without limitation,
authorized representatives of CDER, to inspect those portions of the STEROIDS
Facility in which STEROIDS performs the activities provided for in this
Agreement.
6.01.1 To the extent STEROIDS has prior notice, STEROIDS agrees to
notify UNITED THERAPEUTICS of any inspection by the FDA that relates
specifically
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<PAGE> 6
to STEROIDS API and give UNITED THERAPEUTICS timely updates on the
inspection. UNITED THERAPEUTICS may send a representative to STEROIDS
on the day of the inspection, however UNITED THERAPEUTICS's
representative may not participate in or observe the inspection itself
or have any substantive written or verbal communication with the FDA
inspectors, unless so requested by STEROIDS. STEROIDS agrees to
provide a timely verbal update to UNITED THERAPEUTICS regarding any
such inspection.
6.02 STEROIDS will provide in a timely manner copies of written
communications from such FDA inspections that pertain to API,
including but not limited to documents entitled Observations. Any such
written communications shall be redacted with respect to information
relating to STEROIDS' APIs and any third party.
6.03 This Article 6 shall survive termination of this Agreement in
perpetuity.
7. COMPLIANCE WITH CURRENT GMP
7.01 STEROIDS agrees that, in performing the activities provided for in
this Agreement, it will comply with GMP.
7.02 STEROIDS agrees to perform all of the activities provided for in this
Agreement in accordance with written instructions provided by UNITED
THERAPEUTICS, unless STEROIDS has previously advised UNITED THERAPEUTICS that it
is not able to do so. In the event UNITED THERAPEUTICS desires to modify its
instructions, UNITED THERAPEUTICS agrees to notify STEROIDS of the planned
modifications in writing and to provide a reasonable period of time before
submitting such modifications to the FDA, if necessary, so that STEROIDS has
sufficient time to implement those modifications that affect its activities
hereunder.
8. FDA REGISTRATION OF THE FACILITY
STEROIDS will perform the activities provided for in this Agreement at its
Facility, unless otherwise specified or approved in advance by UNITED
THERAPEUTICS and the appropriate regulatory authorities. The current Facility
will be registered with the FDA and any new facility where API is synthesized
will also be registered.
9. LABEL CONTROL
9.01 In-process labels are to be used by STEROIDS in performing the
activities provided for in this Agreement. The parties agree that STEROIDS has
the right to modify said labels to the extent permitted by law, upon written
notice to UNITED THERAPEUTICS and, where required, after authorization by CDER.
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<PAGE> 7
10. TERM
10.01 This Agreement will be effective as of the date first set forth above
and will remain in effect for a term of five (5) years ("Term") subject to early
termination in accordance with the terms of the provisions of Section 11. The
parties agree to renew this Agreement automatically for renewal terms of one (1)
year ("Renewal Term") unless either party objects to doing so in writing no
later than four (4) months prior to the expiration of a Term or Renewal Term.
11. TERMINATION
11.01 UNITED THERAPEUTICS will have the right, exercisable in its sole
discretion, with or without cause, to terminate this Agreement by giving to
STEROIDS four (4) months advance written notice of termination. After giving
notice of termination and throughout the period ending on the date the notice of
termination becomes effective, UNITED THERAPEUTICS agrees to continue to perform
all of its obligations hereunder.
11.02 If either STEROIDS or UNITED THERAPEUTICS materially breaches or
defaults in the performance or observance of any of the provisions of this
Agreement and such breach or default is not cured within two (2) months after
the giving of notice by the other party specifying such breach or default, the
other party will have the right to terminate this Agreement in full upon a
further one (1) month's notice. Each party shall also have the right to
terminate this Agreement in full upon a one (1) month's notice in the event that
there has been a loss, destabilization, alteration or contamination of API while
in STEROIDS' possession, wherein the loss, etc. resulted in a material adverse
effect. Termination under this Section 11.04 shall relieve the parties of all
future obligations relating to purchase and performance of services under
Article 2 from and after such termination date.
11.03 Upon termination of this Agreement, whether or not for cause,
STEROIDS will provide written notice to UNITED THERAPEUTICS of any inventory of
API and other materials either provided by or purchased, invoiced and paid for
by UNITED THERAPEUTICS and request written instructions from UNITED THERAPEUTICS
as to where to ship same. Such shipment shall be at UNITED THERAPEUTICS's
expense, and UNITED THERAPEUTICS shall be responsible for all storage costs,
payable prior to release of the inventory and associated materials.
12. WARRANTIES
12.01 Mutual Representations and Warranties. Each Party hereby represents
and warrants to the other Party that this Agreement constitutes the legal, valid
and binding obligation of such Party, enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors' rights generally, and that the execution,
delivery and performance of this Agreement does not conflict with any material
agreement, instrument or understanding, oral or written, to which such Party may
be bound, nor violates any law or regulation of any court, governmental body or
administrative or
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<PAGE> 8
other agency having jurisdiction over it, except for such conflicts or
violations that would not have a material adverse effect on the business,
properties or financial condition of the other party.
12.02 UNITED THERAPEUTICS Warranties.
12.02.1 UNITED THERAPEUTICS warrants:
(a) that all activities of UNITED THERAPEUTICS under this
Agreement will be accomplished in accordance with the terms of
this Agreement;
(b) that, to the best of its knowledge, there are no
intellectual property rights, such as, but not limited to
valid United States patents, that would be infringed by the
manufacture, use or sale of API or the use of any New
Procedure. Notwithstanding the preceding sentence, UNITED
THERAPEUTICS makes no warranty with respect to intellectual
property rights relating to any processes performed by
STEROIDS hereunder, except for a New Procedure.
12.03 STEROIDS Warranties.
12.03.1 STEROIDS warrants:
(a) that all activities of STEROIDS under this Agreement will
be accomplished in accordance with (i) the terms of this
Agreement and all Attachments, (ii) all written manufacturing
instructions received from UNITED THERAPEUTICS and accepted by
STEROIDS, (iii) GMP, and (iv) other applicable laws, rules and
regulations;
(b) that, upon delivery of API to a carrier on behalf of
UNITED THERAPEUTICS or UNITED THERAPEUTICS's designee, API
will not be misbranded or otherwise of a nature that may not
be introduced in United States interstate commerce, unless so
directed by UNITED THERAPEUTICS in writing, however, this
warranty of Section 12.03.1 (b) shall not apply if and to the
extent that such condition obtains because UNITED THERAPEUTICS
has breached its warranties in Section 12.02.1;
(c) that it shall not knowingly ship API that has not passed
USP sterility testing or is beyond its labeled expiration
date, or is materially adversely affected due to misbranding,
contamination, having been handled contrary to GMP, or having
been subjected to negligence, unless so instructed in writing
by UNITED THERAPEUTICS, STEROIDS shipping of API is not
intended for any further "Commercial Purpose"
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<PAGE> 9
(d) that, to the best of its knowledge, there are no
intellectual property rights, such as, but not limited to
valid United States patents, that would be infringed by any
processes performed by STEROIDS under this Agreement
12.04 No Other Warranties. The express warranties made in this Agreement
are made in lieu of all other warranties, express or implied, including, without
limitation, the warranties of merchantability and fitness for a particular
purpose.
13. INDEMNIFICATION
13.01 Subject to the provisions of Section 13.05, UNITED THERAPEUTICS will
defend, indemnify and hold harmless STEROIDS and its directors, officers,
employees, agents, successors, and assigns from and against all suits, claims,
liabilities, losses, and expenses, including reasonable attorneys' fees and
expenses, arising directly or indirectly out of injury to persons or property
alleged to have been caused by the design, manufacture, testing, instructions or
warnings accompanying API, or use or unavailability of API or UNITED
THERAPEUTICS breach of this Agreement, except to the extent that the injury is
alleged to have been caused solely by STEROIDS' breach of this Agreement,
intentional action, willful inaction, or gross negligence while providing the
services described herein, provided, however, that the indemnity provisions of
this section 13.01 remain m effect where STEROIDS' allegedly injury-causing
behavior was effected pursuant to specific instructions of UNITED THERAPEUTICS.
The aforementioned injury to persons or property specifically includes, without
limitation, alleged infringement of patent or other intellectual property rights
of third parties by the manufacture, use, or sale of API or the use of a New
Procedure. UNITED THERAPEUTICS shall have full control over the defense of any
such litigation, and agrees to bear all costs and expenses thereof. STEROIDS, at
its own expense, will be entitled to be represented by its own counsel in any
such litigation.
13.02 UNITED THERAPEUTICS agrees that STEROIDS' liability resulting from
the loss, destabilization, alteration or contamination of API of a particular
Lot, wherein such API is lost, destabilized, altered or contaminated such that
it cannot be used in clinical trials or is not placed into commerce, shall not
exceed the amount of any insurance recoveries net of any applicable deductible
realized by STEROIDS in respect to the foregoing plus the value of services
provided with respect to the Lot in question.
13.03 Subject to the provisions of Section 13.02 and 13.05, STEROIDS will
defend, indemnify and hold harmless UNITED THERAPEUTICS and its directors,
officers, employees, agents, successors, and assigns from and against all suits,
claims, liabilities, losses, and expenses, including reasonable attorneys' fees
and expenses, arising directly or indirectly out of injury to persons or
property alleged to have been caused in whole or in part by STEROIDS' breach of
this Agreement, intentional action, willful inaction, or gross negligence while
providing the services described herein to UNITED THERAPEUTICS; provided,
however, that such indemnity shall not apply if such breach, intentional action,
willful inaction, or gross negligence resulted from specific instructions of
UNITED THERAPEUTICS or in part from any breach, intentional
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<PAGE> 10
action, willful action or gross negligence of UNITED THERAPEUTICS. The
aforementioned injury to persons or property specifically includes, without
limitation, alleged infringement of patent or other intellectual property rights
of third parties by STEROIDS' manufacturing procedures, irrespective of API,
performed under this Agreement provided, however, STEROIDS performance of a New
Procedure is specifically excluded from such indemnity. STEROIDS shall have full
control over the defense of any litigation, and agrees to bear all costs and
expenses therefor. UNITED THERAPEUTICS, at its own expense, will be entitled to
be represented by its own counsel in any such action.
13.04 In the event that a suit, claim, liability, loss or expense,
including reasonable attorneys' fees and expenses, arises out of injury to
persons or property alleged to have been caused by both events or circumstances
for which (i) both UNITED THERAPEUTICS and STEROIDS have indemnity obligations
under Sections 13.01 and 13.04, or (ii) UNITED THERAPEUTICS or STEROIDS have
indemnity obligations under Sections 13.01 and 13.04 and one or more third
parties are alleged to be liable for the injury, then the parties agree to pay
losses and expenses arising from such suit claim, liability, loss or expense in
proportion to each party's respective liability for the injury, as adjudged by a
court of competent jurisdiction or, if a settlement is reached, negotiation
between the parties, wherein the parties agree to negotiate their respective
liability for the injury in good faith. UNITED THERAPEUTICS further agrees that
the liability of any such third party shall be attributed solely to UNITED
THERAPEUTICS and that UNITED THERAPEUTICS shall pay any losses and expenses in
proportion to the sum of UNITED THERAPEUTICS's and the third party or parties'
combined liability relative to the total liability.
13.05 No indemnity under Article 13 shall be applicable unless the
indemnified Party (ii) gives the indemnifying Party prompt notice of any claim,
suit or action brought against the indemnified Party, (ii) allows the
indemnifying Party to defend the same, without prejudice to the right of the
indemnified Party to participate at its expense through counsel of its own
choosing, (iii) renders the indemnifying Party all assistance reasonably
necessary in defending against such claim, suit or action at the indemnifying
Party's expense, and (iv) does not compromise or settle such claim, suit or
action without the indemnifying Party's prior written consent. The indemnifying
party shall not settle such claim, suit or action without the indemnified
party's consent if such settlement results in any obligation or liability on the
part of the indemnified party.
14. CONFIDENTIALITY
14.01 Nondisclosure and Nonuse.
14.01.1 STEROIDS and UNITED THERAPEUTICS shall each retain in
confidence information obtained from the other under this Agreement and shall
not disclose such information to any third party except
(a) consultants and Affiliates who are obligated to maintain
it in confidence pursuant to a written agreement that
incorporates by reference
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the terms of Article 14, or that incorporates substantially
similar terms having equivalent scope of protection as those
of this Article 14.
(b) as necessary to obtain approval from a governmental agency
in order to market and sell the API;
(c) as reasonably may be required in a patent application
covering subject matter that is encompassed with this
Agreement; or
(d) as otherwise may be required by law, regulation or
judicial order.
14.01.2 STEROIDS and UNITED THERAPEUTICS each agree that information
that subject to this Article 14 shall be used only for those purposes
contemplated by this Agreement.
14.01.3 Each party shall take all reasonable precautions to safeguard
the confidentiality of the information.
14.02 Exceptions.
14.02.1 The obligations of nondisclosure and nonuse of this Article 14
shall not apply to information that
(a) is known to the receiving party, as evidenced by written
records maintain by the receiving party, or to the public, or
is in the public domain, prior to its disclosure under this
Agreement;
(b) is hereafter lawfully disclosed to the receiving party by
a third party not under an obligation of confidence to the
other party; or
(c) subsequently enters the public domain or becomes known to
the public some means other than a breach of this Agreement.
14.03 Each party acknowledges that the restrictions contained in this
Article 14 are necessary and reasonable to protect the legitimate interests of
the parties and a violation of this Article 14 by a party may result in
irreparable harm to the other party.
14.04 The provisions of this Article 14 shall survive the expiration or
terminate of this Agreement and continue for ten (10) years thereafter.
14.05 All prior confidentiality agreements between the parties hereto are
hereby superseded Article 14 of this Agreement, such that any information
previously disclosed between parties under any such prior agreement shall
henceforth by treated as if disclosed under this Agreement.
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15. MISCELLANEOUS
15.01 Force Majeure. No party will be liable for failure of or delay in
performing obligations set forth in this Agreement, and no party will be deemed
in breach of its obligations if such failure or delay is due to natural
disasters or any causes reasonably beyond the control or anticipation of such
party. Each party agrees to use its best efforts to mitigate the impact on its
performance under this Agreement caused by a force majeure.
15.02 The parties agree that their rights (except for the rights to receive
and obtain payments owed in accordance with this Agreement) and obligations
under this Agreement may not be delegated, transferred or assigned to a third
party without the prior consent of the other party; whether by operation of law
or contract. Nevertheless, either party may transfer or assign its rights and
obligations under this Agreement to any entity which acquires substantially all
of its assets and business, or is an Affiliate of the assigning party.
15.03 Status of Parties. For the purpose of carrying out this Agreement
each party will act an independent contractor and not as partner, joint
venturer, or agent with respect to the other party, and neither party will bind
nor attempt to bind the other party to any contract.
15.04 Notice. Any notice, consent or approval required under this Agreement
will be in writing sent by registered or certified mail, postage prepaid, or by
facsimile, confirmed by such registered or certified mail, and addressed as
follows:
If to STEROIDS:
Steroids Ltd
2201 West Campbell Park Drive
Chicago, Illinois 60612
Attn: Robert Moriarty Ph.D.
President
If to UNITED THERAPEUTICS:
UNITED THERAPEUTICS CORPORATION
2 Davis Drive
Research Triangle Park, NC 27709
Attn: James Crow, PhD
President
(919) 485-8350
All notices shall be deemed effective on the date of mailing, unless otherwise
stated herein. In case either party changes its address or facsimile number at
which notice is be received, written notice of such change will be given without
delay to the other party.
15.05 Entire Agreement. This Agreement and the exhibits attached hereto set
forth the entire agreement and understanding among the parties hereto as to the
subject matter hereof has
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priority over all documents, verbal consents or understandings made between
STEROIDS and UNITED THERAPEUTICS with respect to the subject matter hereof. None
of the terms of this Agreement may be amended or modified except in writing
signed by both parties hereto.
15.06 Waivers. A waiver by either party of any term or condition of this
Agreement in any one instance will not be deemed or construed to be a waiver of
such term or condition for similar instance in the future or of an subsequent
breach hereof.
15.07 Applicable Law. This Agreement will be governed by and construed in
accordance the laws of the District of Columbia without regard to the conflicts
of laws provisions thereof.
15.08 Remedies. The rights and remedies of a party set forth herein with
respect to failure of the other to comply with the terms of this Agreement,
including, without limitation, rights of full or partial termination of this
Agreement are not exclusive, the exercise thereof will not constitute an
election of remedies and the aggrieved party will in all events be entitled to
seek whatever additional remedies may be available in law or in equity.
15.09 Headings. Headings in this Agreement are included herein for case of
reference only and will have no legal effect. References to sections are to
sections of this Agreement unless otherwise specified.
15.10 Title and Intellectual Property to API. UNITED THERAPEUTICS will
retain title to API and all intellectual property in the API, including but not
limited to the agreed initial process to make the API and any New Procedure,
shall belong solely to UNITED THERAPEUTICS. STEROIDS agrees to cooperate fully
in assigning all patent and other intellectual property rights in or related to
the API to UNITED THERAPEUTICS. STEROIDS agrees to cooperate fully in the
preparation of patent applications related to the synthesis of the API. STEROIDS
will retain title and rights to all inventions, concepts, ideas, proprietary
information, manufacturing processes or chemical synthesis not directly and
solely related to the Product, the agreed initial process to make the API and
any new procedure. UNITED THERAPEUTICS shall have the rights to a perpetual,
fully paid, non-exclusive license to any discovery, invention, etc. to which
STEROIDS retain title.
15.11 Use of API. STEROIDS use of the API shall be limited to the
activities described in this Agreement.
15.12 Assignment. Neither this Agreement nor any of its rights or
obligations may be assigned, delegated or otherwise transferred, in whole or in
part, by either Party without the prior written consent of the other, except
that, without securing such prior consent, any Party shall have the right to
assign this Agreement to any successor of such party by way of merger or
consolidation or the acquisition of substantially all of the entire assets of
such Party relating to the subject matter of this Agreement, provided, however,
that such successor shall expressly assume all of the obligations of such Party
under this Agreement. The Parties agree that this Agreement shall be binding
upon and inure to the benefit of their respective successors and approved
assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their duly authorized officers.
UNITED THERAPEUTICS CORPORATION STEROIDS, LTD.
/s/ James W. Crow /s/ Robert M. Moriarty
- ------------------------------ ------------------------------
James W. Crow, Ph.D. Robert M. Moriarty
Dated: Dated:
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<PAGE> 1
EXHIBIT 10.16
LEASE
THIS LEASE ("Lease") is made this 1st day of March, 1999 by and between
BEACON PROJECTS, INC., a Maryland corporation (the "Landlord") and UNITHER
TELEMEDICINE SERVICES CORP., a Delaware corporation (the "Tenant").
WITNESSETH:
1. Premises and Rent. That Landlord for and in consideration of Ten
Dollars ($10.00) received in hand, the covenants and agreements hereinafter set
forth and the rent hereinafter specifically reserved, has leased, and does
hereby lease, unto said Tenant:
-- approximately 2,000 rentable sq. ft. of office space located in the
basement;
-- approximately 1,000 rentable sq. ft. of office space on the second
floor; and
-- shared access to the second floor conference room,
together referred to as the "Premises", in that certain building located at
1824-1826 R Street, N.W., Washington, D.C. (the "Building"), together with the
right to use the front entrance to the Building for a term commencing on March
1, 1999 for Tenant's occupancy of the Premises (the "Commencement Date") and
ending on February 28, 2001, both dates inclusive, except as extended in
accordance with the terms hereof, the said Tenant yielding and paying as rent
for said term an amount equal to Two Thousand Five Hundred Dollars ($2,500.00)
per month, without deduction or demand, payable in advance on the first day of
each month during said term, at the office of Landlord, or at such other place
as Landlord may hereafter designate in writing. Rent for the first month of
the term shall be due and payable on or before the date Tenant executes this
Lease. Rent shall be prorated for any partial month during the term at this
Lease based on a 365-day year. Rent shall be increased ten percent (10%) on
each anniversary of the Commencement Date. Rent checks are to be payable to
Landlord or such other person, firm or corporation as Landlord may designate in
writing. Tenant does hereby take and hold the Premises at the rent hereinabove
specifically reserved and payable as aforesaid, and upon and subject to the
terms and conditions herein contained. For each day that the commencement of
the term is delayed beyond March 1, 1999, the term shall be extended by one (1)
day beyond February 28, 2001.
2. Use of Premises. Tenant may use and occupy the Premises for general
office and administrative purposes or for such other purposes as may be
permitted by law including, specifically, a 24-hour telemedicine facility.
3. Parking. Tenant shall have, and is hereby granted, the right to use up
to four (4) parking spaces located in the rear of the Building during the term
for an additional charge of Two Hundred Dollars ($200.00) per month, per
parking space. It is understood and agreed that there are eight (8) parking
spaces currently available for use in the rear of the Building.
<PAGE> 2
4. Use of Common Elements of the Building. For the rent stipulated to be
paid hereunder, Tenant shall have the non-exclusive right to use all entrances,
lobbies and sidewalks not specifically demised to Landlord or another tenant.
5. Utilities, Maintenance and Taxes. Landlord shall furnish all utilities
to the Building and the cleaning services set forth in Paragraph 22 of this
Lease, and Tenant shall pay Landlord within thirty (30) days of Tenant's
receipt of an invoice therefor its proportionate share (agreed to be 20%) of
the cost thereof, unless separately metered. Landlord shall pay all real
property taxes on the land, Building, and Premises during the term. Landlord
shall be responsible for all repairs and maintenance to the Building's systems
(including those serving the Premises), to the roof and to other structural
portions of the Building, to the common areas and to the exterior of the
Building. Tenant shall keep the Premises (except for Building systems and
structural components of the Building located therein) in good order and
condition and will, at the expiration or other termination of the term hereof,
surrender and deliver up the same in like good order and condition as the same
now is or shall be at the commencement of the term hereof, ordinary wear and
tear, repairs and maintenance which are Landlord's responsibility hereunder and
damage by the elements, fire, and other unavoidable casualty excepted.
6. Subletting and Assignment. Tenant shall not sublet the Premises or any
part thereof or transfer possession or occupancy thereof to any person, firm or
corporation, or transfer or assign this Lease or any rights hereunder.
Notwithstanding the foregoing, Tenant shall have the right to assign this Lease
or sublet all or any portion of the Premises or permit the same to be used by
its parent company, subsidiaries, or affiliates upon prior written notice to
Landlord.
7. Fire Insurance. Tenant shall not do or permit anything to be done in
or about the Premises or bring or keep anything therein which shall in any way
increase the rate of fire or other insurance on the Premises or conflict with
the fire laws or regulations, or with any insurance policy upon said premises
or with any statutes, rules or regulations enacted or established by the
appropriate governmental authority.
8. Alterations. Tenant shall not make any alterations, installments,
changes, replacements, additions, or improvements (structural or otherwise) in
or to the Premises or any part thereof, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed, provided the same do not affect the Building's exterior or structure
or adversely affect the mechanical, plumbing or electrical systems of the
Building. Notwithstanding the foregoing, Tenant shall be permitted to make
such alterations necessary to ensure an uninterruptible power supply to its
telemedicine operations, at Tenant's sole cost.
9. Access. Tenant further agrees that it shall permit Landlord, its agent
or employees, to enter upon the Premises at all reasonable times after
reasonable notice (except in the event of an emergency when no advance notice
shall be required) to inspect the same, to show the same to prospective
purchasers and mortgagees and, during the last
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ninety (90) days of the term, to prospective tenants. However, any entry shall
not unreasonably disturb or interfere with Tenant's business operations.
10. Signage. Tenant shall not place any sign in or on any part of the
Premises visible from the exterior of the Premises or elsewhere in or on the
Building without Landlord's prior written approval. Notwithstanding the
foregoing, Tenant shall have the right to install a brass plaque on the
Building identifying itself provided that Landlord's approval of the size,
color and style of such signage is first obtained, which approval Landlord
agrees not to unreasonably withhold, condition or delay.
11. Personal Property. All personal property of Tenant upon the Premises
shall be at the sole risk of Tenant. Tenant hereby expressly releases Landlord
from any liability incurred or claimed by reason of damage to Tenant's property
unless such damage is caused by Landlord's negligence.
12. Default and Remedies. It is agreed that if Tenant shall fail to pay
the rent, or any other charges due and owing hereunder, at the time the same
shall become due and payable, although no demand shall have been made for the
same; or if Tenant shall violate or fail or neglect to keep and perform any of
the covenants, conditions and agreements herein contained on the part of Tenant
to be kept and performed and such violation, failure or neglect is not cured
within sixty (60) days after receipt by Tenant of Landlord's notice of default
in each and every such event from thenceforth, and at all times thereafter, at
the option of Landlord, Tenant's right of possession shall thereupon cease and
determine, and Landlord shall be entitled to possession of the Premises and to
re-enter the same without demand of rent or demand of possession and may
forthwith proceed to recover possession of the Premises by process of law or
otherwise, any notice to quit, or notice of intention to re-enter the same
being hereby expressly waived by Tenant. And, in the event of such reentry by
process of law or otherwise, Tenant nevertheless agrees to remain answerable
for any and all damage, deficiency or loss of rent which Landlord may sustain
by such re-entry, including reasonable attorneys' fees and court costs; and in
such case, Landlord reserves full power, which is hereby acceded to by Tenant,
to relet the Premises for the benefit of Tenant, in liquidation and discharge,
in whole or in part, as the case may be, of the liability of Tenant under the
terms and provisions of this Lease. Landlord may exercise its rights hereunder
by one or more actions against Tenant.
13. Subordination. This Lease is subject to all ground or underlying
leases and to all mortgages and/or deeds at trust which may now or hereafter
affect the Premises, and to all renewals, modifications, consolidations,
replacements and extensions thereof. This clause shall be self-operative and
no further instrument of subordination shall be required by any mortgagee or
trustee. In confirmation of such subordination, Tenant shall execute promptly
any certificate that Landlord may request. Provided, however, that
notwithstanding the foregoing, the party secured by any such deed of trust
shall have the right to recognize this Lease and, in the event of any
foreclosure sale under such deed of trust, this Lease shall continue in full
force and effect at the option of the party secured by such deed of trust or
the purchaser under any such foreclosure sale; and
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Tenant covenants and agrees that it shall, at the written request of the party
secured by any such deed of trust, execute, acknowledge and deliver any
instrument that has for its purpose and effect the subordination of said deed
of trust to the lien of this Lease. At the option of any landlord under any
ground or underlying lease to which this Lease is now or may hereafter become
subject or subordinate, Tenant agrees that neither cancellation nor termination
of such ground or underlying lease shall by operation of law or otherwise,
result in cancellation or termination of this Lease or the obligations of
Tenant hereunder, and Tenant covenants and agrees to attorn to such landlord or
to any successor to landlord's interest in such ground or underlying lease, and
in that event, this Lease shall continue as a direct lease between the Tenant
herein and such landlord or its successor; and, in any case, such landlord or
successor under such ground or underlying lease shall not be bound by any
prepayment on the part of Tenant of any rent for more than one month in
advance, so that rent shall be payable under this Lease in accordance with its
terms, from the date of the termination of the ground or underlying lease, as
if such prepayment had not been made; and provided, further, such landlord or
successor under such ground or underlying lease shall not be bound by this
Lease or any amendment or modification of this Lease unless, prior to the
termination of such ground or underlying lease, a copy of this Lease or
amendment or modification thereof, as the case may be, shall have been
delivered to such landlord or successor. Notwithstanding the foregoing,
Tenant's subordination and attornment as set forth in this Paragraph 13 with
respect to Landlord's current mortgagee shall be conditioned upon Landlord
obtaining for Tenant a subordination, nondisturbance and attornment agreement
from such mortgagee on the mortgagee's standard form, subject to any changes
thereto as Tenant may request that are reasonably necessary so that such
agreement is in a customary commercially reasonable form.
14. Casualty and Condemnation. In the event that the Premises or the
Building are damaged by fire or other cause and in Landlord's reasonable
estimation such damage can be materially restored within ninety (90) days,
Landlord shall forthwith repair the same and this Lease shall remain in full
force and effect, except that Tenant shall be entitled to a proportionate
abatement in rent from the date of such damage. Such abatement of rent shall be
made pro rata in accordance with the extent to which the damage and the making
of such repairs shall interfere with the use and occupancy by Tenant of the
Premises from time to time. Within forty-five (45) days from the date of such
damage, Landlord shall notify Tenant, in writing, of Landlord's reasonable
estimation of the length of time within which material restoration can be made,
and Landlord's determination shall be binding on Tenant. For purposes of this
Lease, the Building or Premises shall be deemed "materially restored" if they
are restored to substantially the same condition as existed immediately before
such damage. If such repairs cannot, in Landlord's reasonable estimation, be
made within ninety (90) days, Landlord and Tenant shall each have the option of
giving the other, at any time within sixty (60) days after such damage, notice
terminating this Lease as of the date of such damage. In the event of the
giving of such notice, this Lease shall expire and all interest of the Tenant
in the Premises shall terminate as of the date of such damage as if such date
had been originally fixed in this Lease for the expiration of the Lease term.
In the event that neither Landlord nor Tenant exercises its option to terminate
this Lease, then
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Landlord shall repair or restore such damage, this Lease continuing in full
force and effect, and the rent hereunder shall be proportionately abated as
provided above. In the event that Landlord should fail to complete such
repairs and material restoration within sixty (60) days after the date
estimated by Landlord therefor as extended below, Tenant may at its option and
as its sole remedy terminate this Lease by delivering written notice to
Landlord, within fifteen (15) days after the expiration of said period of time,
whereupon the Lease shall end on the date of such notice or such later date
fixed in such notice as if the date of such notice was the date originally
fixed in this Lease for the expiration of the Lease term; provided, however,
that if construction is delayed because of changes, deletions or additions in
construction requested by Tenant, strikes, lockouts, casualties, Acts of God,
war, material or labor shortages, government regulation or control or other
causes beyond the reasonable control of Landlord, the period for restoration,
repair or rebuilding shall be extended for the amount of time Landlord is so
delayed.
Tenant agrees that if the Premises, or any material part thereof, shall be
taken or condemned for public or quasi public use or purpose by any competent
authority, Tenant shall have no claim against Landlord and shall not have any
claim or right to any portion of the amount that may be awarded as damages or
paid as a result of any such condemnation; and all right of Tenant to damages
therefor, if any, are hereby assigned by Tenant to Landlord. And upon such
condemnation or taking, at Landlord's option, the term of this Lease shall
cease and terminate from the date of such governmental taking or condemnation,
and Tenant shall have no claim against Landlord for the value of any unexpired
term of this Lease. Notwithstanding the foregoing, Tenant may apply to the
condemning authority for a separate award for its trade fixtures and moving
expenses.
15. Successors. It is agreed that except as provided in Paragraph 6 of
this Lease, all rights, remedies and liabilities herein given to or imposed
upon either of the parties hereto, shall extend to their respective heirs,
executors, administrators, successors, and assigns.
16. Tenant Holdover. If Tenant shall, with the knowledge and prior
written consent of Landlord, continue to remain in the Premises after the
expiration of the term of this Lease, then and in that event, Tenant shall, by
virtue of this agreement become a tenant by the month at the monthly
installment of rent agreed by Tenant to be paid as aforesaid, commencing said
monthly tenancy with the first day next after the end of the term above
demised; and said Tenant shall give to Landlord at least thirty (30) days'
written notice of any intention to quit the Premises, and Tenant shall be
entitled to thirty (30) days' written notice to quit the Premises, except in
the event of nonpayment of rent or of the breach of any other covenant by
Tenant, in which event Tenant shall not be entitled to any notice to quit, the
usual thirty (30) days' notice to quit being hereby expressly waived. If
Tenant shall continue to remain in the Premises after the expiration of the
term of this Lease without Landlord's prior written consent, Tenant shall pay
Landlord one hundred and twenty-five percent (125%) of the amount of rent then
in effect for each month Tenant remains in all or any part of the Premises, and
Tenant shall
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also pay Landlord for any damages, loss, cost and expense Landlord incurs by
reason of such holding over by Tenant.
17. Limitation of Liability. Redress of any claim against Landlord under
this Lease shall be limited to and enforceable only against and to the extent
of Landlord's interest in the Building. Neither the obligations of Landlord
nor Tenant under this Lease shall be binding upon nor shall any resort be had
to the private properties of any directors, officers, partners, stockholders,
employees, or agents of Landlord or Tenant, as the case may be.
18. Entire Agreement. This Lease contains the entire and final agreement
of and between the parties hereto, and they shall not be bound by any
statements, conditions, representations, inducements or warranties, oral or
written, not herein contained, unless there is written amendment hereto signed
by all the parties hereto.
19. Liability and Liability Insurance. Landlord assumes no liability or
responsibility whatsoever with respect to the conduct and operation of the
business to be conducted on the Premises. Landlord shall not be liable for any
accident to or injury to any person or persons or property on or about the
Premises which are caused by the conduct and operation of said business or by
virtue of equipment or property of Tenant on the Premises. Tenant agrees to
protect, indemnify and save harmless Landlord, of and from any and all expense,
loss, damage and liability incurred pursuant to any claims for injury to
persons or to personal property by reason of any accident, or happening in,
upon, or about the Premises, and Tenant agrees to carry public liability and
property damage insurance with limits of at least $l,000,000.00 bodily injury
per person, $2,000,000.00 bodily injury per accident, and $500,000.00 property
damage in the name of Landlord and Tenant, and to furnish Landlord, prior to
the Commencement Date, with a certificate, or copy of the policy, showing such
insurance to be in force.
20. Compliance with Law. Landlord shall be responsible for all changes or
improvements that are necessary to the Building (including the Premises) for
the same to comply with all legal requirements of any governmental authority
having jurisdiction over the Building not relating to Tenant's specific use of
the Premises or the business conducted therein. Tenant shall comply with all
legal requirements of any governmental authority having jurisdiction over the
Premises relating to Tenant's specific use of the Premises or the business
conducted therein. In the event that Tenant is unable to use the Premises for
the conduct of its business because of a change in the zoning classification
for the Building or a revocation of the certificate of occupancy, Tenant shall
have the right to terminate this Lease upon five (5) days' prior written notice
to Landlord.
21. Condition of Premises. The Premises shall be delivered to Tenant in
the condition in which it currently exists.
22. Clean Premises. Landlord at its sole cost and expense shall keep the
sidewalks in front of the Premises as well as the Building free from
obstructions of any and all nature, shall promptly remove all snow and ice from
said sidewalks, shall provide
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suitable receptacles for trash and refuse, and shall promptly remove or cause
to be removed from the Building all accumulations of snow, trash and refuse.
In the event Landlord fails to perform any of said covenants contained in this
paragraph, then and in that event, Tenant, at its option, may cause the work
provided for herein to be performed at the cost and expense of Landlord, who
agrees to reimburse Tenant promptly for any casts so incurred.
23. Waiver. It is further provided that if, under the provisions hereof,
a seven (7) days' summons or other applicable summary process shall be served,
and a compromise or settlement thereof shall be made, it shall not constitute a
waiver of any covenant herein contained; and that no waiver of any breach of
any covenant, condition or agreement herein contained shall operate as a waiver
of the covenant, condition or agreement itself, or of any subsequent breach
thereof. No provision of this Lease shall be deemed to have been waived by
Landlord unless such waiver shall be in writing signed by Landlord. No payment
by Tenant or receipt by Landlord of a lesser amount than the monthly
installment of rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy provided for in this Lease.
24. Attorneys' Fees. In the event of the employment of any attorney by
Landlord or Tenant because of the violation by the other party of any term or
provision of this Lease, including non-payment of rent as due, the defaulting
party shall pay and hereby agrees to pay reasonable attorneys' fees and all
other costs incurred by the non-defaulting party.
25. No Partnership. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Landlord and
Tenant, or to create any other relationship between the parties hereto other
than that of Landlord and Tenant.
26. Paragraph Headings. Paragraph headings are for purpose of convenience
only and are not to be considered a part of this Lease.
27. Pronouns. Feminine or neuter pronouns shall be substituted for those
of the masculine form, and the plural shall be substituted for the singular
number, in any place or places herein in which the context may require such
substitution or substitutions. Landlord herein for convenience has been
referred to in neuter form.
28. Notices. All notices required or desired to be given hereunder by
either party to the other shall be personally delivered, sent by an established
overnight courier service for next business day delivery or given by certified
or registered mail and shall be deemed effective upon receipt or refusal to
accept receipt. Notices to the respective parties shall be addressed as
follows:
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If to Landlord: c/o Beacon Projects
1824 R Street, N.W.
Washington, D.C. 20009
Attn: Martine Rothblatt
If to Tenant: Unither Telemedicine Services Corp.
1110 Spring Street
Silver Spring, Maryland 20910
Attn: Christopher Patusky
Any party may, by like written notice, designate a new address to which
such notices shall be directed.
29. Quiet Enjoyment. Landlord represents and warrants that it has full
right and authority to enter into this Lease and that Tenant, while paying the
rental and performing its other covenants and agreements contained in this
Lease, shall peaceably and quietly have, hold and enjoy the Premises for the
term without hindrance or molestation from or through Landlord subject to the
terms and provisions of this Lease.
30. Waiver of Jury Trial. The parties hereby waive trial by jury in any
action, proceeding or counterclaim arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant or Tenant's use and
occupancy of the Premises.
31. Applicable Law. This Lease and the rights and obligations of the
parties hereunder shall be construed in accordance with the laws of the
District of Columbia.
32. Broker's Commission. Each of the parties represents and warrants that
it has not dealt with any broker or finder in connection with this Lease and
agrees to indemnify the other against, and hold it harmless from, all liability
arising from claims by any other broker or finder for brokerage commissions or
finder's fees in connection with this Lease, including, without limitation, the
cost of attorneys' fees in connection therewith.
33. Option to Extend. Tenant shall have the right to renew this Lease for
two consecutive one-year terms by giving Landlord notice to such effect at
least sixty (60) days prior to the expiration of the initial term or first
renewal term, as applicable, or at any time prior to receipt of written notice
from Landlord that it intends to sell the Building after February 2001 or has
entered into a lease with another party. Upon giving of such notice by
Tenant, this Lease shall be automatically extended for the first renewal term
or second renewal term, as applicable, upon the same terms, covenants and
conditions of this Lease, except that the rent shall be increased on each
anniversary of the Commencement Date as set forth in Paragraph 1 of this Lease.
IN TESTIMONY WHEREOF, the parties have hereunto signed their names and affixed
their seals, on the day and year first hereinabove written.
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ATTEST/WITNESS: LANDLORD:
BEACON PROJECTS, INC.
__________________________ By: /s/ M. Rothblatt [SEAL]
Its: President
ATTEST/WITNESS TENANT:
UNITHER TELEMEDICINE SERVICES CORP
/s/ Ruth Bowler By: /s/ Chris Patusky [seal]
Its: President and CEO
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EXHIBIT 10.17
UAI TECHNOLOGY, INC.
OFFICE LEASE
THIS LEASE ("Lease") is made 7/1/98, 199_, between UAI TECHNOLOGY,
INC. ("Landlord") and UNITED THERAPEUTICS CORPORATION ("Tenant"). Landlord is a
Corporation, organized under the laws of Delaware, with principal offices at 68
Alexander Drive, Research Triangle Park, NC 27709 (the "Premises"). Tenant is a
Corporation, organized under the laws of DELAWARE , with principal offices
located at 2 DAVIS DRIVE, RESEARCH TRIANGLE PARK, NC 27709.
ARTICLE 1
PREMISES
1.01 PREMISES. Landlord leases to Tenant offices in the Premises as outlined on
the Floor Plan attached as Exhibit A. The Rental Space consists of approximately
4,600 square feet of rentable space. Tenant will have primary access to space
identified in Exhibit A and identified as Section I or Section II. Tenant shall
have shared access to space identified as Section III. Primary access shall mean
access which is available for the exclusive use of Tenant. Shared access shall
mean space which will be shared by the Tenant and the Landlord and available for
use by both. The Building is shown as Exhibit B and is located on the land
described in Exhibit C ("Land"). The Premises contain the fixtures,
improvements, and other property now installed plus any Landlord Improvements
required by Section 4.05 and Exhibit D.
1.02 COMMON AREAS. Tenant and its agents, employees, and invitees have the
non-exclusive right with others designated by Landlord to the free use of the
common areas ("Common Areas") in the Building and on the Land for the Common
Areas' intended and normal purpose. Common Areas include, sidewalks, parking
areas and driveways located outside Building I, as identified in Exhibit B, and
hallways, public bathrooms, common entrances, lobby, and other similar public
areas and access ways identified in Sections I, II and III on Exhibit A.
Landlord may change the Common Areas if the changes do not materially and
unreasonably interfere with Tenant's access to or use of the Premises.
ARTICLE II
USE
Tenant shall use the Premises for general office use, unless Landlord gives its
advance written consent to another use. Landlord warrants that applicable laws,
ordinances, regulations, and restrictive covenants permit the Premises to be
used for general offices. Tenant shall not create a nuisance or use the Premises
for any immoral or illegal purposes. Tenant shall not use the space for any
scientific experimentation, except for such processes that are performed
completely by computer, without the use of any prohibited substances, as
referenced in section 7.04 below. Tenant will inform all its employees, and when
applicable, visitors, of appropriate usage of space as defined in this section
and in other sections of this Lease. Tenant will be directly responsible for any
violation of any terms of usage of Premises by any parties associated with
Tenant.
ARTICLE III
TERM
The Lease begins ("Commencement Date") on the earlier of:
(a) The date Tenant takes possession and occupies the
Premises; or
(b) After (i) the Premises are substantially completed according
to Section 4.01, (ii) Landlord gives the notice required by
Section 4.02, (iii) Landlord is ready, willing and able to
deliver actual possession of the Premises, and (ii) the
Target Date set in Section 4.01 has arrived.
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Except as provided in Section 5.02 below, the Lease ends ("Expiration Date") at
11:59 p.m. on the last day of the calendar month of June, three (3) years
following the Commencement Date, unless terminated earlier under this Lease.
Within thirty (30) days after the Commencement Date, the parties shall confirm
in writing the Commencement and Expiration Dates.
ARTICLE IV
COMPLETION OF PREMISES
4.01 SUBSTANTIAL COMPLETION. Landlord shall use its best efforts to
substantially complete the Premises by July 1, 1998 ("Target Date").
Substantially complete means completing Landlord's Improvements (Section 4.05
and Exhibit D) so that Tenant can use the Premises for their intended purposes.
4.02 NOTICE. Landlord shall give Tenant at least ten (10) days advance notice of
the estimated substantial completion date if different from the Target Date. If
the estimated substantial completion date changes at any time after Landlord
gives notice, then Landlord shall give ten (10) days advance notice of the new
estimated substantial completion date.
4.03 INSPECTION AND PUNCHLIST. Within 30 days after the Commencement Date, the
parties shall inspect the Premises, have all systems demonstrated, and prepare a
punchlist. The punchlist shall list incomplete, minor, or insubstantial details
of construction; necessary mechanical adjustments; and needed finishing touches.
Tenant's acceptance of possession of the Premises after such inspection shall be
conclusive evidence that the Premises were in good order and satisfactory
condition, except for any punchlist items. Landlord reserves the right to
inspect and reasonably approve Tenant's improvements.
4.04 DELAYED POSSESSION. Tenant may cancel this Lease if Landlord cannot deliver
actual possession of the substantially complete Premises by ninety (90) days
after the Target Date. To cancel, Tenant must give notice to Landlord within
sixty (60) days after the expiration of such ninety (90) day period and before
Landlord gives notice to Tenant that the Premises are substantially complete.
The ninety (90) day period above shall be extended in the time equal to any
period of delay caused by Tenant. Within thirty (30) days after cancellation,
Landlord shall return to Tenant prepaid consideration including Rent and
deposits, and neither party shall have any further rights or obligations under
this Lease.
4.05 LANDLORD IMPROVEMENTS. Landlord, at its expense, shall make improvements to
the Premises in accord with Exhibit D ("Landlord Improvements"). The Landlord
Improvements shall be completed in a good and workmanlike manner and comply with
all applicable laws, ordinances, rules, and regulations of governmental
authorities.
ARTICLE V
RENT AND SECURITY
5.01 BASE RENT. Tenant shall pay to Landlord Base Rent during the Term, as
follows:
Section I, consisting of approximately 2,800 square feet,
including allocated shared space shown on Exhibit A
Annual rent of $46,200, monthly rent of $3,850
Section II, consisting of approximately 1,800 square feet,
including allocated shared space shown on Exhibit A
Annual rent of $29,700, monthly rent of $2,475
The Base Rent shall be paid:
(a) without advance notice, demand, offset, or deduction;
(b) by the first day of each month during the Term; and
(c) to Landlord at its address set forth in Section 13.03 or
as Landlord may specify in writing to Tenant.
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If the Term does not begin on the first day or end on the last day of a month,
the Base Rent for that partial month shall be prorated by multiplying the
monthly Base Rent by a fraction, the numerator of which is the number of days of
the partial month included in the Term and the denominator of which is the total
number of days in the full calendar month.
If Tenant fails to pay part or all of the Base Rent by the fifth (5th) day of
the month due, it is past due, the Tenant shall also pay:
(a) a late charge equal to four percent (4%) of the unpaid Base
Rent and Additional Rent, plus
(b) interest at eighteen percent (18%) per annum or the maximum
then allowed by applicable law, whichever is less, on the
remaining unpaid balance, retroactive to the date originally
due until paid.
5.02 SPECIAL TERMINATION PROVISION FOR SECTION II. Upon six (6) months written
notice from Landlord to Tenant, Landlord may require Tenant to vacate offices
and associated common areas located in Section II of Exhibit A. All obligations
of Tenant for renting such space would be terminated upon Tenant's vacating said
space as of such termination date, or earlier date if agreed to by Landlord.
5.03 CPI ADJUSTMENT. The Base Rent shall be subject to upward adjustments, based
on the Consumer Price Index, one year after the Commencement Date of this Lease
and at the end of each subsequent year, during the term of this Lease in
accordance with the following provisions:
(a) The index to be used for this adjustment shall be the
Consumer Price Index (U.S., All Urban Consumers, All Items,
1982-84 equaling a base of 100, as published by the U.S.
Department of Labor, Bureau of Labor Statistics, Washington,
D.C.).
(b) The Base Period Consumer Price Index shall be subtracted
from the Adjustment Period Consumer Price Index; the
difference shall be divided by the Base Period Consumer
Price Index. This quotient shall then be multiplied by the
Base Rent. The result shall added to the Base Rent. This
arithmetical sum shall then be the Adjusted Base Rent for
such immediately succeeding leasehold year which shall be
paid in monthly installments.
(c) If the Consumer Price Index is, at any time during the term
of this Lease, discontinued or no longer published, then the
most nearly comparable published measure of inflation, as
determined by Landlord in its sole discretion, shall be
substituted for the purpose of this calculation.
5.04 EXPENSE AND TAX ESCALATIONS. Base Rent shall be adjusted on each
anniversary of the Commencement Date by increasing the Base Rent paid during the
preceding year by an amount equal to the Tenant's pro rata share of the increase
of Operating Expenses and Real Estate Taxes as defined hereinafter.
(a) TAXES. Should the percentage rate for Real Estate Taxes on
the space occupied by Tenant increase in any calendar year,
then Tenant shall pay to Landlord, as additional rent, an
amount equal to Tenant's Proportion of the amount by which
Taxes for any calendar year were in excess of the amount
that said Taxes would have been had it not been for such
increase..
(b) OTHER EXPENSES. Should the per-square-foot cost for Other
Expenses associated with operating the Premises (including
but not limited to Janitorial Services, Utilities, Building
Maintenance, Grounds Maintenance, Insurance, and other
services directly related to the operations of the Premises)
increase, then Tenant shall pay to Landlord, as additional
rent, an amount equal to Tenant's Proportion of the amount
by which Other
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Expenses for any calendar year were in excess of the amount
that said Other Expenses would have been if the increase had
not taken place.
5.05 PERSONAL PROPERTY TAX. Before delinquency Tenant shall pay taxes assessed
during the Term against trade fixtures or personal property placed by Tenant in
the Premises. If these taxes are assessed against the Building, Tenant shall pay
its share of the taxes to Landlord within ten (10) days after receiving
Landlord's written statement setting forth the amount of taxes applicable to
Tenant's property and the basis for the charge to Tenant. Tenant's failure to
pay within the ten-day period shall entitle Landlord to the same remedies it has
upon Tenant's failure to pay Base Rent or Additional Rent.
5.06 SECURITY DEPOSIT. The Tenant has deposited one month's rent, as defined in
Section 5.01 above (Security Deposit) with Landlord to secure Tenant's
performance of its Lease obligations. If Tenant defaults Landlord may, after
giving five (5) days advance notice to Tenant, without prejudice to Landlord's
other remedies, apply part or all of the Security Deposit to cure Tenant's
default. If Landlord so uses part or all of the Security Deposit, then Tenant
shall within ten (10) days after written demand, pay Landlord the amount used to
restore the Security Deposit to its original amount. Landlord may mix the
Security Deposit with its own funds, and the Security Deposit shall not earn
interest thereon. Any part of the Security Deposit not used by Landlord as
permitted by this paragraph shall be returned to Tenant within thirty (30) days
after the Lease ends.
ARTICLE VI
AFFIRMATIVE OBLIGATIONS
6.01 COMPLIANCE WITH LAWS.
(a) LANDLORD'S COMPLIANCE. Landlord warrants, that on the
Commencement Date, the Premises will comply with all
applicable laws, ordinances, rules, and regulations of
governmental authorities ("Applicable Laws"). During the
Term, Landlord shall comply with all Applicable Laws
regarding the Premises and Building except to the extent
Tenant must comply under Section 6.01(b).
(b) TENANT'S COMPLIANCE. Tenant shall comply with all Applicable
Laws (i) regarding the physical condition of the Premises,
but only to the extent the Applicable Laws pertain to the
particular manner in which Tenant uses the Premises; or (ii)
that do not relate to the physical condition of the Premises
but relate to the lawful use of the Premises and with which
only the occupant can comply, such as laws governing maximum
occupancy, workplace smoking, and illegal business
operations, such as gambling. Notwithstanding the foregoing,
Tenant shall comply with any requirements imposed under the
Americans with Disabilities Act of 1990 ("ADA") which relate
exclusively to the Premises.
6.02 SERVICES AND UTILITIES.
(a) SERVICES. Landlord shall provide at its expense, subject to
reimbursement under Section 5.04:
(i) Heating, ventilation, and air conditioning
("HVAC") for the Premises during business hours to
maintain temperatures for comfortable use and
occupancy;
(ii) Janitorial services to the Premises (all business
days, Monday through Friday);
(iii) Hot and cold water sufficient for drinking,
lavatory, toilet, and ordinary cleaning purposes;
(iv) Electricity to the Premises at all times that
provides electric current in reasonable amounts
necessary for normal office use, lighting, and
HVAC;
(v) Replacement of lighting tubes, lamp ballasts, and
bulbs;
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(vi) Extermination and pest control when necessary; and
(vii) Maintenance of Common Areas in a manner consistent
with other comparable office buildings in the
Raleigh, North Carolina area. The maintenance
shall include cleaning, HVAC, illumination, snow
shoveling, deicing, repairs, replacements, lawn
care, and landscaping.
(b) BUSINESS HOURS. "Business Hours" means:
(i) Monday through Friday, 8:00 a.m. through
5:30 p.m., and
(ii) excludes the following holidays or the days on
which the holidays are designated for observance:
New Year's Day, Memorial Day, July Fourth, Labor
Day, Thanksgiving Day, and Christmas Day.
(c) 24 HOUR ACCESS. Tenant, its employees, agents, and invitees
shall have access to the Premises, twenty-four (24) hours a
day, seven (7) days a week. During non business hours Landlord
may restrict access by requiring persons to show a badge or
identification card issued by Landlord. Landlord shall not be
liable for denying entry to any person unable to show the
proper identification. Landlord may temporarily close the
Building if required in an emergency. Landlord shall use its
best efforts to close the Building during non business hours
only. If, however, the Building must be closed during business
hours, then the Base Rent and Additional Rent shall abate
during any closing that lasts more than twenty-four (24)
hours.
(d) EXTRA SERVICES. Landlord, shall have the right to monitor the
Tenant's use of electricity consumption within the Premises.
Whenever Landlord knows that any tenant (including Tenant) is
using extra services because of either non business-hours use
or high electricity consumption installations, Landlord may
directly charge that tenant for the extra use and exclude
those charges from Operating Expenses. Extra services include:
(i) NON BUSINESS-HOURS USE. Electricity required by
Tenant during non business hours shall be supplied
upon reasonable advance verbal notice. If more
than one tenant directly benefits from these
services then the cost shall be allocated
proportionately between or among the benefiting
tenants based upon the amount of time each tenant
benefits and the square footage each leases.
(ii) EXCESS UTILITY USE. Tenant shall not place or
operate in the Premises any electrically operated
equipment or other machinery, other than
typewriters, personal computers, adding machines,
reproduction machines, and other machinery and
equipment normally used in offices, unless Tenant
receives Landlord's advance written consent.
Landlord shall not unreasonably withhold or delay
its consent, but Landlord may require payment for
the extra use of electricity caused by operating
this equipment or machinery. Landlord may require
that special, high electricity consumption
installations of Tenant such as computer or
reproduction facilities (except personal computers
or normal office photocopy machines) be separately
sub-metered for electrical consumption at Tenant's
cost.
(iii) PAYMENT. Tenant's charges for the utilities
provided under (i) and (ii) above shall be one
hundred percent (100%) of Landlord's actual cost
of labor and utilities and shall be Additional
Rent.
Tenant's failure to pay the charges in (i) and
(ii) above within thirty (30) days of receiving
a proper and correct invoice shall entitle
Landlord to the same remedies it has upon
Tenant's failure to pay Base Rent.
(e) INTERRUPTION OF SERVICES. Landlord does not warrant that any
services Landlord supplies will not be interrupted. Services
may be interrupted because of accidents, repairs, alterations,
improvements, or any reason beyond the reasonable control of
Landlord, and such an interruption shall not:
(i) be considered an eviction or disturbance of
Tenant's use and possession of the Premises;
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(ii) make Landlord liable to Tenant for damages;
(iii) abate Base Rent or Additional Rent; or
(iv) relieve Tenant from performing Tenant's Lease
obligations.
6.03 REPAIRS AND MAINTENANCE.
(a) TENANT'S CARE OF PREMISES. Tenant shall:
(i) keep the Premises and fixtures in good order;
(ii) make repairs or replacements to the Premises or
Building needed because of Tenant's misuse or
negligence, except to the extent that the repairs
or replacements are covered by Landlord's
insurance or the insurance Landlord is required to
carry under this Lease, whichever is greater;
(iii) repair and replace special equipment or decorative
treatments installed by or at Tenant's request and
that serve the Premises only, except
(1) to the extent the repairs or
replacements are needed because of
Landlord's misuse or primary
negligence, and are not covered by
Tenant's insurance or the insurance
Tenant is required to carry under
this Lease, whichever is greater; or
(2) if the Lease is terminated under
Article IX (Loss of Premises); and
(iv) not commit waste.
(b) LANDLORD'S REPAIRS. Except for repairs and replacements that
Tenant must make under paragraph 6.03(a), Landlord shall pay
for and make all other repairs and replacements to the
Premises, Common Areas and Building (including Building
fixtures and equipment). Landlord shall make the repairs and
replacements to maintain the Building in a condition
consistent with other comparable office buildings in the
Raleigh, North Carolina area. This maintenance shall include
the roof, foundation, exterior walls, interior structural
walls, all structural components, and all systems, such as
mechanical, electrical, HVAC, and plumbing.
(c) TIME FOR REPAIRS. Repairs or replacements required under
Sections 6.03(a) or 6.03(b) shall be made within a
reasonable time (depending on the nature of the repair or
replacement needed) after receiving notice or having actual
knowledge of the need for a repair or replacement.
(d) SURRENDERING THE PREMISES. Upon the Expiration Date or
earlier termination of this Lease, Tenant shall surrender
the Premises to Landlord in the same condition that the
Premises were in on the Commencement Date except for:
(i) ordinary wear and tear;
(ii) damage by the elements, fire, and other casualty
unless Tenant would be required to repair under
paragraph 6.03(a);
(iii) condemnation;
(iv) damage arising from any cause not required to be
repaired or replaced by Tenant; and
(v) alterations as permitted by this Lease unless
consent was conditioned on their removal.
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On surrender Tenant shall remove from the Premises its
personal property, trade fixtures, and any alterations
required to be removed under Section 7.01 and repair any
damage to the Premises caused by the removal. Any items not
removed by Tenant as required above shall be considered
abandoned. Landlord may dispose of abandoned items as
Landlord chooses and bill Tenant for the cost of their
disposal, minus any revenues received by Landlord for their
disposal.
Should Premises not be in the same condition as they were on
the Commencement Date, except as provided above, Tenant
shall be required to take steps necessary to restore said
condition. Should Tenant not perform such measures, Landlord
reserves the right to perform any required repairs to bring
Premises back to said condition at Tenant's expense.
Landlord may use funds held as Tenant's Security Deposit for
payment of such repair. However, if such repairs are in
excess of the amount of Security Deposit, Tenant will be
responsible for paying to Landlord the amount still owed.
ARTICLE VII
NEGATIVE OBLIGATIONS
7.01 ALTERATIONS.
(a) DEFINITIONS. "Alterations" means alterations, additions,
substitutions, installations, changes, and improvements, but
excludes minor decorations and the Improvements Landlord is to
make under Section 4.05 and Exhibit D.
(b) CONSENT. Tenant shall not make Alterations without the
Landlord's advance written consent.
(c) CONDITIONS OF CONSENT. Landlord may condition its consent in
Section 7.01(b) on all or any part of the following:
(i) Tenant shall furnish Landlord with reasonably detailed
plans and specifications of the alterations as requested
by Tenant.
(ii) The Alterations shall be performed and completed-
(1) in accord with the submitted plans and
specifications approved by Tenant and Landlord.
(2) in a workmanlike manner,
(3) in compliance with all applicable laws,
regulations, rules, ordinances, and other
requirements of governmental authorities,
(4) using new materials and installations at least
equal in quality to the original Building
materials and installations,
(5) by not disturbing the quiet possession of the
other tenants,
(6) by not interfering with the construction,
operation, or maintenance of the Building, and
(7) with due diligence;
(iii) tenant shall use workers and contractors who Landlord
employs or approves in writing, which approval shall not
be unreasonably withheld or unduly delayed;
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(iv) Tenant shall modify plans and specifications
because of reasonable conditions set by Landlord
after reviewing the plans and specifications;
(v) Tenant's contractors shall carry builder's risk
insurance in an amount then customarily carried by
prudent contractors and workers' compensation
insurance for its employees in statutory limits,
naming Landlord as an additional insured, to the
extent its interest may appear;
(vi) Tenant's workers or contractors shall work in
harmony and not unreasonably interfere with
Landlord's workers or contractors or other tenants
and their workers or contractors;
(vii) Tenant shall, at Landlord's sole option, supply a
lien and completion bond, bank letter of credit,
or other security satisfactory to Landlord, in an
amount equal to the estimated cost to insure
Landlord against materials and mechanics' liens
and against completion of the Alterations;
(viii) Tenant shall give Landlord at least fifteen (15)
days advance notice before beginning any
alterations so that Landlord may post or record
notices of nonresponsibility;
(ix) Upon demand Tenant shall give Landlord evidence
that it complied with any condition set by
Landlord;
(x) If Tenant completes alterations, Tenant shall give
Landlord complete as-built mylar drawings of the
Alterations after they are finished; and
(xi) Tenant shall remove any unusual additions,
alterations and repair any damage from their
removal by the Expiration Date.
(d) PAYMENT AND OWNERSHIP OF THE ALTERATIONS. Alterations made
under this paragraph shall be at Tenant's expense. The
Alterations shall belong to Landlord when this Lease ends
except for those Alterations required by Landlord to be
removed by Tenant, if any, under Section 7.01(c)(xi).
Nevertheless, Tenant may remove its trade fixtures, furniture,
equipment, and other personal property if Tenant promptly
repairs any damage caused by their removal.
7.02 ASSIGNMENT AND SUBLEASING.
(a) CONSENT REQUIRED. Tenant shall not transfer, mortgage,
encumber, assign, or sublease all or part of the Premises
without Landlord's advance written consent. Notwithstanding
the foregoing, Tenant may assign or sublease all or part of
the Premises without first obtaining Landlord's consent to (i)
any entity, directly controlling, controlled by or under
common control of Tenant, or (ii) to any corporation with
which Tenant may merge or consolidate or to any corporation
with which it may transfer all or substantially all of its
assets.
7.03 EMPLOYMENT LAW REQUIREMENTS
(a) Tenant shall take such precautions as to ensure business
practices appropriate with all applicable employment laws.
Tenant shall promptly respond to any charges by Landlord,
other tenants of the Premises, or civil authorities in regard
to complaints against any and all types of employment law
violations. Tenant agrees to hold Landlord harmless from any
and all claims or violations of employment law by employees or
agents of Tenant.
7.04 HAZARDOUS MATERIALS AND ANIMAL TESTING.
(a) No hazardous materials of any kind, including but not limited
to any biochemical materials, anything regarded as a toxic
material, and anything radioactive, are permitted within the
Premises or on any property owned by Landlord.
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(b) No animal testing or experimentation is permitted on the
Premises or on any property owned by Landlord.
ARTICLE VIII
INSURANCE
8.01 INSURANCE.
(a) LANDLORD'S BUILDING INSURANCE. Landlord shall keep the
Building, including the Landlord Improvements insured against
damage and destruction by fire, earthquake, vandalism, and
other perils in the amount of the full replacement value of
the Building, as the value may exist from time to time.
(b) PROPERTY INSURANCE. Each party shall keep its personal
property and trade fixtures in the Premises and Building
insured with "all risks" insurance in an amount to cover one
hundred percent (100%) of the replacement cost of the property
and fixtures. Tenant shall also keep any non-Building-standard
improvements made to the Premises at Tenant's request insured
to the same degree as Tenant's personal property. Tenant's
property insurance shall also provide for business
interruption/extra expense coverage in sufficient amounts.
(c) LIABILITY INSURANCE. Each party shall maintain contractual and
comprehensive general liability insurance, including limits of
no less than $1,000,000 per occurrence/$2,000,000 aggregate
per location subject to no deductible contractual liability
covering the indemnities specified herein. This policy must be
written on an occurrence basis.
Policy shall be endorsed to name Landlord as additional
insured. Definition of additional insured shall include all
Partners, Officers, Directors, Employees, agents and
representatives of the named entity including its managing
agent. Further, coverage for the additional insured shall
apply on a primary basis irrespective of any other
insurance, whether collectible or not.
(d) WORKERS COMPENSATION AND EMPLOYEE LIABILITY INSURANCE.
Affording coverage under the Workers Compensation laws of the
State of North Carolina and Employers Liability coverage
subject to a limit of no less than $100,000 each employee,
$100,000 each accident, $500,000 policy limit.
(e) UMBRELLA LIABILITY INSURANCE. Tenant shall maintain umbrella
liability insurance at not less than a $3,000,000 limit
providing excess coverage over all limits and coverage noted
in Sections 8.01.c and 8.01.d above. This policy shall be
written on an occurrence basis.
(f) WAIVER OF SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant hereby waive and release
each other of and from any and all right of recovery, claim,
action or cause of action, against each other, their agents,
officers and employees, for any loss or damage that may occur
to the Premises, improvements to the Building, or personal
property within the Building, by reason of fire or the
elements, regardless of cause or origin, including negligence
of Landlord or Tenant and their agents, officers and
employees. Landlord and Tenant agree immediately to give their
respective insurance companies which have issued policies of
insurance covering all risk of direct physical loss, written
notice of the terms of the mutual waivers contained in this
Section, and to have the insurance policies properly endorsed,
if necessary, to prevent the invalidation of the insurance
coverage by reason of the mutual waivers. The waiver does not
apply to claims caused by a party's willful misconduct.
If despite a party's best efforts it cannot find an
insurance company meeting the criteria in Section 8.01(f)
that will give the waiver at reasonable commercial rates,
then it shall give notice to the other party within thirty
(30) days after the Commencement Date. The other party shall
then have thirty (30) days to find an insurance company that
will issue the waiver. If the other party also cannot find
such an insurance company, then both parties shall be
released from their obligations to obtain the waiver.
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(g) INCREASE IN INSURANCE. If due to Tenant's particular use of
the Premises, Landlord's insurance rates are increased, Tenant
shall pay the reasonable and direct increase. In addition, the
amounts of coverage required by this Lease are subject to
review by Landlord at the end of each Adjustment Period. At
each review, if necessary to maintain the same level of
coverage that existed on the Commencement Date, the amounts of
coverage shall be increased to the lesser of:
(i) the amounts of coverage carried by prudent
landlords and tenants of comparable office
buildings in the Raleigh, North Carolina area; or
(ii) twenty-five percent (25%) higher than the previous
insurance amounts.
(h) INSURANCE CRITERIA. Insurance policies required by this Lease
shall:
(i) be issued by insurance companies licensed to do
business in the state of North Carolina with
general policyholder's ratings of at least A and a
financial rating of at least XI in the most
current Best's Insurance Reports available on the
date of this Lease;
(ii) name the non procuring party as an additional
insured as its interest may appear (other
landlords or tenants may also be added as
additional insurers in a blanket policy);
(iii) provide that the insurance not be canceled or
materially changed in the scope or amount of
coverage unless thirty (30) days' advance notice
is given to the non procuring party;
(iv) be primary policies - not as contributing with, or
in excess of, the coverage that the other party
may carry;
(v) be permitted to be carried through a "blanket
policy" or "umbrella" coverage;
(vi) have property deductibles not greater than $5,000;
and
(vii) be maintained during the entire Term.
(i) EVIDENCE OF INSURANCE. By the Commencement Date and upon
each renewal of its insurance policies, Tenant shall give
copies of certificates of insurance to Landlord. The
certificate shall specify amounts, types of coverage, the
waiver of subrogation, and the insurance criteria listed in
Section 8.01(f). The policies shall be renewed or replaced
and maintained by Tenant. If Tenant fails to give the
required certificate within thirty (30) days after the
notice of demand for it, Landlord may obtain and pay for
that insurance, but is not obligated to do so, and receive
reimbursement from the party required to have the insurance.
8.02 INDEMNIFICATION.
(a) TENANT'S INDEMNITY. Tenant indemnifies, defends, and holds
Landlord harmless from claims, including but not limited to
claims:
(i) for personal injury, death, or property damage;
(ii) for incidents occurring in or about the Premises
or Building; and
(iii) caused by the negligence or willful misconduct of
Tenant, its agents, employees, or invitees.
When the claim is caused by the joint negligence or willful
misconduct of Tenant and Landlord or Tenant and a third party
unrelated to Tenant, except Tenant's agents, employees, or
invitees, Tenant's duty to defend, indemnify, and hold
Landlord harmless shall be in proportion to Tenant's allocable
share of the joint negligence or willful misconduct.
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(b) LANDLORD'S INDEMNITY. Landlord indemnifies, defends, and holds
Tenant harmless from claims:
(i) for personal injury, death, or property damage;
(ii) for incidents occurring in or about the Premises
or Building; and
(iii) caused by the negligence or willful misconduct of
Landlord, its agents, employees, or invitees.
When the claim is caused by the joint negligence or willful
misconduct of Landlord and Tenant or Landlord and a third
party unrelated to Landlord, except Landlord's agents,
employees, or invitees, Landlord's duty to defend, indemnify,
and hold Tenant harmless shall be in proportion to Landlord's
allocable share of the joint negligence or willful misconduct.
(c) RELEASE OF CLAIMS. Notwithstanding Section 8.02(a) and (b),
the parties release each other from any claims either party
("Injured Party") has against the other to the extent the
claim is covered by the Injured Party's insurance.
8.03 LIMITATION OF LANDLORD'S LIABILITY.
(a) TRANSFER OF PREMISES. If the Building is sold or transferred,
voluntarily or involuntarily, Landlord's Lease obligations and
liabilities accruing after the transfer shall be the sole
responsibility of the new owner, and
(i) the new owner expressly agrees in writing to
assume Landlord's obligations; and
(ii) the Tenant's funds in the hands of Landlord, such
as the Security Deposit, shall be given to the new
owner.
(b) LIABILITY FOR MONEY JUDGMENT. If Landlord, its employees,
officers, directors or partners are ordered to pay Tenant a
money judgment because of Landlord's default, Tenant's sole
remedy to satisfy the judgment shall be to execute against
Landlord's interest in the Building and Land. Under no
circumstance will Landlord, or its officers, directors,
partners or employees be personally liable for any money
judgment.
ARTICLE IX
LOSS OF PREMISES
9.01 DAMAGES.
(a) DEFINITION. "Relevant Space" means:
(i) the Premises, excluding Tenant's fixtures
installed by or at the request of Tenant;
(ii) access to the Premises; and
(iii) any part of the Building that provides essential
services to the Premises.
(b) REPAIR OF DAMAGE. If the Relevant Space is damaged in part or
whole from any cause and the Relevant Space can be
substantially repaired and restored within sixty (60) days
from the date of the damage using standard working methods and
procedures, Landlord shall at its expense promptly and
diligently repair and restore the Relevant Space to
substantially the same condition as existed before the damage.
This repair and restoration shall be made within sixty (60)
days from the date of the damage unless the delay is due to
causes beyond Landlord's reasonable control.
If the Relevant Space cannot be repaired and restored within
the sixty (60) day period, then either party,
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may, within thirty (30) days after determining that the
repairs and restoration cannot be made within sixty (60) days,
cancel the Lease by giving notice to the other party.
Nevertheless, if the Relevant Space is not repaired and
restored within one year from the date of the damage, then
Tenant may cancel the Lease at any time within thirty (30)
days after the sixty (60) day period. Tenant shall not be able
to cancel this Lease if its willful misconduct causes the
damage unless Landlord is not promptly and diligently
repairing and restoring the Relevant Space.
(c) DETERMINING THE EXTENT OF DAMAGE. If the parties cannot agree
in writing whether the repairs and restoration will take more
than one year to make, then the determination will be made by
Landlord's architect. Landlord will make its best effort to
determine damage within ten (10) business days of an
occurrence.
(d) ABATEMENT. Unless the damage is caused by Tenant's willful
misconduct, the Base Rent and Additional Rent shall abate in
proportion to that part of the Premises that is unfit for use
in Tenant's business. The abatement shall consider the nature
and extent of interference to Tenant's ability to conduct
business in the Premises and the need for access and essential
services. The abatement shall continue from the date the
damage occurred until ten (10) business days after Landlord
completes the repairs and restoration to the Relevant Space or
the part rendered unusable and notice to Tenant that the
repairs and restoration are completed, or until Tenant again
uses the Premises or the part rendered unusable, whichever is
first.
(e) TENANT'S PROPERTY. Notwithstanding anything else in this
Article IX, Landlord is not obligated to repair or restore
damage to Tenant's trade fixtures, furniture, equipment, or
other personal property, or any Tenant improvements.
(f) DAMAGE TO BUILDING. If:
(i) more than twenty percent (20%) of the Building is
damaged and the Landlord decides not to repair and
restore the Building;
(ii) any mortgagee of the Building shall not allow
adequate insurance proceeds for repair and
restoration;
(iii) the damage is not covered by Landlord's insurance;
or
(iv) the Lease is in the last twelve (12) months of its
Term, then Landlord may cancel this Lease. To
cancel, Landlord must give notice to Tenant within
thirty (30) days after the Landlord knows of the
damage. The notice must specify the cancellation
date, which shall be at least thirty (30) but not
more than sixty (60) days after the date notice is
given.
(g) CANCELLATION. If either party cancels this Lease as permitted
above, then this Lease shall end on the day specified in the
cancellation notice. The Base Rent, Additional Rent, and other
charges shall be payable up to the cancellation date and shall
account for any abatement. Landlord shall promptly refund to
Tenant any prepaid, unaccrued Base Rent and Additional Rent,
accounting for any abatement, plus Security Deposit, if any,
less any sum then owing by Tenant to Landlord.
9.02 CONDEMNATION.
(a) DEFINITIONS. The terms "eminent domain," "condemnation,"
"taken," and the like in Section 9.02 include takings for
public or quasi-public use and private purchases in place of
condemnation by any authority authorized to exercise the power
of eminent domain.
(b) ENTIRE TAKING. If the entire Premises or the portions of the
Building required for reasonable access to, or the reasonable
use of, the Premises are taken by eminent domain, this Lease
shall automatically end on the earlier of:
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(i) the date title vests; or
(ii) the date Tenant is dispossessed by the condemning
authority.
(c) PARTIAL TAKING. If the taking of a part of the Premises
materially interferes with Tenant's ability to continue its
business operations in substantially the same manner and space
then Tenant may terminate this Lease on the earlier of:
(i) the date when title vests;
(ii) the date Tenant is dispossessed by the condemning
authority; or
(iii) sixty (60) days following notice to Tenant of the
date when vesting or dispossession is to occur.
If there is a partial taking and this Lease continues, then
the Lease shall end as to the part taken and the Base Rent and
Additional Rent shall abate in proportion to the part of the
Premises taken and Tenant's pro rata share shall be equitably
reduced.
(d) TERMINATION BY LANDLORD. If title to a part of the Building
other than the Premises is condemned, and in the Landlord's
reasonable opinion, the Building should be restored in a
manner that materially alters the Premises, Landlord may
cancel this Lease by giving notice to Tenant. Cancellation
notice shall be given within sixty (60) days following the
date title vested. This Lease shall end on the date specified
in the cancellation notice, which date shall be at least
thirty (30) days but not more than ninety (90) days after the
notice is given.
(e) RENT ADJUSTMENT. If the Lease is canceled as provided in
Sections 9.02(b), (c), or (d), then the Base Rent, Additional
Rent, and other charges shall be payable up to the
cancellation date, and shall account for any abatement.
Landlord, considering any abatement, shall promptly refund to
Tenant any prepaid, unaccrued Base Rent and Additional Rent
plus Security Deposit, if any, less any sum then owing by
Tenant to Landlord.
(f) REPAIR. If the Lease is not canceled as provided for in
Sections 9.02(b), (c), or (d), then Landlord at its expense
shall promptly repair and restore the Premises to the
condition that existed immediately before the taking, except
for the part taken, to render the Premises a complete
architectural unit, but only to the extent of the:
(i) condemnation award received for the damage; and
(ii) the Landlord's original obligation under Section
4.05 and Exhibit D.
(g) AWARDS AND DAMAGES. Landlord reserves all rights to damages
paid because of any partial or entire taking of the Premises.
Tenant assigns to Landlord any right Tenant may have to the
damages or award. Further, Tenant shall not make claims
against Landlord or the condemning authority for damages.
Notwithstanding anything else in this Paragraph 9.02(g),
Tenant may claim and recover from the condemning authority a
separate award for Tenant's moving expenses, business
dislocation damages, Tenant's personal property and fixtures,
the unamortized costs of leasehold improvements paid for by
Tenant, excluding the Landlord's Improvements, and any other
award that would not substantially reduce the award payable to
Landlord. Each party shall seek its own award, as limited by
this provision, at its own expense, and neither shall have any
right to the award made to the other.
(h) TEMPORARY CONDEMNATION. If part or all of the Premises are
condemned for a limited period of time ("Temporary
Condemnation"), this Lease shall remain in effect. The Base
Rent and Additional Rent and Tenant's obligations for the part
of the Premises taken shall abate during the Temporary
Condemnation in
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proportion to the part of the Premises that Tenant is unable
to use in its business operations as a result of the Temporary
Condemnation. Landlord shall receive the entire award for any
Temporary Condemnation.
ARTICLE X
DEFAULT
10.01 TENANT'S DEFAULT.
(a) DEFAULTS. Each of the following constitutes a default
("Default"):
(i) Tenant's failure to pay Base Rent or Additional
Rent within five (5) days after it is past due and
payable;
(ii) Tenant's failure to pay Base Rent or Additional
Rent by the due date, at any time during a
calendar year in which Tenant has already received
two (2) notices of its failure to pay Base Rent or
Additional Rent by the due date;
(iii) Tenant's failure to observe any of the material
terms of the Lease Agreement. If Tenant shall
violate any of the material terms of Section 7.04
above, Tenant will be required to immediately cure
such violation. If such violation is not cured,
Landlord may require Tenant to evacuate space, and
may have the option to terminate this Lease
Agreement. Tenant will be responsible for all
costs incurred by Landlord in attempting to cure
any violation under Section 7.04 above.
(iv) Tenant's failure to perform or observe any other
material Tenant obligation after a period of
thirty (30) business days or the additional time,
if any, that is reasonably necessary to promptly
and diligently cure the failure, after it receives
notice from Landlord setting forth in reasonable
detail the nature and extent of the failure and
identifying the applicable Lease provision(s);
(v) Tenant's abandoning or vacating the Premises;
(vi) Tenant's failure to vacate or stay any of the
following within sixty (60) days after they occur:
(1) a petition in bankruptcy is filed by or
against Tenant;
(2) Tenant is adjudicated as bankrupt or
insolvent;
(3) a receiver, trustee, or liquidator is
appointed for all or a substantial part
of Tenant's property; or
(4) Tenant makes an assignment for the
benefit of creditors.
10.02 LANDLORD'S REMEDIES.
(a) REMEDIES. Landlord in addition to the remedies given in this
Lease or under the law, may do any one or more of the
following if Tenant commits a material Default under Section
10.01:
(i) end this Lease, and Tenant shall then surrender
the Premises to Landlord;
(ii) enter and take possession of the Premises either
with process of law and remove Tenant, with or
without having ended the Lease; and
(iii) alter locks and other security devices at the
Premises with process of law.
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Tenant waives claims for damages by reason of Landlord's
reentry, repossession, or alteration of locks or other
security devices and for damages by reason of any legal
process.
(b) NO SURRENDER. Landlord's exercise of any of its remedies or
its receipt of Tenant's keys shall not be considered an
acceptance or surrender of the Premises by Tenant. A surrender
must be agreed to in writing signed by both parties.
(c) RENT. If Landlord terminates this Lease or Tenant's right to
possess the Premises because of a material Default, Landlord
may hold Tenant liable for Base Rent, Additional Rent, and
other indebtedness accrued to the date the Lease expires or is
terminated. Tenant shall also be liable for the Base Rent,
Additional Rent and other indebtedness that otherwise would
have been payable by Tenant during the remainder of the Term
had there been no material default, reduced by any sums
Landlord receives by reletting the Premises during the Term.
(d) OTHER EXPENSES. Tenant shall also be liable for that part of
the following sums paid by Landlord and attributable to that
part of the Term ended due to Tenant's Default:
(i) reasonable broker's fees incurred by Landlord for
reletting part or all of the Premises prorated for
that part of the reletting Term ending
concurrently with the then current Term of this
Lease;
(ii) the cost of removing and storing Tenant's
property;
(iii) other necessary, reasonable and direct expenses
incurred by Landlord in enforcing its remedies,
including, without limitation, reasonable
attorneys fees.
(e) PAYMENT. Tenant shall pay the sums due in Sections 10.02(c)
and (d) within thirty (30) days of receiving Landlord's proper
and correct invoice for the amounts.
(f) RELETTING. Landlord may relet for a shorter or longer period
of time than the Lease Term and make any necessary repairs or
alterations. Landlord may relet on any reasonable terms
including a reasonable amount of free rent.
10.03 SELF-HELP. If Tenant defaults, Landlord may, without being obligated and
without waiving the Default, cure the Default, and may enter the Premises to do
so. Tenant shall pay Landlord, upon demand, as Additional Rent, all costs,
expenses and disbursements incurred by Landlord.
10.04 SURVIVAL. The remedies permitted by this Article X and the parties'
indemnities in Section 8.02 shall survive the Expiration Date or earlier
termination of this Lease.
10.05 TENANT'S REMEDIES. If Landlord shall default in the performance of any
material covenant to be performed under this Lease, then
(i) if the default is not cured by Landlord within five days of written
request from Tenant, Landlord shall be responsible for the
necessary, reasonable and direct expenses incurred by Tenant in
correcting such default and
(ii) if, in connection with the enforcement of the Tenant's rights or
remedies, the Tenant shall incur fees and expenses for services
rendered, and Tenant shall prevail in litigation, then such fees and
expenses shall be immediately reimbursed by Landlord. If Landlord
shall prevail in litigation then such fees and expenses shall be
immediately reimbursed by Tenant.
ARTICLE XI
NON DISTURBANCE
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11.01 SUBORDINATION.
(a) MORTGAGES. Subject to Section 11.01(b), this Lease is
subordinate to prior or subsequent mortgages covering the
Building.
(b) FORECLOSURES. If any mortgage is foreclosed, then:
(i) This Lease shall continue;
(ii) Tenant's quiet possession shall not be disturbed
if Tenant is not in Default;
(iii) Tenant will attorn to and recognize the mortgagee
or purchaser at foreclosure sale (Successor
Landlord) as Tenant's landlord for the remaining
Term; and
(iv) The Successor Landlord shall not be bound by:
(1) any payment of Base Rent or Additional
Rent for more than one month in advance,
except the Security Deposit and free
rent, if any, specified in the Lease,
(2) any amendment, modification, or ending
of this Lease without Successor
Landlord's consent after the Successor
Landlord's name is given to Tenant
unless the amendment, modification, or
ending is specifically authorized by the
original Lease and does not require
Landlord's prior agreement or consent,
and
(3) any liability for any act or omission of
a prior Landlord.
(c) SELF-OPERATING. This Section 11.01 is self-operating. However,
Tenant shall promptly execute and deliver any documents needed
to confirm this arrangement.
11.02 ESTOPPEL CERTIFICATE.
(a) OBLIGATION. Tenant shall from time to time, within ten (10)
business days after receiving a written request from Landlord,
execute and deliver to Landlord a written statement which may
be relied upon by Landlord and any third party with whom the
Landlord is dealing and which shall certify:
(i) the accuracy of the Lease document;
(ii) the Commencement and Expiration Dates of the
Lease;
(iii) that the Lease is unmodified and in full effect or
in full effect as modified, stating the date and
nature of the modification;
(iv) whether to the Tenant's knowledge the Landlord is
in default or whether the Tenant has any claims or
demands against Landlord, and, if so, specifying
the Default, claim, or demand; and
(v) to other correct and reasonably ascertainable
facts that are covered by the Lease terms.
(b) REMEDY. The Tenant's failure to comply with its obligations in
Section 11.02(a) shall be a Default, except that the cure
period for this Default shall be five (5) business days after
the Tenant receives notice of the Default.
11.03 QUIET POSSESSION. If Tenant is not in default, and subject to the Lease
terms, Landlord warrants that Tenant's peaceable and quiet enjoyment of the
Premises shall not be disturbed by anyone claiming by or through Landlord.
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ARTICLE XII
LANDLORD'S RIGHTS
12.01 RULES.
(a) RULES. Tenant, its employees and invitees, shall comply with:
(i) the Rules attached as Exhibit E; and
(ii) reasonable modifications and additions to the
Rules adopted by Landlord.
(b) CONFLICT WITH LEASE. If a Rule issued under Section 12.01(a)
conflicts with or is inconsistent with any Lease provision,
the Lease provision controls.
(c) ENFORCEMENT. Although Landlord is not responsible for another
tenant's failure to observe the Rules, Landlord shall not
unreasonably enforce the Rules against Tenant.
12.02 MECHANIC'S LIENS.
(a) DISCHARGE LIEN. Tenant shall, within twenty (20) days after
receiving notice of any mechanic's lien for material or work
claimed to have been furnished to the Premises on Tenant's
behalf and at Tenant's request:
(i) discharge the lien; or
(ii) post a bond equal to the amount of the disputed
claim with companies reasonably satisfactory to
Landlord.
If Tenant posts a bond, it shall contest the validity of the
lien. Tenant shall indemnify, defend, and hold Landlord
harmless from losses incurred from these liens.
(b) LANDLORD'S DISCHARGE. If Tenant does not discharge the lien or
post the bond within the twenty (20) day period, Landlord may
pay any amounts, including interest and legal fees, to
discharge the lien. Tenant shall then be liable to Landlord
for the amounts paid by Landlord as Additional Rent.
(c) CONSENT NOT IMPLIED. This Section 12.02 is not a consent to
subject Landlord's property to these liens.
12.03 RIGHT TO ENTER.
(a) PERMITTED ENTRIES. Landlord and its agents, servants, and
employees may enter the Premises at reasonable times, and at
any time if an emergency, without charge, liability, or
abatement of Base Rent, to:
(i) examine the Premises;
(ii) make repairs, alterations, improvements, and
additions either required by the Lease or
advisable to preserve the integrity, safety, and
good order of part or all of the Premises or
Building;
(iii) provide janitorial and other services required by
the Lease;
(iv) comply with Applicable Laws;
(v) show the Premises to prospective lenders or
purchasers;
(vi) post notices of non responsibility;
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(vii) remove any Alterations made by Tenant in violation
of Section 7.01; and
(viii) post "For Sale" signs and, during the one hundred
twenty (120) days immediately before this Lease
ends, post "For Lease" signs.
(b) ENTRY CONDITIONS. Notwithstanding Section 12.03(a), entry is
conditioned upon Landlord:
(i) giving Tenant at least twenty-four (24) hours
advance notice, except in an emergency;
(ii) promptly finishing any work for which it entered;
and
(iii) causing the least practical interference to
Tenant's business.
12.04 HOLDOVER.
(a) HOLDOVER STATUS. If Tenant continues occupying the Premises
after the Term ends ("Holdover") then:
(i) if the Holdover is with Landlord's written
consent, it shall be a month-to-month tenancy,
terminable on thirty (30) days advance notice by
either party.
(ii) if the Holdover is without Landlord's written
consent, then Tenant shall be a
tenant-at-sufferance. Tenant shall pay by the
first day of each month twice the amount of Base
Rent and Additional Rent due in the last full
month immediately preceding the Holdover period
and shall be liable for any damages suffered by
Landlord because of Tenant's Holdover, Landlord
shall retain its remedies against Tenant who holds
over without written consent.
(b) HOLDOVER TERMS. The Holdover shall be on the same terms and
conditions of the Lease except:
(i) the Term;
(ii) Base Rent and Additional Rent;
(iii) the extension Term is deleted;
(iv) the Quiet Possession provision is deleted;
(v) Landlord's obligation for services and repairs is
deleted; and
(vi) consent to an assignment or sublease may be
unreasonably withheld and delayed.
12.05 SIGNS. Tenant shall not place or have placed any other signs, listings,
advertisements, or any other notices anywhere in the Building or on the Premises
without Landlord's prior written consent, such consent not to be unreasonably
withheld or delayed. Landlord will provide direction signs for Tenant on the 68
Alexander Drive campus.
12.06 RIGHT TO RELOCATE. If the demised Premises comprise less than fifty
percent (50%) of the floor where located, Landlord, at its option, may
substitute for the Demised Premises other space (hereafter called "Substitute
Premises") within the project before the commencement date or at any time during
the term or any extension of their lease. Insofar as reasonably possible, the
Substitute Premises shall have a comparable square foot area, configuration, and
amenities substantially similar to the Demised Premises.
Landlord shall give Tenant at least ninety (90) days written notice of its
intention to relocate Tenant to the Substitute Premises. This notice will be
accompanied by a floor plan of the Substitute Premises. After such notice,
Tenant Shall have ten (10) days within which to agree with Landlord on the
proposed new space and reasonable rent adjustments as may
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be appropriate and unless such agreement is reached within such period of time,
this lease shall terminate at the end of the ninety (90) day period of time
following the aforesaid notice. In the event suitable substitute space is not
available after Landlord's written notice then either party may terminate this
lease with sixty (60) days advance written notice.
Landlord agrees to construct or alter, at its own expense, the Substitute
Premises as expeditiously as possible so that they are in substantially the same
condition that the Demised Premises were in immediately prior to the relocation.
Landlord shall have the right to reuse the fixtures, improvements, and
alterations used in the Demised Premises. Tenant agrees to occupy the Substitute
Premises as soon as Landlord's work is substantially completed.
Landlord shall pay Tenant's reasonable cost of moving Tenant's furnishings,
trade fixtures, and inventory to the Substitute Premises. Except as provided
herein, Tenant agrees that all of the obligations of this lease, including the
payment of rent, will continue despite Tenant's location. Tenant's rent shall
abate from the date the Demised Premises are closed until the date the
Substitute Premises are open for business. Tenant agrees to use all reasonable
efforts to open for business in the Substitute Premises as quickly as is
reasonably possible under the circumstance.
Except as provided above, Landlord shall not be liable or responsible in any way
for damages or injuries suffered by Tenant pursuant to the relocation in
accordance with this provision including, but not limited to, loss of goodwill,
business, or profits.
ARTICLE XIII
MISCELLANEOUS
13.01 BROKER'S WARRANTY. The parties warrant that ANTHONY AND CO. is the only
broker they dealt with on this Lease. The party who breaches this warranty shall
defend, hold harmless, and indemnify the non breaching party from any claims or
liability arising from the breach. Landlord is solely responsible for paying the
commission of ANTHONY & CO.
13.02 ATTORNEY'S FEES. In any litigation between the parties regarding this
Lease, the losing party shall pay to the prevailing party all reasonable
expenses and court costs including attorneys' fees incurred by the prevailing
party. A party shall be considered the prevailing party if:
(a) it initiated the litigation and substantially obtains the
relief it sought, either through a judgment or voluntary
action before (after it is scheduled) trial or judgment;
(b) the other party withdraws its action without substantially
obtaining the relief it sought; or
(c) it did not initiate the litigation and judgment is entered for
either party, but without substantially granting the relief
sought.
13.03 NOTICES. Unless a Lease provision expressly authorizes verbal notice, all
notices under this Lease shall be in writing and sent by registered or certified
mail, postage prepaid, as follows:
To Tenant: United Therapeutics Corporation (mailing address)
ATTN: Dr. Gilles Cloutier
P.O. Box 13169
Research Triangle Park, NC 27709
and
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To Landlord: UAI Technology, Inc.
ATTN: Steven F. Maier
PO Box 13628, 68 Alexander Drive
Research Triangle Park, NC 27709
Either party may change these persons or addresses by giving notice as provided
above. Tenant shall also give required notices to Landlord's mortgagee after
receiving notice from Landlord of the mortgagee's name and address. Notice shall
be considered given and received on the latest original delivery or attempted
delivery date as indicated on the postage receipt(s) of all persons and
addresses to which notice is to be given.
13.04 PARTIAL INVALIDITY. If any Lease provision is invalid or unenforceable to
any extent, then except that provision, the remainder of this Lease shall
continue in effect and be enforceable to the fullest extent permitted by law.
13.05 WAIVER. The failure of either party to exercise any of its rights is not a
waiver of those rights. A party waives only those rights specified in writing
and signed by the party waiving its rights.
13.06 BINDING ON SUCCESSORS. This Lease shall bind the parties' heirs,
successors, representatives, and permitted assigns.
13.07 GOVERNING LAW. This Lease shall be governed by the laws of the state in
which the Building is located.
13.08 LEASE NOT AN OFFER. Landlord gave this Lease to Tenant for review. It is
not an offer to lease. This Lease shall not be binding unless signed by both
parties and an originally signed counterpart is delivered to Tenant by JUNE
30, 1998.
13.09 RECORDING. Recording of this Lease is prohibited except as allowed in this
paragraph. At the request of either party, the parties shall promptly execute
and record, at the cost of the requesting party, a short form memorandum
describing the Premises and stating this Lease's Term, its Commencement and
Expiration Dates, and other information the parties agree to include.
13.10 SURVIVAL OF REMEDIES. The parties' remedies shall survive the expiration
or termination of this Lease when caused by the Default of the other party.
13.11 AUTHORITY OF PARTIES. Each party warrants that it is authorized to enter
into the Lease, that the person signing on its behalf is duly authorized to
execute the Lease, and that no other signatures are necessary.
13.12 BUSINESS DAYS. Business day means Monday through Friday inclusive,
excluding holidays identified at Section 6.02(b). Throughout this Lease,
wherever "days" are used the term shall refer to calendar days. Wherever the
term "business days" is used the term shall refer to business days.
13.13 ENTIRE AGREEMENT. This Lease contains the entire agreement between the
parties about the Premises and Building. Except for the Rules for which Section
12.01(a) controls, this Lease shall be modified only by a writing signed by both
parties.
13.14 DEFINITION OF LEASE. This Lease consists of the following:
(a) Title Page;
(b) Table of Contents;
(c) Articles I through XIII;
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(d) Signature Page;
(e) Exhibits A through E.
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease
the day and year first above written.
LANDLORD: UAI TECHNOLOGY, INC.
------------------------------------
SIGNATURE:
/s/ Mark E. Friedman
------------------------------------
MARK E. FRIEDMAN
DATE: 7/2/98
-------------------------------
WITNESS: NAME: /s/ J.D.
-------------------------------
TITLE: Controller
-------------------------------
DATE: 7/2/98
-------------------------------
TENANT: UNITED THERAPEUTICS CORPORATION
------------------------------------
SIGNATURE:
/s/ Gilles Cloutier
------------------------------------
DR. GILLES CLOUTIER
DATE: 6/22/98
-------------------------------
WITNESS: NAME: /s/ Denise Corbisiero
-------------------------------
TITLE: Admin. Assistant
------------------------------
DATE: 7/7/98
--------------------------------
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EXHIBIT C
LAND
BEGINNING at an existing iron pipe located in the westernmost right-of-way line
of T.W. Alexander Drive, marking the northeasternmost corner of the property
described herein and having the North Carolina Grid Coordinates of N 787,
877.83, E 2, 035, 943.91; thence along and with the westernmost right-of-way
line to T.W. Alexander Drive South 00(Degree) 49' 42" East 157.40 feet to an
existing iron pipe; thence along with the westernmost right-of-way line to T.W.
Alexander Drive South 01(Degree) 29' 40" East 527.60 feet to an existing
concrete monument marking the easternmost point of the former southern border of
a 10.462 acre tract, the property of UAI Technology, Inc.; thence along and with
the westernmost right-of-way line of T.W. Alexander Drive South 01(Degree) 29'
40" East 316.40 feet to an existing concrete monument; thence along and with the
northernmost line of other property of the Research Triangle Foundation of North
Carolina South 88(Degree) 30' 20" West 695.60 feet to an existing concrete
monument located in the easternmost line of the aforesaid property now or
formerly of W.L. Lowe; thence along and with the easternmost line of the
aforesaid property of W.L. Lowe, North 01(Degree) 07' 15" East 316.73 feet to an
existing iron pipe marking the westernmost point of the former southern border
of a 10.462 acre tract, the property of UAI Technology, Inc.; thence along and
with the eastern line of the property now or formerly of W.L. Lowe, North
01(Degree) 04' 57" East 270.96 feet to an existing iron pipe; thence along and
with the eastern line of other property of Research Trianlge Foundatin of North
Carolina North 01(Degree) 23' 04" East 414.83 feet to an existing iron pipe;
thence along and with the southern line of other property of Research Triangle
Foundation of North Carolina North 88(Degree) 30' 20" East 649.96 feet to the
point and place of BEGINNING, as shown on a plat and survey thereof entitled
"Recombination and Foundation Survey - U.A.I. Technology, Inc." date May 3, 1991
by Boney and Associates, Inc. Engineering and Surveying, Raleigh, N.C. The
southern five acres of this property is shown on a plat and survey recorded in
Plat Book 124, Page 200 Durham County Registry. The northern 10.462 acres of
this property is shown on a plat and survey recorded in Plat Book 106, Page 32,
Durham County Registry. And Plat Book 124, Page 200 Durham County Registry.
22
<PAGE> 23
EXHIBIT D
LANDLORD IMPROVEMENTS
- Locks on office doors, to be provided at Tenant's expense.
- Landlord will provide keys for entry into main door of building.
- A separate agreement regarding existing furniture and phone system
will be made between Landlord and Tenant.
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<PAGE> 24
EXHIBIT E
RULES AND REGULATIONS
(1) ACCESS TO COMMON AREAS OF THE PROPERTY. Landlord may from time to time
establish security controls for the purpose of regulating access to the
common areas of the property. Tenant shall abide by all such security
regulations so established and agrees to always leave clear access for
vehicular traffic through all parking lots, loading areas and driveways.
(2) PROTECTING DEMISED PREMISES. Before leaving the Demised Premises
unattended, Tenant shall close and securely lock all doors or other means
of entry to the Demised Premises.
(3) BUILDING DIRECTORIES. The directories of the building shall be used
exclusively for the display of the name and location of tenants only and
will be provided at the expense of Landlord. Any company names and/or name
changes requested by Tenant to be displayed in the directories must be
approved by Landlord and, if approved, will be provided at the sole
expense of Tenant.
(4) LARGE ARTICLES. Furniture, freight and other large or heavy articles may
be brought into the building in a manner so as to not damage the property
and always at Tenant's sole responsibility. All damage done to the
building, its furnishings, fixtures or equipment by moving or maintaining
such furniture, freight or articles shall be repaired at the expense of
Tenant.
(5) SIGNS. Tenant shall not paint, display, inscribe, maintain or affix any
sign, placard, picture, advertisement, name, notice, lettering or
direction on any part of the outside or inside of the building or on the
Premises, or on any part of the inside of the Demised Premises which can
be seen from the outside of the Demised Premises, without the written
consent of Landlord, and then only such name or names or matter and in
such color, size, style, character and material as shall be first approved
by Landlord in writing. Landlord reserves the right to remove at Tenant's
expense all matter other than that above provided for without notice to
Tenant.
(6) COMPLIANCE WITH LAWS. Tenant shall comply with all applicable laws,
ordinances, governmental orders or regulations and applicable orders or
directions from any public office or body having jurisdiction, whether now
existing or hereinafter enacted with respect to the Demised Premises and
the use or occupancy thereof. Tenant shall not make or permit any use of
the Demised Premises which directly or indirectly is forbidden by law,
ordinance, governmental regulations or order or direction of applicable
public authority, or which may be dangerous to person or property.
(7) HAZARDOUS MATERIALS. Tenant shall not use or permit to be brought into the
Demised Premises or the building any flammable oils or fluids, or any
explosive or other articles deemed hazardous to persons or property, or do
or permit to be done any act or thing which will invalidate or which if
brought in would be in conflict with any insurance policy covering the
building or its operation, or the Demised Premises, or any part of either,
and will not do or permit to be done anything in or upon the Demised
Premises, or bring or keep anything therein, which shall not comply with
all rules, orders, regulations or requirements of any organization,
bureaus, department or body having jurisdiction with respect thereto (and
Tenant shall at all times comply with all such rules, orders, regulations
or requirements), or which shall increase the rate of insurance on the
building, its appurtenances, contents or operation. Tenant shall not bring
onto the Premises any biological, radioactive, or chemical substances.
(8) DEFACING DEMISED PREMISES AND OVERLOADING. Tenant shall not place anything
or allow anything to be placed in the Demised Premises near the glass or
any door, partition, wall or window which may be unsightly from outside
the Demised Premises. Tenant shall not place or permit to be placed any
article of any kind on any window ledge or on the exterior walls; blinds,
shades, awnings or other forms of inside or outside window ventilators or
similar devices shall not be placed in or about the outside windows in the
Demised Premises except to the extent that the character, shape, color
material and make thereof is approved by Landlord. Tenant shall not do any
painting or decorating in the Demised Premises or install any floor
coverings in the Demised Premises or make, paint, cut or drill into, or in
any way deface any part of the Demised Premises or building without in
each instance obtaining the prior written consent of Landlord. Tenant
shall not overload any floor or part thereof in the Demised Premises, or
any facility in the building or
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<PAGE> 25
any public corridors or elevators therein by bringing in or removing any
large or heavy articles and, Landlord may direct and control the location
of safes, files, and all other heavy articles and, if considered necessary
by Landlord, require supplementary supports at Tenant's expense of such
material and dimensions necessary to properly distribute the weight.
(9) OBSTRUCTION OF PUBLIC AREAS. Tenant shall not, whether temporarily,
accidentally or otherwise, allow anything to remain in, place or store
anything in, or obstruct in any way, any sidewalk, court, passageway,
entrance, or shipping area. Tenant shall lend its full cooperation to keep
such areas free from all obstruction and in a clean and sightly condition,
and move all supplies, furniture and equipment as soon as received
directly to the Demised Premises, and shall move all such items and waste
(other than waste customarily removed by building employees) that are at
any time being taken from the Demised Premises directly to the areas
designated for disposal. All courts, passageways, entrances, exits,
elevators, escalators, stairways, corridors, halls and roofs are not for
the use of the general public and Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence
in the judgment of Landlord shall be prejudicial to the safety, character,
reputation and interest of the building and its tenants provided, however,
that nothing herein contained shall be construed to prevent such access to
persons with whom Tenant deals within the normal course of Tenant's
business unless such persons are engaged in illegal activities.
(10) ADDITIONAL LOCKS. Tenant shall not attach or permit to be attached
additional locks or similar devices to any door or window, change any
existing locks or the mechanism thereof, or make or permit to be made any
keys for any door other than those provided by Landlord. Upon termination
of this lease or of Tenant's possession, Tenant shall surrender all keys
to the Demised Premises. Tenant shall be solely responsible for the costs
of all locks and keys other than the original set in the premises as of
the date of occupancy.
(11) COMMUNICATIONS OR UTILITY CONNECTIONS. If Tenant desires signal, alarm or
other utility or similar service connections installed or changed, Tenant
must first obtain approval of Landlord, and such installation shall be at
Tenant's expense. Tenant shall not install in the Demised Premises any
equipment which requires a substantial amount of electrical current
without the advance written consent of Landlord. Tenant shall ascertain
from Landlord the maximum amount of load or demand for or use of
electrical current which can safely be permitted in the Demised Premises,
taking into account the capacity of the electric wiring in the building
and the Demised Premises, taking into account the capacity of the electric
wiring in the building and the Demised Premises and the needs of other
tenants in the building, and shall not in any event connect a greater load
than that which is safe.
(12) OFFICE OF THE BUILDING. Service requirements of Tenant will be attended to
only upon application at the Landlord Services office. Employees of
Landlord shall not perform any work outside of their duties unless under
special instructions from Landlord. Tenant shall appoint a single person
to serve as liaison between Tenant and Landlord for purposes of service
requirements.
(13) RESTROOMS. The restrooms, toilets, urinals, vanities and the other
apparatus shall not be used for any purpose other than that for which they
were constructed and no foreign substance of any kind whatsoever shall be
thrown therein and the expense of any breakage, stoppage or damage
resulting from the violation of this rule shall be borne by Tenant who, or
whose employees or invitees, shall have caused it.
(14) INTOXICATION. Landlord reserves the right to exclude or expel from the
building any person who, in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs, or who shall in any manner do any
act in violation of any of the rules and regulations of the building.
(15) NUISANCES AND CERTAIN OTHER PROHIBITED USES. Tenant shall not (a) install
or operate any internal combustion engine, boiler, machinery,
refrigerating, heating or air conditioning apparatus in or about the
Demised Premises; (b) engage in any mechanical business, utilize any
article or thing, or engage in any service in or about the Demised
Premises or building, except those ordinarily embraced within the
permitted use of the Demised Premises specified in Article 7; (c) use the
Demised Premises for housing, lodging, or sleeping purposes; (d) place any
antennae on the roof or on or in any part of the inside or outside of the
building other than the inside of the Demised Premises, or place a musical
or sound producing instrument or device inside or outside the Demised
Premises which may be heard outside the Demised Premises; (e) use any
illumination or power for the operation of any equipment or device other
than electricity; (f)
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<PAGE> 26
operate any electrical device from which may emanate electrical waves
which may interfere with or impair radio or television broadcasting or
reception from or in the building or elsewhere; (g) bring or permit to be
in the building complex any bicycle or other vehicle, or dog (except in
the company of a blind person) or other animal or bird; (h) make or permit
any objectionable noise or odor to emanate from the Demised Premises; (i)
disturb, solicit or canvass any occupant of the building; (j) do anything
in or about the Demised Premises tending to create or maintain a nuisance
or do any act tending to injure the reputation of the building; (k)
perform any scientific experimentation or other processes, whether or not
these experiments or processes required any laboratory equipment.
(16) SOLICITATION. Tenant shall not make any room-to-room canvass to solicit
business from other tenants in the building and shall not exhibit, sell or
offer to sell, use, rent or exchange any products or services in or from
the Demised Premises unless ordinarily embraced within the Tenant's use of
the Demised Premises specified herein and specific authority granted in
the lease agreement.
(17) ENERGY CONSERVATION. Tenant shall not waste electricity, water, heat or
air conditioning and agrees to cooperate fully with Landlord to assure the
most effective operation of the building's heating and air conditioning,
and shall not allow the adjustment (except by Landlord's authorized
building personnel) or any controls.
(18) BUILDING SECURITY. Tenant must follow routine security procedures as set
forth by Landlord, and inform all employees of such policies.
(19) PARKING. Parking is in designated parking areas only. There should be no
vehicles in "no parking" zones or at curbs. Handicapped spaces are for
handicapped persons and the Police Department will ticket unauthorized
(unidentified) cars in handicapped spaces. No vehicles may be abandoned or
repaired on the property, and vehicles requiring extended parking should
be identified to Landlord.
(20) JANITORIAL SERVICE. Tenants will remove excessive trash from inside and
outside their premises and shall deposit same in the dumpsters provided by
Landlord. Any large volume of trash resulting from delivery of furniture,
equipment, etc., should be removed by the delivery company, Tenant, or
Landlord at Tenant's expense. Any requests for extraordinary trash removal
should be directed to Landlord Services office.
(21) Landlord reserves the right to make such other reasonable Rules and
Regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building and the Land, and for the
preservation of good order therein.
(22) TENANTS USE RESTRICTED TO AREAS RENTED. Tenant shall inform all employees
that its use of the Premises is restricted to those areas listed in
Section 1.01 above. No employees, agents, visitors, or any other persons
affiliated with Tenant shall have access to areas except those
specifically listed in Section 1.01.
(23) WEAPONS. No weapons or firearms may be carried onto the Premises at any
time.
(24) SMOKING. Smoking is not allowed on the Premises.
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<PAGE> 1
EXHIBIT 10.18
INDEMNIFICATION AGREEMENT
This Indemnity Agreement, dated as of ____________ ___, 1999, is made by
and between UNITED THERAPEUTICS CORPORATION, a Delaware corporation (the
"Company"), and ____________________ (the "Indemnitee"), an "agent" (as
hereinafter defined) of the Company.
RECITALS
A. The Company recognizes that competent and experienced persons are
increasingly reluctant to serve as directors or executive officers of
corporations unless they are protected by comprehensive liability insurance or
indemnification, or both, due to increased exposure to litigation costs and
risks resulting from their service to such corporations, and due to the fact
that the exposure frequently bears no reasonable relationship to the
compensation of such directors and executive officers;
B. The statutes and judicial decisions regarding the duties of directors
and executive officers are often difficult to apply, ambiguous or conflicting,
and therefore fail to provide such directors and executive officers with
adequate, reliable knowledge of legal risks to which they are exposed or
information regarding the proper course of action to take;
C. The Company and the Indemnitee recognize that plaintiffs often seek
damages in such large amounts and the costs of litigation may be so enormous
(whether or not the case is meritorious), that the defense and/or settlement of
such litigation is often beyond the personal resources of directors and
executive officers;
D. The Company believes that it is unfair for its directors and executive
officers to assume the risk of huge judgments and other expenses which may occur
in cases in which the director or executive officer received no personal profit
and in cases where the director or executive officer was not culpable;
E. The Company, after reasonable investigation, has determined that the
liability insurance coverage presently available to the Company is inadequate to
cover all possible exposure for which the Indemnitee should be protected. The
Company believes that the interests of the Company and its stockholders would
best be served by a combination of such insurance and the indemnification by the
Company of the directors and executive officers of the Company,
F. Section 145 of the General Corporation Law of Delaware ("Section
145"), under which the Company is organized, empowers the Company to indemnify
its directors, officers, employees and agents by agreement and to indemnify
persons who serve, at the request of the Company, as the directors, officers,
employees or agents of other corporations or
<PAGE> 2
enterprises, and expressly provides that the indemnification provided by Section
145 is not exclusive;
G. The Board of Directors has determined that contractual indemnification
as set forth herein is not only reasonable and prudent but necessary to promote
the best interests of the Company and its stockholders;
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or executive officer of the Company free from
undue concern for claims for damages arising out of or related to such services
to the Company, and
I. The Indemnitee is willing to serve, or to continue to serve, the
Company, only on the condition that he is furnished the indemnity provided for
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. Definitions
(a) Agent. For purposes of this Agreement, "agent" of the Company
meansany person who is or was a director, officer, employee or other agent of
the Company or a subsidiary of the Company, or is or was serving at the request
of, for the convenience of, or to represent the interest of the Company or a
subsidiary of the Company as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise.
(b) Expenses. For purposes of this Agreement, "expenses" includes
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements and other
out-of-pocket costs), actually and reasonably incurred by the Indemnitee in
connection with either the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement,
Section 145 or otherwise, and amounts paid in settlement by or on behalf of the
Indemnitee, but shall not include any final judgments, fines or penalties
actually levied against the Indemnitee.
(c) Proceedings. For the purposes of this Agreement, "proceeding"
means any threatened, pending or completed action, suit or other proceeding,
whether civil, criminal, administrative or investigative.
(d) Subsidiary. For purposes of this Agreement, "subsidiary" means
any corporation of which more than 50% of the outstanding voting securities are
owned directly or indirectly by the Company, by the Company and one or more
other subsidiaries or by one or more other subsidiaries.
2
<PAGE> 3
(e) Other Enterprise. For purpose of this Agreement, "other
enterprise" shall include employee benefit plans; references to "fines" shall
include any excise tax assessed with respect to any employee benefit plans;
references to "serving at the request of the Company" shall include any service
as a director, officer, employee or agent of the Company which imposes duties
on, or involves services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants or beneficiaries; and any
person who acts in good faith and in a manner he reasonably believes to be in
the best interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Company" as referred to in this Agreement.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to
serve as an agent of the Company, at the will of the Company (or under separate
agreement, if such agreement exists), in the capacity the Indemnitee currently
serves as an agent of the Company, so long as he is duly appointed or elected
and qualified in accordance with the applicable provisions of the By-Laws of the
Company or any subsidiary of the Company or until such time as he tenders his
resignation in writing; provided, however, that nothing contained in this
Agreement is intended to create any right to continued employment by the
Indemnitee in any capacity.
3. Indemnity in Third Party Proceeding. The Company shall indemnify the
Indemnitee if the Indemnitee is a party to or threatened to be made a party to
or otherwise involved in any proceeding (other than a proceeding by or in the
right of the Company) by reason of the fact that the Indemnitee is or was an
agent of the Company, including any proceeding based upon any act or inaction by
the Indemnitee in his capacity as an agent of the Company, against any and all
expenses, judgments, fines and penalties actually and reasonably incurred by him
in connection with such proceeding, but only if the Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
proceeding by judgment, order of court, settlement, conviction or on plea of
nolo contendere, or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal proceedings, that such person had
reasonable cause to believe that his conduct was unlawful.
4. Indemnity in Derivative Actions; Indemnification as Witness.
(a) The Company shall indemnify the Indemnitee if the Indemnitee is a
party to or threatened to be made a party to or otherwise involved in any
proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that the Indemnitee is or was an agent of the Company,
including any proceeding based upon any act or inaction by the Indemnitee in his
capacity as an agent of the Company, against all expenses actually and
reasonably incurred by the Indemnitee in connection with such proceeding, but
only if the Indemnitee acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, except
that no indemnification under this Section 4 shall be made in respect of any
claim, issue or matter as to which the Indemnitee shall have been finally
3
<PAGE> 4
adjudged to be liable to the Company by a court of competent jurisdiction for
gross negligence or misconduct in the performance of his duty to the Company,
unless and only to the extent that any court in which such proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as such court
shall deem proper.
(b) Notwithstanding any other provisions of this Agreement, to the
extent the Indemnitee is, by reason of the fact that he is or was an agent of
the Corporation, involved in any investigative proceeding, including but not
limited to testifying as a witness or furnishing documents in response to a
subpoena or otherwise, the Indemnitee shall be indemnified against any and all
expenses actually and reasonably incurred by or for him in connection therewith.
5. Idemnification of Expenses of Successful Party. Notwithstanding any
other provisions of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any proceeding or in defense
of any claim, issue or matter therein, the Company shall indemnify the
Indemnitee against all expenses actually and reasonably incurred in connection
with such proceeding.
6. Partial Idemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses, judgments, fines or penalties, actually and reasonably
incurred by him in a proceeding but is not entitled, however, to indemnification
for the total amount thereof, the Company shall nevertheless indemnify the
Indemnitee for the portion thereof to which the Indemnitee is entitled.
7. Advancement of Expenses. Subject to Section 11(a) hereof, the Company
shall advance all expenses incurred by the Indemnitee in connection with any
proceeding to which the Indemnitee is a party or is threatened to be made a
party by reason of the fact that the Indemnitee is or was an agent of the
Company. The Indemnitee hereby undertakes to repay such amounts advanced only
if, and to the extent that, it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Company as authorized by
this Agreement. The advances to be made hereunder shall be paid by the Company
to or on behalf of the Indemnitee within thirty (30) days following delivery of
a written request therefor by the Indemnitee to the Company.
8. Notice and Other Idemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof, provided the failure to provide
such notification shall not diminish the Indemnitee's indemnification hereunder.
(b) Any indemnification requested by the Indemnitee under Section
3, 4, 5 or 6 hereof shall be made no later than forty-five (45) days after
receipt of the written request of the Indemnitee unless a determination is made
within said forty-five (45) day period (i) by the
4
<PAGE> 5
Board of Directors of the Company by a majority vote of a quorum thereof
consisting of directors who are not parties to such proceeding, or (ii) in the
event such a quorum is not obtainable, at the election of the Company, either by
independent legal counsel in a written opinion or by a panel of arbitrators
(selected in the manner set forth in Section 8(c) hereof) that the Indemnitee
has not met the relevant standards for indemnification set forth in Section 3,
4, 5 or 6 hereof.
(c) Except as set forth herein, the right of indemnification under
this Agreement and any dispute arising hereunder, including but not limited to
matters of validity, interpretation, application and enforcement, shall be
determined exclusively by and through final and binding arbitration in
Washington, D.C. each party hereto expressly and conclusively waiving his right
to proceed to a judicial determination with respect to such matter. Such
arbitration shall be conducted in accordance with the commercial arbitration
rules then in effect of the American Arbitration Association before a panel of
three arbitrators, one of whom shall be selected by the Company, the second of
whom shall be selected by the Indemnitee and the third of whom shall be selected
by the other two arbitrators. If for any reason arbitration under the
arbitration rules of the American Arbitration Association cannot be initiated,
the necessary arbitrator or arbitrators shall be selected by the presiding judge
of the local court of general jurisdiction in Washington, D.C.. Each arbitrator
selected as provided hereto is required to be serving or to have served as a
director or an executive officer of a corporation whose shares of common stock,
during at least one year of such service, were quoted in the Nasdaq National
Market System or listed on the New York Stock Exchange. It is expressly
understood and agreed by the parties that a party may compel arbitration
pursuant to this Section 8(c) through an action for specific performance and
that any award entered by the arbitrators may be enforced, without further
evidence or proceedings, in any court of competent jurisdiction.
(d) The provisions of Section 8(c) hereof shall not apply if, and
to the extent that, they may be inconsistent with an undertaking given by the
Company (including an undertaking given after the date of this Agreement) to the
Securities and Exchange Commission to submit to a court of competent
jurisdiction the question whether indemnification for liabilities under the
Securities Act of 1933, as amended (the "Securities Act"), by the Company is
against public policy as expressed in the Securities Act, and to be governed by
the final adjudication of such issue. In such case, the determination by such
court shall be deemed, for purposes of this Agreement, to be a determination
pursuant to Section 8(c) hereof.
(e) The Company shall reimburse the Indemnitee for the expenses
incurred in prosecuting or defending such arbitration unless the arbitrator
finds that each of the claims and/or defenses of the Indemnitee in any such
proceeding was frivolous or in bad faith.
9. Assumption of Defense. In the event the Company shall be obligated to
pay the expenses of any proceeding against the Indemnitee, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding, with
counsel reasonably acceptable to the Indemnitee, upon the delivery to the
Indemnitee of written notice of its election to do so. After delivery of such
notice, approval of such counsel by the Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to the Indemnitee under
this Agreement
5
<PAGE> 6
for any fees of counsel subsequently incurred by the Indemnitee with respect to
the same proceeding, provided that (a) the Indemnitee shall have the right to
employ his counsel in such proceeding at the Indemnitee's expense and (b) if (i)
the employment of counsel by the Indemnitee has been previously authorized in
writing by the Company, (ii) the Company shall have reasonably concluded that
there may be a conflict of interest between the Company and the Indemnitee in
the conduct of any such defense, or (iii) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, the fees and expenses
of the Indemnitee's counsel shall be at the expense of the Company.
10. Insurance. The Company may, but is not obligated to, obtain
directors' and officers' liability insurance ("D&O Insurance") as may be or
become available in reasonable amounts from established and reputable insurers
with respect to which the Indemnitee is named as an insured. Notwithstanding any
other provision of the Agreement, the Company shall not be obligated to
indemnify the Indemnitee for expenses, judgments, fines or penalties which have
been paid directly to the Indemnitee by D&O Insurance. If the Company has D&O
Insurance in effect at the time the Company receives from the Indemnitee any
notice of the commencement of a proceeding, the Company shall give prompt notice
of the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the policy. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such proceeding in accordance
with the terms of such policy.
11. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by the Indemnitee. To indemnify or advance
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, except to the
extent set forth in Section 8(e) hereof; provided, however, that such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors finds it to be appropriate; or
(b) Unauthorized Settlements. To indemnify the Indemnitee under
this Agreement for any amounts paid in settlement of a proceeding effected
without the Company's written consent; the Company shall not settle any
proceeding without the Indemnitee's written consent; neither the Company nor the
Indemnitee will unreasonably withhold consent to any proposed settlement; or
(c) Certain Matters. To indemnify the Indemnitee on account of any
proceeding with respect to (i) payments made to the Indemnitee if it is
determined by final judgment or other final adjudication that such payments were
in violation of law or (ii) which it is determined by final judgment or other
final adjudication that the conduct of the Indemnitee constituted bad faith or
active and deliberate dishonesty; or
(d) Section 16. To indemnify the Indemnitee on account of any
claim by or on behalf of the Company for recovery of profits resulting from the
purchase and sale or
6
<PAGE> 7
sale and purchase by the Indemnitee of equity securities of the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended; or
(e) Unlawful. To indemnify the Indemnitee to the extent such
indemnification has been determined pursuant to Section 8(c) hereof to be
unlawful.
12. Nonexclusivity. The provisions for indemnification and advancement of
expenses set forth in this Agreement shall not be deemed exclusive of any other
rights which the Indemnitee may have under any provision of law, the Company's
Certificate of Incorporation or By-Laws, the vote of the Company's stockholders
or disinterested directors, other agreements or otherwise, both as to action in
his official capacity and to action in another capacity while occupying his
position as an agent of the Company, and the Indemnitee's rights hereunder shall
continue after the Indemnitee has ceased acting as an agent of the Company and
shall inure to the benefit of the heirs, executors and administrators of the
Indemnitee.
13. Suboragation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suit to enforce such rights.
14. Interpretation of Agreement. It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent now or hereafter
permitted by law.
15. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever, (a)
the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 14 hereof.
16. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
17. Successors and Assigns. The terms of this Agreement shall bind, and
shall inure to the benefit of, the successors and assigns of the parties hereto.
7
<PAGE> 8
18. Notice. All notices, claims, requests, demands and other
communications hereunder shall be in writing and shall be duly given if: (a)
personally delivered or sent via telecopy, (b) sent by certified mail, return
receipt requested, or (c) sent by nationally recognized overnight courier
service (for next business day delivery), shipping prepaid to the addresses
shown on the signature page of this Agreement or such other address or addresses
as the person to whom notice is to be given may have previously furnished to the
other party in writing in the manner set forth above. Notices shall be deemed
given at the time of personal delivery or completed telecopy, or, if sent by
certified mail, three (3) business days after such sending, or, if sent by
nationally recognized overnight courier service, one (1) business day after such
sending.
19. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware, without giving effect to conflict of laws principles. If a
court of competent jurisdiction shall make a final determination that the
provisions of the law of any state other than Delaware govern indemnification by
the Company of its directors and executive officers, then the indemnification
provided under this Agreement shall in all instances be enforceable to the
fullest extent permitted under such law, notwithstanding any provision of this
Agreement to the contrary.
The parties hereto have entered into this Indemnity Agreement effective
as of the date first above written.
UNITED THERAPEUTICS
CORPORATION
By _____________________________
1110 Spring Street
Silver Spring, Maryland 20910
INDEMNITEE:
________________________________
[Name]
Address: _______________________
_______________________
_______________________
<PAGE> 1
Exhibit 21
Subsidiaries of the Registrant
Unither Pharmaceuticals, Inc., a Delaware corporation
Lung Rx, Inc., a Delaware corporation
Unither Telemedicine Services, Inc., a Delaware corporation
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
United Therapeutics Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
KPMG LLP
McLean, Virginia
April 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 DEC-31-1998
<CASH> 15,429 6,779
<SECURITIES> 0 10,023
<RECEIVABLES> 108 54
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 15,537 16,856
<PP&E> 1,544 1,418
<DEPRECIATION> 74 50
<TOTAL-ASSETS> 17,765 18,747
<CURRENT-LIABILITIES> 1,984 1,758
<BONDS> 313 314
<COMMON> 107 101
0 0
0 0
<OTHER-SE> 15,361 16,578
<TOTAL-LIABILITY-AND-EQUITY> 17,765 18,747
<SALES> 54 54
<TOTAL-REVENUES> 54 54
<CGS> 0 0
<TOTAL-COSTS> 12,459 13,382
<OTHER-EXPENSES> 171 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7 15
<INCOME-PRETAX> (12,406) (12,832)
<INCOME-TAX> 3 3
<INCOME-CONTINUING> 0 0
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<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,238) (12,835)
<EPS-PRIMARY> (1.19) (1.54)
<EPS-DILUTED> (1.19) (1.54)
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