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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 2000.
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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FIRST HORIZON PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 2834 58-2004779
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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660 HEMBREE PARKWAY, SUITE 106
ROSWELL, GA 30076
(770) 442-9707
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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MAHENDRA G. SHAH, PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
FIRST HORIZON PHARMACEUTICAL CORPORATION
660 HEMBREE PARKWAY, SUITE 106
ROSWELL, GA 30076
(770) 442-9707
(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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STEPHEN D. FOX, ESQ. LESLIE E. DAVIS, ESQ.
ARNALL GOLDEN & GREGORY, LLP TESTA, HURWITZ & THIBEAULT, LLP
2800 ONE ATLANTIC CENTER 125 HIGH STREET
1201 WEST PEACHTREE STREET BOSTON, MA 02110
ATLANTA, GA 30309 (617) 248-7000
(404) 873-8500
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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.
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, 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 PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE(2) PRICE(1) FEE(2)
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Common Stock, $0.001 par value per share 4,370,000 Shares $14.00 $61,180,000 $16,151.52
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(1) Includes 570,000 shares of common stock that the Underwriters have the
option to purchase solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under The Securities Act of 1933.
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 PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 18, 2000
[COMPANY LOGO]
3,800,000 SHARES
COMMON STOCK
First Horizon Pharmaceutical Corporation is offering 3,800,000 shares of
its common stock. This is our initial public offering, and no public market
currently exists for our shares. We have applied to have the shares offered in
this prospectus approved for quotation on the Nasdaq National Market under the
symbol "FHRX". We anticipate that the initial public offering price will be
between $12.00 and $14.00 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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PER SHARE TOTAL
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Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to First Horizon................................... $ $
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional 570,000 shares of common stock to cover over-allotments.
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ROBERTSON STEPHENS
BANC OF AMERICA SECURITIES LLC
CHASE H&Q
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The date of this prospectus is , 2000.
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NITROLINGUAL(R) PUMPSPRAY is an oral spray of nitroglycerin used for the
acute relief or prevention of chest pain associated with angina pectoris that
results from heart disease.
[GRAPHICS-BOTTLE OF NITROLINGUAL PUMPSPRAY]
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
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TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 4
Forward-Looking Statements.................................. 17
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 27
Management.................................................. 38
Certain Relationships and Related Transactions.............. 49
Principal Stockholders...................................... 51
Description of Capital Stock................................ 53
Shares Eligible for Future Sale............................. 57
Underwriting................................................ 59
Legal Matters............................................... 61
Experts..................................................... 61
Additional Information...................................... 61
Index to Financial Statements............................... F-1
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We own or have rights to tradenames and registered trademarks that we use
in connection with the sale of our products. We have filed an application to
register the trademark Zebutal in the United States. We own the U.S. registered
trademarks Tanafed(R), Protuss(R), Mescolor(R), Zoto-HC(R) and Defen(R).
Nitrolingual(R), Robinul(R) and TIMERx(R) are registered U.S. trademarks of G.
Pohl Boskamp GmbH & Co., American Home Products Corporation and Penwest
Pharmaceuticals Co., respectively.
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SUMMARY
You should read the following summary together with the more detailed
information and financial statements and related notes that follow. 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. The information presented also assumes
that the underwriters do not exercise their over-allotment right.
THE COMPANY
First Horizon Pharmaceutical Corporation is an emerging pharmaceutical
company that markets and sells 11 brand name prescription drugs to
high-prescribing primary care and select specialty physicians through its
nationwide sales and marketing force of 128 professionals. We focus on the
treatment of chronic conditions, including cardiovascular diseases, respiratory
and gastroenterological disorders, and pain and inflammation. Our strategy is to
acquire and obtain licenses for pharmaceutical products that other companies do
not actively market and to increase sales through aggressive promotion and
marketing. We leverage our existing sales infrastructure by acquiring products
that we believe have a high growth potential and complement our existing
products. In addition, we seek to maximize the value of drugs by developing new
patentable formulations, using new delivery methods and seeking regulatory
approval for new indications.
Large multinational companies dominate the $91 billion U.S. prescription
pharmaceutical market. These companies are increasingly divesting products
which, as a result of consolidation or lack of strategic fit, do not meet the
threshold level of sales required for continued marketing and promotion. In 1999
alone, we acquired and licensed products from American Home Products Corporation
and Aventis (formerly Rhone-Poulenc Rorer).
Since 1992, we have introduced 11 products, including two line extensions.
Our key products include the angina product Nitrolingual, the gastrointestinal
products Robinul and Robinul Forte, and the liquid cold and allergy product,
Tanafed. In 1999, we acquired marketing rights from Aventis and Pohl-Boskamp to
Nitrolingual, a product used for the acute relief or prevention of chest pain
associated with angina pectoris that results from heart disease. According to
industry sources, this product had sales of approximately $12 million in 1998, a
12.6% increase over 1997. In February 2000, we launched an improved version of
this product called Nitrolingual Pumpspray. We acquired Robinul and Robinul
Forte from American Home Products Corporation in January 1999. Since 1993, we
have marketed Tanafed, a liquid cold and allergy product primarily for children.
Third parties manufacture all of our products.
We recently concluded development agreements with Penwest Pharmaceuticals
Co. and Inpharmakon Corporation for a product that we are developing for the
treatment of migraine headache. The FDA has approved the marketing of the active
ingredient in this product for the treatment of other conditions. We are also
currently developing a line extension of Robinul to treat symptoms associated
with the excessive production of saliva.
Our net revenues have grown from approximately $1.6 million for the year
ended December 31, 1995 to approximately $18.6 million for the year ended
December 31, 1999. We achieved this through a combination of increased sales of
existing products and acquisitions.
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Our principal office is located at 660 Hembree Parkway, Suite 106, Roswell,
Georgia 30076 and our telephone number is (770) 442-9707. Our corporate Internet
address is www.horizonpharm.com. The information contained on our website is not
a part of this prospectus.
THE OFFERING
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Common stock offered................................. 3,800,000 shares
Common stock to be outstanding after the
offering(1)........................................ 12,339,643 shares
Use of proceeds...................................... We intend to apply the proceeds from
the offering as follows: to repay
approximately $1,840,000 of debt
outstanding as of December 31, 1999
under our credit facility with LaSalle
Bank, and for general corporate
purposes, including the development of
new products, the expansion of our
sales and marketing force and new
product acquisitions.
Nasdaq National Market symbol........................ FHRX
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(1) This number excludes 1,800,000 shares subject to options granted under our
stock plans.
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SUMMARY FINANCIAL DATA
The following summary historical and as adjusted financial data should be
read together with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and related notes
included elsewhere in this prospectus. The as adjusted balance sheet data
summarized below reflects the sale of the 3,800,000 shares of common stock we
are offering at an assumed initial public offering price of $13.00 per share
after deducting the underwriting discounts and commissions and our estimated
offering expenses.
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YEAR ENDED DECEMBER 31,
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1995 1996 1997 1998 1999
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(UNAUDITED) (UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Net revenues................... $1,620,720 $2,516,616 $5,557,700 $9,252,058 $18,624,514
Operating income (loss)........ (37,715) (395,185) (288,018) 269,421 1,655,049
Net income (loss).............. (92,025) (344,348) (180,446) 135,554 770,464
Net income (loss) per common
share:
Basic:.................... $ (0.01) $ (0.04) $ (0.02) $ 0.02 $ 0.10
Diluted:.................. $ (0.01) $ (0.04) $ (0.02) $ 0.02 $ 0.08
Weighted average common shares
outstanding:
Basic:.................... 5,636,137 5,830,000 7,576,580 7,978,234 8,028,673
Diluted:.................. 5,636,137 5,830,000 7,576,580 8,565,227 9,099,899
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DECEMBER 31, 1999
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ACTUAL AS ADJUSTED
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 219,688 $45,461,688
Working capital............................................. (733,884) 44,508,116
Total assets................................................ 11,077,744 56,319,744
Borrowings under revolving loan agreement................... 800,000 800,000
Long-term debt including current portion.................... 2,898,886 2,898,886
Accumulated deficit......................................... (896,822) (896,822)
Total stockholders' equity.................................. 3,615,564 48,857,564
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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 First Horizon Pharmaceutical
Corporation's common stock. If any of the following risks occur, our business,
financial condition and 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.
RISKS RELATED TO OUR BUSINESS
WE CURRENTLY DEPEND ON TWO KEY PRODUCTS FOR A LARGE PORTION OF OUR SALES, AND
SUBSTANTIAL DECLINES IN EITHER OF THEM WOULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR OPERATING RESULTS.
Any factor that adversely affects the sale of our key products could
significantly decrease our sales and profits. Tanafed, Robinul and Robinul Forte
accounted for approximately 51% of our total revenues in 1999. We believe that
sales of these products will continue to represent a large portion of our
operating profits. In the future, new products could constitute a substantial
portion of our sales.
OUR GROWTH WILL SUFFER IF WE DO NOT ACQUIRE RIGHTS TO NEW PRODUCTS.
We depend on acquisitions of rights to products from others as our primary
source for new products. Risks in acquiring new products include the following:
- the availability of new products that we find attractive and
complementary to our business; and
- the price to acquire or obtain a license for these products.
We often face significant competition from other pharmaceutical companies
with greater financial, marketing and sales resources in acquiring rights to
products, which makes it more difficult to find attractive products on
acceptable terms. Our failure to acquire rights to attractive products on
acceptable terms would adversely affect growth in our future sales and profits.
WE MAY ENCOUNTER PROBLEMS IN THE MANUFACTURE OF OUR PRODUCTS THAT COULD LIMIT
OUR ABILITY TO SUCCESSFULLY SELL OUR PRODUCTS.
We rely on third-party manufacturers which may not satisfy our requirements for
products.
Third parties manufacture all of our products, and we do not currently have
the ability to manufacture products. If we are not able to obtain our products
from our manufacturers, if our products do not comply with specifications or if
the prices at which we purchase our products increase, our sales and profits
will suffer. We do not maintain alternative manufacturing sources for any of our
products. Furthermore, due to the patent held on Nitrolingual Pumpspray by our
supplier, Pohl-Boskamp, no alternative source for Nitrolingual exists. Also,
Pohl-Boskamp can terminate our distribution agreement for Nitrolingual if a
company with a product competitive with Nitrolingual acquires direct or indirect
influence or control over our company. Similarly, the manufacturing process for
producing the raw materials for Tanafed is patented, and no other source for
these materials is currently available. We may not be able to locate alternative
manufacturers on commercially acceptable terms in the event of an interruption
of supply from any of our current suppliers. If we breach our manufacturing
agreements, our manufacturers
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could terminate our agreements. We do not have a written agreement with the
manufacturer of our Zoto-HC and Protuss-D products. We may encounter a shortage
of products in the event of an unanticipated interruption from our regular
supply sources, and we currently do not have business interruption insurance. In
addition, each of our third-party manufacturing agreements requires that we
purchase all of our product requirements from the manufacturers that are a party
to those agreements. This could hinder our ability to enter into manufacturing
agreements with other manufacturers that may be more beneficial or less costly
to us.
In addition, our reliance upon third party manufacturers raises the
following risks:
- whether products will be supplied to us on a timely basis and in adequate
quantities, if at all;
- whether the products manufactured will conform with specifications;
- whether the price at which we obtain our products will increase;
- whether third-party manufacturers renew our contracts after expiration;
- whether third-party manufacturers experience interruptions or declines in
their business that affect the manufacture of our products;
- whether third-party manufacturers experience interruptions in the supply
of raw materials for our products; and
- whether third-party manufacturers use for themselves or disclose to
others our confidential information.
Our third-party manufacturers could violate manufacturing regulations.
All of our third-party manufacturers are subject to inspection by the FDA
and, in appropriate cases, the Drug Enforcement Administration and foreign
regulators. These manufacturers must operate under the FDA's good manufacturing
practice requirements and other FDA regulations that govern quality control and
documentation policies and procedures. Some of our third-party manufacturers are
also subject to the Drug Enforcement Administration's registration, importation,
security and recordkeeping requirements. Also, material changes to the
manufacturing processes of our products are subject to FDA approval. Our
third-party manufacturers may not comply with the good manufacturing practice or
other FDA requirements. If they do not, they may not deliver products, we may
have no products to sell or we may have to recall products with manufacturing
defects. From time to time, some of our third-party manufacturers have received
warning letters from the FDA concerning non-compliance with these manufacturing
practice requirements. In addition, we rely upon our third-party manufacturers
to provide many of the documents that we use to comply with our FDA reporting
requirements for Robinul, Robinul Forte, and Nitrolingual.
FINANCIAL RESULTS MAY FLUCTUATE DUE TO FACTORS OUTSIDE OF OUR CONTROL.
Our financial results have historically fluctuated and may continue to
fluctuate on a quarter-to-quarter basis due to:
- the interruption of the supply of our products;
- the timing and cost of product acquisitions and licensing agreements;
- the timing and cost of product development projects;
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- the introduction of new products by competitors;
- the availability and cost of raw materials;
- price changes in our products and in the products of competitors;
- FDA-related regulatory considerations;
- exceeding budgeted expenditures;
- sales field force attrition; and
- seasonality of sales of cough, cold and allergy products.
These factors could adversely affect our results of operations.
WE FACE COMPETITION FROM GENERIC PRODUCTS THAT COULD REDUCE SALES OF OUR
PRODUCTS.
Our Zebutal Capsules, Protuss Liquid, Protuss-DM Tablets, Protuss-D Liquid,
Zoto-HC ear drops, Mescolor Tablets, Robinul and Robinul Forte products are not
protected by patents and face competition from less expensive generic products.
Third-party payors and pharmacists can substitute generics for our products even
if physicians prescribe them. Government agencies and third-party payors often
put pressure on patients to purchase generic products instead of brand-name
products as a way to reduce healthcare costs. An increase in the amount of
generic competition against any one or more of our products could cause a
decrease in revenue from our products.
STRONG COMPETITION IN DEVELOPING AND MARKETING OUR PRODUCTS, AND ACQUIRING NEW
PRODUCTS, COULD HURT OUR SALES.
We compete with other pharmaceutical companies, including large global
pharmaceutical companies with financial resources substantially greater than
ours who have a larger volume of sales, more sales personnel, manufacturing
facilities and can spend more on promotion of products. In addition, we also
compete with smaller pharmaceutical companies for new product acquisitions.
These competitors include Dura Pharmaceuticals, Inc., Forest Laboratories, Inc.,
Watson Pharmaceuticals, Inc., King Pharmaceuticals, Inc., Shire Pharmaceuticals
Group plc and Jones Pharma Incorporated. We face risks from competitors
including:
- whether we will be able to acquire commercially attractive pharmaceutical
products on acceptable terms;
- whether other companies develop novel therapies that treat or prevent
diseases that our products treat;
- whether other companies will offer competing or alternative products at a
lower price;
- whether additional competitors will enter the market;
- whether promotion and marketing competition for products will reduce our
sales, require us to incur greater costs, or require significant
management attention; and
- whether other companies introduce improved products.
The selling prices of pharmaceutical products typically decline as
competition increases, and the marketplace may not continue to accept price
increases for our products, which could reduce revenues and profits. Some of our
products have low barriers to entry, which makes it
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easier for competitors to compete with these products. Further, other products
currently available or under development by other pharmaceutical companies may
be more effective or offered at lower prices than our current or future
products. Competitors may also be able to complete the regulatory process
sooner, and therefore may begin to market their products in advance of products
we are developing.
A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR A LARGE PORTION OF OUR SALES AND THE
LOSS OF ONE OF THEM, OR CHANGES IN THEIR PURCHASING PATTERNS, COULD HURT OUR
BUSINESS.
While we market our products to a large number of doctors, chain
pharmacists, mail order pharmacists, retail merchandisers, third-party payors
and end-users, we sell most of our products to a small number of wholesale drug
distributors. In 1999, sales to Bergen Brunswig Corporation, Cardinal Health,
Inc. and McKesson HBOC, Inc. represented approximately 10%, 19% and 28%,
respectively, of our total sales. The loss of any of these distributors could
have an adverse effect on our business, financial condition and results of
operations if we are not able to replace them quickly. A change in purchasing
patterns or a reduction in inventory carrying levels by any of these
distributors could temporarily have a material adverse impact on our results of
operation until the completion of these changes.
Additionally, the distribution network for pharmaceutical products has
recently been subject to increasing consolidation. As a result, a few large
wholesale distributors control a large share of the market. Further
consolidation or financial difficulties of these distributors could result in
the combination or elimination of warehouses that could increase product returns
or delay product purchases to reduce inventory levels at the distributor.
IF WE CANNOT PROTECT OUR TRADEMARK REGISTRATIONS, OUR SALES AND PROFITS COULD
DECLINE.
We believe that our brand names are an important factor in establishing
product recognition. Our trademark registrations could be challenged by others
and our inability to use one or more of our trademarks because of third-party
claims could cause our sales and profits to decline. Maintenance of our
trademarks requires that we enforce our rights by preventing infringement by
third parties. We may not have the resources to stop others from infringing our
trademarks.
IF WE DO NOT SUCCESSFULLY MANAGE GROWTH, OUR SALES AND PROFITS COULD SUFFER.
Our growth strategy requires us to acquire and integrate new products and
expand our sales field force, both of which are costly and require management
attention. In order to manage our growth, we will have to implement and improve
our operational, financial and management information systems, while at the same
time effectively motivating, managing and increasing the number of our
employees. In addition to integrating new products and managing new employees,
management will have to continue to devote time to effectively market our
existing products at the same time. If we do not manage these changes well, it
could materially adversely affect our sales, financial condition and results of
operation.
THE AVAILABILITY OF A PREVIOUS VERSION OF OUR NITROLINGUAL PRODUCT COULD REDUCE
ITS SALES.
The availability of a previous version of our Nitrolingual Pumpspray
product may affect our future sales. Aventis previously marketed another version
of this product named Nitrolingual Spray. Existing inventories of Nitrolingual
Spray remain with distributors and retailers that may wish to sell these
existing inventories prior to purchasing our Nitrolingual product.
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IF OUR PRODUCTS UNDER DEVELOPMENT FAIL IN CLINICAL STUDIES OR IF WE FAIL OR
ENCOUNTER DIFFICULTIES IN OBTAINING REGULATORY APPROVAL FOR NEW PRODUCTS OR NEW
USES OF EXISTING PRODUCTS, WE WILL BE UNABLE TO MARKET AND SELL THOSE PRODUCTS.
If we cannot obtain FDA approval for our products under development, our
future sales will suffer. We currently have under development a new product for
the treatment of migraine headache and a line extension of Robinul for the
treatment of symptoms associated with excessive salivation. We may develop other
uses for products in the future. We must receive regulatory approval to sell new
products that we have under development and to market product uses that the FDA
has not approved. To obtain these approvals, we must conduct clinical studies
demonstrating that the product and the delivery mechanism for the product are
safe and effective. The FDA may require additional data, such as clinical data,
which could result in additional costs. We do not have experience in obtaining
FDA approval for products or new indications. We rely on third-parties to
formulate, develop and manufacture materials needed for clinical trials, and
their actions are outside of our control.
In addition, our rights to a component of our migraine product under
development could be terminated if we fail to achieve certain scheduled
performance milestones, including the commencement and completion of clinical
trials and applying for and obtaining FDA approval of the product.
The timing and extent of clinical trials is subject to some factors that
are beyond our control. Our ongoing clinical studies might be delayed or halted
for various reasons, including:
- we do not obtain FDA approval of an investigational new drug application
which is required before clinical trials may begin;
- we do not obtain Institutional Review Board approval to introduce the
product into humans in clinical studies;
- the product is not shown to be effective;
- patients experience unacceptable side effects during treatment;
- patients die during the clinical studies because their disease is too
advanced or because they experience medical problems that are not related
to the product or new use studied;
- patients do not enroll in the studies at the rate we expect;
- we do not properly obtain patient enrollment including informed consent;
and
- product supplies are not sufficient to treat the patients in the studies.
WE MAY VIOLATE GOVERNMENT REGULATIONS OR INCUR SIGNIFICANT EXPENSES TO COMPLY
WITH SUCH REGULATIONS.
Many government agencies regulate our business, including the following:
- the FDA;
- the Drug Enforcement Administration;
- the Consumer Product Safety Commission;
- the Occupational Safety and Health Administration;
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- the Health Care Financing Administration;
- the Environmental Protection Agency; and
- state, local and foreign governments.
The FDA must approve all of our products under development for new
indications and any new drug products under a new drug application, an
abbreviated new drug application, or a supplemental new drug application. We
must demonstrate to the FDA that the products are safe and effective for their
intended use before we can market them in the United States. After the FDA
approves our products for marketing, we must process, package, handle, store,
label, promote, distribute and sell our products according to the approved
conditions. In addition, we must comply with regulations relating to returned
and salvaged products. There are also post-marketing requirements once we
receive approval for a product or new use, such as notifying the FDA of adverse
events associated with the new product use or new product and recordkeeping
requirements. We might also need to take corrective action if problems arise and
are associated with our products. In addition, our third-party manufacturers
must manufacture all of our products in conformity with the FDA's current good
manufacturing practice requirements.
We also sell drugs that are "controlled substances" under the Controlled
Substances Act and have registered with the Drug Enforcement Administration to
store and distribute products containing controlled substances. The Controlled
Substances Act establishes, among other things, registration, security and
recordkeeping requirements. In addition, we must comply with federal and state
anti-kickback and other healthcare fraud and abuse laws that pertain to the
marketing of our drugs.
Compliance with these statutes and regulations, which may be ambiguous or
unclear, is complex and can be very costly. We believe that we are compliant
with all government regulations. However, based on the number and complexity of
statutes and regulations with which we must comply, a government agency could
find that we are not properly in compliance. Violation of these laws could
result in fines, civil or criminal penalties, stop sale orders, loss or denial
of product approvals and recalls or seizures of products. In addition, our
third-party manufacturers' actions are not completely within our control and a
government agency could find that they are not properly complying with a
regulation, which could adversely affect our ability to obtain or sell our
products or require a recall or seizure of our products.
We cannot determine the effect that any future changes in regulations or
statutes may have on our business, and we may not be able to predict a
government agency's interpretation and enforcement of these laws. Any of these
changes could be costly.
IF THIRD-PARTY PAYORS DO NOT ADEQUATELY REIMBURSE PATIENTS FOR OUR PRODUCTS, OUR
SALES AND PROFITS COULD DECLINE.
Third-party payors, such as the government, private healthcare insurers and
managed care organizations, continuously challenge the pricing of medical
products and services through their reimbursement policies. If reimbursement for
our products is low or non-existent, patients and pharmacies may not continue to
choose them. Competition among pharmaceutical companies to place their products
on the list of products approved for third-party reimbursement creates downward
pricing pressure in the industry.
In the past several years there have been federal and state government
initiatives or reforms affecting the payment for healthcare services and
products, including proposals that would limit reimbursement under the Medicare
and Medicaid programs. We anticipate that federal and
9
<PAGE> 14
state governments will continue to review and assess healthcare delivery systems
and payment methods especially in light of the anticipated increase in
healthcare costs caused by the aging of the population. Reforms may include:
- controls on healthcare spending through limitations on the growth of
private health insurance premiums and Medicare and Medicaid spending;
- the increased use of capitated managed care contractors by government
payors; and
- price controls on pharmaceutical products.
Any of these reforms could affect our revenues or could cause us to limit
or eliminate spending on development projects.
WE DEPEND ON HIGHLY TRAINED MANAGEMENT, AND WE MAY NOT BE ABLE TO KEEP CURRENT
MANAGEMENT OR HIRE QUALIFIED MANAGEMENT PERSONNEL IN THE FUTURE.
The loss of the services of our key regulatory, technical and management
personnel could have a material adverse effect on our business, especially the
ability to develop and market our products. In addition, Dr. Mahendra G. Shah,
our chief executive officer, does not provide exclusive full-time services to
us. As part of our growth strategy, we will need to attract new operational and
marketing personnel, and we may have difficulty hiring personnel at an
acceptable cost.
PRODUCT LIABILITY CLAIMS, PRODUCT RECALLS AND PRODUCT RETURNS COULD HURT OUR
PROFITS.
We face the risk of exposure to product liability claims. We carry product
liability insurance; however, this insurance may not be sufficient to cover
potential claims. This insurance may not be available to us in the future at an
acceptable cost.
Even after we receive regulatory approval for a product and market it,
identification of side effects or manufacturing problems could result in
withdrawal of marketing approval or recall of the product or some other
corrective action by the FDA or other government agencies that could require:
- reformulation of the product;
- additional testing;
- clinical trials; or
- changes in the labeling or marketing of the product.
In addition, we may have to issue market withdrawals or other corrective
action. We instituted a voluntary recall on our Protuss-DM product in January,
1999 because of a labeling error. However, we quickly corrected the error and
the financial impact was immaterial to our results of operations. If a product
recall or withdrawal occurs, it could affect our profits, financial condition
and results of operation.
We permit customers to return unused pharmaceutical products under certain
conditions. Historically, product returns have not been material. However, the
amount of returns may increase in future years.
10
<PAGE> 15
OUR LEVEL OF DEBT COULD LIMIT OUR ABILITY TO OBTAIN ADDITIONAL FINANCING AND
LIMIT OUR CASH FLOW.
As of December 31, 1999, we had total outstanding indebtedness of
approximately $3,699,000, or approximately 51% of our total capitalization. Even
after this offering and the repayment of the term loan under our credit facility
with LaSalle Bank, we may incur additional indebtedness to implement our growth
strategy.
This level of debt could:
- reduce our earnings per share by requiring interest and possibly other
payments;
- limit our operating flexibility as a result of requirements of our
lender;
- require us to use a large portion of our cash flow from operations for
debt payments that would reduce the availability of our cash flow to fund
working capital, capital expenditures, and expenditures for research and
development efforts and other general corporate purposes;
- limit our ability to pursue additional product and strategic acquisitions
due to restrictive covenants in our credit facility;
- increase our vulnerability to adverse economic and industry conditions by
limiting our flexibility in planning for and reacting to changes in our
business and industry; and
- place us at a disadvantage to our competitors that have proportionately
less debt.
If we cannot generate cash flows in the future sufficient to make our debt
payments, and we cannot borrow sufficient funds either under our credit facility
or from other sources, we may need to refinance all or a portion of our existing
debt, sell all or a portion of our assets, or sell equity securities. We may not
be able to successfully refinance, sell our assets or sell equity securities,
or, if we could, the amount of proceeds we could realize may not be
satisfactory.
Our credit facility with LaSalle Bank contains restrictive financial
covenants and financial requirements with which we must comply. For example, we
must generate specific levels of earnings before interest, taxes, depreciation
and amortization, a specific interest rate ratio and a minimum debt to equity
ratio. Any failure to comply with these requirements and other covenants could
cause us to default on the loan, which could adversely affect our financial
condition unless we are able to obtain waivers.
WE ARE LIKELY TO NEED ADDITIONAL FINANCING AND IF WE CANNOT OBTAIN IT, OUR
SALES, PROFITS, ACQUISITIONS AND DEVELOPMENT PROJECTS COULD SUFFER.
After the offering, we may require additional funds to:
- acquire or obtain licenses for new products;
- expand our sales field force;
- support the marketing and sales of new products;
- expand our facilities; and
- develop and test additional products.
We may seek additional funding through public and private financing,
including equity and debt offerings. Adequate funds for these purposes, whether
through the financial markets or from other sources, may not be available when
we need them or on terms acceptable to us. Insufficient funds could cause us to
delay, scale back, or abandon some or all of our product
11
<PAGE> 16
acquisitions, licensing opportunities, marketing, and product development
programs and manufacturing opportunities.
IF WE DO NOT SECURE OR ENFORCE OUR PATENTS OR OTHER INTELLECTUAL PROPERTY
RIGHTS, WE COULD ENCOUNTER INCREASED COMPETITION THAT COULD ADVERSELY AFFECT OUR
OPERATING RESULTS.
We rely and expect to continue to rely upon non-patented proprietary
know-how and continuing technological innovation in the development and
manufacture of many of our principal products. If our third-party manufacturers
or others use our confidential information for themselves, or disclose it to
others, we could lose our marketing advantage. We filed a U.S. patent
application relating to the use of a compound found in our Robinul products for
the treatment of certain new indications. We do not hold patent rights covering
the products we are distributing. We obtained exclusive rights in the United
States to distribute our Nitrolingual Pumpspray and Tanafed products and have no
or only limited rights to enforce the patents relating to these products. We
have a license from Penwest Pharmaceuticals Co. to use the TIMERx technology in
our migraine product under development. Any exclusivity afforded by any of these
patents could cease because the licensors could terminate the license or because
we have no or only limited rights to enforce patents or to require enforcement
actions by the owners of the patents.
Even if we hold rights to patents, we may nevertheless encounter
competition. Proceedings involving our rights in patents or patent applications
could result in adverse decisions about:
- the patentability of claims relating to our products; and/or
- the enforceability, validity or scope of protection offered by our rights
in patents.
Without the exclusivity afforded by rights in patents, others may market
products that compete with our products, adversely affecting our sales and
operating results.
We also rely on the skills, knowledge, and experience of our regulatory and
technical personnel, as well as of third-parties. The confidentiality agreements
required of our employees and third-parties may not provide adequate protection
for our trade secrets, know-how and other proprietary information. If any of our
employees or third-parties disclose any of our trade secrets or know-how, our
sales and operating results could suffer.
OUR PRODUCTS COULD INFRINGE THE PATENTS OR TRADEMARKS HELD BY THIRD PARTIES,
WHICH COULD REQUIRE US TO PAY LICENSE FEES OR DEFEND LITIGATION THAT COULD BE
EXPENSIVE OR PREVENT US FROM SELLING PRODUCTS.
The manufacture, use or sale of our products may infringe on the patent
rights of others. If we do not avoid infringement of the patent rights of
others, we may be required to seek a license, defend an infringement action or
challenge the validity of the patents in court. Patent litigation is costly and
time consuming. In addition, if we are found to have infringed a patent, we may
have to stop selling some of our products. The sale of products under our
trademarks may infringe the trademark rights of others. If we are unable to
avoid infringement of the trademark rights of others, we may be required to seek
a license, defend an infringement in court or change the name of our product. We
may not have sufficient resources to bring these actions to a successful
conclusion.
The agreements under which we obtained rights to Nitrolingual do not
contain indemnification provisions in the event that we are liable for
infringement or have to defend patent or trademark infringement claims by
others.
12
<PAGE> 17
TECHNOLOGICAL ADVANCES MAY MAKE OUR PRODUCTS OBSOLETE.
Rapid technological change occurs in the pharmaceutical industry, which
could make our products obsolete and materially impact sales. Specifically,
vaccines and preventative medications to prevent the flu and gene therapy to
treat cardiovascular disease, may obviate the need for palliative therapies such
as ours, which could materially impact our sales.
THE REGULATORY STATUS OF OUR DESI PRODUCTS COULD ADVERSELY AFFECT OUR SALES OF
THOSE PRODUCTS IN THE FUTURE.
The regulatory status of our Protuss, Protuss-D, Protuss-DM, Zoto-HC,
Tanafed, Mescolor and Defen-LA products, as DESI products, allows third parties
to more easily introduce competitive products, and may make it more difficult
for us to sell these products in the future. The DESI program, which was adopted
by the FDA beginning in 1964, resulted in a list of drugs from which
manufacturers can market products without submitting safety or efficacy data. As
a result, our DESI products may become subject to additional competition because
a third party having a product similarly qualifying under the DESI program does
not have to submit safety and efficacy data on that product. Further, the FDA
might require that we submit this data on our DESI products, which could be
costly and, if the FDA does not approve this submission, we would have to
discontinue marketing the products.
The FDA has from time to time considered changing the regulatory
classification of products that include our DESI cough and cold products from
prescription to over-the-counter use. If the FDA changes the regulatory
classification of our products to over-the-counter status, which is likely to
occur at some time in the future, we will need to:
- market our cough and cold products under an over-the-counter (OTC)
monograph, thereby losing benefits of third-party payor reimbursements
and requiring that these OTC products have an identical formulation with
other products sold under the OTC monograph, thus causing us to lose any
marketing advantages previously available to us;
- demonstrate the products' efficacy through a new drug application
submission, regardless of whether we intend to sell the products for
prescription or OTC use;
- reformulate the products if we want to continue to market the products
for prescription use, which would require a new drug application; or
- withdraw the products from the market.
YEAR 2000 COMPUTER PROBLEMS MAY DISRUPT OUR OPERATIONS.
We face uncertainty in Year 2000 compliance. The Year 2000 issue results
from computer programs being written using two digits rather than four to define
the applicable year. Any computer programs or hardware that have date-sensitive
software or embedded chips may recognize a date using "00" as the year 1900
rather than the year 2000. This may result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to receive supplies from our vendors, to ship
products to our customers or to operate our accounting and other internal
systems. We have not had any disruption either from our computer and software
systems or those of our suppliers from Year 2000 issues that had a material
impact on our business. The Year 2000 problem may continue to be a risk. The
third parties that we rely on may encounter problems in the future, which could
cause a material disruption in our operations.
13
<PAGE> 18
RISKS RELATED TO OUR OFFERING
AFTER THE OFFERING, EXISTING OFFICERS, DIRECTORS AND OUR PRINCIPAL STOCKHOLDER
WILL RETAIN A SUBSTANTIAL BLOCK OF STOCK THAT WILL ALLOW THEM TO ELECT DIRECTORS
AND DIRECT THE OUTCOME OF MATTERS REQUIRING STOCKHOLDER APPROVAL.
After the offering, our officers, directors and principal stockholder will
beneficially own approximately 65% of our outstanding common stock.
Kapoor-Pharma Investments, L.P. will own approximately 53% of our outstanding
common stock after the offering. As majority stockholder, Kapoor-Pharma
Investments has the power to elect all of our directors. As long as
Kapoor-Pharma Investments has the right to elect a majority of the board of
directors, it will hold significant control or influence over our policies and
acts. John N. Kapoor, Ph.D., one of our directors, is president and sole
shareholder of EJ Financial Enterprises, Inc. EJ Financial Enterprises is the
managing general partner of Kapoor-Pharma Investments, L.P. In addition,
Mahendra G. Shah, Ph.D., our Chairman and Chief Executive Officer, is
vice-president of EJ Financial Enterprises.
THE MARKET PRICE OF OUR COMMON STOCK AFTER THE OFFERING MIGHT NOT EXCEED THE
OFFERING PRICE.
Prior to this offering, there was no public market for our common stock,
and a significant public trading market may not develop or continue after this
offering. We and the underwriters determined the initial public offering price
through negotiations. If the market price of the common stock after the offering
does not exceed the initial public offering price, investors will not realize
any return on their investment. If the market price of the common stock after
the offering is less than the initial public offering price, investors may lose
some or all of their investment.
OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE.
The market prices for securities of drug companies are highly volatile.
Various factors, including factors that are not related to our operating
performance, may cause significant volume and price fluctuations in the market.
The following factors may cause fluctuations in our stock price:
- fluctuations in operating results;
- rates of product acceptance;
- timing or delay of regulatory approvals, including our migraine product
under development or our line extension of Robinul to treat symptoms
associated with excessive salivation;
- whether third-party manufacturers experience interruptions in the supply
of raw materials;
- announcements by us or others about technological innovations or new
products;
- failure to meet financial estimates or expectations of securities
analysts;
- developments in or disputes regarding patent or other proprietary rights;
- results of FDA clinical trials for products under development;
- regulatory or enforcement actions against us;
14
<PAGE> 19
- FDA or public concern over the safety or efficacy of our products;
- future sales of substantial amounts of common stock by our existing
stockholders; and
- general market conditions.
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET AFTER THE OFFERING COULD
CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.
Our shareholders could sell substantial amounts of our common stock in the
public market following the offering. As a result, the aggregate number of
shares of our common stock available to the public would increase and,
consequently, the price of our common stock could fall. We cannot predict the
timing or amount of future sales of shares of our stock or the effect, if any,
that market sales of shares, or the availability of shares for sale, will have
on the prevailing market price of our common stock. Upon completion of the
offering, we will have 12,339,643 outstanding shares of common stock, assuming
no exercise of outstanding options. Of these shares, the 3,800,000 shares sold
in this offering will be freely tradeable. This leaves 8,539,643 currently
outstanding shares that will be eligible for sale in the public market as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ------------------------------------------------------------
<C> <S>
100,000 Available for immediate sale on the date of this prospectus
-- Available for sale 90 days after the date of this prospectus
8,439,643 Available for sale 180 days after the commencement of
trading of our shares on the Nasdaq National Market,
subject in some cases to volume and other restrictions
</TABLE>
In addition, 1,800,000 shares are issuable upon the exercise of currently
outstanding options. Of these shares, 45,000 will be eligible for sale in the
public market 90 days after the date of this prospectus and 1,755,000 of these
shares will be eligible for sale 180 days after the commencement of trading of
our shares on the Nasdaq National Market, subject in some cases to vesting
restrictions contained in stock option agreements deferring the exercisability
of the options.
After this offering, we expect to file a registration statement covering
shares of common stock issuable upon exercise of options and other grants under
our stock plans. This will allow shares purchased upon the exercise of such
options to be sold in the public markets, subject in some cases to volume and
other restrictions.
ANTI-TAKEOVER PROVISIONS COULD DISCOURAGE A THIRD PARTY FROM MAKING A TAKEOVER
OFFER THAT COULD BE BENEFICIAL TO STOCKHOLDERS.
Certain provisions in our Restated Certificate of Incorporation and the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law
could delay or prevent a third party from acquiring us or replacing members of
our board of directors, even if the acquisition or the replacements would be
beneficial to our stockholders. Our charter documents contain anti-takeover
devices including:
- only one of the three classes of directors is elected each year;
- the right of stockholders to act by written consent has been eliminated;
15
<PAGE> 20
- stockholders cannot amend our bylaws unless approved by at least
two-thirds of the shares entitled to vote;
- our board of directors is permitted to issue shares of preferred stock
without shareholder approval under any terms, conditions, rights and
preferences that the board determines; and
- a requirement to give advance notice to nominate directors or to submit
proposals for consideration at stockholder meetings.
These factors could also reduce the price that certain investors might be
willing to pay for shares of our 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 will suffer immediate and substantial dilution. The initial
public offering price per share will significantly exceed the net tangible book
value per share of ($0.23). Accordingly, investors will suffer immediate and
substantial dilution. This dilution will result because our existing investors
paid substantially less than the initial public offering price when they bought
their shares of our common stock. The exercise of outstanding options to
purchase our common stock will result in further dilution to new investors.
THE NET PROCEEDS FROM THE OFFERING MAY BE ALLOCATED IN WAYS WITH WHICH YOU AND
OTHER STOCKHOLDERS MAY NOT AGREE.
Management will have significant flexibility in applying the net proceeds
of this offering and could use these proceeds for purposes other than those
contemplated at the time of the offering.
IF STOCKHOLDERS DO NOT RECEIVE DIVIDENDS, THEY MUST RELY ON STOCK APPRECIATION
FOR ANY RETURN ON THEIR INVESTMENT.
We have never declared or paid cash dividends on any of our stock. We
currently intend to retain our earnings for future growth and therefore do not
anticipate paying cash dividends in the near future. In addition, our credit
facility with LaSalle Bank prohibits the payment of dividends. As a result, only
appreciation of the price of the common stock will provide a return to investors
in this offering in the near future.
16
<PAGE> 21
FORWARD-LOOKING STATEMENTS
Many statements made in this prospectus under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and elsewhere are forward-looking
statements that are not based on historical facts. Because these forward-looking
statements involve risks and uncertainties, there are important factors that
could cause actual results to differ materially from those expressed or implied
by these forward-looking statements, including those discussed under "Risk
Factors."
The forward-looking statements made in this prospectus relate only to
events as of the date on which the statements are made. We undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,800,000 shares of
common stock that we are offering will be $45,242,000 after deducting estimated
offering expenses and assuming an initial public offering price of $13.00 per
share. If the underwriters' over-allotment option is exercised in full, assuming
an initial public offering price of $13.00 per share, we estimate that the net
proceeds will be $52,133,300.
We anticipate using the net proceeds from this offering as follows: for
general corporate purposes, including the development of new products, the
expansion of our sales and marketing force, new product acquisitions and
repayment of approximately $1,840,000 of debt outstanding as of December 31,
1999 under the term loan of our credit facility with LaSalle Bank, N.A.
Borrowings under the term loan bear interest at our choice of either the prime
rate of interest or LIBOR plus 2%, and the note matures on December 22, 2001. We
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 our development efforts, technological
advances and the competitive environment for our products. We might also use a
portion of the net proceeds to acquire or invest in complementary businesses,
products and technologies.
Pending use of the net proceeds, we intend to invest the net proceeds in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. The payment of cash
dividends is subject to the discretion of our board of directors and will be
dependent upon many factors, including our earnings, our capital needs and
general financial condition. We anticipate that for the forseeable future, we
will retain earnings, if any, in order to finance the expansion and development
of our business. Our credit facility prohibits the payment of any dividends or
other distributions on any shares of our stock.
17
<PAGE> 22
CAPITALIZATION
The following table sets forth as of December 31, 1999, the actual
capitalization of our company and our capitalization, as adjusted to reflect the
issuance and sale of the 3,800,000 shares of common stock we are offering at an
assumed public offering price of $13.00 per share. This table should be read in
conjunction with our financial statements and the notes to the financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
---------------------------------
ACTUAL AS ADJUSTED
---------- --------------------
<S> <C> <C>
Borrowings under revolving credit facility............ $ 800,000 $ 800,000
Long-term debt, including current portion............. 2,898,886 2,898,886
Stockholders' equity:
Preferred stock, $0.001 par value; 1,000,000 shares
authorized, no shares outstanding, actual, and as
adjusted......................................... -- --
Common stock, $0.001 par value; 40,000,000 shares
authorized, 8,539,643 shares issued and
outstanding in 1999 and 12,339,643 as adjusted
shares issued and outstanding.................... 8,540 12,340
Additional paid-in capital............................ 5,788,220 51,026,420
Deferred compensation................................. (1,284,374) (1,284,374)
Accumulated deficit................................... (896,822) (896,822)
---------- -----------
Total stockholders' equity.................. 3,615,564 48,857,564
---------- -----------
Total capitalization........................ $7,314,450 $52,556,450
========== ===========
</TABLE>
The number of shares of common stock to be outstanding after this offering
does not include:
- 1,800,000 shares issuable upon exercise of options outstanding as of
February 18, 2000, at a weighted average exercise price of $1.69 per
share; and
- 570,000 shares issuable pursuant to the underwriters' over-allotment
option.
The board of directors approved the grant of options under our 2000 Stock
Plan to purchase 177,950 shares subject to completion of this offering at an
exercise price equal to the initial public offering price per share in this
offering. Following this grant, there will be 1,822,050 shares available for
future grants under this plan.
18
<PAGE> 23
DILUTION
Our net tangible book value as of December 31, 1999 was ($1.987) million,
or ($0.23) 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 3,800,000 shares of common stock at an assumed initial
public offering price of $13.00 per share, and after deducting underwriting
discounts and commissions and estimated offering expenses, our as adjusted net
tangible book value as of December 31, 1999 would have been $43.255 million, or
$3.51 per share. This represents an immediate increase in pro forma net tangible
book value of $3.74 per share to existing stockholders, and an immediate
dilution of $9.49 per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Net tangible book value per share at December 31, 1999.... ($0.23)
Increase per share attributable to new investors.......... 3.74
------
Pro forma net tangible book value per share after this 3.51
offering..................................................
------
Dilution per share to new investors......................... $ 9.49
======
</TABLE>
The following table summarizes, on an as adjusted basis as of December 31,
1999, the differences between the number of shares of common stock that we
issued, 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 $13.00 per share.
<TABLE>
<CAPTION>
SHARES ISSUED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... 8,539,643 69.2% $ 4,234,900 8.6% $ 0.50
New investors........ 3,800,000 30.8 45,242,000 91.4 11.91
---------- ----- ----------- -----
Total...... 12,339,643 100.0% 49,476,900 100.0%
========== ===== =========== =====
</TABLE>
The discussion regarding dilution and these tables assumes no exercise of
any outstanding stock options. The discussion does not include: (a) 1,800,000
shares issuable upon exercise of options outstanding under our 1997
Non-Qualified Stock Option Plan at a weighted average exercise price of $1.69 or
(b) 570,000 shares issuable at an assumed price of $13.00 per share pursuant to
the underwriters' over-allotment option. The board of directors approved the
grant of options to purchase 177,950 shares under our 2000 Stock Plan subject to
completion of this offering, at an exercise price equal to the public offering
price per share in this offering. Following this grant, there will be 1,822,050
shares available for future grants under our 2000 Stock Plan.
19
<PAGE> 24
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to and
should be read in conjunction with, our financial statements and the related
notes and other financial information included elsewhere in this prospectus, as
well as "Management's Discussion and Analysis of Financial Condition and Results
of Operations". The selected financial data as of December 31, 1997, 1998, and
1999 and for the years ended December 31, 1997, 1998, and 1999 were derived from
our financial statements that have been audited by Arthur Andersen LLP,
independent public accountants. The selected financial data as of December 31,
1995 and 1996 were derived from unaudited financial statements which, in the
opinion of management, include all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of our financial condition
and results of operations. These results may not be indicative of future
results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.............................. $ 1,620,720 $ 2,516,616 $ 5,557,700 $ 9,252,058 $18,624,514
Operating costs and expenses:
Cost of revenues........................ 329,692 489,905 1,136,691 1,903,054 3,140,416
Selling, general and administrative
expenses, excluding non-cash
compensation expense.................. 1,302,766 2,393,018 4,545,254 6,789,358 12,400,439
Non-cash compensation expense........... -- -- 133,500 -- 143,986
Depreciation and amortization........... 25,977 28,878 30,273 35,225 424,274
Research and development................ -- -- -- 255,000 860,350
----------- ----------- ----------- ----------- -----------
Total operating expenses:................. 1,658,435 2,911,801 5,845,718 8,982,637 16,969,465
Operating (loss) income................... (37,715) (395,185) (288,018) 269,421 1,655,049
Other (expense) income:
Interest expense........................ (54,310) (67,461) (5,496) (14,017) (356,598)
Interest income......................... -- 3,314 2,909 4,383 11,950
Other................................... -- -- 3,629 (2,749) 8,059
----------- ----------- ----------- ----------- -----------
Total other (expense) income.............. (54,310) (64,147) 1,042 (12,383) (336,589)
----------- ----------- ----------- ----------- -----------
Income before benefit (provision) for
income taxes............................ (92,025) (459,332) (286,976) 257,038 1,318,460
Benefit (provision) for income taxes...... -- 114,984 106,530 (121,484) (547,996)
----------- ----------- ----------- ----------- -----------
Net (loss) income......................... $ (92,025) $ (344,348) $ (180,446) $ 135,554 $ 770,464
=========== =========== =========== =========== ===========
Net (loss) income per common share:
Basic................................... $ (0.01) $ (0.04) $ (0.02) $ 0.02 $ 0.10
=========== =========== =========== =========== ===========
Diluted................................. $ (0.01) $ (0.04) $ (0.02) $ 0.02 $ 0.08
=========== =========== =========== =========== ===========
Weighted average common shares
outstanding:
Basic................................... 5,636,137 5,830,000 7,576,580 7,978,234 8,028,673
=========== =========== =========== =========== ===========
Diluted................................. 5,636,137 5,830,000 7,576,580 8,565,227 9,099,899
=========== =========== =========== =========== ===========
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 71,652 $ 30,986 $ 244,766 $ 425,023 $ 219,688
Working capital........................... (188,995) (601,443) 687,426 640,090 (733,884)
Total assets.............................. 643,639 834,238 1,758,872 2,933,101 11,077,744
Borrowings under revolving loan
agreement............................... -- -- -- 602,928 800,000
Long-term debt including current
portion................................. -- -- -- -- 2,898,886
Accumulated deficit....................... (1,278,046) (1,622,394) (1,802,840) (1,667,286) (896,822)
Total stockholders' (deficit) equity...... (131,660) (477,011) 814,326 956,130 3,615,564
</TABLE>
20
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
First Horizon Pharmaceutical Corporation is an emerging pharmaceutical
company that markets and sells 11 brand name prescription drugs to
high-prescribing primary care and select specialty physicians through its
nationwide sales and marketing force of 128 professionals. We focus on the
treatment of chronic conditions, including cardiovascular diseases, respiratory
and gastroenterological disorders, and pain and inflammation. Our strategy is to
acquire and obtain licenses for pharmaceutical products that other companies do
not actively market and to increase sales through aggressive promotion and
marketing. We leverage our existing sales infrastructure by acquiring products
that we believe have a high-growth potential and complement our existing
products. In addition, we seek to maximize the value of drugs by developing new
patentable formulations, using new delivery methods and seeking regulatory
approval for new indications.
Since 1992, we have introduced 11 products including two line extensions.
Our key products include the angina product Nitrolingual, the gastrointestinal
products Robinul and Robinul Forte, and the liquid cold and allergy product,
Tanafed. In 1999, we acquired marketing rights from Aventis and Pohl-Boskamp to
Nitrolingual, a product used for the acute relief or prevention of chest pain
associated with angina pectoris that results from heart disease. According to
industry sources, this product had sales of approximately $12 million in 1998, a
12.6% increase over 1997. In February 2000, we launched an improved version of
this product called Nitrolingual Pumpspray. We acquired Robinul and Robinul
Forte from American Home Products Corporation in January 1999. Since 1993, we
have marketed Tanafed, a liquid cold and allergy product primarily for children.
We recently concluded development agreements with Penwest Pharmaceuticals Co.
and Inpharmakon Corporation for a product that we are developing for the
treatment of migraine headache. The FDA has approved the marketing of the active
ingredient in this product for the treatment of other conditions. We are also
currently developing a line extension of Robinul to treat symptoms associated
with the excessive production of saliva.
Our net revenues have grown from approximately $1.6 million for the year
ended December 31, 1995 to approximately $18.6 million for the year ended
December 31, 1999. We achieved this through a combination of increased sales of
existing products and acquisitions.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Net Revenues. Revenues from product sales are recognized upon shipment to
customers and are shown net of sales adjustments. Net revenues are net of
provisions for discounts, rebates to customers, returns, and other adjustments
are provided in the same period that the related sales are recorded. Net
revenues for the year ended December 31, 1999 were $18,625,000, compared to
$9,252,000 for the year ended December 31, 1998, a 101% increase. Of this
increase, $6,206,000 resulted from product acquisitions and licensing agreements
made in 1999, or from products that earned revenues for the first time in 1999.
Sales of products sold prior to 1999 or "existing products" were $12,419,000, a
$3,167,000 or 34% increase over 1998. This increase primarily resulted from the
expansion of our sales force, increased marketing efforts and the continued
increase in demand for our products as a result of current and prior efforts of
our
21
<PAGE> 26
sales force. Rebates and other sales allowances were $2,156,000 in 1999
primarily related to Medicaid rebates on Robinul and Robinul Forte.
Cost of Revenues. Cost of revenues for the year ended December 31, 1999,
were $3,140,000, compared to $1,903,000 for the year ended December 31, 1998, a
65% increase.
Gross Margin. Gross margin for the year ended December 31, 1999 was 83%,
compared to 79% in 1998. The increase in gross margin primarily resulted from
the higher gross margin earned on Robinul and Robinul Forte which we began
selling in February 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of salaries, commissions, bonuses, training and
education costs, sample and promotional costs, royalty and commission payments
to product licensors, office expenses, travel expenses, payroll taxes, rent and
utilities, insurance, outside professional services, taxes, bad debts and other
general office expenses. Selling, general and administrative expenses for the
year ended December 31, 1999 were $12,400,000, compared to $6,789,000 for the
year ended December 31, 1998, an 83% increase. Selling-related expenses
increased over the previous year due to increased expenses related to sales
force expansion, higher commission and royalty payments and larger sample,
marketing and promotional costs. General and administrative expenses increased
over the previous year due to increased compensation and related expenses, and
increased costs as a result of relocation of our corporate offices from a
7,500-square-foot facility to a 24,300-square-foot facility in September 1998.
Non-cash compensation. Non-cash compensation expenses were $144,000 for
the year ended December 31, 1999, compared to no expense for the year ended
December 31, 1998. This expense resulted from our issuing stock options in 1999
at exercise prices that were less than the market value of our stock at time of
issuance, as determined by an independent valuation.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses were $424,000 for the year ended December 31, 1999, compared to $35,000
for the year ended December 31, 1998. This increase primarily resulted from
amortization expense related to the purchase in 1999 of Robinul and Robinul
Forte.
Research and Development Expenses. Research and development expenses
consist primarily of costs incurred to develop formulations, engage contract
research organizations to conduct clinical studies, test products under
development and engage medical and regulatory consultants. We expense all
research and development costs as incurred. Research and development expenses
were $860,000 for the year ended December 31, 1999, compared to $255,000 for the
year ended December 31, 1998. This increase resulted from our continuing
development of a new product for the treatment of migraine headache and our
continuing development of a line extension of Robinul for the treatment of
symptoms associated with excessive salivation.
Interest Expense. Interest expense for the year ended December 31, 1999
was $357,000, compared to $14,000 for the year ended December 31, 1998. The
$343,000 increase resulted primarily from borrowings for the acquisition of
Robinul and Robinul Forte.
Interest Income. Interest income for the year ended December 31, 1999 was
$12,000, compared to $4,000 for the year ended December 31, 1998. This $8,000
increase resulted from increased average cash balances resulting from improved
financial performance.
Income Tax Expense. Income tax expense for the year ended December 31,
1999 was $548,000, compared to $121,000 for the year ended December 31, 1998.
The $427,000 increase resulted from increased pre-tax income.
22
<PAGE> 27
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Net Revenues. Net revenues for the year ended December 31, 1998 were
$9,252,000, compared to $5,558,000 for the year ended December 31, 1997, a 66%
increase. The increase resulted from the expansion of our sales force from 51
sales representatives and five district managers at the end of 1997 to 71 sales
representatives and seven district managers at the end of 1998 and the continued
increase in demand for our products as a result of prior efforts of our sales
force.
Cost of Revenues. Cost of revenues for the year ended December 31, 1998
were $1,903,000, compared to $1,137,000 for the year ended December 31, 1997, a
67% increase.
Gross Margin. Gross margins for the years ended December 31, 1998 and 1997
were 79%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1998 were $6,789,000,
compared to $4,545,000 for the year ended December 31, 1997, a 49% increase.
Selling-related expenses increased over the previous year due to increased
expenses related to sales force expansion, higher commission and royalty
payments and larger sample, marketing and promotional costs. General and
administrative expenses increased over the previous year due to increased
compensation and related expenses, and increased costs as a result of relocation
of our corporate offices from a 7,500-square-foot facility to a
24,300-square-foot facility in September, 1998.
Non-cash compensation. We had non-cash compensation expenses of $0 for the
year ended December 31, 1998, compared to $134,000 for the year ended December
31, 1997. The 1997 non-cash compensation expense resulted from our issuing stock
options in 1997 at exercise prices that were less than the market value of our
stock at the time of issuance, as determined by an independent valuation.
Research and Development Expenses. Research and development expenses were
$255,000 for the year ended December 31, 1998, compared to no expenses for the
year ended December 31, 1997. We paid $200,000 in development fees to
Inpharmakon Corporation for the fee for licensing our migraine product under
development.
Depreciation and Amortization Expense. Depreciation and amortization
expense was $35,000 for the year ended 1998, compared to $30,000 for the year
ended 1997, a 17% increase. The increase resulted from purchases of computers
for new personnel and furniture related to our corporate office relocation.
Interest Income. Interest income for the year ended December 31, 1998 was
$4,000, compared to $3,000 for the year ended December 31, 1997. The $1,000
increase resulted from increased average cash balances resulting from improved
financial performance.
Interest Expense. Interest expense for the year ended December 31, 1998
was $14,000, compared to $5,000 for the year ended December 31, 1997. The $9,000
increase resulted primarily from borrowings on our line of credit with LaSalle
Bank.
Income Tax Expense. Income tax expense for the year ended December 31,
1998 was $121,000, compared with a benefit of $107,000 for the year ended
December 31,1997. The $228,000 increase resulted from 1998 being our first
profitable operating year.
23
<PAGE> 28
LIQUIDITY AND CAPITAL RESOURCES
We have financed our business and cash requirements primarily with cash
from operations, borrowings for product acquisitions and the issuance of stock
to our majority stockholder.
Our cash and cash equivalents at December 31, 1999, 1998 and 1997 were
$220,000, $425,000 and $245,000, respectively. Net cash provided by operating
activities for the year ended 1999 was $1,018,000. Our sources of cash were
primarily from net income and increases in accounts payable and accrued expenses
partially offset by increases in accounts receivable, inventories and deferred
taxes. Net cash used in operating activities for the years ended 1998 and 1997
was $181,000 and $196,000, respectively. Our use of net cash was primarily a
result of increases in accounts receivable and inventories partially offset by
increase in deferred taxes, accounts payable and accrued expenses plus net
income.
We purchased intangible assets in 1999 for $4,000,000 in cash with an
additional $1,800,000 financed by the seller of the assets. As a part of the
acquisition, we also assumed estimated liabilities of $218,460 for returns of
products shipped by the seller prior to the acquisition date. In addition, we
spent $186,000 for the purchase of property and computer related items in 1999.
Net cash used in investing activities in 1998 and 1997 was $208,000 and
$121,000, respectively. These investments were primarily for the purchase of
property and computer related items.
During 1999, we borrowed $4,000,000 and incurred indebtedness of $1,800,000
for the purchase of intangible assets. In 1999 we also made payments of
$1,235,000 on long-term debt and had a net increase of $197,000 on our revolving
line of credit. During 1998, we borrowed $563,000 under our revolving line of
credit. During 1997, we financed our capital requirements by raising $550,000
through the issuance of stock to our majority shareholder.
In May 1998, we obtained a revolving credit facility from LaSalle Bank
under which we could borrow up to $1,000,000, subject to borrowing base
limitations based on eligible accounts receivable and inventory balances. The
credit facility was amended and restated on December 22, 1998 to provide for
partial financing of a product acquisition through our term loan described
below. Under the amended facility, terms of the revolving credit provided for
borrowings of up to $2,500,000. Borrowings under the revolving credit facility
bear interest at the bank's prime rate, and are due on January 31, 2001. At
December 31, 1999, the outstanding balance under the revolving loan was $800,000
with an interest rate of 8.50%, and we had additional availability under the
terms of the facility of $1,700,000. During January 2000, the revolving credit
facility was amended and restated to provide for borrowings up to $3,500,000
through June 30, 2000, reducing to $2,500,000 at June 30, 2000. We borrowed
$2,400,000 under our term loan facility in January, 1999 bearing interest at our
choice of either LaSalle's prime rate or LIBOR plus 2%. The term loan is
repayable in monthly payments of $40,000 plus accrued interest and matures on
December 22, 2001. At December 31, 1999 outstanding indebtedness under the term
loan was $1,840,000 with an interest rate of 7.96%.
Under the terms of our credit facility, we must maintain certain financial
ratios and satisfy other financial conditions. The credit facility also limits
our ability to incur additional indebtedness, and prohibits substantial asset
sales and cash dividends.
We expect that the proceeds from this offering, cash from operations and
borrowings under our credit facility will be adequate to fund our current
operations and current working capital requirements for the next eighteen
months. In the event that we make significant future product
24
<PAGE> 29
acquisitions, we expect that we will need to raise additional funds. Adequate
funds for these purposes, whether through the financial markets or from other
sources, may not be available when needed or on terms acceptable to us.
Insufficient funds may cause us to delay, scale back or abandon some or all of
our future product acquisition opportunities.
Our future capital requirements and the adequacy of our available funds
will depend on many factors, including:
- the timing and cost of product acquisitions and licensing agreements;
- regulatory approval of our migraine product under development and the
Robinul product extension;
- size and scope of our development efforts for additional products;
- cost, timing and outcomes of regulatory reviews;
- expansion of our sales and marketing force;
- determinations as to the commercial potential of our products under
development;
- status of competitive products;
- defending and enforcing intellectual property rights; and
- establishment, continuation or termination of third-party manufacturing
agreements.
IMPACT OF INFLATION
We have experienced only moderate price increases under our agreements with
third-party manufacturers as a result of raw material and labor price increases.
We have passed these price increases along to our customers.
SEASONALITY
Although our business is generally non-seasonal, sales of certain products,
such as cough and cold products, increase slightly between October and March due
to the cold and flu season. We expect the impact of seasonality to decrease as
we acquire or obtain licenses for products that treat chronic conditions.
However, we anticipate that the seasonality may continue to affect sales for the
foreseeable future.
YEAR 2000 DISCLOSURE
We did not have any disruption either from our computer and software
systems or those of our suppliers and third-party manufacturers from Year 2000
issues that had a material impact on our business. The Year 2000 problem may
continue to be a risk. We or the third parties that we rely on could encounter
problems in the future that could cause a material disruption in our operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." We must adopt SFAS No. 133 for the year
ending December 31, 2000. SFAS No. 133 established methods of accounting for
derivative financial instruments and
25
<PAGE> 30
hedging activities related to those instruments as well as other hedging
activities. Because we do not hold any derivative financial instruments and do
not engage in hedging activities, adoption of SFAS No. 133 is not expected to
have a material impact on our financial condition or results of operations.
26
<PAGE> 31
BUSINESS
OVERVIEW
First Horizon Pharmaceutical Corporation is an emerging pharmaceutical
company that markets and sells 11 brand name prescription drugs to
high-prescribing primary care and select specialty physicians through its
nationwide sales and marketing force of 128 professionals. We focus on the
treatment of chronic conditions, including cardiovascular diseases, respiratory
and gastroenterological disorders, and pain and inflammation. Our strategy is to
acquire and obtain licenses for pharmaceutical products that other companies do
not actively market and to increase sales through aggressive promotion and
marketing. We leverage our existing sales infrastructure by acquiring products
that we believe have a high growth potential and complement our existing
products. In addition, we seek to maximize the value of drugs by developing new
patentable formulations, using new delivery methods and seeking regulatory
approval for new indications.
Since 1992, we have introduced 11 products including two line extensions.
Our key products include the angina product Nitrolingual, the gastrointestinal
products Robinul and Robinul Forte, and the liquid cold and allergy product,
Tanafed. In 1999, we acquired marketing rights from Aventis and Pohl-Boskamp to
Nitrolingual, a product used for the acute relief or prevention of chest pain
associated with angina pectoris that results from heart disease. According to
industry sources, this product had sales of approximately $12 million in 1998, a
12.6% increase over 1997. In February 2000, we launched an improved version of
this product called Nitrolingual Pumpspray. We acquired Robinul and Robinul
Forte from American Home Products Corporation in January 1999. Since 1993, we
have marketed Tanafed, a liquid cold and allergy product primarily for children.
We recently concluded development agreements with Penwest Pharmaceuticals Co.
and Inpharmakon Corporation for a product that we are developing for the
treatment of migraine headache. The FDA has approved the marketing of the active
ingredient in this product for the treatment of other conditions. We are also
currently developing a line extension of Robinul to treat symptoms associated
with the excessive production of saliva.
Our net revenues have grown from approximately $1.6 million for the year
ended December 31, 1995 to approximately $18.6 million for the year ended
December 31, 1999. We achieved this through a combination of increased sales of
existing products and acquisitions.
FIRST HORIZON STRATEGY
We believe that our ability to market, acquire and develop brand name
products and leverage our sales and marketing infrastructure uniquely positions
us to continue to grow. We focus on products that treat chronic conditions
primarily because patients and physicians remain loyal to such products. This
results in repeat use over an extended period of time, generates recurring
consistent revenue streams and lowers marketing costs necessary to maintain
existing sales.
The key elements of our strategy include:
- Increase sales of products through targeted promotion. We increase sales
by promoting our products to high-prescribing primary care and specialty
physicians through our nationwide sales and marketing force that includes
128 professionals. We also use targeted direct mail and telemarketing to
promote our products.
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<PAGE> 32
- Identify and license or acquire brand name prescription products. We
acquire the rights to brand name pharmaceutical products that we believe
will benefit from increased marketing efforts to high-prescribing primary
care and specialty physicians, leverage our existing sales
infrastructure, complement our existing products and have the potential
for market exclusivity.
- Develop proprietary products and line extensions. We seek to reduce the
costs and risks of development by focusing on drugs that the FDA has
already approved in the United States. We plan to develop products,
including line extensions of our current drugs, using patent-protected
delivery systems or formulations that offer market differentiation and
the potential for market exclusivity.
PRODUCTS
We currently market and sell the following products:
<TABLE>
<CAPTION>
PRODUCT DATE OF INTRODUCTION PRODUCT INDICATION
- ------- -------------------- ------------------
<S> <C> <C>
Nitrolingual Pumpspray.......... 2000 Acute relief or prevention of an
attack of angina pectoris due to
heart disease
Robinul/Robinul Forte........... 1999 Adjunctive therapy for the
treatment of peptic ulcer
Zebutal Capsules................ 1999 Tension headache
Protuss DM Tablets.............. 1997 Cough and congestion
Mescolor Tablets................ 1994 Allergy and runny nose
Protuss-D Liquid................ 1994 Cough and congestion
Zoto-HC Ear Drops............... 1994 Swimmer's ear infections
Tanafed Suspension.............. 1993 Allergy and cold
Defen-LA Tablets................ 1992 Cough and cold
Protuss Liquid.................. 1992 Cough and congestion
</TABLE>
The FDA approved Nitrolingual Pumpspray, Robinul and Robinul Forte under
new drug applications. The FDA also approved an abbreviated new drug application
for Zebutal. The other products are DESI drugs.
Nitrolingual
On February 1, 2000, we began marketing Nitrolingual Pumpspray for which we
acquired exclusive distribution rights from Pohl-Boskamp. Nitrolingual Pumpspray
is an oral spray of nitroglycerin used for the acute relief or prevention of
chest pain associated with angina pectoris that results from heart disease.
Pohl-Boskamp holds a patent that was issued in 1993 on the formulation of
Nitrolingual.
Aventis previously had the rights to market the chlorofluorocarbon (CFC)
version of this product named Nitrolingual Spray. We believe that Nitrolingual
Pumpspray has marketing advantages over Nitrolingual Spray. Unlike the previous
version, Nitrolingual Pumpspray is packaged in a translucent, plastic-coated
glass bottle, that allows patients to easily see the
28
<PAGE> 33
amount of product left in the bottle. In addition, Nitrolingual Pumpspray does
not contain CFC, making it environmentally friendly.
The primary competitor to Nitrolingual Pumpspray is nitroglycerin tablets.
Unlike tablets, which begin to lose their potency immediately upon opening the
bottle, Nitrolingual Pumpspray maintains its potency for two years. Further,
studies have shown that Nitrolingual Pumpspray provides for more rapid
absorption than the tablets. Each metered dose provides for consistent delivery
of nitroglycerin. Also, unlike the tablets, Nitrolingual Pumpspray requires no
special storage or handling to maintain its potency.
According to the American Heart Association, about 6.2 million Americans
suffer from angina pectoris.
Robinul and Robinul Forte
On January 29, 1999, we acquired exclusive rights in the United States to
Robinul and Robinul Forte, which is a higher-strength dosage of Robinul. Both
Robinul and Robinul Forte belong to a class of drugs known as anticholinergics,
which reduce the motion of the gastrointestinal tract. The FDA has approved both
products for use as a therapy in conjunction with other therapeutics in the
treatment of peptic ulcer. Compared to other anticholinergics, the Robinul
product line has an overall better side effect profile and is longer acting,
thereby requiring fewer doses. We are currently developing a line extension and
will seek regulatory approval to use the active ingredient in Robinul to treat
symptoms associated with the excessive production of saliva. Since acquiring the
products, we have substantially increased the sales of Robinul and Robinul
Forte. Industry sources estimate that the U.S. market for anticholinergics was
$130 million in 1999.
Tanafed
Tanafed is a liquid cold and allergy product marketed for children. We
believe that pediatricians prescribe Tanafed because it is effective and
children prefer its taste. The National Center for Health Statistics ("NCHS")
estimated that in 1994, 66 million people in the United States sought medical
attention or were restricted in their activity due to the common cold. NCHS
further estimated that colds caused 24 million days of restricted activity and
20 million days lost from school in 1994.
Cough, Cold and Allergy Products
Our other products for the treatment of cough, cold and allergy are
Defen-LA Tablets, Mescolor Tablets and the Protuss product line, which includes
Protuss Liquid, Protuss DM Tablets and Protuss-D Liquid.
Other Products
We sell Zoto-HC ear drops for the treatment of swimmer's ear infections and
Zebutal Capsules for the treatment of tension headaches. A study has shown that
approximately nine out of ten people have at least one headache in any given
year. Headaches account for approximately 18 million outpatient visits annually
to hospitals and healthcare clinics.
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<PAGE> 34
PRODUCT DEVELOPMENT
We seek to maximize the value of drugs by developing new patentable
formulations, using new delivery methods and seeking regulatory approval for new
indications. Through the use of these distinct formulations and patent-protected
delivery systems, we plan to create a marketing advantage over generic drugs and
reduce substitution by the pharmacist. Some of these development projects
include line extensions which allow us to extend the life cycle of our key
products. We expect the strength of extensive literature-based clinical data on
the active ingredients in our products under development, current acceptance and
usage of the active ingredients in these products by healthcare professionals,
and the safety profile of the active ingredients in approved products will
reduce development costs and risks associated with FDA approval.
Migraine Product (FHPC 01)
We are developing a proprietary formulation of a product named FHPC 01, for
the treatment of migraine headaches, which contains an active ingredient that is
currently approved by the FDA for other indications. We have entered into a
development agreement with Penwest Pharmaceuticals Co. to develop a product
using Penwest's patented TIMERx controlled-release technology. Penwest has also
granted us the right to reference their Drug Master File as necessary for us to
file a new drug application for this product. A Drug Master File is a submission
to the FDA, often in support of a new drug application, that companies may use
to provide confidential, detailed information about facilities, processes or
articles used in the manufacturing, processing, packaging and storing of one or
more human drugs. We have engaged Parexel International to conduct clinical
trials for this product. A study has shown that an estimated 23.6 million
Americans suffer from migraine headaches. Of these, approximately half suffer
from migraines that are moderately to severely disabling.
Excessive Salivation Product (FHPC 02)
We are developing a product named FHPC 02 for the treatment of the symptoms
associated with the excessive production of saliva primarily in children. This
product will be a line extension of our Robinul products. We have entered into
an agreement with Mikart to develop a new dosage form. We plan to initiate
clinical trials and file for a supplementary new drug application to market the
product. Excessive salivation, also known as Sialorrhea, is a socially
embarrassing condition that occurs in patients who suffer from cerebral palsy
and Parkinson's disease.
Formulation and Clinical Trials
We generally seek to contract third parties to formulate, develop and
manufacture materials needed for clinical trials and to perform scale-up work.
We select third-party contractors that we believe have the capability to
commercially manufacture the products. By selecting qualified third parties
capable of both developing formulations and providing full-scale manufacturing
services, we believe we will be able to shorten development and scale-up times
necessary for production. The key advantage to this approach is that the
third-party contractor will have the equipment, operational parameters and
validated testing procedures already in place for the commercial manufacture of
our products. Our management team has experience in selecting and managing
activities of third-party contract companies.
30
<PAGE> 35
SALES AND MARKETING
To maximize the effectiveness of our selling efforts, our sales force
focuses on high-prescribing primary care and select specialty physicians. Our
sales force seeks to develop close relationships with these physicians and
respond to their needs. We intend to enhance our existing marketing and sales
channels to expand and increase the penetration of our products. We have
expanded our sales and marketing force to 128 professionals nationwide.
We sell our products to pharmaceutical wholesalers (who in turn distribute
to pharmacies), chain drug stores, other retail merchandisers and, on a limited
basis, directly to pharmacies. In 1999, sales to our top five pharmaceutical
wholesalers accounted for over 72% of all of our sales. Three of the five
wholesalers each accounted for 10% or more of all of our sales: McKessonHBOC
(28%), Cardinal Health (19%) and Bergen Brunswig (10%).
We have traditionally targeted our sales efforts in areas with low
managed-care penetration in which it is easier to establish a presence. In
addition, we have a group of sales professionals that focuses exclusively on
building relationships with managed-care organizations that can be leveraged
across markets. We continue to strengthen this group to gain access to
formularies and develop long-term working relationships that may lead to
adoption of our products.
During 1999, our Robinul line accounted for 27.5% of our revenues and our
cough, cold and allergy products accounted for 57.5% of our revenues. During
1998, our cough, cold and allergy products accounted for 82.0% of our revenues
and Zoto-HC accounted for 18.0% of our revenues. During 1997, our cough, cold
and allergy products accounted for 80.9% of our revenues and Zoto-HC accounted
for 19.1% of our revenues.
THIRD-PARTY AGREEMENTS
Nitrolingual Pumpspray
In July 1999, we acquired from Pohl-Boskamp the exclusive rights to
distribute, market and sell Nitrolingual Pumpspray beginning on February 1, 2000
in the United States for five years plus an additional five-year renewal period
subject to establishing mutually acceptable minimum purchase requirements. Under
the agreement, Pohl-Boskamp supplies us with our requirements of product at
prices that decrease as volume purchased in each year increases. We must
purchase designated minimum quantities in each year of the agreement and pay a
royalty on net sales of the product. Also, Pohl-Boskamp can terminate our
distribution agreement for Nitrolingual if a company with a product competitive
with Nitrolingual acquires direct or indirect influence or control over our
company.
Aventis had exclusive rights through January 2000, to a version of the
product containing CFC named Nitrolingual Spray. To promote earlier adoption of
Nitrolingual Pumpspray, we obtained exclusive marketing rights from Aventis to
market Nitrolingual Spray in the United States as of November 22, 1999. We
promoted Nitrolingual Spray for a short period of time to reduce inventories of
the product in the distribution channels. Since the launch of Nitrolingual
Pumpspray, we have not marketed this CFC product.
Robinul/Robinul Forte
On January 29, 1999, we acquired exclusive rights in the United States to
Robinul and Robinul Forte tablets from American Home Products Corporation. We
will pay the $1.1 million aggregate remaining portion of the purchase price
quarterly through February 2001. In addition, we must pay royalties on net
sales. We negotiated for American Home Products Corporation or
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its designee to continue to manufacture and supply the product to us until
January 29, 2001. We have an agreement with Mikart, dated April 23, 1999, for
Mikart to become qualified under applicable regulations to manufacture and
supply our requirements for Robinul. Under this agreement, Mikart will
manufacture the products for five years from the time Mikart becomes a qualified
manufacturer plus renewal terms of one year until either party elects not to
renew. The agreement with Mikart requires that we purchase certain designated
minimum quantities.
Tanafed
On January 1, 1996, we obtained exclusive distribution rights from
Unisource, Inc. to Tanafed in North America through December 31, 2003 plus an
additional seven years at our option. The agreement requires us to purchase all
of our requirements for Tanafed from Unisource, including at least certain
minimum quantities of Tanafed in each year of the agreement. We entered into a
patent and license agreement with the supplier of raw material for Tanafed dated
January 1, 2000. Our license allows us to market and distribute Tanafed for
which the manufacturer has a patent covering the manufacturing process for one
of its active ingredients.
Migraine Product (FHPC 01)
On October 31, 1998, we entered into an agreement with Inpharmakon
Corporation in which we acquired rights to the proprietary information for the
migraine product FHPC 01 for which we plan to conduct clinical studies and
submit a new drug application. The agreement expires on October 31, 2008, but we
may renew it indefinitely after expiration. Under the agreement, we must develop
a workable once-a-day formulation for the drug, conduct clinical trials, file
for and obtain regulatory approval, and begin commercial sales of the product
within prescribed times. If we do not reach specified milestones on a timely
basis, Inpharmakon may terminate the agreement. We must also pay fees to
Inpharmakon and, in the event of commercial sales of the product, we must pay
royalties. If we elect to sell the business opportunity to a third party, we
must share the proceeds of the sale with Inpharmakon.
On March 25, 1999, we acquired rights from Penwest Pharmaceuticals Co. to
use Penwest's TIMERx controlled-release technology to develop a product
containing the active ingredient in FHPC 01. Under the Penwest agreement, we
have the right to manufacture, use and sell the developed product in North
America and Mexico for a period extending fifteen years from the date a new drug
application is issued for the product, as well as a license under certain
Penwest patents. We must pay Penwest fees upon achieving specified development
milestones and royalties upon any sales of the migraine product. Penwest may
terminate the agreement in the event we fail to timely achieve designated
performance milestones within prescribed time periods.
Other Products
Generally, our other products are manufactured pursuant to manufacturing
and supply agreements for remaining terms ranging from one to five years.
Generally, these agreements require that we purchase all of our requirements for
these products from the manufacturers which are a party to these agreements,
including specified minimum purchase quantities of the product for each year.
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MANUFACTURERS AND SINGLE SOURCE SUPPLIERS
We use third-party manufacturers for the production of our products for
development and commercial purposes. Given the general under-utilization of
resources, the availability of excess capacity for manufacturing in the
marketplace, and the lower cost of outsourcing, we intend to continue to
outsource our manufacturing for the near-term.
We currently use the services of six third-party manufacturers for our
products. These manufacturers manufacture our products pursuant to our product
specifications. We have manufacturing and supply agreements with five of these
manufacturers. The terms of these agreements generally range from two years to
ten years. Under some of these agreements, the manufacturers or other
third-parties own the rights to the product that we have under our marketing
licenses. We have not entered into agreements for alternative manufacturing
sources for any of our products. The suppliers of Nitrolingual Pumpspray and the
raw materials for Tanafed hold patents for their respective products. This
provides us with a competitive advantage because the patents create a barrier to
entry to other companies that might otherwise seek to develop similar products.
TRADEMARKS
We have a U.S. registered trademark for Horizon Pharmaceutical and have
filed for the trademark for First Horizon Pharmaceutical. Our products are sold
under a variety of trademarks registered in the United States, including
Zoto-HC, Protuss, Mescolor, Defen and Tanafed. We have filed for the trademark
Zebutal. Further, we have been licensed rights to use the Nitrolingual and
Robinul trademarks in the United States from Pohl-Boskamp and American Home
Products, respectively. We have rights to the TIMERx trademark pursuant to our
rights to market the product we have under development with Penwest.
PATENTS
We consider the protection afforded by patents important to our business.
We intend to seek patent protection in the United States and selected foreign
countries where deemed appropriate for products we develop.
Nitrolingual Pumpspray
By virtue of our distribution agreement with Pohl-Boskamp for Nitrolingual
Pumpspray, we are afforded marketing exclusivity arising from Pohl-Boskamp's
1993 U.S. patent relating to the product. This patent expires in 2010.
Tanafed
We entered into a licensing agreement with the raw material supplier for
our Tanafed product effective January 1, 2000. This agreement grants us a
license to market and distribute Tanafed for which the manufacturer has a patent
covering the manufacturing process of one of its active ingredients. This patent
expires in 2014.
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Migraine Product (FHPC 01)
Pursuant to our development agreement with Penwest for a once-a-day
migraine product, we are the licensee of certain Penwest patents for the purpose
of manufacturing and marketing the product under development. These patents
expire from 2008 through 2016.
Active Ingredient in Robinul/Robinul Forte
In 1999, we filed a patent application directed to the use of
glycopyrrolate for the treatment of certain new indications. Glycopyrrolate is
the active ingredient in Robinul and Robinul Forte.
COMPETITION
The market for drugs is highly competitive with many established
manufacturers, suppliers and distributors actively engaged in all phases of the
business. We believe that competition in the sale of our products is based
primarily on price, service, availability and product efficacy. Our brand-name
pharmaceutical products may be subject to competition from alternate therapies
during the period of patent protection and thereafter from generic equivalents.
Some of our products have generic equivalents in the marketplace.
We also compete with other pharmaceutical companies for new products and
product line acquisitions. These competitors include Dura Pharmaceuticals, Inc.,
Forest Laboratories, Inc., Watson Pharmaceuticals, Inc., King Pharmaceuticals,
Inc., Shire Pharmaceuticals Group plc, Jones Pharma Inc. and other companies
that acquire branded product lines from other pharmaceutical companies.
GOVERNMENT REGULATION
According to the Federal Food, Drug, and Cosmetic Act ("FDC Act"), all new
drugs are subject to premarket approval by the FDA. Applicable FDA law will
treat our development of new products and new uses for approved products or the
development of any of our line extensions as "new drugs," which requires the
submission of a New Drug Application ("NDA"), and approval of the NDA by the
FDA.
The steps required for approval of an NDA include:
- pre-clinical studies;
- submission to the FDA of an Investigational New Drug application ("IND"),
which must become effective before human clinical trials commence;
- adequate and well-controlled human clinical trials to establish the
safety and effectiveness of the product;
- submission of an NDA or a supplemental NDA ("sNDA") to the FDA; and
- FDA approval of the NDA or sNDA prior to any commercial sale or shipment
of the product.
Pre-clinical studies generally include laboratory evaluation of product
chemistry and formulation, as well as animal studies, if appropriate, to assess
quality and safety. An applicant submits the results of the pre-clinical studies
with chemistry, manufacturing, and control information and pharmacology and
toxicology data to the FDA as a part of an IND and for
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review by the FDA prior to the commencement of human clinical trials. Unless the
FDA objects to an IND, the IND will become effective 30 days following its
receipt by the FDA.
Clinical trials involve the administration of the investigational new drug
to humans. The trials are subject to extensive regulation including compliance
with Good Clinical Practices, obtaining informed patient consent and review and
approval of each study by an Institutional Review Board. Clinical trials are
typically conducted in three sequential phases, although phases may overlap. In
Phase I, the investigational new drug usually is administered to healthy human
subjects and is tested for safety. Phase II usually involves studies in a
limited patient population to:
- determine the initial effectiveness of the investigational new drug for
specific indications;
- determine dosage tolerance and optimal dosage; and
- identify possible adverse effects and safety risks.
When an investigational new drug is found to be effective and to have an
acceptable safety profile in Phase II evaluation, Phase III trials are
undertaken to further evaluate clinical effectiveness and to further test for
safety within an expanded patient population. The FDA reviews both the clinical
plans and the results of the trials and may require the study to be discontinued
at any time if there are significant safety issues. In some cases, the FDA can
request Phase IV clinical studies after approval of the NDA. These studies can
be designed to obtain additional safety and efficacy data, detect new uses for
or abuses of a drug, or determine effectiveness for labeled indications under
conditions of widespread usage. These studies can involve significant additional
expenses.
Once the FDA has approved an NDA, the holder of the NDA may request changes
in the conditions of approval contained in its NDA through a sNDA. The format,
content and procedures applicable to NDA supplements are generally the same as
those for NDAs. However, the only information required in a supplement is that
needed to support the requested change. If the NDA or sNDA relied on new
clinical investigations, other than bioavailability studies, it may qualify for
a three-year period of exclusivity, distinct from any applicable patent
protection that may exist. The FDA may also require user fees for prescription
drug NDAs. Supplements proposing to include a new indication for use in
pediatric populations are not subject to user fees.
Another form of an NDA is the 505(b)(2) NDA, which applicants submit
pursuant to Section 505(b)(2) of the FDC Act. This type of NDA permits the
inclusion of safety and effectiveness studies that the applicant has not
conducted or been granted a right of reference by the sponsor of the studies. In
addition, the FDA recommends a 505(b)(2) NDA for a modification, such as a new
dosage form, of a previously approved drug which requires more than merely
bioequivalence data. This NDA is similar to a full NDA, except that, under
conditions prescribed by the FDA, it may be supported in whole or in part by one
or more study investigations published in scientific literature in lieu of the
applicant's clinical trials. We intend to submit this type of application for
market potential product line extensions or new uses of already-approved
products.
In addition, if we submit a certain type of new drug application, the FDA
will require us to certify any patent which covers the drug for which we seek
approval. If there is a patent in existence, a certain type of certification is
made and proper notice is given, and the patent holder makes an infringement
claim within a specified time period, then the FDA will not approve our
marketing application for thirty months or until the patent litigation is
resolved,
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whichever occurs sooner. In addition, distinct from patent considerations,
approval of a certain type of new drug application could be delayed because of
the existence of non-patent exclusivity afforded by the FDA for the innovator
drug.
The least burdensome application for new drug approval is the abbreviated
NDA ("ANDA"), which may apply to a new drug that is bioequivalent to a drug
previously approved by the FDA for safety and effectiveness, and listed as the
drug to which bioequivalence must be shown. An applicant may submit an ANDA for
products that are the same as an approved drug regarding active ingredients,
route of administration, dosage form, strength and conditions of use recommended
on the labeling. The ANDA requires bioequivalence data and other technical and
manufacturing information, but no safety and effectiveness studies.
Even after obtaining regulatory approval, such approval may require
post-marketing testing and surveillance to monitor the safety of the product. In
addition, the product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing. At
present, companies cannot export pharmaceutical products that cannot be lawfully
sold in the United States unless certain statutorily prescribed conditions are
met.
FDA regulations also require that we report adverse events, submit new
marketing and promotional materials, submit changes we plan to make to the
product manufacturing or labeling and comply with recordkeeping requirements. In
the event that we do not comply with the FDA requirements, the manufacture,
sales and distribution of our products may be suspended, and we may be prevented
from obtaining FDA approval of new products.
Our third-party manufacturers must adhere to FDA regulations relating to
current good manufacturing practice ("cGMP") regulations, which include
requirements relating to organization of personnel, buildings and facilities,
equipment, control of components and drug product containers and closures,
production and process controls, packaging and labeling controls, holding and
distribution, laboratory controls, records and reports, and returned and
salvaged products. Ongoing compliance with cGMP procedures, labeling and other
regulatory requirements are monitored through periodic inspections and market
surveillance by state and federal agencies, including the FDA. Failure by our
third-party manufacturers to comply with these rules could result in sanctions
being imposed, including fines, injunctions, civil penalties, suspension or
withdrawal of FDA approvals, seizures or recalls of products, operating
restrictions and criminal prosecutions. In addition, we rely upon our
third-party manufacturers to provide many of the documents that we use to comply
with our FDA reporting requirements for Robinul, Robinul Forte, and
Nitrolingual.
In addition, we are subject to fees under the Prescription Drug User Fee
Act for new drug applications for new drug products and sNDAs for new uses,
except that we may qualify for a waiver of the fee for our first new drug
application. We will be responsible for paying these fees for sNDAs and
subsequent submissions unless we receive approval from the FDA for a reduction
or refund.
We are also subject to regulation under other federal and state laws,
including the Occupational Safety and Health Act and other environmental laws
and regulations, national restrictions on technology transfer, and import,
export and customs regulations. In addition, some of our products that contain
controlled substances, such as Protuss and Protuss-D, are subject to DEA
regulations relating to storage, distribution, importation and sampling
procedures. We have registered with the Drug Enforcement Administration under
the Controlled
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Substances Act which establishes, among other things, registration, security and
recordkeeping requirements.
In addition, whether or not we obtain FDA approval, we must obtain approval
of a pharmaceutical product by comparable governmental regulatory authorities in
foreign countries prior to the commencement of clinical trials and subsequent
marketing of such product in such countries. The approval procedure varies from
country to country, and the time required may be longer or shorter than that
required for FDA approval.
REIMBURSEMENT
Our ability to market our products successfully will depend in part on the
extent to which reimbursement for the costs of the products will be available
from government health administration authorities, private health insurers, and
managed care organizations in the United States and in any foreign markets where
we may sell our products. Third-party payors can affect the pricing or relative
attractiveness of our products by regulating the reimbursement they provide on
our products and competing products. Insurance carriers may not reimburse
healthcare providers for use of our products used for new indications. Domestic
and foreign government and third-party payors are increasingly attempting to
contain healthcare costs by limiting both coverage and the level of
reimbursement for new pharmaceutical products.
PRODUCT LIABILITY INSURANCE
We currently maintain a product liability insurance policy. We do not
currently maintain business interruption insurance.
EMPLOYEES
We had 150 full-time employees as of December 31, 1999, including 127 sales
and marketing employees in the field, and 23 in management, finance and
administration. We also maintain active independent contractor relationships
with various individuals with whom we have consulting agreements. We believe our
employee relations are good. None of our employees is subject to a collective
bargaining agreement.
PROPERTIES
We lease a 24,300 square-foot facility in Roswell, Georgia. Our facility
includes space for offices and a warehouse. This lease expires on August 31,
2003. We also lease executive office space on a short-term basis in Raleigh,
North Carolina, and Phoenix, Arizona, for our regional managers. We believe that
our facilities are adequate for our current requirements; however, we anticipate
that as we grow, we will require additional facilities.
LEGAL PROCEEDINGS
From time to time, we may become involved in routine litigation. Currently,
we are not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following are our executive officers and directors as of the date of
this prospectus:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Mahendra G. Shah, Ph.D............ 55 Chairman of the Board and Chief Executive Officer
R. Brent Dixon.................... 55 President and Director
Gregory P. Hauck.................. 33 Vice President, Developed Products
Balaji Venkataraman............... 33 Vice President and Chief Financial Officer
Robert D. Godfrey, Jr............. 37 Vice President, Sales
William Campbell.................. 44 Controller
John N. Kapoor, Ph.D.(1).......... 56 Director
John E. Robson(2)................. 69 Director
Jon S. Saxe(1)(2)................. 63 Director
</TABLE>
- ------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mahendra G. Shah, Ph.D. is the Chairman of the Board and Chief Executive
Officer. Dr. Shah has been a director since 1993, and his present term as
director will expire in 2001. Dr. Shah became Chief Executive Officer in October
1999. From 1991 to the present, he has been a Vice President of EJ Financial
Enterprises, Inc. From 1996 to the present, he has been the President of
Protomed Pharmaceuticals, Inc. From 1987 to 1991, he was the Senior Director of
New Business Development with Fujisawa USA, Inc. Prior to that time, he worked
in various scientific and management positions with Schering-Plough and Bristol
Myers-Squibb Company. He serves on the board of Structural Bioinformatics Inc.,
Zarix, Introgen Therapeutics and Inpharmakon Corporation. He previously served
on the board of Unimed Pharmaceuticals. Dr. Shah received a Ph.D. degree in
Industrial Pharmacy from St. John's University. EJ Financial Enterprises, Inc.
is the sole shareholder and managing general partner of Kapoor Pharma
Investments, L.P., our largest shareholder.
R. Brent Dixon is the President and a director of the company. He has been
a director since 1993, and his present term as director will expire in 2002. Mr.
Dixon has been with the company since its formation. He has been our President
since 1993 and served as a Vice-President from 1992 to 1993. He has over 30
years of operational, sales, and strategic market development experience in the
pharmaceutical industry. Prior to working at the company, he was President of
Dixon and Associates, a healthcare consulting company. Prior to that he served
as National Sales Manager for Center Laboratories, a subsidiary of Merck AG. Mr.
Dixon has also served as a Regional and District Manager for Roberts
Pharmaceuticals and Adams Laboratories. Mr. Dixon attended St. Petersburg Junior
College and the University of Mississippi.
Gregory P. Hauck is the Vice President of Developed Products. He has been
with the company since its formation and has been serving as Vice-President
since 1993. He is responsible for developing product promotional materials as
well as product line marketing strategies. In his previous position as Vice
President of Sales and Marketing for the company
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from 1994 to 1997, he was responsible for implementing its sales strategies. Mr.
Hauck began working with the company in 1992 as the National Sales Manager where
he was primarily responsible for the hiring and training of all new sales
representatives. He entered the pharmaceutical industry in 1989 as a sales
representative with Hauck Pharmaceuticals and Roberts Pharmaceuticals. Mr. Hauck
received a B.S. degree in Education from the University of Georgia and,
afterwards, spent a brief period of time as an educator.
Balaji Venkataraman has been the Vice President and Chief Financial Officer
since October 1999. Between August 1998 and September 1999, he was Vice
President of Corporate Development and Strategic Planning at the company. He
also served as a consultant to the company during his employment as the Director
of Strategic Planning at EJ Financial Enterprises, Inc. from September 1997 to
August 1998. From 1995 to 1997, he was an Associate, Licensing and New Business
Start-Up, at the University of Pennsylvania Center for Technology Transfer. From
1994 to 1995, he was the Marketing Manager at Curative Technologies Inc., a
wound care services company. From 1993 to 1994, he was a Technical Sales
Representative for Millipore Corporation. From 1991 to 1993 he was the Senior
Research Chemist at Scios Inc. He has also held product management and finance
positions at Schering Plough and Pfizer. Mr. Venkataraman received an M.S.
degree in Organic Chemistry from Case Western Reserve University and an M.B.A.
degree from the Wharton School at the University of Pennsylvania.
Robert D. Godfrey, Jr. has been Vice President of Sales since 1998. He
served as the National Sales Manager between 1996 and 1998. He began his career
with the company in 1992 as a Sales Representative for the Jacksonville,
Florida, territory and was promoted in 1994 to District Manager of the entire
Florida sales territory. At that time, in addition to his managerial
responsibilities, he continued to promote First Horizon products to physicians
and pharmacies until 1995. Prior to his career with the company, Mr. Godfrey
held the position of Marketing Research Consultant with MGT Information Systems
and also worked independently as a Research Consultant in the southeastern
United States. Mr. Godfrey received an M.B.A. degree and a B.S. degree in
Marketing from Jacksonville University.
William G. Campbell has been our Controller and Treasurer since 1998. Prior
to joining First Horizon, from 1995 to 1998, Mr. Campbell was the Controller/CFO
of DialysisAmerica, Inc. He was the Associate Administrator/CFO of Stringfellow
Memorial Hospital from 1993 to 1995; and from 1989 to 1993, he was the Director
of Budgets, Costs and Reimbursement at Grady Memorial Hospital, a large public
teaching hospital. His prior professional experience also includes a number of
profit and not-for-profit consulting, big five public accounting, governmental
auditing and internal audit positions. Mr. Campbell is a Certified Public
Accountant and received a B.A. degree in Accounting from Walsh College of
Accountancy and Business Administration and an M.B.A. degree in Accounting from
Kennesaw State College.
John N. Kapoor, Ph.D. has been one of our directors since 1996, and his
present term as director will expire in December 2000. Dr. Kapoor has over 20
years of experience in the healthcare field through his ownership and management
of healthcare-related businesses. In 1990, Dr. Kapoor founded Kapoor-Pharma
Investments, L.P., our largest stockholder, and its managing partner, EJ
Financial Enterprises, Inc., of which he is the President and sole shareholder.
EJ Financial provides funds and strategic advice to healthcare businesses. Dr.
Kapoor is the Chairman of OptionCare, Inc., Akorn, Inc. and NeoPharm, Inc. Dr.
Kapoor is a director of Integrated Surgical Systems, Inc., as well as a Chairman
of a private company and a director of several other private companies. Dr.
Kapoor received a B.Sc. degree from Bombay University and a Ph.D. degree in
medicinal chemistry from the State University of New York.
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John E. Robson was elected a director in January 2000. His term as
director will expire in 2002. Since October 1993, Mr. Robson has served as
Senior Advisor of Robertson, Stephens. Previously, he was President and Chief
Executive Officer of G.D. Searle & Company. Mr. Robson has held Presidential
appointments in Washington, D.C., including in the White House, as Chairman of
the Civil Aeronautics Board where he initiated airline deregulation in the
1970s. From 1989 to 1993, Mr. Robson served as Deputy Secretary of the United
States Treasury Department during the Bush Administration. He has also been Dean
of the Goizueta School of Business Administration at Emory University, Atlanta,
Georgia from 1986 to 1989, and a corporate lawyer and member of the executive
committee at Sidley and Austin. Mr. Robson holds appointments as a Distinguished
Visiting Fellow at Stanford University's Hoover Institution and as a Visiting
Fellow at The Heritage Foundation, in Washington, D.C. He is also a member of
the United States Postal Service Commission on a Safe and Secure Workplace and
President of the Worklife Institute. Mr. Robson currently serves as a Director
of Exide Corporation, Monsanto Company, Northrop Grumman Corporation and
ProLogis Trust. He is a former board member of Age Wave, LLC, Chiron
Corporation, Conrail, Continental Airlines, Norrell, Inc., and Rand McNally
Company. Mr. Robson received a B.A. degree from Yale University and a J.D.
degree from Harvard University School of Law.
Jon S. Saxe was elected a director in January 2000. His term as director
will expire in December, 2001. He also serves as a Director of Protein Design
Labs, Inc. Mr. Saxe served as President of Protein Design Labs, Inc. from
January 1995 to May 1999. In addition, he is a Director of Questcor
Pharmaceuticals Inc., Incyte Pharmaceuticals Inc., ID Biomedical Corporation,
InSite Vision, and is Chairman of Point Biomedical Corporation and Iconix
Pharmaceuticals. Mr. Saxe served as President of Saxe Associates, a
biotechnology consulting firm, from May 1993 to December, 1994. He served as the
President, Chief Executive Officer and a Director of Synergen, Inc., a
biopharmaceutical company, from October 1989 to April, 1993. Mr. Saxe served in
various positions including Vice President of Licensing and Corporate
Development and Head of the Patent Law Department for Hoffmann-LaRoche, Inc.
from 1960 through 1989. Mr. Saxe received a B.S. Ch.E. degree from
Carnegie-Mellon University, a J.D. degree from George Washington University
School of Law, and an L.L.M. degree from New York University School of Law.
EXECUTIVE OFFICERS
Each officer serves at the discretion of our board of directors and holds
office until his successor is elected and qualified or until his earlier
resignation or removal. There are no family relationships among any of our
directors or executive officers.
ELECTION OF DIRECTORS
Dr. Shah, Mr. Dixon and Dr. Kapoor were elected to the board under a
stockholder agreement. Under the terms of this agreement, the board of directors
was set at three members. In addition, Kapoor-Pharma Investments has the right
to elect two directors, and Dr. Shah, Mr. Dixon and Mr. Hauck have the right to
elect one director by majority vote. This agreement will terminate upon
completion of this offering.
Our board of directors increased the number of directors from three to five
in January 2000. Pursuant to our bylaws, the board filled the two vacancies
created by the increase by appointing Jon S. Saxe and John E. Robson as
directors.
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BOARD COMPOSITION
Pursuant to our Restated Certificate of Incorporation, the board of
directors is divided into three classes of directors:
- Class A, whose term will expire at the annual meeting of stockholders to
be held in the year 2000;
- Class B, whose term will expire at the annual meeting of stockholders to
be held in the year 2001;
- Class C, whose term will expire at the annual meeting of stockholders to
be held in the year 2002.
John N. Kapoor is a Class A director. Mahendra G. Shah and Jon S. Saxe are
Class B directors. R. Brent Dixon and John E. Robson are Class C directors.
Directors within each class are elected to serve three-year terms and
approximately one-third of the directors sit for election at each annual meeting
of the Company's stockholders.
A classified board of directors may have the effect of deterring or
delaying any attempt by any group to obtain control of the company by a proxy
contest since a third party would be required to have its nominees elected at
two separate meetings of the board of directors in order to elect a majority of
the members of the board.
BOARD COMMITTEES
The board of directors has formed an audit committee to review the results
and scope of the audit of our annual financial statements, to discuss various
matters with the auditors, to receive statements from the auditors and to make
recommendations to the board of directors regarding the inclusion of audited
financial statements in our annual reports. The current members of our audit
committee are Jon S. Saxe and John E. Kapoor.
The board of directors has also formed a compensation committee to
recommend salaries and incentive compensation for executive officers and to
administer our stock plan. The members of the compensation committee are Jon S.
Saxe and John E. Robson.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
In January 2000, our board of directors established a compensation
committee. Messrs. Robson and Saxe serve as members of the compensation
committee. For the year ended December 31, 1999, the entire board of directors
determined executive compensation. Two members of our board of directors,
Mahendra G. Shah and R. Brent Dixon, are also employees. Dr. Shah has
participated in certain transactions with us in the past. See "Certain
Relationships and Related Transactions."
DIRECTOR COMPENSATION
We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. Each director who
is not an employee also receives a fee of $12,000 per year and $1,000 for each
board meeting attended. Each director who is not an employee and not affiliated
with a greater than 10% shareholder receives options to purchase shares of our
common stock upon election to the board.
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SCIENTIFIC ADVISORY BOARD
We have engaged a scientific and medical advisor to advise us on issues
related to specific pharmaceutical products. The current advisor is an expert in
clinical development, medical sciences and drug development. We plan to add
additional members with different expertise to support our growth. In certain
cases, this advisor has agreed to be available for consultation for a specified
number of days each year, but he may consult and meet informally with us on a
more frequent basis. Our current scientific and medical advisor may have other
commitments that may limit his availability to us. Our scientific advisory board
consists of the following individual:
Nelson L. Levy, M.D., Ph.D., is currently the Chief Executive Officer of
the CoreTechs Corporation, which implements a unique paradigm of technology
transfer and which starts science-based companies. He was previously President
of Fujisawa Pharmaceutical Company, where he refocused and revitalized the sales
and marketing organizations, in-licensed two major pharmaceuticals and filed an
NDA for FK-506 (Prograf), Fujisawa's leading product. From 1981 to 1984, he was
the Vice President for Pharmaceutical Research at Abbott Laboratories. He is on
the board of directors of two public and three private companies and on the
scientific advisory boards of three other companies, two of which are publicly
traded. He is a Summa Cum Laude graduate of Yale University, received his M.D.
degree from the Columbia College of Physicians and Surgeons and a Ph.D. degree
in Immunology from Duke University.
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<PAGE> 47
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning the
compensation awarded to or earned by our chief executive officer and by each of
our four other most highly compensated executive officers (the "Named Executive
Officers") who earned in excess of $100,000 in cash compensation during the year
ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------------ ---------------------- ALL OTHER
SHARES COMPEN-
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS SATION(1)
- --------------------------- -------- ------- ---------------------- ---------
<S> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D.(1)..............
Chairman and Chief Executive
Officer............................ $ -- $55,200 300,000 $ --
R. Brent Dixon
President and Director................ 100,000 27,600 60,000 1,634(2)
Balaji Venkataraman
Vice President and Chief Financial
Officer............................ 93,400 21,250 200,000 24(3)
Gregory P. Hauck
Vice President, Developed Products.... 89,000 20,000 50,000 624(4)
Robert D. Godfrey, Jr.
Vice President, Sales................. 85,950 20,000 70,000 2,024(5)
</TABLE>
- ------------
(1) Dr. Shah did not receive a salary in 1999.
(2) Represents $1,610 contributed under the 401(k) plan and $24 for term life
insurance premiums.
(3) Represents $24 for term life insurance premiums.
(4) Represents $600 contributed under the 401(k) plan and $24 for term life
insurance premiums.
(5) Represents $2,000 contributed under the 401(k) plan and $24 for term life
insurance premiums.
STOCK OPTION GRANTS
The following tables show for the year ended December 31, 1999, information
regarding options granted to, and held at year end by, the Named Executive
Officers.
Amounts reported in the potential realizable value column below are
hypothetical values that may be realized upon exercise of the options
immediately prior to the expiration of their term, calculated by assuming that
the stock price on the date of grant as determined by the board of directors
appreciates at the indicated annual rate compounded annually for the entire term
of the option (10 years). The 0% annual rate of appreciation shows the value at
the grant date based upon the stated market price of the stock on the date of
grant. The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent our estimate or
projection of the future common stock price.
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<PAGE> 48
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE OF
NUMBER OF PERCENTAGE OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS MARKET STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE PRICE ON FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER DATE OF ----------------------------------
NAME GRANTED FISCAL YEAR(1) SHARE GRANT EXPIRATION DATE 0% 5% 10%
- ---- ---------- -------------- --------- -------- --------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mahendra G. Shah,
Ph.D................... 25,000(2) 3.2% $2.50 $3.08 3/17/09 $ 14,500 $ 62,925 $ 137,218
275,000(3) 35.0 2.65 4.48 10/22/09 503,250 1,278,048 2,466,741
R. Brent Dixon........... 60,000(4) 7.6 2.50 3.08 3/17/09 34,800 151,020 329,324
Balaji Venkataraman...... 40,000(5) 5.1 1.88 4.48 9/1/09 104,000 216,698 389,599
60,000(3) 7.6 1.88 4.48 10/22/09 156,000 325,047 584,398
100,000(3) 12.7 2.65 4.48 10/22/09 183,000 464,745 896,997
Robert D. Godfrey, Jr.... 20,000(4) 2.5 2.50 3.08 3/17/09 11,600 50,340 109,775
50,000(3) 6.4 2.65 4.48 10/22/09 91,500 232,372 448,498
Gregory P. Hauck......... 50,000(4) 6.4 2.50 3.08 3/17/09 29,000 125,850 274,436
</TABLE>
- ------------
(1) In 1999, options to purchase a total of 785,500 shares of common stock were
granted.
(2) The option holder may exercise the option to purchase 25% of these shares of
common stock on March 17, 1999 and an additional 25% per year on the next
three anniversaries thereof.
(3) The option holder may exercise the option to purchase 25% of these shares of
common stock on October 22, 2000 and an additional 25% per year on the next
three anniversaries thereof.
(4) The option holder may exercise the option to purchase 25% of these shares of
common stock on March 17, 2000 and an additional 25% per year on the next
three anniversaries thereof.
(5) The option holder may exercise the option to purchase 25% of these shares of
common stock on September 1, 1999 and an additional 25% per year on the next
three anniversaries thereof.
None of our Named Executive Officers exercised stock options in the fiscal
year ended December 31, 1999. The following table sets forth information
concerning the number and value of unexercised options held by each of our Named
Executive Officers on December 31, 1999. There was no public market for our
common stock as of December 31, 1999. Accordingly, the fair market value on
December 31, 1999 is based on an assumed initial public offering price of $13.00
per share. This valuation at December 31, 1999 does not represent the actual
value of our stock at December 31, 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1999
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D.......................... 106,250 293,750 $1,303,125 $3,043,125
R. Brent Dixon.................................. 265,000 135,000 3,309,375 1,558,125
Balaji Venkataraman............................. 10,000 190,000 111,200 2,035,800
Robert D. Godfrey, Jr........................... 35,000 115,000 414,375 1,228,125
Gregory P. Hauck................................ 265,000 125,000 3,309,375 1,453,125
</TABLE>
EXECUTIVE OFFICERS EMPLOYMENT AGREEMENTS
On January 1, 2000, we entered into employment agreements with Mahendra G.
Shah, Ph.D., R. Brent Dixon, Balaji Venkataraman, Robert D. Godfrey, Jr.,
Gregory P. Hauck and William G. Campbell. These employment agreements may be
terminated by us with or without cause. The officers may terminate employment
upon sixty days written notice to us. Upon
44
<PAGE> 49
termination of Messrs. Shah, Dixon and Venkataraman's employment without cause,
as defined in the agreement, each officer will be entitled to receive his salary
for twelve months following termination, a lump sum equal to 100% of the bonus
he received the preceding calendar year, if any, continued health insurance
coverage substantially equivalent to that provided to the officer prior to
termination for twelve months following termination, a car allowance for twelve
months following termination, and all of the officer's unvested options will
immediately vest and become exercisable.
Upon termination of Messrs. Godfrey, Hauck and Campbell's employment
without cause, each officer will be entitled to receive his salary for six
months following termination, a lump sum equal to 50% of the bonus he received
the preceding calendar year, if any, continued health insurance coverage
substantially equivalent to that provided to the officer prior to termination
for six months following termination, a car allowance for six months following
termination and all of the officer's unvested options will immediately vest and
become exercisable.
Upon termination by us for cause, termination in the event of death or
termination by the officer, each officer or his estate is entitled to receive
all accrued but unpaid salary as of the date of termination. Upon any
termination of these agreements, each officer or his estate will have 120 days
from the date of termination to exercise any vested options.
These employment agreements provide for a base salary of $110,000 for Dr.
Shah, $102,000 for Mr. Dixon, $95,000 for Mr. Venkataraman, $90,000 for Mr.
Godfrey, $85,000 for Mr. Hauck and $80,000 for Mr. Campbell. In addition, these
employment agreements entitle each executive officer to receive a bonus based on
the percentage of his salary, if we and/or the officer meets certain performance
goals to be established by the board of directors each year. The compensation
committee will review the performance goals and determine whether or not we
and/or the executive have achieved the performance goals based on our financial
statements. The board retains the right to award additional compensation to each
officer based on the officer's contributions to the company.
The agreements provide that in the event of a change of control, as defined
in the agreements, all options become fully vested and immediately exercisable.
The employment agreements restrict each officer from engaging in or having
any financial interest in a business that is in competition with our business
during that officer's employment with the company and for thirty-six months
following termination of employment. A business is in competition with us if it
involves research and development work involving products that we market at the
time of termination or that were under study by us at that time and were
expected to be marketed within six months. This provision does not prevent the
officers from investing in a publicly held company, provided that the officer's
beneficial ownership of securities does not exceed 5% of the outstanding class
of the publicly held company's securities. The employment agreements also
restrict each officer from soliciting our suppliers, customers or clients for
thirty-six months after employment. This provision does not prohibit an officer
from soliciting wholesale customers, managed care agencies, scientific or
computer consultants, lawyers or manufacturers as long as manufacturers have
excess capacity. The employment agreements also prohibit each officer from
soliciting, employing or engaging any of our employees or affiliates for
thirty-six months following employment. The employment agreements prohibit each
officer from disclosing any of our trade secrets, confidential information or
ideas that the officer may have acquired or developed relating to our business
for twelve months following employment.
45
<PAGE> 50
EMPLOYEE BENEFIT PLANS
1997 Non-Qualified Stock Option Plan
Our 1997 Non-Qualified Stock Option Plan, as amended, was adopted by our
board of directors and approved by our stockholders June 18, 1997. The 1997 plan
authorizes the issuance of up to 4,000,000 shares of our common stock.
Currently, options to purchase an aggregate of 1,800,000 shares of our common
stock at a weighted average exercise price of $1.69 per share are outstanding
under the 1997 plan. Upon the closing of this offering, no additional grants of
stock options will be made under this 1997 plan.
Options granted under the plan are not transferable by the optionee except
by will or by the laws of descent and distribution. Options will become
immediately exercisable in the event of a change of control if the surviving
company does not assume the options granted under the plan.
The 2000 Stock Plan
Our board of directors and stockholders approved the 2000 Stock Plan in
February 2000. This plan provides for the granting of:
- incentive stock options under the Internal Revenue Code of 1986;
- options that do not qualify as incentive stock options;
- stock awards or stock bonuses; and
- sales of stock.
The 2000 Stock Plan provides for the grants of these options and other
awards to officers, directors, full and part-time employees, advisors and
consultants. Only full-time employees may receive incentive stock options. We
have reserved 2,000,000 shares of common stock for issuance under the 2000 Stock
Plan. Our compensation committee administers the 2000 Stock Plan and has the
sole authority to determine:
- the meaning and application of the terms of the plan and all grant
agreements;
- the persons to whom option or stock grants are made;
- the nature and amount of option or stock grants;
- the price to be paid upon exercise of each option;
- the period within which options may be exercised;
- the restrictions on stock awards; and
- the other terms and conditions of awards.
In order to meet one of the requirements of Section 162(m) of the Internal
Revenue Code, the 2000 Stock Plan limits to 500,000 the number of shares that
may be covered by grants to any single person in any one calendar year.
The exercise price per share for incentive stock options cannot be less
than the fair market value of our common stock on the date of the grant. If a
recipient owns more than 10% of our common stock, incentive stock options
granted to that recipient must have an exercise price of not less than 110% of
the fair market value of our common stock on the grant date.
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<PAGE> 51
Determinations of fair market value are made in accordance with the plan. The
compensation committee has the authority to determine the exercise price for
non-qualified stock options.
The compensation committee has the authority to determine the term of each
option. However, the term of stock options may not exceed 10 years from the date
of grant. In the case of an incentive option granted to an owner of more than
10% of our common stock, the term may not exceed five years from the date of
grant.
Generally, the recipient of an option may exercise it only while employed
by us, except that a recipient may exercise vested options for 60 days after
termination of employment or such later date as set forth in the grant
agreement, a recipient may exercise vested options for twelve months following
disability, and if a recipient dies while employed by us, his or her estate,
heirs or beneficiaries may exercise vested options held by the recipient within
twelve months following the date of death. The plan also provides for the
acceleration of vesting and exercisability of options and vesting of stock
awards if we are subject to a change of control.
The compensation committee has the authority to award stock under the plan
as stock bonuses. In addition, the compensation committee may issue stock under
the plan for consideration, including promissory notes and services. The
compensation committee also has the authority to determine the terms, conditions
and restrictions of stock awards and sales of stock, which may include
restrictions on transferability, voting, repurchase by us and forfeiture of
shares. If shares of the stock are subject to forfeiture, we will retain all
dividends or other distributions paid on the stock until the shares are no
longer subject to forfeiture, at which time we will pay all accumulated amounts
to the recipient. Unless otherwise determined by the compensation committee,
shares awarded as a stock bonus to an officer or director may not be sold until
six months after the date of the award. All shares relating to stock awards or
stock sales are counted against the aggregate number of shares available for
granting awards under the 2000 Stock Plan.
If a stock split, stock dividend, consolidations, recapitalizations,
reorganizations or similar event occurs, we will make proportional adjustments
to the number of shares of common stock reserved for issuance under the 2000
Stock Plan and issuable under outstanding options and adjustments to the
exercise prices of outstanding options.
Awards under the plan are not transferable except by will or the laws of
descent and distribution. The 2000 Stock Plan will terminate in February, 2010,
and we may not grant awards under it after termination. Our board of directors
may amend, alter or discontinue the plan at any time, provided that we must
obtain shareholder approval for any change that would increase the number of
shares reserved for issuance or would change the class of persons eligible to
receive grants. In addition, the board may not amend the plan to:
- fix the exercise price per share for incentive stock options at less than
100% of the fair market value of a share of common stock on the date of
grant;
- extend the expiration date of the plan;
- extend the maximum period of ten years during which holders may exercise
options; or
- materially increase the benefits to participants under the plan.
In no event may the board or shareholders amend the plan, alter or impair
the rights of an existing recipient without their consent.
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<PAGE> 52
As a condition to the exercise of an option, the vesting or award of a
stock bonus or the vesting or sale of stock, we may require the recipient to pay
over to us all applicable federal, state and local taxes that we must withhold.
At the discretion of the compensation committee and upon the request of a
recipient, the withholding tax requirements may be satisfied by withholding
shares of stock otherwise issuable to the recipient.
As of the date of this prospectus, the board of directors approved the
grant of options to purchase 177,950 shares, subject to the completion of this
offering, at an exercise price per share equal to the public offering price per
share in this offering. Following this grant, there will be 1,822,050 shares
available for future option grants under the 2000 Stock Plan.
Employee Stock Purchase Plan
Our employee stock purchase plan was adopted in February 2000 and is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code. We have reserved 500,000 shares of
common stock for the stock purchase plan. In order to participate in the stock
purchase plan, employees must meet eligibility requirements, including length of
employment. At present participating employees will be able to direct us to make
payroll deductions of up to 7% of their regular compensation during an offering
period for the purchase of shares of our common stock. Each offering period will
be six months, with the first offering period beginning on the later of July 1,
2000 or the effective date of the registration statement for the plan. The stock
purchase plan will provide participating employees with the right, subject to
specific limitations, to purchase our common stock at a price equal to 85% of
the lesser of the fair market value of our common stock on the first or last day
of the offering period. The stock purchase plan will terminate on December 31,
2010. The board of directors has the authority to amend, suspend or discontinue
the stock purchase plan as long as the change will not adversely affect
participants without their consent and as long as we receive any shareholder
approval required by law.
401(k)/Profit Sharing Plan
We have established a tax-qualified employee savings and retirement plan
for all of our employees who satisfy certain eligibility requirements, including
requirements relating to age and length of service. Under the 401(k) plan,
employees may elect to reduce their current compensation by up to 15% or the
statutory dollar limit, whichever is less, and have us contribute the amount of
this reduction to the 401(k) plan. In addition, we match a percentage of an
employee's contribution that we establish from time to time. Each employee is
fully vested in his or her salary contributions and our matching contributions
vest over six years.
We intend for the 401(k) plan to qualify under Section 401 of the Code so
that contributions by employees or by us to the 401(k) plan, and income earned
on plan contributions, are not taxable to employees until withdrawn from the
401(k) plan. Our contributions, if any, will be deducted by us when made.
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<PAGE> 53
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Officers and Directors
Mahendra G. Shah, Ph.D., our Chairman and Chief Executive Officer, is the
Vice President of EJ Financial Enterprises, Inc. John N. Kapoor, Ph.D., one of
our directors, is President and sole shareholder of EJ Financial. EJ Financial
is the Managing General Partner of Kapoor-Pharma Investments, L.P. which
beneficially owns 76% of our Common Stock.
John E. Robson, one of our directors, is a Senior Advisor of Robertson
Stephens, which is acting as one of the representatives of underwriters for this
offering.
Collaboration Agreement
In 1998, we entered into a collaboration agreement with Inpharmakon
Corporation under which we acquired rights to the proprietary information for
our migraine product FHPC 01 currently under development. We paid $200,000 and
$1,352 to Inpharmakon in 1998 and 1999, respectively, under this agreement. We
must pay fees and royalties to Inpharmakon on any sales of the developed
product. The agreement expires on October 31, 2008 with automatic five-year
renewals thereafter. The terms of this agreement were negotiated at arms' length
by management, and we believe the terms are fair to us. The John N. Kapoor
Trust, dated September 30, 1989 (the "Trust") owns 50% of the shares of
Inpharmakon Corporation. John N. Kapoor is Trustee of the Trust, and the Trust
is a partner of Kapoor-Pharma Investments. In addition, Dr. Shah is a director
of Inpharmakon Corporation and owns options to purchase 25,000 shares of
Inpharmakon.
Packaging Agreement
In 1997, we entered into a packaging agreement with Diversified Healthcare
Services, Inc., under which Diversified Healthcare packages samples of our
Defen-LA, Mescolor, Protuss-DM and Zebutal products. Under this agreement,
Diversified Healthcare has the right to provide exclusive packaging services for
these products. We paid $83,000, $132,152 and $282,493 to Diversified Healthcare
in 1997, 1998 and 1999, respectively, under this agreement. The term of this
agreement is three years, with automatic yearly renewals unless terminated by
either party. The terms of this agreement were negotiated at arm's length by
management, and we believe the terms are fair to us. Warren Hauck, Chief
Executive Officer of Diversified Healthcare, is the father of Gregory P. Hauck,
our Vice President of Developed Products, and Daniel C. Hauck, who currently
owns 5.6% of our common stock. Steven Hauck, the President of Diversified
Healthcare, is the brother of Gregory and Daniel Hauck.
Non-compete Agreements
In 1996, we entered into two agreements with Crabapple Enterprises, Inc.
under which Crabapple agreed not to market products that compete with our
Protuss, Protuss-D and Zoto-HC products. We paid $91,000, $159,902 and $162,768
to Crabapple in 1997, 1998 and 1999, respectively, under these agreements. These
agreements require us to pay royalties on sales of these products. The term of
the agreement for Protuss and Protuss-D is seven years with an option to renew
for an additional five years. The term of the agreement for Zoto-HC is ten years
with an option to renew for an additional five years. Crabapple may cancel these
agreements if minimum royalty amounts are not paid. The terms of these
agreements were negotiated at arm's length by management, and we believe the
terms are fair to us. Warren
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<PAGE> 54
Hauck, Chief Executive Officer of Crabapple, and Mary Hauck, Secretary of
Crabapple, are the parents of Gregory and Daniel Hauck.
Conversion of Notes into Common Stock
On January 11, 1999, Kapoor-Pharma Investments loaned us $1,600,000 at an
interest rate of 2% over the prime rate. In December, 1999, we converted
principal and $144,984 of accrued interest into 558,395 shares of common stock
pursuant to the terms of the loan agreement. We used this loan to acquire the
Robinul product line.
During 1997, we converted $385,000 in loans from Kamal R. Kapoor plus
$124,363 accrued interest into 814,978 shares of our common stock at a
conversion rate of $0.625 per share. Kamal Kapoor is John N. Kapoor's brother.
During 1997, we converted $150,000 in loans from the Trust plus $3,345
accrued interest into 245,352 shares of common stock at a conversion rate of
$0.625 per share.
During 1997, we converted $100,000 in loans from EJ Financial Enterprises
plus $25,575 accrued interest into 200,918 shares of common stock at a
conversion rate of $0.625 per share.
Sale of Common Stock
On January 27, 1997, we issued 320,000 shares of common stock to the Trust
for $200,000 or $0.625 per share.
On June 30, 1997, we issued 560,000 shares of common stock to Kapoor-Pharma
Investments for $350,000 or $0.625 per share.
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<PAGE> 55
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock and as adjusted to reflect the sale of the shares
of common stock in this offering, by:
- each person or entity we know to own beneficially more than 5% of our
common stock;
- each of our directors;
- each of the Named Executive Officers; and
- all directors and executive officers as a group.
Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power, or shares voting and/or investment power
with his or her spouse, with respect to all shares of capital stock listed as
owned by that person or entity. Except as otherwise noted below, the address of
each person listed below is our address.
The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission and assumes
the underwriters do not exercise their over-allotment option. the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and any shares as to which
the individual has the right to acquire beneficial ownership within 60 days of
the date of this prospectus through the exercise of any stock option, warrant or
other right. The inclusion in the following table of those shares, however, does
not constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY
OWNED
NUMBER OF SHARES --------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ------------------------------------ ------------------- --------------- --------------
<S> <C> <C> <C>
5% STOCKHOLDERS
Kapoor-Pharma Investments, L.P.(1)
225 E. Deerpath, Suite 250
Lake Forest, IL 60045................. 6,487,583 76.0% 52.6%
Daniel C. Hauck......................... 480,000 5.6 3.9
842 Gable Gate Turn
Roswell, GA 30076
DIRECTORS AND NAMED EXECUTIVE OFFICERS
John N. Kapoor, Ph.D.(1)................ 6,487,583 76.0 52.6
R. Brent Dixon(2)....................... 785,000 8.9 6.2
Gregory P. Hauck(3)..................... 782,500 8.9 6.2
Mahendra G. Shah, Ph.D.(4).............. 424,560 4.9 3.4
Robert D. Godfrey, Jr.(5)............... 55,000 * *
Balaji Venkataraman(6).................. 10,000 * *
John E. Robson.......................... -- -- --
Jon S. Saxe............................. -- -- --
All directors and executive officers as
a group (9 persons)(7)................ 8,549,643 91.6 65.1
</TABLE>
- ------------
* Represents less than 1%.
(1) John N. Kapoor, Ph.D., one of our directors, is the president and sole
stockholder of the managing general partner of Kapoor-Pharma Investments,
L.P. In such capacity, Mr. Kapoor has the authority to vote and dispose of
the shares owned by Kapoor-Pharma Investments and is therefore deemed the
beneficial owner of those shares.
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<PAGE> 56
(2) Includes 305,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(3) Includes 302,500 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(4) Includes 112,500 shares of common stock issuable upon exercise of stock
options exercisable within 60 days. Also includes 10,000 shares that Dr.
Shah owns as custodian for his daughter and may be deemed to beneficially
own.
(5) Includes 55,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(6) Includes 10,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(7) Includes 790,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
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<PAGE> 57
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 40,000,000 shares of common stock,
par value $.001, and 1,000,000 shares of preferred stock, par value $.001. Upon
the closing of this offering, there will be 12,339,643 shares of common stock
outstanding assuming that the underwriters do not exercise their over-allotment
right, and no shares of preferred stock outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of our 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
the company, 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.
Holders of common stock are not entitled to preemptive rights or 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
Under our Restated Certificate of Incorporation, the board of directors has
the authority, without further action by the stockholders, to issue up to
1,000,000 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. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of the company, which could have a depressive effect on the
market price of our common stock. We have no present plan to issue any shares of
preferred stock.
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<PAGE> 58
DELAWARE ANTI-TAKEOVER PROVISIONS
We are 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
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.
CHARTER AND BYLAWS ANTI-TAKEOVER PROVISIONS
Pursuant to our Restated Certificate of Incorporation, the board of
directors is divided into three classes of directors. Directors within each
class are elected to serve three-year terms and approximately one-third of the
directors sit for election at each annual meeting of stockholders. A classified
board of directors may have the effect of deterring or delaying any attempt by
any group to obtain control of the company by a proxy contest since a third
party would be required to have its nominees elected at two separate meetings of
the board of directors in order to elect a majority of the member of the board.
A director may be removed only for cause and requires a vote of at least
two-thirds of the shares entitled to vote for election of directors.
In addition, our Restated Certificate of Incorporation also provides that
amendment of our bylaws by shareholders requires a vote of at least two-thirds
of the shares entitled to vote for the election of directors. This supermajority
restriction makes it more difficult for stockholders to
54
<PAGE> 59
require an amendment of the bylaws and enhances the board's power with respect
to matters of corporate governance that are governed by the bylaws.
Our bylaws establish an advance notice procedure for stockholders to bring
matters before stockholder meetings, including proposed nominations of persons
for election to the board of directors and bringing business matters or
stockholder proposals before a meeting. These procedures specify the information
stockholders must include in their notice and the timeframe in which they must
give us notice. At a stockholder meeting, stockholders may only consider
nominations or proposals specified in the notice of meeting, nominations or
proposals brought before the meeting by or at the direction of the board of
directors, and nominations or proposals by a person who was a stockholder of
record on the record date for the meeting, who is entitled to vote at the
meeting and who has given us timely written notice, in proper form, of his or
her intention to bring that nomination or proposal before the meeting.
The bylaws do not give the board of directors the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a meeting. However, our bylaws may have the effect
of precluding the conduct of that item of business at a meeting if the proper
procedures are not followed. These provisions may discourage or deter a
potential third party from conducting a solicitation of proxies to elect their
own slate of directors or otherwise attempting to obtain control of our company.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our Restated Certificate of Incorporation contains 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 us or our
stockholders;
- 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 our rights or any stockholder's
rights to seek non-monetary relief, such as an injunction or rescission, in the
event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws.
In addition, our Restated Certificate of Incorporation and Bylaws provide
the directors and executive officers indemnification protection to the fullest
extent permitted by Delaware law. We believe that these provisions will assist
us in attracting and retaining qualified individuals to serve as directors and
officers. Our Bylaws permit us to enter into agreements providing to each
officer or director indemnification rights substantially similar to those set
forth in the Bylaws and such agreements are expected to be entered into by each
member of our board of directors and each of our executive officers. Although
the form of indemnification agreement offers substantially the same scope of
coverage afforded by our Bylaws, it provides greater assurances to directors and
executive officers that indemnification will be available because, as a
contract, it cannot be modified unilaterally in the future by the board of
directors or by the stockholders to eliminate the rights it provides.
55
<PAGE> 60
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is LaSalle Bank N.A.,
Chicago, Illinois.
LISTING
We have applied to have First Horizon common stock quoted on the Nasdaq
National Market under the symbol "FHRX."
56
<PAGE> 61
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices of shares of First
Horizon. In addition, since no shares outstanding prior to this offering 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 of shares of First Horizon
and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
12,339,643 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and excluding 1,800,000 shares issuable upon exercise of
outstanding 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, unless such shares are purchased by "affiliates" as that term is
defined in Rule 144 under the Securities Act. The remaining 8,539,643 shares of
common stock currently outstanding and 1,800,000 shares issuable upon the
exercise of outstanding options are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. Restricted securities 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 either on the date of this prospectus or 90 days after the date
of this prospectus, all 8,539,643 shares currently outstanding and 1,800,000
shares issuable upon the exercise of outstanding options will become eligible
for sale in the public market under Rule 144(k), Rule 144 or Rule 701. All but
100,000 of the shares currently outstanding are subject to lock-up agreements.
Of the 1,800,000 shares issuable upon the exercise of outstanding options,
1,755,000 shares are subject to lock-up agreements. These 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 FleetBoston Robertson
Stephens Inc. for a period of 180 days from the date our shares commence trading
on the Nasdaq National Market. FleetBoston Robertson Stephens Inc. may release
all or any portion of the securities subject to the lock-up agreements without
notice. See "Underwriting."
Rule 144
Under 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, which generally includes 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 our common stock then outstanding, which
will equal approximately 123,396 shares immediately after this offering;
or
- The average weekly trading volume of First Horizon's 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 the company.
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<PAGE> 62
Rule 144(k)
Under Rule 144(k), a person who was not an affiliate of the company 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, which generally includes 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 our employees,
consultants or advisors, other than affiliates, who purchases or receives shares
from us 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 the Rule 144 holding period
requirements.
We intend to file a registration statement under the Securities Act
covering the 2,000,000 shares of common stock reserved for issuance under our
2000 Stock Plan following completion of this offering. Thereafter, shares that
are issued under the plan will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market.
58
<PAGE> 63
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Banc of America Securities LLC, and Chase
Securities Inc., have severally agreed with us, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
shares of common stock set forth below opposite their respective names. The
underwriters are committed to purchase and pay for all shares if any are
purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
Banc of America Securities LLC..............................
Chase Securities Inc........................................
--------
Total.............................................
========
</TABLE>
The representatives have advised us that 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 that price less a
concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After this offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
such reduction shall change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus. The common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part.
Prior to this offering, there has been no public market for the common
stock. Consequently, the public offering price for the common stock offered by
this prospectus has been determined through negotiations among the
representatives and us. Among the factors considered in such negotiations were
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
Over-Allotment Option
We have granted to the underwriters an option, exercisable during the
30-day period after the date of this prospectus, to purchase up to 570,000
additional shares of common stock, to cover over-allotments, if any, at the
public offering price less the underwriting discount set forth on the cover page
of this prospectus. If the underwriters exercise their over-allotment option to
purchase any of the additional 570,000 shares of common stock, the underwriters
have severally agreed, subject to certain conditions, to purchase approximately
the same percentage thereof as the number of shares to be purchased by each of
them bears to the total number of shares of common stock offered in this
offering. If purchased, these additional shares will be sold by the underwriters
on the same terms as those on which the shares offered hereby are being sold. We
will be obligated, pursuant to the over-allotment option, to sell shares to the
underwriters to the extent the over-allotment option is exercised. The
underwriters may exercise the over-allotment option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered in this offering.
59
<PAGE> 64
The following table summarizes the compensation to be paid to the
underwriters by us:
<TABLE>
<CAPTION>
TOTAL
---------------------
WITHOUT WITH
OVER- OVER-
PER SHARE ALLOTMENT ALLOTMENT
--------- --------- ---------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable
by First Horizon............................. $ $ $
</TABLE>
We estimate expenses payable by us in connection with this offering, other
than the underwriting discounts and commissions referred to above, will be
approximately $ .
Indemnity
The underwriting agreement contains covenants of indemnity among the
underwriters and us against certain civil liabilities, including liabilities
under the Securities Act, and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements
Each executive officer and director of First Horizon and substantially all
other holders of our securities have agreed during the period of 180 days after
the effective date of this prospectus, subject to specified exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock or any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock owned as of the date of this
prospectus or thereafter acquired directly by those holders or with respect to
which they have the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens Inc. However, FleetBoston Robertson Stephens Inc.
may, in its sole discretion and at any time or from time to time, without
notice, release all or any portion of the securities subject to lock-up
agreements. There are no existing agreements between the representatives and any
of our stockholders who have executed a lock-up agreement providing consent to
the sale of shares prior to the expiration of the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to certain exceptions, consent to the disposition of any shares held by
stockholders subject to lock-up agreements prior to the expiration of the
lock-up period, or issue, sell, contract to sell, or otherwise dispose of, any
shares of common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or exchangeable for
shares of common stock other than our sale of shares in this offering, the
issuance of our common stock upon the exercise of outstanding options or
warrants, and the issuance of options under existing stock option and incentive
plans provided that those options do not vest prior to the expiration of the
lock-up period. See "Shares Eligible for Future Sale."
Listing
We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol "FHRX."
60
<PAGE> 65
Stabilization
The representatives have advised us that, pursuant to Regulation M under
the Securities Act of 1933, some persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids that may have the effect of
stabilizing or maintaining the market price of the shares of common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of shares of common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price of
the common stock. A "syndicate covering transaction" is the bid for or purchase
of common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with the offering. A "penalty bid" is
an arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with the
offering if the common stock originally sold by such underwriter or syndicate
member purchased by the representatives in a syndicate covering transaction and
has therefore not been effectively placed by such underwriter or syndicate
member. The representatives have advised us that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
Directed Share Program
The underwriters have reserved up to 5% of the common stock to be issued by
us and offered for sale in this offering, at the initial public offering price,
to directors, officers, employees, business associates and persons otherwise
connected to First Horizon. The number of shares of common stock available for
sale to the general public will be reduced to the extent these individuals
purchase reserved shares. Any reserved shares that are not purchased will be
offered by the underwriters to the general public on the same basis as the other
shares offered in this offering.
LEGAL MATTERS
The validity of the shares of common stock that we are offering will be
passed upon for us by Arnall Golden & Gregory, LLP. Certain legal matters in
connection with this offering will be passed upon for the underwriters by Testa,
Hurwitz & Thibeault, LLP.
EXPERTS
The audited financial statements and schedule included in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, Independent Public Accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ADDITIONAL INFORMATION
We have 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 we are offering. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedule filed with it. We have omitted certain items in accordance
with the rules and regulations of the Commission. For further
61
<PAGE> 66
information with respect to our business and the common stock we are offering,
please see 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 statement being
qualified in all respects by such reference. You may inspect a copy of the
registration statement, and the exhibits and schedule filed with it, 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 you can obtain copies of all or any part of
the registration statement from these offices upon the payment of the fees
prescribed by the Commission. You can obtain information on the operation of the
public reference room by calling the Commission at 1-800-SEC-0330. 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. We have electronically filed the registration statement,
including all exhibits and schedule filed with it, with the Commission.
62
<PAGE> 67
FIRST HORIZON PHARMACEUTICAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Horizon Pharmaceutical Corporation:
We have audited the accompanying balance sheets of FIRST HORIZON
PHARMACEUTICAL CORPORATION (formerly Horizon Pharmaceutical Corporation, a
Delaware corporation) as of December 31, 1998 and 1999, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Horizon Pharmaceutical
Corporation as of December 31, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 17, 2000
F-2
<PAGE> 69
FIRST HORIZON PHARMACEUTICAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 425,023 $ 219,688
Accounts receivable, net of allowance for doubtful
accounts and discounts of $35,395 and $55,783 for 1998
and 1999, respectively................................. 1,147,248 2,900,623
Inventories............................................... 402,397 798,615
Samples and other prepaid expenses........................ 470,382 553,614
Deferred tax assets....................................... 146,931 550,780
---------- -----------
Total current assets.............................. 2,591,981 5,023,320
Property and equipment, net................................. 305,247 422,096
Other Assets:
Note receivable from related party........................ 30,000 30,000
Intangibles, net.......................................... 5,873 5,602,328
---------- -----------
Total other assets................................ 35,873 5,632,328
---------- -----------
Total assets...................................... $2,933,101 $11,077,744
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 553,318 $ 910,168
Accrued expenses.......................................... 795,645 2,776,647
Borrowings under revolving loan agreement................. 602,928 800,000
Current portion of long-term debt......................... -- 1,270,389
---------- -----------
Total current liabilities......................... 1,951,891 5,757,204
Long-Term Liabilities:
Long-term debt, net of current maturities................. -- 1,628,497
Deferred tax liabilities.................................. 25,080 76,479
---------- -----------
Total liabilities................................. 1,976,971 7,462,180
Commitments and Contingencies (Notes 1,5,6,8,10 and 11)
Stockholders' Equity:
Preferred stock, 1,000,000 shares authorized and none
outstanding............................................ -- --
Common stock, $0.001 par value; 40,000,000 shares
authorized; 7,981,248 and 8,539,643 shares issued and
outstanding in 1998 and 1999, respectively............. 7,982 8,540
Additional paid-in capital................................ 2,615,434 5,788,220
Deferred compensation..................................... 0 (1,284,374)
Accumulated deficit....................................... (1,667,286) (896,822)
---------- -----------
Total stockholders' equity........................ 956,130 3,615,564
---------- -----------
Total liabilities and stockholders' equity........ $2,933,101 $11,077,744
========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 70
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Net revenues..................................... $5,557,700 $9,252,058 $18,624,514
Operating costs and expenses
Cost of revenues............................... 1,136,691 1,903,054 3,140,416
Selling, general and administrative expenses,
excluding non-cash compensation expense..... 4,545,254 6,789,358 12,400,439
Non-cash compensation expense.................. 133,500 -- 143,986
Depreciation and amortization.................. 30,273 35,225 424,274
Research and development expense............... -- 255,000 860,350
---------- ---------- -----------
Total operating costs and expenses..... 5,845,718 8,982,637 16,969,465
Operating (loss) income.......................... (288,018) 269,421 1,655,049
Other income (expense):
Interest expense............................... (5,496) (14,017) (356,598)
Interest income................................ 2,909 4,383 11,950
Other.......................................... 3,629 (2,749) 8,059
---------- ---------- -----------
Total other income (expense)........... 1,042 (12,383) (336,589)
---------- ---------- -----------
Income before benefit (provision) for income
taxes.......................................... (286,976) 257,038 1,318,460
Benefit (provision) for income taxes............. 106,530 (121,484) (547,996)
---------- ---------- -----------
Net (loss) income................................ $ (180,446) $ 135,554 $ 770,464
========== ========== ===========
Net (loss) income per common share:
Basic.......................................... $ (0.02) $ 0.02 $ 0.10
========== ========== ===========
Diluted........................................ $ (0.02) $ 0.02 $ 0.08
========== ========== ===========
Weighted average common shares outstanding:
Basic.......................................... 7,576,580 7,978,234 8,028,673
========== ========== ===========
Diluted........................................ 7,576,580 8,565,227 9,099,899
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 71
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN DEFERRED ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT TOTAL
--------- ------ ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996..... 5,830,000 $5,830 $1,139,553 $ -- $(1,622,394) $ (477,011)
Conversion of debt to
equity..................... 1,261,248 1,262 787,021 -- -- 788,283
Proceeds from sale of
stock...................... 880,000 880 549,120 -- -- 550,000
Deferred compensation........ -- -- 133,500 -- -- 133,500
Net loss..................... -- -- -- -- (180,446) (180,446)
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1997..... 7,971,248 7,972 2,609,194 -- (1,802,840) 814,326
Stock options exercised...... 10,000 10 6,240 -- -- 6,250
Net income................... -- -- -- -- 135,554 135,554
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1998..... 7,981,248 7,982 2,615,434 -- (1,667,286) 956,130
Conversion of debt to
equity..................... 558,395 558 1,744,426 -- -- 1,744,984
Deferred compensation........ -- -- 1,428,360 (1,284,374) -- 143,986
Net income................... -- -- -- -- 770,464 770,464
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1999..... 8,539,643 $8,540 $5,788,220 $(1,284,374) $ (896,822) $3,615,564
========= ====== ========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 72
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income................................. $(180,446) $ 135,554 $ 770,464
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization................ 30,273 35,225 424,274
Non-cash interest expenses................... -- -- 144,984
Deferred tax provision....................... (108,867) 102,000 (352,450)
Non-cash compensation expense................ 133,500 -- 143,986
Loss on disposal of equipment................ -- 4,404
Changes in assets and liabilities net of
acquired assets and liabilities:
Accounts receivable........................ (226,597) (486,629) (1,753,375)
Inventories................................ 35,309 (261,368) (396,218)
Samples and other prepaid expenses......... (304,815) (139,445) (83,232)
Notes receivable from related party........ -- (30,000) --
Accrued expenses........................... 153,621 446,429 1,763,019
Accounts payable........................... 272,031 13,288 356,850
--------- --------- -----------
Net cash (used in) provided by operating
activities........................... (195,991) (180,542) 1,018,302
--------- --------- -----------
Cash flows from investing activities:
Purchase of intangibles......................... 500 -- (4,000,000)
Purchase of property and equipment.............. (121,272) (208,464) (185,709)
--------- --------- -----------
Net cash used in investing activities... (120,772) (208,464) (4,185,709)
Cash flows from financing activities:
Proceeds from revolving loan agreement.......... -- 563,013 197,072
Proceeds from long-term debt.................... -- -- 4,000,000
Principal payments on long-term debt............ (19,457) -- (1,235,000)
Proceeds from issuance of common stock.......... 550,000 6,250 --
--------- --------- -----------
Net cash provided by financing
activities........................... 530,543 569,263 2,962,072
--------- --------- -----------
Net change in cash and cash equivalents........... 213,780 180,257 (205,335)
Cash and cash equivalents, beginning of year...... 30,986 244,766 425,023
--------- --------- -----------
Cash and cash equivalents, end of year............ $ 244,766 $ 425,023 $ 219,688
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 73
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
First Horizon Pharmaceutical Corporation (formerly Horizon Pharmaceutical
Corporation, the "Company") is an emerging pharmaceutical company that markets
and sells brand name prescription drugs to high-prescribing primary care and
select specialty physicians in the United States through their nationwide sales
and marketing field force. The Company focuses on the treatment of chronic
conditions, including cardiovascular diseases, respiratory and
gastroenterological disorders, and pain and inflammation. The Company's strategy
is to acquire and obtain licenses for pharmaceutical products that other
companies do not actively market, and to increase sales through aggressive
promotion and marketing. In addition, the Company seeks to maximize the value of
their drugs by developing new patentable formulations, using new delivery
methods and seeking regulatory approval for new indications.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment to customers and
are shown net of sales adjustments. Provisions for discounts, rebates to
customers, returns, and other adjustments are provided in the same period that
the related sales are recorded. Cost of revenues is comprised of purchased
product costs.
ROYALTIES AND COMMISSION COSTS
The Company pays royalties and commissions on the sale of certain products.
These costs are included in selling general and administrative costs in the
accompanying statement of operations. Total royalties and commission costs were
$81,000, $194,000 and $620,000 for the years ending December 31, 1997, 1998 and
1999, respectively.
RESEARCH AND DEVELOPMENT
Research and development expenses consist primarily of costs incurred to
develop formulations, engage contract research organizations to conduct clinical
studies, test products under development and engage medical and regulatory
consultants. The Company expenses all research and development costs as
incurred. Research and development costs were $0, $255,000 and $860,350 for the
years ended December 31, 1997, 1998 and 1999, respectively.
RETURNS AND REBATE ALLOWANCES
The Company provides all customers with a right of return within six months
of the expiration date of the product, and as a result records a provision for
returns at the time of sale. The Company is contractually obligated to pay
rebates on the sale of certain prescription drugs.
F-7
<PAGE> 74
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The reserve for returns and rebates is estimated based upon historical
experience and other relevant information, in accordance with generally accepted
accounting principles. There is no certainty that future returns and rebates
will not exceed established reserves.
CASH AND CASH EQUIVALENTS
The Company considers only those investments that are highly liquid, and
readily convertible to cash with an original maturity of three months or less to
be cash equivalents. The Company had no cash equivalents at December 31, 1998 or
1999.
CONCENTRATION OF CREDIT RISK
The Company extends credit on an uncollateralized basis primarily to
wholesale drug distributors and retail pharmacy chains throughout the United
States. Historically, the Company has not experienced significant credit losses
on its accounts.
The Company's five largest customers accounted for approximately 79% and
66% of account's receivable at December 31, 1998 and 1999, respectively.
The following table represents a summary of sales to significant customers
as a percentage of the Company's total revenues:
<TABLE>
<CAPTION>
CUSTOMER 1997 1998 1999
- -------- ---- ---- ----
<S> <C> <C> <C>
McKesson HBOC, Inc......................................... 29% 29% 28%
Cardinal Health, Inc....................................... 28 28 19
Bergen Brunswig Corporation................................ 12 12 10
</TABLE>
The Company relies on third-party suppliers to produce its products. The
supply of a product whose sales comprised 24% of the Company's sales in 1999 is
exclusively available through a single supplier.
Two products accounted for 46%, 49% and 51% of the Company's sales in 1997,
1998 and 1999, respectively.
SEGMENT REPORTING
The Company operates in a single segment, the sale and marketing of
prescription drugs.
INVENTORIES
Inventories consist of purchased pharmaceutical products and are stated at
the lower of cost or market. Cost is determined using the first-in, first-out
method.
SAMPLES AND OTHER PREPAID EXPENSES
Samples and other prepaid expenses primarily consist of product samples
used in the sales and marketing efforts of the Company's products. Samples are
expensed upon distribution.
F-8
<PAGE> 75
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major improvements, which extend
the lives of existing property and equipment, are capitalized. Depreciation is
provided for on the straight-line basis over the estimated useful lives of the
assets. Accelerated depreciation is used for income tax purposes. Expenditures
for maintenance and repairs that do not extend the lives of the applicable
assets are charged to expense as incurred.
The estimated useful lives of the classes of assets generally are as
follows:
<TABLE>
<S> <C>
Office equipment....................................... Five to ten years
Furniture and fixtures................................. Five to ten years
Computer hardware and software......................... Three to seven years
Leasehold improvements................................. Five years
</TABLE>
The components of property and equipment as of December 31, 1998 and 1999
are as follows:
<TABLE>
<CAPTION>
1998 1999
-------- ---------
<S> <C> <C>
Office equipment....................................... $ 36,583 $ 42,315
Furniture and fixtures................................. 81,641 131,065
Computer hardware and software......................... 172,892 294,414
Leasehold improvements................................. 89,617 98,648
-------- ---------
380,733 566,442
Less accumulated depreciation and amortization......... (75,486) (144,346)
-------- ---------
Property and equipment, net.................. $305,247 $ 422,096
======== =========
</TABLE>
Depreciation and amortization expense related to property and equipment,
for the years ended December 31, 1997, 1998, and 1999 was $29,924, $34,745, and
$68,860, respectively.
In the event that facts and circumstances indicate that the carrying
amounts of property and equipment may be impaired, an evaluation of
recoverability is performed using the estimated future undiscounted cash flows
associated with the asset compared to the asset's carrying amount to determine
if a write-down is required.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position, or "SOP," No. 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. The Company was required to implement SOP No.
98-1 for the year ending December 31, 1999. The adoption of SOP No. 98-1 had no
impact to the financial condition or results of operations of the Company.
INTANGIBLE ASSETS
The costs of obtaining patents and product licenses are capitalized and
amortized on a straight-line basis over the estimated periods benefited by the
asset (15 to 20 years). Amortization of such assets is included in depreciation
and amortization expense in the accompanying financial statements. Amortization
expense for the years ended December 31, 1997, 1998, and 1999 was $979, $480,
and $269,326 respectively.
F-9
<PAGE> 76
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company continually reevaluates the propriety of the carrying amount of
intangibles as well as the related amortization period to determine whether the
current events and circumstances warrant adjustments to the carrying values
and/or estimates of useful lives. This evaluation is performed using the
estimated projected future undiscounted cash flows associated with the asset
compared to the asset's carrying amount to determine if a write-down is
required. To the extent such projections indicate that the undiscounted cash
flows are not expected to be adequate to recover the carrying amounts, the
assets are written down to fair value as determined by discounting future cash
flows.
INCOME TAXES
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes."
SFAS No. 109 requires recognition of deferred tax assets and liabilities using
currently enacted tax rates.
MARKETING AND ADVERTISING COSTS
The Company follows the policy of charging the costs of marketing and
advertising to expense as incurred. Marketing and advertising expenses were
$46,188, $39,233, and $178,929 for the years ending December 31, 1997, 1998 and
1999 respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's borrowings under its variable rate long-term debt agreements
are recorded at cost, which approximates fair value.
EARNINGS PER SHARE
As required by SFAS No. 128, "Earnings Per Share," the Company has
presented basic and diluted earnings per common share amounts in the
accompanying financial statements. Basic earnings per common share is calculated
based on the weighted average common shares outstanding during the year, while
diluted earnings per common share also gives effect to all potential dilutive
stock equivalents during each year such as options, warrants, and contingently
issuable shares. The Company incurred a net loss in 1997 and, as such, the
weighted average number of common shares used for diluted earnings per common
share does not consider the potential dilutive effect of such common stock
equivalents as such consideration would have an antidilutive effect on earnings
per common share.
Below is the calculation of basic and diluted net (loss) income per common
share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Net (loss) income........................ $ (180,446) $ 135,554 $ 770,464
========== ========== ===========
Weighted average common shares
outstanding -- basic................... 7,576,580 7,978,234 8,028,673
Dilutive effect of stock options......... N/A 586,993 1,071,226
---------- ---------- -----------
Weighted average common shares
outstanding -- diluted................. 7,576,580 8,565,227 9,099,899
========== ========== ===========
Basic net (loss) income per share........ $ (0.02) $ 0.02 $ 0.10
========== ========== ===========
Diluted net (loss) income per share...... $ (0.02) $ 0.02 $ 0.08
========== ========== ===========
</TABLE>
F-10
<PAGE> 77
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year financial statement presentation.
RESTATED FINANCIAL STATEMENTS
The financial statements for the period ending December 31, 1997 have been
restated to reflect certain adjustments for accrued expenses net of taxes.
SUPPLEMENTAL CASH FLOW DISCLOSURES
The Company purchased intangible assets for $4,000,000 in cash with an
additional $1,800,000 financed by the seller. Pursuant to the acquisition, the
Company also assumed estimated liabilities of $218,460 for returns of products
shipped by the seller prior to the acquisition date in 1999.
The Company issued 1,261,248 and 558,395 shares of common stock in the
conversion of outstanding convertible debt (including accrued interest) totaling
$788,283 and $1,744,984 and in 1997 and 1999, respectively.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1998 1999
---- ------- --------
<S> <C> <C> <C>
Cash paid for taxes................................ $ -- $ -- $777,927
==== ======= ========
Cash paid for interest............................. $970 $10,855 $235,889
==== ======= ========
</TABLE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company must
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 the Company does not hold any derivative financial
instruments and does not engage in hedging activities, adoption of SFAS
instruments as well as other hedging activities. Because the Company does not
hold any derivative financial instruments and does not engage in hedging
activities, adoption of SFAS No. 133 is not expected to have a material impact
on the Company's financial condition or results of operations.
2. REVOLVING LOAN AGREEMENT
In May 1998, the Company entered into a revolving loan agreement with a
bank under which the Company can borrow up to $1,000,000, subject to borrowing
base limitations based on eligible accounts receivable and inventory balances,
as defined in the agreement. The revolving loan agreement was amended and
restated on December 22, 1998 to provide for partial financing of a product
acquisition through a term loan. Under the amended agreement, terms of the
revolving loan facility provide for up to $2,500,000, subject to borrowing base
limitations
F-11
<PAGE> 78
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
based on eligible accounts receivable and inventory, as defined in the
agreement. Borrowings under the revolving loan facility bear interest at the
bank's prime rate, and are due on January 31, 2001. At December 31, 1999, the
outstanding balance under the revolving loan was $800,000 with an interest rate
of 8.5%, and the Company had additional availability under the terms of the
agreement of approximately $1,700,000. During January 2000, the loan agreement
was amended and restated to provide for borrowings up to $3,500,000 through June
30, 2000, reverting back to $2,500,000 from June 30, 2000 to January 31, 2001.
The revolving loan agreement contains certain restrictive covenants including,
among other things, minimum EBITDA levels and debt to equity ratio. Any failure
to comply with these requirements could have a material adverse effect on the
Company's operations, unless waivers are obtained.
3. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Term note payable (initial amount of $2,400,000) to a
bank bearing interest at the lesser of Prime or
LIBOR plus 2% (7.96% at December 31, 1999), with
monthly payments of $40,000 plus accrued interest
maturing in December 2001........................... $ -- $1,840,000
Obligation to a seller of intangible assets payable in
quarterly installments of $225,000 through February
2001, net of an unamortized discount of $52,850,
using an interest rate of 8.75%..................... -- 1,058,886
-------- ----------
-- 2,898,886
Less current maturities............................... -- (1,270,389)
-------- ----------
Total....................................... $ -- $1,628,497
======== ==========
</TABLE>
The term note payable contains certain restrictive covenants including,
among other things, minimum EBITDA levels and debt to equity ratio. Any failure
to comply with these requirements could have a material adverse effect on the
Company's operations, unless waivers are obtained.
Future maturities of long-term debt are $1,270,389 and $1,628,497 for the
years ended December 31, 2000 and 2001, respectively.
F-12
<PAGE> 79
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
-------- ----------
<S> <C> <C>
Employee compensation and benefits........................ $510,578 $ 891,285
Customer return allowance................................. 140,000 272,423
Product rebates........................................... -- 851,248
Interest.................................................. 15,028 64,011
Other..................................................... 130,039 697,680
-------- ----------
$795,645 $2,776,647
======== ==========
</TABLE>
5. STOCKHOLDER'S EQUITY
In 1998, the Company approved a four-for-one common stock split, thus
increasing authorized common shares from 10 million to 40 million. All common
stock information for all periods presented herein has been restated to give
effect to this stock split.
Through 1996, the Company borrowed $635,000 from related parties accruing
interest at Prime plus 2%. During 1997, the Company issued 1,261,248 shares of
common stock by converting the $635,000 of debt to shareholders, plus accrued
interest of $153,283 to common stock at a rate of $0.625 per share, the then
estimated fair market value. Additionally, the company issued 880,000 shares of
common stock at $0.625 per share in exchange for $550,000 in cash.
In 1998, 10,000 shares of common stock were issued upon exercise of stock
options at an exercise price of $0.625 per share.
During 1999, the Company issued 558,395 shares of common stock upon the
conversion of $1.6 million of convertible debt incurred for the purchase of a
product license and accrued interest of $144,984 thereon to common stock. The
shares were converted at a rate of $3.125 as stipulated in the applicable
agreement. The original debt agreement stipulated an interest rate of Prime plus
2% (10.25% at the conversion date) with the full principal amount due by
December 1, 2001.
Under the Company's Restated Certificate of Incorporation the Board of
Directors has the authority, without further action by the stockholders, to
issue up to 1,000,000 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. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of the Company, which could have a depressive effect on the
market price of our common stock. The Company has no present plan to issue any
shares of
F-13
<PAGE> 80
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
preferred stock. As of December 31, 1998 and 1999 there were no shares of
preferred stock outstanding.
6. STOCK OPTIONS
Pursuant to the Company's 1997 Non-Qualified Stock Option Plan (the
"Plan"), the Board of Directors approved the issuance of options to purchase
shares of common stock of the Company to various employees. Under the Plan,
4,000,000 shares (adjusted for the 1998 four-for-one stock split) of common
stock were reserved for issuance. Vesting periods range from immediate to four
years, and options granted generally expire seven years from the date of grant.
All options also include accelerated vesting provisions in the event of a change
in control, as defined in the Plan.
The Company has granted stock options to officers, directors, and employees
as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF SHARES AVERAGE
SUBJECT TO EXERCISE
OPTIONS PRICE
---------- --------
<S> <C> <C>
Outstanding at December 31, 1996........................ -- N/A
Granted............................................... 870,000 $0.556
Canceled.............................................. -- N/A
--------- ------
Outstanding at December 31, 1997........................ 870,000 0.556
Granted............................................... 122,000 1.875
Canceled.............................................. (10,000) 1.375
Exercised............................................. (10,000) 0.625
--------- ------
Outstanding at December 31, 1998........................ 972,000 0.712
Granted............................................... 785,500 2.494
Canceled.............................................. (5,000) 2.250
Exercised............................................. -- N/A
--------- ------
Outstanding at December 31, 1999........................ 1,752,500 $1.506
========= ======
Shares vested at December 31, 1999...................... 753,750
=========
</TABLE>
At December 31, 1999, approximately 2,237,500 shares remained reserved for
issuance under the 1997 Plan. Subsequent to year-end the Company retired the
1997 Plan. Prior to the retirement of the 1997 Plan the Company's board approved
the issuance of an additional 47,500 options, exercisable at $8.35 per share. At
February 14, 2000, 1,800,000 options were issued and outstanding under the 1997
Plan. The intent of Company management is to no longer issue options under the
1997 Plan. The following table sets forth the range of exercise prices, number
of shares, weighted average exercise price, and remaining contractual lives by
similar price and grant date at December 31, 1999.
F-14
<PAGE> 81
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------- -----------------------
OUTSTANDING WEIGHTED WEIGHTED EXERCISABLE WEIGHTED
AT AVERAGE AVERAGE AT AVERAGE
DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICE 1999 CONTRACTUAL LIFE PRICE 1999 PRICE
- --------------------------- ------------ ---------------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.500 - $0.625 856,000 4.9 years $0.556 706,000 $0.540
1.875 - 1.880 234,000 7.7 years 1.876 41,500 1.661
2.500 - 2.650 662,500 9.6 years 2.605 6,250 2.500
--------- -------
Total 1,752,500 753,750
========= =======
</TABLE>
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock options. Accordingly, the Company obtained appraisals
of the fair market value of the stock on the date of the option grant and will
recognize compensation expense over the vesting period of the options. The
Company has recognized compensation expense related to stock options grants of
$133,500, $0 and $143,986, in 1997, 1998 and 1999, respectively. Had
compensation costs for these options been determined using the minimum value
option pricing model prescribed by SFAS 123, "Accounting for Stock Based
Compensation," the Company's Pro forma net (loss) income per common share share
would have been reported as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Net (loss) income:
As reported................................ $(180,446) $135,554 $770,464
Pro-forma.................................. (251,889) 111,734 476,823
Net (Loss) Income per Common Share -- basic:
As Reported................................ (0.02) 0.02 0.10
Pro-forma.................................. (0.03) 0.01 0.06
Net (Loss) Income per Common
Share -- diluted:
As Reported................................ (0.02) 0.02 0.08
Pro-forma.................................. (0.03) 0.01 0.05
</TABLE>
The weighted average minimum value of options granted during 1997, 1998 and
1999 is estimated at $0.44, $1.51, $2.01 per share. The minimum value of options
is estimated on the date of the grant using the following weighted average
assumptions:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate....................... 6.19% 5.53% 5.57%
Expected dividend yield....................... -- -- --
4 4 4
Expected lives................................ years years years
Expected volatility........................... --% --% --%
</TABLE>
On February 14, 2000, the Board of Directors and stockholders approved the
2000 Stock Plan. This plan provides for the granting of incentive stock options
under the Internal Revenue Code of 1986; options that do not qualify as
incentive stock options, stock awards or stock bonuses, and sales of stock. The
2000 Stock Plan provides for the grants of these options and other awards to
officers, directors, full- and part-time employees, advisors and consultants.
Only
F-15
<PAGE> 82
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
full-time employees may receive incentive stock options. The Company has
reserved 2,000,000 shares of common stock for issuance under the 2000 Stock
Plan. The Company's compensation committee administers the 2000 Stock Plan and
has the sole authority to determine the meaning and application of the terms of
the plan and all grant agreements, the persons to whom option or stock grants
are made, the nature and amount of option or stock grants, the price to be paid
upon exercise of each option, the period within which options may be exercised,
the restrictions on stock awards, and the other terms and conditions of awards.
The 2000 Stock Plan will terminate in February 2010. Subsequent to the approval
of this plan, the Company's Board of Directors approved the grant of options to
purchase 177,950 shares of common stock which will become effective upon the
issuance of stock by the Company in a public offering. Such options will be
exercisable at the offering price.
The Company adopted an employee stock purchase plan on February 14, 2000
that is intended to qualify as an employee stock purchase plan within the
meaning of Section 423 of the Internal Revenue Code. The Company has reserved
500,000 shares of common stock for the stock purchase plan. In order to
participate in the stock purchase plan, employees must meet eligibility
requirements, including length of employment. Participating employees will be
able to direct the Company to make payroll deductions of up to 7% of their
compensation during an offering period for the purchase of shares of the
Company's common stock. Each offering period will be six months, beginning on
July 1, 2000. The stock purchase plan will provide participating employees with
the right, subject to specific limitations, to purchase the Company's common
stock at a price equal to 85% of the lesser of the fair market value of the
Company's common stock on the first or last day of the offering period. The
Board of Directors has the authority to amend, suspend or discontinue the stock
purchase plan as long as the change will not adversely affect participants
without their consent and as long as the Company receives the shareholder
approval required by law. The stock purchase plan will terminate on December 31,
2010.
7. INCOME TAXES
The benefit/(provision) for income taxes for 1997, 1998 and 1999 consisted
of the following components:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
Current.................................. $ (2,337) $ (19,484) $(900,446)
Deferred................................. 108,867 (102,000) 352,450
-------- --------- ---------
Total.......................... $106,530 $(121,484) $(547,996)
======== ========= =========
</TABLE>
F-16
<PAGE> 83
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of the statutory rate to the effective rate as recognized
in the statement of operations is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate................................. 35% (35)% (35)%
State taxes, net....................................... 4 (4) (4)
Nondeductible meals and entertainment expenses......... (2) (8) (3)
-- --- ---
37% (47)% (42)%
== === ===
</TABLE>
Deferred tax assets and liabilities reflect the impact of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts recognized for income tax purposes.
Significant components of the Company's net deferred tax assets as of December
31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Current deferred tax assets:
Net operating loss carryforward....................... $ 33,196 $ --
Accrued liabilities................................... 60,335 439,785
Deferred compensation................................. 53,400 110,995
-------- --------
146,931 550,780
Long-term deferred tax liabilities:
Depreciation and amortization......................... 25,080 76,479
-------- --------
Net deferred tax assets....................... $121,851 $474,301
======== ========
</TABLE>
8. LICENSE AGREEMENTS AND PRODUCT RIGHTS
On January 1, 1996, the Company obtained exclusive distribution rights from
Unisource, Inc. for Tanafed in North America through December 31, 2003 with an
option for an additional seven years. The agreement requires the Company to
purchase all of their requirements for Tanafed from Unisource, including at
least certain minimum quantities of Tanafed in each year of the agreement. The
Company entered into a patent and license agreement with the raw materials'
supplier for Tanafed dated January 2000, which provides a license to a patent
covering an active ingredient in Tanafed.
On October 31, 1998, the Company entered into an agreement with Inpharmakon
Corporation in which the Company acquired rights to the proprietary information
for a migraine product for which the Company plans to conduct a clinical study
and submit a new drug application. The agreement expires on October 31, 2008;
however, the Company may renew it indefinitely after expiration. Under the
agreement, the Company must develop a workable once-a-day formulation for the
drug, conduct clinical trials, file for regulatory approval, obtain regulatory
approval and begin commercial sales of the product within prescribed times. If
the Company does not reach specified milestones on a timely basis, Inpharmakon
may terminate the agreement. The Company paid $200,000 to Inpharmakon during
1998 under the terms of the agreement. The Company must also pay fees to
Inpharmakon and, in the event of commercial
F-17
<PAGE> 84
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
sales of the product, the Company must pay royalties. If the Company elects to
sell the opportunity to a third party, the Company must share the proceeds of
the sale with Inpharmakon.
On January 29, 1999, the Company acquired exclusive rights in the United
States to Robinul and Robinul Forte tablets from American Home Products
Corporation. The Company agreed to pay royalties on net sales as long as the
Company sells the product. The Company negotiated for AHP, or its designee, to
continue to manufacture and supply the product to the Company until January 29,
2001. The Company has an agreement with a supplier, dated April 23, 1999, for
the supplier to become qualified under applicable regulations to manufacture and
supply the requirements for Robinul. Under this agreement, the supplier will
manufacture the products for five years from the time the supplier becomes a
qualified manufacturer plus renewal terms of one year until either party elects
to not renew. The agreement with the supplier requires that the Company purchase
certain designated minimum quantities. The Company has capitalized the cost of
obtaining the license and is amortizing it over an estimated economic life of 20
years.
On March 25, 1999, the Company acquired the rights from Penwest
Pharmaceuticals Co. to the application of Penwest's controlled release TIMERx
technology to the active ingredient in the migraine product. Under the Penwest
agreement, the Company has the right to manufacture, use and sell the developed
product in North America and Mexico for a period extending fifteen years from
the date a new drug application is issued for the product, as well as a license
to the TIMERx(R) patents for such purpose. The Company must pay Penwest fees
upon achieving specified development milestones and royalties upon any sales of
the migraine product. Penwest may terminate the agreement in the event the
Company fails to timely achieve designated performance milestones within
prescribed time periods.
In July 1999, the Company entered in to an agreement with Pohl-Boskamp for
the exclusive rights to distribute, market and sell Nitrolingual Pumpspray
beginning on February 1, 2000 in the United States for five years plus an
additional five year renewal period subject to establishing mutually acceptable
minimum purchase requirements. Under the agreement, Pohl-Boskamp supplies the
Company with their requirements of product at prices that decrease as volume
purchased in each year increases. The Company must purchase designated minimum
quantities in each year of the agreement and pay a royalty on net sales of the
product. Aventis had exclusive rights through January 2000 to a version of the
product containing CFC named Nitrolingual Spray. To promote earlier adoption of
Nitrolingual Pumpspray, the Company obtained exclusive rights from Aventis to
market this CFC product in the United States as of November 22, 1999.
Each of the Company's third-party manufacturing agreements requires that
the Company purchase all of their product requirements from the manufacturers
that are a party to those agreements.
The Company uses third-party manufacturers for the production of its
products for development and commercial purposes. Given the general
under-utilization of resources, the availability of excess capacity for
manufacturing in the marketplace, and the lower cost of outsourcing, the Company
intends to continue to outsource manufacturing for the near-term.
F-18
<PAGE> 85
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company currently uses the services of six third-party manufacturers
for manufacturing of the Company's products pursuant to the Company's product
specifications. The Company has manufacturing and supply agreements with five of
these manufacturers. The remaining terms of these agreements generally range
from one to five years. Under some of these agreements, the manufacturers or
other third parties own the rights to the product that the Company has under
their marketing licenses. The Company has not entered into agreements for
alternative manufacturing sources for any of its products. The suppliers of
Nitrolingual Pumpspray and the raw materials for Tanafed hold patents for their
respective products.
9. RETIREMENT PLAN
In 1996, the Company began a qualified defined contribution 401(k) plan,
which provides benefits to substantially all employees. The annual contribution,
if any, to the trust is at the discretion of the Board of Directors of the
Company. There were no employer contributions to the plan for the year ended
December 31, 1997. Employer contributions to the plan for the year ended
December 31, 1998 and 1999 were $20,695 and $36,055 respectively.
10. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities under a cancelable operating lease that
expires in August 2003. The total annual rent expense was $38,962, $90,315, and
$211,533 for 1997, 1998 and 1999, respectively. The Company leases vehicles for
certain employees under cancelable lease agreements expiring in 2001. The total
annual vehicle lease expense under the lease agreement for the years ended
December 31, 1997, 1998 and 1999 was $0, $0, and $434,393, respectively.
The total minimum future commitment under lease for years succeeding
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
2000................................................ $ 999,969
2001................................................ 621,903
2002................................................ 198,073
2003................................................ 137,640
2004................................................ 8,525
----------
Total....................................... $1,966,110
==========
</TABLE>
Subsequent to year end, the Company entered in employment contracts with
certain executives. These contracts provide base salaries ranging from $80,000
to $110,000.
11. RELATED-PARTY TRANSACTIONS
The Company purchases repackaging services from Diversified Healthcare
Services, a related party. For the years ended December 31, 1997, 1998, and
1999, the amounts paid for repackaging were approximately $83,000, $132,000, and
$282,000, respectively.
F-19
<PAGE> 86
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company pays royalties to a related party for particular products sold.
For the years ended December 31, 1997, 1998, and 1999, the amounts paid for
royalties were approximately $91,000, $160,000, and $163,000, respectively.
During 1997, the Company converted $385,000 in loans from Kamal Kapoor, a
related party, plus $124,363 accrued interest, into 814,978 shares of common
stock at a rate of $0.625 per share.
During 1997, the Company converted $150,000 in loans from the John N.
Kapoor Trust dated September 30, 1989, an affiliate of the Company, plus $3,345
accrued interest, into 245,352 shares of common stock at a rate of $0.625 per
share.
During 1997, the Company converted $100,000 in loans from EJ Financial
Enterprises, plus $25,575 accrued interest, into 200,918 shares of common stock
at a rate of $0.625 per share.
On January 27, 1997, the Company issued 320,000 shares of its common stock
to the John Kapoor Trust in exchange for $200,000.
On June 30, 1997, the Company issued 560,000 shares of its common stock to
Kapoor-Pharma Investments in exchange for $350,000.
The Company extended a non-interest bearing note receivable to an officer
of the Company during 1998. As of December 31, 1998 and 1999 the amount due to
the Company under this note was $30,000.
During 1998, the Company entered into a collaboration agreement with
Inpharmakon Corporation, an affiliate of an officer of the Company, under which
Inpharmakon will assist the Company in developing their FHPC 01 product. The
Company paid $200,000, and $1,352 to Inpharmakon in 1998 and 1999, respectively
under this agreement.
On January 11, 1999, Kapoor-Pharma Investments, an affiliate of the
Director of the Company, loaned the Company $1,600,000 at an interest rate of 2%
over the Prime Rate of Interest. In November 1999, the Company converted
principal and $144,984 of accrued interest totaling $1,744,984 into 558,395
shares of common stock at $3.125 per share, pursuant to the terms of the loan
agreement.
F-20
<PAGE> 87
UNTIL , 2000 (25 DAYS AFTER COMMENCEMENT OF THE OFFERING),
ALL DEALERS THAT BUY, SELL, OR TRADE OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE> 88
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, the Nasdaq listing fee and the NASD filing fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- ------
<S> <C>
Registration fee............................................ $16,151.52
Nasdaq National Market listing fee.......................... *
NASD filing fee............................................. 6,618
Blue sky qualification fees and expenses.................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer agent and registrar fees........................... *
Miscellaneous............................................... *
----------
Total............................................. $ *
==========
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Delaware law, the Registrant's 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 First Horizon 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 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 maintains a policy of directors and officers
insurance that provides insurance against certain expenses and liabilities which
may be incurred by directors and officers.
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> 89
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the last three years, the Registrant has sold or issued the
following unregistered securities:
(1) As of December 8, 1999, the Registrant issued an aggregate of
558,395 shares of its common stock for an aggregate consideration of
$1,744,984 to an accredited investor pursuant to the conversion of a
convertible promissory note issued to such accredited investor as of
January 11, 1999.
(2) As of December 7, 1998, the Registrant made effective a four for
one stock split with respect to its issued and outstanding common stock.
(3) As of April 20, 1998, the Registrant issued 10,000 shares of its
common stock for an aggregate consideration of $6,250 to an employee
pursuant to the exercise of its stock option.
(4) As of June 30, 1997, the Registrant issued 560,000 shares of its
common stock for an aggregate consideration of $350,000 to one accredited
investor.
(5) At various times during the relevant three-year time period, the
Registrant issued to certain employees and consultants options to purchase
in the aggregate up to 1,725,500 shares of its common stock at exercise
prices ranging from $0.50 to $2.65 per share.
Exemption from the registration provisions of the Securities Act for the
transaction described in paragraph 2 above was claimed on the basis that such
transaction did not constitute an "offer," "offer to sell," "sale," or "offer to
buy" under Section 5 of the Securities Act. Exemption from the registration
provisions of the Securities Act for the other transactions described above was
claimed under Section 4(2) of the Securities Act and the rules and regulations
promulgated thereunder on the basis that such transaction did not involve any
public offering, the purchasers were sophisticated with access to the kind of
information registration would provide and that such purchasers acquired such
securities without a view towards distribution thereof. In addition, exemption
from the registration provisions of the Securities Act for the transactions
described in paragraphs 3 and 5 was claimed under Section 3(b) of the Securities
Act on the basis that such securities were sold pursuant to a written
compensatory benefit plans or pursuant to a written contract relating to
compensation and not for capital raising purposes under Rule 701 of the
Securities Act.
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> <C> <S>
1 -- Form of Underwriting Agreement
3.1 -- Restated Certificate of Incorporation of the Registrant
3.2 -- Amended and Restated Bylaws of the Registrant
4* -- Form of Stock Certificate
5* -- Opinion of Arnall Golden & Gregory, LLP
</TABLE>
II-2
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.1 -- 1997 Non-Qualified Stock Option Plan
10.2 -- 2000 Stock Plan
10.3 -- Form of Nonqualified Stock Option Agreement
10.4 -- Form of Employment Agreement dated as of January 1, 2000
between the Registrant and certain of its executive officers
10.5 -- Convertible Term Loan Note dated January 11, 1999 made by
the Registrant for the benefit of Kapoor Pharma Investments,
L.P., as amended by Amendment No. 1 to the Convertible Term
Note dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.6 -- Convertible Term Note Agreement dated January 11, 1999
between the Registrant and Kapoor Pharma Investments, L.P.,
as amended by Amendment No. 1 to the Convertible Term Note
dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.7 -- Lease Agreement dated June 28, 1998 between the Registrant
and ASC North Fulton Associates Joint Venture
10.8** -- Product Development and Supply Agreement dated March 25,
1999 between the Registrant and Penwest Pharmaceuticals Co.
10.9** -- Collaboration Agreement dated October 31, 1998 between the
Registrant and Inpharmakon Corporation
10.10** -- Exclusive Patent License Agreement dated January 1, 2000
between the Registrant and Jame Fine Chemicals, Inc.
10.11** -- Exclusive Distribution Agreement dated January 1, 1996
between the Registrant and Unisource, Inc.
10.12** -- Manufacturing and Supply Agreement dated April 23, 1999
between the Registrant and Mikart, Inc.
10.13** -- Product Supply Agreement dated January 29, 1999 between the
Registrant and American Home Products Corporation
10.14** -- License Agreement dated January 29, 1999 between the
Registrant and American Home Products Corporation
10.15** -- Distribution Agreement dated July 22, 1999 between the
Registrant and G. Pohl-Boskamp GmbH & Co.
10.16 -- Form of Indemnity Agreement between the Registrant and its
directors and executive officers
23.1 -- Consent of Arthur Andersen LLP
23.2* -- Consent of Arnall Golden & Gregory, LLP (included in Exhibit
5)
24 -- Powers of Attorney (included on page II-5)
27 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* To be filed by amendment
** First Horizon has requested confidential treatment for certain portions of
this exhibit pursuant to Rule 406 of the Securities Act of 1933, as amended.
II-3
<PAGE> 91
(b) The following is the schedule filed as a part of the registration
statement: Schedule II -- Valuation and Qualifying Accounts.
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> 92
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 Roswell, State of Georgia on
the 18th day of February, 2000.
FIRST HORIZON PHARMACEUTICAL CORPORATION
By: /s/ R. BRENT DIXON
--------------------------------------
R. Brent Dixon
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints R. Brent Dixon and Balaji Venkataraman, and each
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, any related registration statement
filed pursuant to Rule 462 promulgated pursuant to the Securities Act, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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 indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MAHENDRA G. SHAH, PH.D. Chairman of the Board and February 18, 2000
- --------------------------------------------- Chief Executive Officer
Mahendra G. Shah, Ph.D. (principal executive
officer)
/s/ R. BRENT DIXON President and Director February 18, 2000
- ---------------------------------------------
R. Brent Dixon
/s/ JOHN. N. KAPOOR, PH.D. Director February 18, 2000
- ---------------------------------------------
John. N. Kapoor, Ph.D.
/s/ BALAJI VENKATARAMAN Vice President and Chief February 18, 2000
- --------------------------------------------- Financial Officer
Balaji Venkataraman (principal financial and
accounting officer)
/s/ JON S. SAXE Director February 18, 2000
- ---------------------------------------------
Jon S. Saxe
/s/ JOHN E. ROBSON Director February 18, 2000
- ---------------------------------------------
John E. Robson
</TABLE>
II-5
<PAGE> 93
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Horizon Pharmaceutical Corporation:
We have audited in accordance with generally accepted auditing standards,
the financial statements of FIRST HORIZON PHARMACEUTICAL CORPORATION (formerly
Horizon Pharmaceutical Corporation, a Delaware corporation) included in this
registration statement and have issued our report thereon dated February 17,
2000. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule located in this registration
statement at item 16(b) is the responsibility of the company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 17, 2000
II-6
<PAGE> 94
SCHEDULE II
FIRST HORIZON PHARMACEUTICAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS BALANCE
-------------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1997 Allowance for doubtful accounts $ -- $ 25,924 $ -- $ (12,674) $ 13,250
Allowance for customer returns 100,000 38,289 -- (38,289) 100,000
1998 Allowance for doubtful accounts 13,250 40,714 (18,569) 35,395
Allowance for customer returns 100,000 80,994 (40,994) 140,000
1999 Allowance for doubtful accounts 35,395 51,493 (31,105) 55,783
Allowance for customer returns 140,000 366,904 (234,481) 272,423
Allowance for product rebates -- 1,294,072 (442,824) 851,248
</TABLE>
II-8
<PAGE> 95
EXHIBIT INDEX
The following is a list of exhibits filed as a part of this registration
statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Form of Underwriting Agreement
3.1 -- Restated Certificate of Incorporation of the Registrant.
3.2 -- Amended and Restated By-Laws of the Registrant.
4* -- Form of Stock Certificate
5* -- Opinion of Arnall Golden & Gregory, LLP
10.1 -- 1997 Non-Qualified Stock Option Plan
10.2 -- 2000 Stock Plan
10.3 -- Form of Nonqualified Stock Option Agreement
10.4 -- Form of Employment Agreement dated as of January 1, 2000
between the Registrant and certain of its executive officers
10.5 -- Convertible Term Loan Note dated January 11, 1999 made by
the Registrant for the benefit of Kapoor Pharma Investments,
L.P., as amended by Amendment No. 1 to the Convertible Term
Note dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.6 -- Convertible Term Note Agreement dated January 11, 1999
between the Registrant and Kapoor Pharma Investments, L.P.,
as amended by Amendment No. 1 to the Convertible Term Note
dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.7 -- Lease Agreement dated June 28, 1998 between the Registrant
and ASC North Fulton Associates Joint Venture
10.8** -- Product Development and Supply Agreement, dated March 25,
1999 between the Registrant and Penwest Pharmaceuticals Co.
10.9** -- Collaboration Agreement dated October 31, 1998 between the
Registrant and Inpharmakon Corporation
10.10** -- Exclusive Patent License Agreement dated January 1, 2000
between the Registrant and Jame Fine Chemicals, Inc.
10.11** -- Exclusive Distribution Agreement, dated January 1, 1996,
between the Registrant and Unisource, Inc.
10.12** -- Manufacturing and Supply Agreement, dated April 23, 1999,
between the Registrant and Mikart, Inc.
10.13** -- Product Supply Agreement, dated January 29, 1999, between
the Registrant and American Home Products Corporation
10.14** -- License Agreement, dated January 29, 1999, between the
Registrant and American Home Products Corporation
10.15** -- Distribution Agreement dated July 22, 1999 between the
Registrant and G. Pohl-Boskamp GmbH & Co.
10.16 -- Form of Indemnity Agreement between the Registrant and its
directors and executive officers
</TABLE>
II-8
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
23.1 -- Consent of Arthur Andersen LLP
23.2* -- Consent of Arnall Golden & Gregory, LLP (included in Exhibit
5)
24 -- Powers of Attorney (included on page II-5)
27 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* To be filed by amendment.
** First Horizon has requested confidential treatment for certain portions of
this exhibit pursuant to Rule 406 of the Securities Act of 1933, as amended.
The following is the schedule filed as a part of the registration
statement: Schedule II -- Valuation and Qualifying Accounts.
II-9
<PAGE> 1
EXHIBIT 1
UNDERWRITING AGREEMENT
__________ ___, 2000
FleetBoston Robertson Stephens Inc.
Banc of America Securities LLC
Chase H&Q
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
INTRODUCTORY. First Horizon Pharmaceutical Corporation, a
Delaware corporation (the "Company"), proposes to issue and sell to the several
underwriters named in Schedule A (the "Underwriters") an aggregate of [___]
shares (the "Firm Shares") of its Common Stock, par value $.001 per share (the
"Common Shares"). In addition, the Company has granted to the Underwriters an
option to purchase up to an additional [___] Common Shares (the "Option Shares")
as provided in Section 2. The Firm Shares and, if and to the extent such option
is exercised, the Option Shares are collectively called the "Shares".
FleetBoston Robertson Stephens Inc. ("Robertson Stephens"), Banc of America
Securities, LLC and Chase H&Q have agreed to act as representatives of the
several Underwriters (in such capacity, the "Representatives") in connection
with the offering and sale of the Shares. As a part of this offering
contemplated by this Agreement, Robertson Stephens has agreed to reserve out of
the Shares set forth opposite its name on the Schedule II to this Agreement, up
to ______ shares, for sale to the Company's employees, officers, directors,
business associates and other parties associated with the Company (collectively,
"Participants"), as set forth in the Prospectus under the heading "Underwriting"
(the "Directed Share Program"). The Shares to be sold by Robertson Stephens
pursuant to the Directed Share Program (the "Directed Shares") will be sold by
Robertson Stephens pursuant to this Agreement at the public offering price. Any
Directed Shares not orally confirmed for purchase by any Participants as of 7:00
a.m. New York time on the first day trading of the shares commences will be
offered to the public by Robertson Stephens as set forth in the Prospectus.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(File No. 333-[___]), which contains a form of prospectus, to be used in
connection with the public offering and sale of the Shares. Any such prospectus,
subject to completion, used in connection with such public offering is called a
"preliminary prospectus". Such registration statement, as amended, including
<PAGE> 2
the financial statements, exhibits and schedules thereto, in the form in which
it was declared effective by the Commission under the Securities Act of 1933 and
the rules and regulations promulgated thereunder (collectively, the "Securities
Act"), including any information deemed to be a part thereof at the time of
effectiveness pursuant to Rule 430A under the Securities Act, is called the
"Registration Statement". Any registration statement filed by the Company
pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b)
Registration Statement", and from and after the date and time of filing of the
Rule 462(b) Registration Statement the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. Such prospectus, in the form
first used by the Underwriters to confirm sales of the Shares, is called the
"Prospectus". All references in this Agreement to the Registration Statement,
the Rule 462(b) Registration Statement, a preliminary prospectus, the Prospectus
or any amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its agreements with the
Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sale of
the Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times, complied and will comply in all material
respects with the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. Each
preliminary prospectus, as of its date, and the Prospectus, as amended or
supplemented, as of its date and at all subsequent times through the 30th day of
the date hereof, did not and will not contain any untrue statement of a material
fact or omit 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. The representations and warranties set forth in the two immediately
preceding sentences do not apply to statements in or omissions from the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment thereto, or the Prospectus, or any preliminary
prospectus or any amendments or supplements thereto, made in reliance upon and
in conformity with information relating to any Underwriter furnished to the
Company in
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<PAGE> 3
writing by the Representatives expressly for use therein. There are no contracts
or other documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives three complete conformed copies of the
Registration Statement and three copies of each consent and certificate of
experts filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable 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 bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as
of which information is given in the Prospectus: (i) there has been no material
adverse change, or any development, known to the Company or that could
reasonably have been expected to be known by the Company, that could reasonably
be expected to result in a material adverse change, in the condition, financial
or otherwise, or in the earnings, business, operations or prospects, whether or
not arising from transactions in the ordinary course of business, of the Company
(any such change or effect, where the context so requires, is called a "Material
Adverse Change" or a "Material Adverse Effect"); (ii) except as disclosed in the
Prospectus, the Company, has not incurred any material liability or obligation,
indirect, direct or contingent, not in the ordinary course of business nor
entered into any material transaction or agreement not in the ordinary course of
business; and (iii) there has been no dividend or distribution of any kind
declared, paid or made by the Company or on any class of capital stock or
repurchase or redemption by the Company of any class of capital stock.
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<PAGE> 4
(h) Independent Accountants. Arthur Andersen LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) filed with the Commission as
a part of the Registration Statement and included in the Prospectus and have
expressed their opinion with respect to the supporting schedules filed with the
Commission as part of the Registration Statement, are independent public or
certified public accountants as required by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the financial position of the Company as of and
at the dates indicated and the results of its operations and cash flows for the
periods specified. [The supporting schedules included in the Registration
Statement present fairly in all material respects the information required to be
stated therein.] Such financial statements [and supporting schedules] have been
prepared in conformity with generally accepted accounting principles as applied
in the United States, which principles have been applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial data set
forth in the Prospectus under the captions ["Summary--Summary Financial Data",
"Selected Financial Data" and "Capitalization"] fairly present the information
set forth therein on a basis consistent with that of the audited financial
statements contained in the Registration Statement.
(j) Company's Accounting System. The Company maintains a system of
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 as applied in the United States 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.
(k) Subsidiaries of the Company. The Company has no subsidiaries and
does not own or control, directly or indirectly, any corporation, association or
other entity.
(l) Incorporation and Good Standing of the Company. The Company has
been duly organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is organized with full corporate
power and authority to own its properties and conduct its business as described
in the prospectus, and is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction which requires such
qualification except where failure to be so qualified or in good standing would
not have a Material Adverse Effect.
(m) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options described in the Prospectus).
The Common Shares (including the Shares) conform in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding Common Shares have
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<PAGE> 5
been duly authorized and validly issued, are fully paid and nonassessable and
have been issued in compliance with federal and state securities laws. None of
the outstanding Common Shares were issued in violation of any preemptive rights,
rights of first refusal or other similar rights to subscribe for or purchase
securities of the Company. There are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company other than those accurately
described in the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth in the Prospectus accurately and fairly
presents in all material respects the information required to be shown with
respect to such plans, arrangements, options and rights.
(n) Stock Exchange Listing. The Shares have been approved for inclusion
on the Nasdaq National Market, subject only to official notice of issuance.
(o) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated herein and in the Prospectus, (ii)
by the National Association of Securities Dealers, LLC and (iii) by the federal
and provincial laws of Canada.
(p) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation of or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to,
(i) the charter or by-laws of the Company, (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to which the
Company is a party or bound or to which its property is subject or (iii) any
statute, law, rule, regulation, judgment, order or decree applicable to the
Company of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or any of its
properties, which conflict, breach, violation or imposition, with respect to
(ii) and (iii) above, could reasonably be expected to have a Material Adverse
Effect.
(q) No Defaults or Violations. The Company is not in violation or
default of (i) any provision of its charter or by-laws, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which it is a party or bound or to which its property is subject or (iii) any
statute, law, rule, regulation, judgment, order or decree of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its properties, as
applicable, except any such violation or default which would not, singly or in
the aggregate, result in a Material Adverse Change except as otherwise disclosed
in the Prospectus.
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<PAGE> 6
(r) No Actions, Suits or Proceedings. No action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or its property is pending or, to the best knowledge of
the Company, threatened that (i) could reasonably be expected to have a Material
Adverse Effect on the performance of this Agreement or the consummation of any
of the transactions contemplated hereby or (ii) could reasonably be expected to
result in a Material Adverse Effect.
(s) All Necessary Permits, Etc. The Company possesses such valid and
current certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct its
business, except where failure to secure such could not reasonably be expected
to have Material Adverse Effect and the Company has not received any notice of
proceedings relating to the revocation or modification of, or non-compliance
with, any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could
result in a Material Adverse Change.
(t) Title to Properties. The Company has good and marketable title to
all the properties and assets reflected as owned in the financial statements
referred to in Section 1(i) above (or elsewhere in the Prospectus), in each case
free and clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially interfere with
the use made or proposed to be made of such property by the Company. The real
property, improvements, equipment and personal property held under lease by the
Company are held under valid and enforceable leases, with such exceptions as are
not material and do not materially interfere with the use made or proposed to be
made of such real property, improvements, equipment or personal property by the
Company.
(u) Tax Law Compliance. The Company has filed all necessary federal,
state and foreign income and franchise tax returns or has properly requested
extensions thereof and has paid all taxes required to be paid, if due and
payable, by it and, if due and payable, any related or similar assessment, fine
or penalty levied against it, except as may be being contested in good faith and
by appropriate proceedings. The Company has made adequate charges, accruals and
reserves in the applicable financial statements referred to in Section 1(i)
above in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company has not been
finally determined. The Company is not aware of any tax deficiency that has been
or might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(v) Intellectual Property Rights. The Company owns or possesses
adequate rights to use all patents, patent rights or licenses, inventions,
collaborative research agreements, trade secrets, know-how, trademarks, service
marks, trade names and copyrights which are necessary to conduct its business as
described in the Registration Statement and Prospectus; the expiration of any
patents, patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not reasonably be expected to result in a Material Adverse
Change that is not otherwise disclosed in the Prospectus; the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of the Company by others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
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<PAGE> 7
names or copyrights; and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of others
with respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
reasonably be expected to cause a Material Adverse Change. There is no claim
being made against the Company regarding patents, patent rights or licenses,
inventions, collaborative research, trade secrets, know-how, trademarks, service
marks, trade names or copyrights. The Company does not in the conduct of its
business as now or proposed to be conducted as described in the Prospectus
infringe or conflict with any right or patent of any third party, or any
discovery, invention, product or process which is the subject of a patent
application filed by any third party, known to the Company, which such
infringement or conflict is reasonably likely to result in a Material Adverse
Change.
(w) Year 2000 Preparedness. There are no issues related to the
Company's Year 2000 preparedness that (i) are of a character required to be
described or referred to in the Registration Statement or Prospectus by the
Securities Act which have not been accurately described in the Registration
Statement or Prospectus or (ii) might reasonably be expected to result in any
Material Adverse Change or that might materially affect its properties, assets
or rights.
(x) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares.
(y) Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(z) Insurance. The Company is insured by insurers of recognized
financial responsibility with policies in such amounts and with such deductibles
and covering such risks as are generally deemed adequate and customary for its
business including, but not limited to, policies covering real and personal
property owned or leased by the Company against theft, damage, destruction, acts
of vandalism and earthquakes, general liability and Directors and Officers
liability. The Company has no reason to believe that it will not be able (i) to
renew its existing insurance coverage as and when such policies expire or (ii)
to obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. The Company has not been denied any
insurance coverage which it has sought or for which it has applied.
(aa) Labor Matters. To the best of the Company's knowledge, no labor
disturbance by the employees of the Company exists or is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers or manufacturers that might be
expected to result in a Material Adverse Change.
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<PAGE> 8
(bb) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(cc) Lock-Up Agreements. Each officer and director of the company and
each beneficial owner of [_____ or more percent] of the outstanding issued share
capital of the Company has agreed to sign an agreement substantially in the form
attached hereto as Exhibit A (the "Lock-up Agreements"). The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the Lock-up Agreements presently in
effect or effected hereby. The Company hereby represents and warrants that it
will not release any of its officers, directors or other stockholders from any
Lock-up Agreements currently existing or hereafter effected without the prior
written consent of Robertson Stephens.
(dd) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in the Prospectus which have not been described as required.
(ee) No Unlawful Contributions or Other Payments. Neither the Company
nor, to the best of the Company's knowledge, any employee or agent of the
Company, has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any law or
of the character required to be disclosed in the Prospectus.
(ff) Environmental Laws. (i) The Company 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 where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
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 is not currently aware that it
will be required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. ss. 9601, et seq.), or otherwise designated as a contaminated site under
applicable state or local law.
(gg) Periodic Review of Costs of Environmental Compliance. In the
ordinary course of its business, the Company conducts a periodic review of the
effect of Environmental Laws on the business, operations and properties of the
Company, in the course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties). On the
basis of such review and the amount of its established reserves, the Company has
reasonably concluded that such associated costs and liabilities would not,
individually or in the aggregate, result in a Material Adverse Change.
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<PAGE> 9
(hh) ERISA Compliance. The Company and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or its "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company, any member of any group of
organizations described in Sections 414(b),(c),(m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company, or any of its ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company or any of its ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfounded benefit liabilities" (as defined under ERISA). Neither the Company nor
any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained by the
Company or any of their ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification,
except where failure to maintain such qualification would not have a Material
Adverse Effect.
(ii) Consents Required in Connection with the Directed Share Program.
No consent, approval, authorization or order of, or qualification with, any
governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered.
(jj) No Improper Influence in Connection with the Directed Share
Program. The Company has not offered, or caused Robertson Stephens to offer,
Shares to any person pursuant to the Directed Share Program with the specific
intent to unlawfully influence (i) a customer or supplier of the Company to
alter the customer's or supplier's level or type of business with the Company or
(ii) a trade journalist or publication to write or publish favorable information
about the Company or its products.
Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters in connection with the
terms of this Agreement shall be deemed to be a representation and warranty by
the Company to each Underwriter as to the matters set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) The Firm Shares. The Company agrees to issue and sell to the
several Underwriters the Firm Shares upon the terms herein set forth. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to
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the conditions herein set forth, the Underwriters agree, severally and not
jointly, to purchase from the Company the respective number of Firm Shares set
forth opposite their names on Schedule A. The purchase price per Firm Share to
be paid by the several Underwriters to the Company shall be $[___] per share.
(b) The First Closing Date. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made by the Company and the
Representatives at 6:00 a.m. San Francisco time, at the offices of Arnall,
Golden & Gregory, LLP, 2800 Atlantic Center, 1201 West Peachtree Street,
Atlanta, GA 30309 (or at such other place as may be agreed upon among the
Representatives and the Company), (i) on the third (3rd) full business day
following the first day that Shares are traded, (ii) if this Agreement is
executed and delivered after 1:30 P.M., San Francisco time, the fourth (4th)
full business day following the day that this Agreement is executed and
delivered or (iii) at such other time and date not later than seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 8 hereof),
such time and date of payment and delivery being herein called the "Closing
Date;" provided, however, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
2(g) and 3(e) hereof, the Representatives may, in their sole discretion,
postpone the Closing Date until no later that two (2) full business days
following delivery of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of [___] Option Shares from the Company at the
purchase price per share to be paid by the Underwriters for the Firm Shares. The
option granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of such
notice of exercise. If any Option Shares are to be purchased, (i) each
Underwriter agrees, severally and not jointly, to purchase the number of Option
Shares (subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on Schedule A opposite the name of such Underwriter bears to the total number of
Firm Shares. The Representatives may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the Company.
(d) Public Offering of the Shares. The Representatives hereby advise
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
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<PAGE> 11
(e) Payment for the Shares. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representatives have been
authorized, for their own account and the accounts of the several Underwriters,
to accept delivery of and receipt for, and make payment of the purchase price
for, the Firm Shares and any Option Shares the Underwriters have agreed to
purchase. Robertson Stephens, individually and not as the Representatives of the
Underwriters, may (but shall not be obligated to) make payment for any Shares to
be purchased by any Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered, a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
SECTION 3. COVENANTS OF THE COMPANY.
The Company further covenants and agrees with each Underwriter as
follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act"), to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act 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 Securities Act and (iii)
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
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<PAGE> 12
compliance with the Securities Act. If the Company elects to rely on Rule 462(b)
under the Securities Act, the Company shall file a Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) under the
Securities Act prior to the time confirmations are sent or given, as specified
by Rule 462(b)(2) under the Securities Act, and shall pay the applicable fees in
accordance with Rule 111 under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any
post-effective amendment thereto shall have become effective, (ii) of receipt of
any comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) 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 such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) 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) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. The Company will comply with the Securities Act 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 Representatives or counsel for 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, and furnish at its own
expense to the Underwriters and to dealers, 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.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection
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with sales by an Underwriter or dealer (the "Prospectus Delivery Period"), as
many copies of the Prospectus and any amendments and supplements thereto as the
Representatives may request.
(f) Insurance. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause Robertson Stephens to be
added as an additional insured to such policy in respect of the offering
contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which, in your opinion, the market price of the Shares has been or is
likely to be materially affected (regardless of whether such rumor, publication
or event necessitates a supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising the Company to the effect
set forth above, forthwith prepare, consult with you concerning the substance of
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication or
event.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [September 30, 2001] that satisfies the provisions of Section 11(a) of
the Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The Company
will not offer, sell or 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 (whether by actual disposition or effective economic disposition due
to cash settlement or otherwise by the Company or any affiliate of the Company
or any person in privity with the Company or any affiliate of the Company)
directly or indirectly, or announce the offering of, any other Common Shares or
any securities convertible into, or exchangeable for, Common Shares; provided,
however, that the Company may (i) issue and sell Common Shares pursuant to any
stock option plan, stock ownership plan, stock purchase plan or dividend
reinvestment plan of the Company in effect at the date of the Prospectus and
described in the Prospectus so long as none of those shares may be transferred
and the Company shall enter stop transfer instructions with its transfer agent
and registrar against the transfer of any such Common Shares, except with
respect to Common Shares issued pursuant to the Company's stock purchase plan
and except with respect to up to 45,000 Common Shares issued pursuant to any
Company stock option plan (provided, that, with respect to the holders of
options to purchase Common Shares issued pursuant to such stock option plan,
the Company shall use all reasonable efforts to cause such optionholders to
execute a Lock-up Agreement) and (ii) the Company may issue Common
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<PAGE> 14
Shares issuable upon the conversion of securities or the exercise of warrants
outstanding at the date of the Prospectus and described in the Prospectus. These
restrictions terminate after the close of trading of the Shares on the 180th day
after (and including) the day the Shares commenced trading on the Nasdaq
National Market (the "Lock-Up Period").
(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
(n) Exchange Act Compliance. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
(o) Directed Share Program. The Company (i) will comply with all
applicable securities and other applicable laws, rules and regulations in each
jurisdiction in which the Directed Shares are offered in connection with the
Directed Share Program and (ii) will pay all reasonable fees and disbursements
of counsel incurred by the Underwriters in connection with the Directed Share
Program and any stamp duties, similar taxes or duties or other taxes, if any,
incurred by the underwriters in connection with the Directed Share Program.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS.
The obligations of the several Underwriters to purchase and pay for the
Shares as provided herein on the First Closing Date and, with respect to the
Option Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company of its covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No
Objection from the National Association of Securities Dealers, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters'
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<PAGE> 15
Counsel; and the National Association of Securities Dealers, LLC shall have
raised no objection to the fairness and reasonableness of the underwriting terms
and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date, or the Second
Closing Date, as the case may be, there shall not have been any Material Adverse
Change in the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and adverse
and that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus.
(d) Opinion of Counsel for the Company. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Arnall, Golden & Gregory, LLP, counsel for the Company, substantially in the
form of Exhibit B attached hereto, dated the First Closing Date, or the Second
Closing Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely
as to questions of law not involving the laws of the United States or the State
of Georgia, or The General Corporation Law of the State of Delaware upon
opinions of local counsel, and as to questions of fact upon representations or
certificates of officers of the Company, and of government officials, in which
case their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) Opinion of Intellectual property Counsel for the Company. You shall
have received on the First Closing Date, or the Second Closing Date, as the case
may be, an opinion of Jones & Askew LLP, intellectual property counsel for the
Company substantially in the form of Exhibit C attached hereto.
(f) Opinion of Counsel for the Underwriters. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Testa, Hurwitz & Thibeault, LLP, substantially in the form of Exhibit
D hereto. The Company shall have furnished to such counsel such documents as
they may have requested for the purpose of enabling them to pass upon such
matters.
(g) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
Arthur Andersen, LLP addressed to the Underwriters, dated the First Closing Date
or the Second Closing Date, as the
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<PAGE> 16
case may be, confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
four (4) business days prior to the First Closing Date or the Second Closing
Date, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
the First Closing Date or the Second Closing Date, as the case may be, and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus. The Original Letter from Arthur
Andersen, LLP shall be addressed to or for the use of the Underwriters in form
and substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Securities Act and the applicable
published Rules and Regulations, (ii) set forth their opinion with respect to
their examination of the consolidated balance sheet of the Company as of
December 31, 1999 and related consolidated statements of operations,
shareholders' equity, and cash flows for the twelve (12) months ended December
31, 1999, [(iii) state that Arthur Andersen, LLP has performed the procedures
set out in Statement on Auditing Standards No. 71 ("SAS 71") for a review of
interim financial information and providing the report of Arthur Andersen, LLP
as described in SAS 71 on the financial statements for each of the quarters in
the ____-quarter period ended ________________, ___ (the "Quarterly Financial
Statements"), (iv) state that in the course of such review, nothing came to
their attention that leads them to believe that any material modifications need
to be made to any of the Quarterly Financial Statements in order for them to be
in compliance with generally accepted accounting principles consistently applied
across the periods presented,] and address other matters agreed upon by Arthur
Andersen, LLP and you. In addition, you shall have received from Arthur
Andersen, LLP a letter addressed to the Company and made available to you for
the use of the Underwriters stating that their review of the Company's system of
internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's consolidated
financial statements as of December 31, 1999, did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
(h) Officers' Certificate. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the First Closing
Date or the Second Closing Date, as the case may be;
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<PAGE> 17
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending, or to their knowledge, threatened under the
Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and in all material respects
conformed to the requirements of the Securities Act, the Registration
Statement and the Prospectus, and any amendments or supplements
thereto, did not and do not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and, since the
effective date of the Registration Statement, there has occurred no
event required to be set forth in an amended or supplemented Prospectus
which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as set forth
in Prospectus there has not been (a) any material adverse change in the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company, (b) any transaction that is material
to the Company, except transactions entered into in the ordinary course
of business, (c) any obligation, direct or contingent, that is material
to the Company, incurred by the Company, except obligations incurred in
the ordinary course of business, (d) any change in the capital stock or
outstanding indebtedness of the Company that is material to the
Company, (e) any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company, or (f) any loss or damage
(whether or not insured) to the property of the Company which has been
sustained or will have been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company.
(i) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
Company, and each beneficial owner of [_______OR MORE PERCENT] of the
outstanding issued share capital of the Company.
(j) Stock Exchange Listing. The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(k) Compliance with Prospectus Delivery Requirements. The Company shall
have complied with the provisions of Sections 2(g) and 3(e) hereof with respect
to the furnishing of Prospectuses.
(l) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as
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<PAGE> 18
contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.
If any condition specified in this Section 4 is not satisfied
when and as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Shares to the Underwriters, (iv) all fees and expenses of the Company's
counsel, independent public or certified public accountants and other advisors,
(v) all costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement
(including financial statements, exhibits, schedules, consents and certificates
of experts), each preliminary prospectus and the Prospectus, and all amendments
and supplements thereto, and this Agreement, (vi) all costs and expenses
incurred by Underwriters' counsel in connection with the Directed Share Program,
(vii) all filing fees, reasonable attorneys' fees and expenses incurred by the
Company or the Underwriters in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part
of the Shares for offer and sale under the state securities or blue sky laws or
the provincial securities laws of Canada or any other country, and, if requested
by the Representatives, preparing and printing a "Blue Sky Survey", an
"International Blue Sky Survey" or other memorandum, and any supplements
thereto, advising the Underwriters of such qualifications, registrations and
exemptions, (viii) the filing fees incident to, and the reasonable fees and
expenses of counsel for the Underwriters in connection with, the National
Association of Securities Dealers, LLC review and approval of the Underwriters'
participation in the offering and distribution of the Common Shares, (ix) the
fees and expenses associated with including the Common Stock on the Nasdaq
National Market, (x) all costs and expenses incident to the travel and
accommodation of the Company's employees on the "roadshow", and (xi) all other
fees, costs and expenses referred to in [Item 13] [Item 14] of Part II of the
Registration Statement. Except as provided in this Section 5, Section 6, and
Section 7 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement
is terminated by the Representatives pursuant to Section 4 or Section 9, or if
the sale to the Underwriters of the Shares on the First Closing Date is not
consummated because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or to comply with any provision hereof,
the Company agrees to reimburse the Representatives and the other Underwriters
(or such Underwriters as have terminated this Agreement with respect to
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themselves), severally, upon demand for all out-of-pocket expenses that shall
have been reasonably incurred by the Representatives and the Underwriters in
connection with the proposed purchase and the offering and sale of the Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel and accommodation expenses, postage, facsimile and telephone
charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Underwriters.
(1) The Company agrees to indemnify and hold harmless each Underwriter,
its officers and employees, and each person, if any, who controls any
Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A under the Securities Act, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) upon any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the Company to
perform its obligations hereunder or under law; or (v) upon any untrue statement
or alleged untrue statement of any material fact contained in any audio or
visual materials provided by the Company or prepared in conformity with written
information furnished by or on behalf of the Company including, without
limitation, slides, videos, films or tape recordings, used in connection with
the marketing of the Shares, or (vi) 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 any matter covered by clause (i), (ii), (iii), (iv) or (v)
above, provided that the Company shall not be liable under this clause (vi) to
the extent that a court of competent jurisdiction shall have determined by a
final judgment 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 bad faith or willful misconduct; and to
reimburse each Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by Robertson
Stephens) as such expenses are reasonably incurred by such Underwriter or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any untrue
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<PAGE> 20
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Representatives expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is 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, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act, hereby acknowledges that the only information that the
Underwriters have furnished to the Company expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) are the statements set forth in the table in the first
paragraph and the second paragraph [second and [_] paragraphs] under the caption
"Underwriting" in the Prospectus; and the Underwriters confirm that such
statements are correct.
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(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, 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 a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (Robertson Stephens in the case of Section 7(b) and Section
8), representing the indemnified parties who are parties to such action), (ii)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this Section 7 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, 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 against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 60 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such
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<PAGE> 22
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section 7
is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by such party 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 such party 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 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 Underwriters agree that it would not be just
and equitable if contributions pursuant to this Section 7(f) 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 7(f). 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 7(f) 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 (f), (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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 7(f) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party
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<PAGE> 23
as such losses, claims, damages, liabilities or expenses are incurred, but in
all cases, no later than forty-five (45) days of invoice to the indemnifying
party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties 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 7.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
(j) Indemnification for Directed Share Program. The Company agrees to
indemnify and hold harmless Robertson Stephens and its affiliates and each
person, if any, who controls Robertson Stephens or its affiliates within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act ("Robertson Stephens Entities"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating
any such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any material prepared by or with the
consent of the Company for distribution to participants in connection with the
Directed Share Program, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) the failure of any participant to pay
for and accept delivery of Directed Shares that the participant has agreed to
purchase; or (iii) related to, arising out of, or in connection with the
Directed Share Program other than losses, claims, damages or liabilities (or
expenses relating thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of Robertson Stephens Entities.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase does not exceed 10% of the aggregate number of
the Shares to be purchased on such date, the other Underwriters shall be
obligated, severally, in the proportions that the number of Firm Common Shares
set forth opposite their respective names on Schedule A bears to the aggregate
number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to
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<PAGE> 24
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date. If, on the First Closing Date or the
Second Closing Date, as the case may be, any one or more of the Underwriters
shall fail or refuse to purchase Shares and the aggregate number of Shares with
respect to which such default occurs exceeds 10% of the aggregate number of
Shares to be purchased on such date, and arrangements satisfactory to the
Representatives and the Company for the purchase of such Shares are not made
within 48 hours after such default, this Agreement shall terminate without
liability of any party to any other party except that the provisions of Section
5, and Section 7 shall at all times be effective and shall survive such
termination. In any such case either the Representatives or the Company shall
have the right to postpone the First Closing Date or the Second Closing Date, as
the case may be, but in no event for longer than seven days in order that the
required changes, if any, to the Registration Statement and the Prospectus or
any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be
deemed to include any person substituted for a defaulting Underwriter under this
Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT. This Agreement may be
terminated by the Representatives by notice given to the Company if (a) at any
time after the execution and delivery of this Agreement and prior to the First
Closing Date (i) trading or quotation in any of the Company's securities shall
have been suspended or limited by the Commission or by the Nasdaq Stock Market,
or trading in securities generally on either the Nasdaq Stock Market or the New
York Stock Exchange shall have been suspended or limited, or minimum or maximum
prices shall have been generally established on any of such stock exchanges by
the Commission or the National Association of Securities Dealers, LLC; (ii) a
general banking moratorium shall have been declared by any of federal, New York,
Delaware or California authorities; (iii) there shall have occurred any outbreak
or escalation of national or international hostilities or any crisis or
calamity, or any change in the United States or international financial markets,
or any substantial change or development involving a prospective change in
United States' or international political, financial or economic conditions, as
in the judgment of the Representatives is material and adverse and
makes it impracticable or inadvisable to market the Common Shares in the manner
and on the terms contemplated in the Prospectus or to enforce contracts for the
sale of securities; (iv) in the judgment of the Representatives there
shall have occurred any Material Adverse Change; or (v) the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as in the judgment of the Representatives may
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured or (b) in
the case of any of the events specified 9(a)(i)-(v), such event singly or
together with any other event, makes it, in your judgement, impracticable or
inadvisable to market the Shares in the manner and on the terms contemplated in
the Prospectus. Any termination pursuant to this Section 9 shall be without
liability on the part of (x) the Company to any Underwriter, except that the
Company shall be obligated to reimburse the expenses of the Representatives and
the Underwriters pursuant to Sections 5 and 6 hereof, (y) any Underwriter to the
Company or any person controlling the Company, or (z) of any party hereto to any
other
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<PAGE> 25
party except that the provisions of Section 7 shall at all times be effective
and shall survive such termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and
other statements of the Company or any person controlling the company, of its
officers, and of the several Underwriters set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter or the Company or any of its or their
partners, officers or directors or any controlling person, as the case may be,
and will survive delivery of and payment for the Shares sold hereunder and any
termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
FLEETBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2675
Attention: General Counsel
If to the Company:
First Horizon Pharmaceutical Corporation
600 Hembree Parkway, Suite 106
Roswell, GA 30076
Facsimile: (770) 442-9594
Attention: Chief Financial Officer
Any party hereto may change the address for receipt of
communications by giving written notice to the others.
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 8 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the Shares
as such from any of the Underwriters merely by reason of such purchase.
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<PAGE> 26
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
SECTION 15. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
Section headings herein are for the convenience of the parties only and shall
not affect the construction or interpretation of this Agreement.
[The remainder of this page has been intentionally left blank.]
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<PAGE> 27
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
FIRST HORIZON PHARMACEUTICAL
CORPORATION
By:
------------------------------------------
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and
accepted by the Representatives as of the date first above written.
FLEETBOSTON ROBERTSON STEPHENS INC.
BANC OF AMERICA SECURITIES LLC
CHASE H&Q
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
BY FLEETBOSTON ROBERTSON STEPHENS INC.
By:
-------------------------------------------------
Name: Mitch Whiteford
Title:
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<PAGE> 28
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF FIRM COMMON
UNDERWRITERS SHARES TO BE PURCHASED
- ------------ ----------------------
<S> <C>
FLEETBOSTON ROBERTSON STEPHENS INC. .................................... [___]
BANC OF AMERICA SECURITIES LLC.......................................... [___]
CHASE H&Q............................................................... [___]
[___]................................................................... [___]
[___]................................................................... [___]
[___]................................................................... [___]
Total.......................................................... [___]
</TABLE>
S-A
<PAGE> 29
EXHIBIT A
LOCK-UP AGREEMENT
FleetBoston Robertson Stephens Inc.
Bank of America Securities LLC
Chase H&Q
As Representatives of the Several Underwriters
c/o FleetBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
RE: First Horizon Pharmaceutical Corporation (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares
of Common Stock of the Company ("Common Stock") or securities convertible into
or exchangeable or exercisable for Common Stock. The Company proposes to carry
out a public offering of Common Stock (the "Offering") for which you will act as
the representatives (the "Representatives") of the underwriters. The undersigned
recognizes that the Offering will be of benefit to the undersigned and will
benefit the Company by, among other things, raising additional capital for its
operations. The undersigned acknowledges that you and the other underwriters are
relying on the representations and agreements of the undersigned contained in
this letter in carrying out the Offering and in entering into underwriting
arrangements with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this restriction, (ii) as a distribution to partners or shareholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, (iii) with respect to sales or purchases of
Common Stock acquired on the open market or (iv) with the prior written consent
of FleetBoston Robertson Stephens Inc. The foregoing restrictions will commence
as of the date hereof and shall terminate after the close of trading of the
Common Stock on the 180th day after (and including) the day the Common Stock
commenced trading on the Nasdaq National Market (the "Lock-Up Period"). The
foregoing restriction has been expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than such holder. Such prohibited hedging or other transactions
would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without limitation,
any put or call option)
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<PAGE> 30
with respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities. The undersigned also agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent and registrar against the transfer of shares of Common Stock or Securities
held by the undersigned except in compliance with the foregoing restrictions.
This agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned. In the event the Offering has not occurred on or before
September 30, 2000, this Lock-Up Agreement shall be of no further force or
effect.
Dated
-----------------------------------
----------------------------------------
Printed Name of Holder
By:
-------------------------------------
Signature
----------------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing
if signing as custodian, trustee, or on
behalf of an entity)
A-2
<PAGE> 31
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company has been incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation;
(ii) The Company has adequate corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus;
(iii) The Company is duly qualified to do business as a foreign corporation
and is in good standing in
_____________________________________________________. To such counsel's
knowledge, the Company does not own or control, directly or indirectly, any
corporation, association or other entity;
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein, the issued and outstanding shares of capital stock of
the Company outstanding prior to the issuance of the Shares have been duly
and validly issued and are fully paid and nonassessable, and will not have
been issued in violation of or subject to any preemptive right arising
under the certificate of incorporation or Delaware General Corporation Law,
or to such counsel's knowledge, any co-sale right, right of first refusal
or other similar right, other than any registration rights described in
Opinion (xviii) hereof;
(v) The Firm Shares or the Option Shares, as the case may be, to be issued
by the Company pursuant to the terms of this Agreement have been duly
authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully
paid and nonassessable, will not have been issued in violation of or
subject to any preemptive right, co-sale right, right of first refusal or
other similar right contained in the Company's charter or By-laws, and to
such counsel's knowledge, will not have been issued in violation of or
subject to any other preemptive right, co-sale right, right of first
refusal or other similar right.
(vi) The Company has adequate corporate power and authority to enter into
this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(vii) This Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery by
you and compliance by all parties with applicable federal and state
securities laws, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law, except that a
court may refuse to enforce or limit the application of this Agreement or
certain provisions hereof as unconscionable or contrary to public policy,
and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors'
B-1
<PAGE> 32
rights generally or by general equitable principles (whether relief is
sought in a proceeding at law or in equity (whether relief is sought in
a proceeding at law or in equity);
(viii) The Registration Statement has become effective under the Act and,
to such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Securities Act;
(ix) The 8-A Registration Statement, as of its effective date, complied as
to form in all material respects with the requirements of the Exchange Act;
the 8-A Registration Statement has become effective under the Exchange Act;
[and the Firm Shares or the Option Shares have been validly registered
under the Securities Act and the Rules and Regulations of the Exchange Act
and the applicable rules and regulations of the Commission thereunder.] To
our knowledge, no order suspending the effectiveness of the Form 8-A
Registration Statement has been issued by the Commission and no proceeding
for that purpose has been instituted or threatened by the Commission.
(x) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects with
the requirements of the Securities Act and the applicable Rules and
Regulations;
(xi) The information in the Prospectus under the captions "Description of
Capital Stock," "Risk Factors--If our Products under Development Fail..."
and "--Violating Regulatory Affairs" and "Business-Government Regulation,"
to the extent that it constitutes matters of law or legal conclusions, has
been reviewed by such counsel and is a fair summary of such matters and
conclusions; and the forms of certificates evidencing the Common Stock and
filed as exhibits to the Registration Statement comply with the Delaware
General Corporation Law;
(xii) The description in the Registration Statement and the Prospectus of
the charter and bylaws of the Company and of federal statutes, the
statutory laws of the State of Georgia and the Delaware General Corporation
Law are accurate and fairly present the information required to be
presented by the Securities Act;
(xiii) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character required
to be described or referred to in the Registration Statement or Prospectus
or to be filed as an exhibit to the Registration Statement which are not
described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default
under, any bond, debenture, note or other evidence of indebtedness, or any
B-2
<PAGE> 33
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument known to such counsel to which the
Company is a party or by which its properties are bound, or any applicable
statute, rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree specifically naming the Company of any
court, government or governmental agency or body having jurisdiction over
the Company or over any of its properties or operations;
(xv) No consent, approval, authorization or order of or qualification with
any court, government or governmental agency or body having jurisdiction
over the Company, or over any of its properties or operations is necessary
in connection with the consummation by the Company of the transactions
herein contemplated, except (i) such as have been obtained under the
Securities Act or in connection with the 8-A Registration Statement, (ii)
such as may be required under state or other securities or Blue Sky laws in
connection with the purchase and the distribution of the Shares by the
Underwriters, (iii) such as may be required by the National Association of
Securities Dealers, LLC and (iv) such as may be required under the federal
or provincial laws of Canada;
(xvi) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Securities Act, other than those
described therein;
(xvii) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable statute,
rule or regulation known to such counsel or, to such counsel's knowledge,
any order, writ or decree of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries, or over
any of their properties or operations; and
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company having
rights known to such counsel to registration of such shares of Company
Shares or other securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering contemplated
thereby, waived such rights or such rights have expired by reason of lapse
of time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration
Statement pursuant to the exercise of and in full satisfaction of such
rights.
(xix) The Company is not and, after giving effect to the offering and the
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives,
B-3
<PAGE> 34
Underwriters' Counsel and the independent certified public accountants of the
Company, at which such conferences the contents of the Registration Statement
and Prospectus and related matters were discussed, and although they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel which leads them to believe that, at the time the Registration
Statement became effective and at all times subsequent thereto up to and on the
First Closing Date or Second Closing Date, as the case may be, the Registration
Statement and any amendment or supplement thereto including changes incorporated
pursuant to Rule 430A (other than the financial statements including supporting
schedules and other financial and statistical information derived therefrom, as
to which such counsel need express no comment) contained any 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 that the
Prospectus (other than the financial statements including supporting schedules
and other financial and statistical information derived therefrom, as to which
such counsel need express no comment), as of the date it was filed with the
Commission and at all times subsequent thereto up to and on the First Closing
Date or the Second Closing Date, as the case may be, contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
B-4
<PAGE> 35
, 2000
-----------
FleetBoston Robertson Stephens Inc.
Banc of America Securities LLC
Chase H&Q
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Re: First Horizon Pharmaceutical Corporation
Ladies and Gentlemen:
We are intellectual property counsel to First Horizon Pharmaceutical
Corporation, a Delaware corporation (the "Company"), for certain of its
intellectual property. This opinion is being furnished to you pursuant to
Section 4(e) of the Underwriting Agreement dated as of _________________ (the
"Agreement") between you and the Company, relating to the issuance and sale to
you of certain shares of Common Stock of the Company. Unless otherwise defined
herein, the definition of the capitalized terms used herein shall be the same as
those in the Agreement.
We are familiar with the technology used by the Company in its business and
the manner of its use thereof as described in the Registration Statement and the
Prospectus. We have read the sections of the Registration Statement and the
Prospectus referring to patents, trade secrets, trademarks, service marks or
other proprietary information or materials; specifically, but without
limitation, we have read the statements in the Registration Statement and the
Prospectus under the captions, "Risk Factors", "Business--Products,"
"Business--Product Development," "Business--Third Party Agreements,"
"Business--Trademarks," and "Business--Patents."
In our capacity as the Company's intellectual property counsel, we are
familiar with the Company's intellectual property. As of February 18, 2000, the
Company has filed one United States patent application, has licensed twenty (20)
United States patents from Penwest Pharmaceutical Corporation, and has licensed
two (2) United States patents from Jame Fine Chemicals, Inc., all of which are
listed in Schedule A hereto. In addition, the Company holds six (6) United
States trademark registrations, has filed two (2) United States trademark
applications, and has licensed three (3) trademarks from third parties, all of
which are listed in Schedule A hereto.
Based upon the foregoing, and with respect to those intellectual property
matters for which we are responsible, we are of the opinion that:
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Page 2
(i) We are aware of no facts which would preclude the Company from
having clear title to the Company's patent application referred to or described
in the Registration Statement and Prospectus, or a valid license to the patents
licensed from a third party ("Licensor") referred to or described in the
Registration Statement and Prospectus. To the best of our knowledge, the Company
has complied with the Patent and Trademark Office ("PTO") duty of candor and
good faith in dealing with the PTO. An assignment from each named inventor to
the Company for the Company's patent application listed in Schedule A has been
executed and filed with the PTO. I have not been informed of any fact which
would indicate that all assignments from each named inventor to the Licensor
have not been executed and recorded with the PTO for each licensed patent listed
in schedule A. We are aware of no facts that the Company lacks any rights or
licenses to use all patents and know-how necessary to conduct the business now
conducted or proposed to be conducted by the Company as described in the
Registration Statement and Prospectus, except as described therein. We are aware
of no facts which would form a basis for a finding that any of the claims of the
patents or patent applications owned or licensed by the Company is unpatentable,
unenforceable or invalid. We are not aware of any pending U.S. or foreign patent
applications which, if issued, would limit or prohibit the business now
conducted or proposed to be conducted by the Company as described in the
Registration Statement and the Prospectus, except as described therein. We are
not aware of any patents of others which are or would be infringed by specific
products or processes referred to in the Registration Statement and Prospectus
in such manner as to materially and adversely affect the Company, except as
described therein;
(ii) We are aware of no facts which would preclude the Company from
having ownership rights to the Company's trademark registrations or
applications to register the trademarks referred to or described in the
Registration Statement and Prospectus, or a valid license to use the trademarks
licensed from third parties referred to or described in the Registration
Statement and Prospectus;
(iii) We are aware of no pending or threatened action, suit,
proceeding or claim by others that the Company is infringing any patent,
trademark, service mark or other intellectual property right which could result
in any material adverse effect on the Company;
(iv) We are aware of no legal or governmental proceedings pending
relating to the Company's intellectual property, other than PTO review of
pending applications for patents or trademark registrations, including appeal
proceedings, and, to the best of our knowledge, no such proceedings are
threatened or contemplated by governmental authorities or others;
(v) We are aware of no other contract or document material to the
Company's intellectual property other than those described in the Registration
Statement and the Prospectus; and
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Page 3
(vi) Although we have not independently verified the accuracy or
completeness of the statements contained in the Registration Statement and the
Prospectus, nothing has come to our attention that causes us to believe that,
at the time the Registration Statement became effective or as of the date
hereof, the Registration Statement and Prospectus, particularly, including but
not limited to, the description under the captions "Risk Factors,"
"Business--Products," "Business--Product Development," "Business--Third Party
Agreements," "Business--Trademarks," and "Business--Patents," contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
In addition, and not as an opinion but for your information, we have read
the claims of United States Patent No. 5,186,925 (the '925 patent) in the name
of G. Pohl-Boskamp GmbH & Co., and based on conversations with the Company as
to the specifications of Nitrolingual Pumpspray product, the Nitrolingual
Pumpspray product is covered by at least one claim of the '925 patent.
In addition, and not as an opinion but for your information, we have read
the claims of United States Patent No. 5,663,415 (the '415 patent) in the name
of Jame Fine Chemicals, Inc., and based on conversations with the Company as to
the specifications of the Tanafed product, the manufacture of at least one of
the active ingredients in the Tanafed product is protectable by at least one
claim of the '415 patent.
This is solely for your information, and to assist you as the underwriters
in conducting your investigation of the affairs of the Company in connection
with the aforesaid Registration Statement and Prospectus, and it is not to be
quoted or otherwise referred to in any public disclosure document, furnished to
any other person, or filed with any governmental agency.
Very truly yours,
JONES AND ASKEW, LLP
By: ____________________________________
Date: __________________________________
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<PAGE> 38
____________ ___, 2000
Page 1
EXHIBIT D
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Firm Shares [Option Shares] have been duly authorized and, upon
issuance and delivery and payment therefor in accordance with the terms of
the Underwriting Agreement, will be validly issued, fully paid and
non-assessable.
(ii) The Registration Statement complied as to form in all material
respects with the requirements of the Act; the Registration Statement has
become effective under the Act and, to such counsel's knowledge, no stop
order proceedings with respect thereto have been instituted or threatened
or are pending under the Securities Act.
(iii) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Shares have
been validly registered under the Securities Act and the Rules and
Regulations of the Exchange Act and the applicable rules and regulations of
the Commission thereunder;
(iv) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
Such counsel shall state that such counsel has reviewed the
opinions addressed to the Representatives from [list each set of counsel that
has provided an opinion], each dated the date hereof, and furnished to you in
accordance with the provisions of the Underwriting Agreement. Such opinions
appear on their face to be appropriately responsive to the requirements of the
Underwriting Agreement.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement and any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any 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 First Closing
Date or the Second Closing Date, as the case may be, the Registration Statement,
the Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
D-1
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
HORIZON PHARMACEUTICAL CORPORATION
The undersigned, R. Brent Dixon, President of HORIZON PHARMACEUTICAL
CORPORATION, a corporation organized and existing under the laws of the State of
Delaware (the "Corporation"), does hereby certify as follows:
FIRST: The name of the Corporation is: Horizon Pharmaceutical
Corporation
SECOND: The Certificate of Incorporation of the Corporation was filed
in the Office of the Secretary of State of the State of Delaware on July 9,
1992, and was amended by Certificates of Amendment filed on August 11, 1992, May
24, 1994, December 7, 1998, and December 15, 1999.
THIRD: This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 245 of the Delaware General
Corporation Law, the Board of Directors having duly adopted resolutions setting
forth and declaring advisable this Restated Certificate of Incorporation, and
the written consent of the stockholders of the Corporation has been given in
accordance with Section 228 of the Delaware General Corporation Law.
FOURTH: This Restated Certificate of Incorporation is being filed
pursuant to Sections 103, 228, 242 and 245 of the Delaware General Corporation
Law in order to restate the Certificate of Incorporation of the Corporation and
also to amend the Certificate of Incorporation.
FIFTH: The Certificate of Incorporation of the Corporation is hereby
amended and restated in its entirety as follows:
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST HORIZON PHARMACEUTICAL CORPORATION
ARTICLE 1: NAME
The name of the Corporation is: First Horizon Pharmaceutical
Corporation (the "Corporation").
ARTICLE 2: REGISTERED AGENT AND OFFICE
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the Corporation's registered agent
at such address is The Corporation Trust Company.
ARTICLE 3: PURPOSE
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.
ARTICLE 4: CAPITALIZATION
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 41,000,000 shares, of which
40,000,000 shares shall be designated as "Common Stock," $.001 par value per
share, and 1,000,000 shares shall be designated as "Preferred Stock," $.001 par
value per share.
A statement of the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, in respect of each class of
stock of the Corporation is as follows:
A. Common Stock
Except as otherwise required by law or as provided by the Board of
Directors with respect to any class or series of Preferred Stock, the entire
voting power and all voting rights shall be vested exclusively in the Common
Stock. Each holder of shares of Common Stock shall be entitled to one vote for
each share outstanding in his or her name on the books of the Corporation.
Subject to the preferred rights of the stockholders of shares of any
series of Preferred Stock as provided by the Board of Directors with respect to
any such series of Preferred Stock, the holders of the Common Stock shall be
entitled to receive, as and when declared by the Board of Directors out of the
funds of the Corporation legally available therefor, such dividends (payable in
cash, stock or otherwise) as the Board of Directors may from time to time
determine, payable to stockholders of record on such dates, not exceeding 60
days preceding the dividend payment dates, as shall be fixed for such purpose by
the Board of Directors in advance of payment of each particular dividend.
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<PAGE> 3
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the distribution or payment
to the holders of shares of any series of Preferred Stock as provided by the
Board of Directors with respect to any such series of Preferred Stock, the
remaining assets of the Corporation available for distribution to stockholders
shall be distributed among and paid to the holders of Common Stock ratably in
proportion to the number of shares of Common Stock held by them respectively.
B. Preferred Stock
The Board of Directors is hereby authorized as it may determine to
issue shares of Preferred Stock at any time and from time to time, in one or
more series, and to fix or alter the designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions, of such shares of Preferred Stock, including without limitation
of the generality of the foregoing, dividend rights, dividend rates, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), redemption price or prices and liquidation preferences of any
wholly unissued series of preferred shares and the number of shares constituting
any of such series and the designation thereof, or any of them; and to increase
or decrease the number of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
ARTICLE 5: BOARD OF DIRECTORS
The initial Board of Directors of the Corporation shall be such number
as is determined in accordance with the Bylaws of the Corporation. The directors
of the Corporation shall be divided into three classes, designated as Class A,
Class B and Class C. In the event that the number of directors shall not be
evenly divisible by three, the Board of Directors shall determine in which class
or classes the remaining director or directors, as the case may be, shall be
included. No Class shall have more than one director more than any other Class
unless such disparity results from the death or resignation of a director or the
removal of a director by the stockholders, in which event the remaining
directors shall promptly fill such vacancy so that no Class has more than one
director more than any other Class. The term of office of each director shall be
three years; provided, however, that, the initial term of office of filing of
the directors in Class A shall expire at the first annual meeting of the
stockholders after the date of filing of this Certificate of Incorporation, the
initial term of office of the directors in Class B shall expire at the second
annual meeting after the date of filing of this Certificate of Incorporation,
and the initial term of office of the directors in Class C shall expire at the
third annual meeting after the date of filing of this Certificate of
Incorporation. At each annual meeting of stockholders, directors shall be
elected for a full term of three years to succeed those whose terms expire.
Notwithstanding any other provision of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law), any removal of a director
shall be only for cause and shall be effected only by the affirmative vote of
the holders of two-thirds or more of the outstanding shares of capital stock of
the Corporation
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<PAGE> 4
entitled to vote generally in the election of directors cast at a meeting of the
stockholders called for that purpose.
ARTICLE 6: LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of such 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) under Section 174 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which such director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of this Article 6 by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
ARTICLE 7: INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of Delaware, indemnify any and all persons whom
it shall have the power to indemnify under said section from and against any and
all of the expenses, liabilities or other matters referred to in or covered by
said section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
other capacities while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
ARTICLE 8: AMENDMENT OF CERTIFICATE OF INCORPORATION
AND BYLAWS
Notwithstanding any provision of this Certificate of Incorporation or
the Bylaws of the Corporation, no provision of Articles 5, 6, 7, 8 and 9 of this
Certificate of Incorporation shall be amended, modified or repealed, nor shall
any provision of this Certificate of Incorporation inconsistent with any such
provision be adopted, by the stockholders of the Corporation unless approved by
the unanimous written consent of the stockholders or by the affirmative vote of
at least two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors cast at a
meeting of the stockholders called for that purpose.
The Board of Directors shall have the power acting by simple majority
to adopt, amend or repeal any provision of the Bylaws of the Corporation.
Notwithstanding any other provision of this Certificate of Incorporation or the
Bylaws of the Corporation (and notwithstanding that some lesser percentage which
may be specified by law), no provision of the Bylaws of the Corporation shall be
amended, modified or repealed by the stockholders of the Corporation, nor shall
any provision of
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<PAGE> 5
the Bylaws of the Corporation inconsistent with any such provision be adopted by
the stockholders of the Corporation, unless approved by the unanimous written
consent of the stockholders or by the affirmative vote of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors cast at a meeting of the stockholders
called for that purpose.
ARTICLE 9: LIMITATION ON ACTION BY STOCKHOLDERS
Following the effective date of an initial public offering of Common
Stock of the Corporation registered with the Securities and Exchange Commission,
no action may be taken by the stockholders except at an annual or special
meeting of the stockholders.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Incorporation to be executed and signed by its President on this 15th day of
February, 2000.
-----------------------------
Mahendra G. Shah, Ph.D.
Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.2
adopted by the Board of Directors on February 14, 2000
AMENDED AND RESTATED BYLAWS
OF
HORIZON PHARMACEUTICAL CORPORATION
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the
stockholders of the Corporation shall be held on such date, at such time and at
such place within or without the State of Delaware as may be designated by the
Board of Directors, for the purpose of electing Directors and for the
transaction of such other business as may be properly brought before the
meeting.
SECTION 2. Special Meetings. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by a majority of the Directors then in
office or the Chairman of the Board and shall be called by the Chief Executive
Officer, President or the Secretary at the request in writing of stockholders
holding together at least a majority of the number of shares of Common Stock
outstanding and entitled to vote at such meeting. Any special meeting of the
Stockholders shall be held on such date, at such time and at such place within
or without the State of Delaware as the Board of Directors or the officer
calling the meeting may designate. At a special meeting of the stockholders, no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting unless all of the stockholders are
present in person or by proxy, in which case any and all business may be
transacted at the meeting even though the meeting is held without notice.
SECTION 3. Notice of Meetings. Except as otherwise provided in
these Bylaws or by law, a written notice of each meeting of the stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of the Corporation entitled to vote at
such meeting at his address as it appears on the records of the Corporation. The
notice 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.
SECTION 4. Nomination of Directors. This Section 4 shall take
effect upon the effective date of an initial public offering of Common Stock of
the Corporation registered with the Securities and Exchange Commission.
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation.
Nominations of persons for election to the Board of Directors may be made at any
annual meeting of stockholders, or at any special meeting of stockholders called
for the purpose of electing directors, (a) by or at the direction of the Board
of Directors (or any duly authorized committee thereof) or (b) by any
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 4 and on the record date
for the determination of stockholders entitled to vote at such meeting and (ii)
who complies with the notice procedures set forth in this Section 4.
<PAGE> 2
In addition to any other applicable requirements, for a nomination to
be made by a stockholder such stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
(a) in the case of an annual meeting, not less than ninety (90) days nor more
than 130 days prior to the date of the anniversary of the previous year's annual
meeting; provided, however, that in the event the annual meeting is scheduled to
be held on a date more than thirty (30) days prior to or delayed by more than
sixty (60) days after such anniversary date, notice by the stockholder in order
to be timely must be so received not later than the later of the close of
business ninety (90) days prior to such annual meeting or the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made and
(b) in the case of a special meeting of stockholders called for the purpose of
electing directors, not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the special meeting was mailed
or public disclosure of the date of the special meeting was made, whichever
first occurs (and in no event shall the public announcement of an adjournment of
the meeting commence a new time period for a giving of a stockholder's notice
under this Section).
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 4. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
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<PAGE> 3
SECTION 5. Stockholder Proposals; Business To Be Transacted At
Meetings. This Section 5 shall take effect upon the effective date of an initial
public offering of Common Stock of the Corporation registered with the
Securities and Exchange Commission.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors (or any duly authorized committee thereof). No
business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (c) otherwise properly brought before the
annual meeting by any stockholder of the Corporation (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 5
and on the record date for the determination of stockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section 5.
In addition to any other applicable requirements (including, without
limitation, Securities and Exchange Commission rules and regulations with
respect to inclusion of stockholder proposals in the Corporation's annual Proxy
Statement), for business to be properly brought before an annual meeting by a
stockholder, such stockholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than ninety (90) days nor more than 130 days prior to the date of the
anniversary of the previous year's annual meeting; provided, however, that in
the event the annual meeting is scheduled to be held on a date more than thirty
(30) days prior to or delayed by more than sixty (60) days after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the later of the close of business ninety (90) days
prior to such annual meeting or the tenth (10th) day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was first made by the Corporation.
In no event shall the public announcement of an adjournment of an annual meeting
commence a new time period for a giving of a stockholder's notice under this
Section 5.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business, (v) the names and addresses of other stockholders known by the
stockholder proposing such business to support the proposal, and the class and
number of shares of the Corporation's capital stock known to be beneficially
owned by such other stockholders, and (vi) a representation that such
stockholder intends to appear in person or by proxy at the annual meeting to
bring such business before the meeting.
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<PAGE> 4
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 5, provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 5 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
SECTION 6. Quorum. At any meeting of the stockholders, the
holders of a majority in number of the total outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or represented
by proxy, shall constitute a quorum of the stockholders for all purposes, unless
the representation of a larger number of shares shall be required by law, by the
certificate of Incorporation or by these Bylaws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a quorum
for purposes of such class vote unless the representation of a larger number of
shares of such class shall be required by law, by the Certificate of
Incorporation or by these Bylaws.
SECTION 7. Adjourned Meetings. Whether or not a quorum shall be
present in person or represented at any meeting of the stockholders, the holders
of a majority in number of the shares of stock of the Corporation present in
person or represented by proxy and entitled to vote at such meeting may adjourn
from time to time; provided, however, that if the holders of any class of stock
of the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the stockholders, or the holder of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been transacted by them at the original meeting. If the adjournment is for
more than thirty 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 adjourned meeting as if such
adjourned meeting was a newly called meeting.
SECTION 8. Organization. The Chief Executive Officer, or in his
absence the President or, in his absence, the Chairman of the Board or any Vice
President shall call all meetings of the stockholders to order, and shall act as
Chairman of such meetings. In the absence of such officers, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting shall elect a
Chairman.
The Secretary of the Corporation shall act as Secretary of all meetings
of the stockholders; but in the absence of the Secretary, the Chairman may
appoint any person to act as Secretary of the meeting. It shall be the duty of
the Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting,
arranged in
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alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open,
either at the Corporation's headquarters or, if so specified, at the place where
the meeting is to be held, for the ten days next preceding the meeting, to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, and shall be produced and kept at the time and place of
the meeting during the whole time thereof and subject to the inspection of any
stockholder who may be present.
SECTION 9. Voting. Except as otherwise provided in the
Certificate of Incorporation, by law or, in the case of Preferred Stock, by the
Board of Directors, each stockholder shall be entitled to one vote for each
share of the capital stock of the Corporation registered in the name of such
stockholder upon the books of the Corporation. Each stockholder entitled to vote
at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. When
directed by the presiding officer or upon the demand of any stockholder, the
vote upon any matter before a meeting of stockholders shall be by ballot. Except
as otherwise provided by law or by the Certificate of Incorporation, Directors
shall be elected by a plurality of the votes cast at a meeting of stockholders
by the stockholders entitled to vote in the election and other action shall be
authorized by a majority of the votes cast at a meeting of stockholders by the
stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging 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.
SECTION 10. Action Without Meeting. Unless otherwise provided by
the Certificate of Incorporation, any action required to be taken at any annual
or special meeting of stockholders, or any action which may be taken at any
annual or special meeting, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than a
majority of the shares entitled to vote thereon. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
SECTION 11. Inspectors. When required by law or directed by the
presiding officer, but not otherwise, the polls shall be opened and closed, the
proxies and ballots shall be received and taken in charge, and all questions
touching the qualification of voters, the validity of proxies and the acceptance
or rejection of votes shall be decided at any meeting of the stockholders by two
or more inspectors who may be appointed by the Board of Directors before the
meeting, or if not so appointed, shall be appointed by the presiding officer at
the meeting. If any person so appointed fails to appear or act, the vacancy may
be filled by appointment in like manner.
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ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number and Term of Office. The business and affairs
of the Corporation shall be managed by or under the direction of a Board of
Directors, none of whom need be stockholders of the Corporation. The number of
Directors constituting the Board of Directors and the expiration of their
initial terms shall be fixed from time to time by resolution passed by a
majority of the Board of Directors. The Directors shall, except as hereinafter
otherwise provided for filling vacancies, be elected at the annual meeting of
stockholders, and shall hold office until their respective successors are
elected and qualified or until their earlier resignation or removal.
SECTION 2. Removal, Vacancies and Additional Directors. Any
Director may resign at any time upon written notice to the Corporation. Removal
of a Director shall require the affirmative vote of the holders of at least
two-thirds of the shares entitled to vote at an election of such Director or
Directors. Vacancies caused by any such removal and not filled by the
stockholders at the meeting at which such removal shall have been made, or any
vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal. When one or more Directors shall resign effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as herein provided in
connection with the filling of other vacancies.
SECTION 3. Place of Meeting. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the State
of Delaware as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time to time
by resolution shall determine. No notice shall be required for any regular
meeting of the Board of Directors; but a copy of every resolution fixing or
changing the time or place of regular meetings shall be mailed to every Director
at least five days before the first meeting held in pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chief Executive
Officer, the President, the Chairman of the Board or by any two of the Directors
then in office. Notice of the day, hour and place of holding of each special
meeting shall be given by sending the same by mail or overnight courier service
at least two days before the meeting or by causing the same to be transmitted by
telegraph, cable or wireless at least one day before the meeting to each
Director. Unless otherwise indicated in the notice thereof, any and all business
other than an amendment of these Bylaws may be transacted at any special
meeting, and an amendment of these Bylaws may be acted upon if the notice of the
meeting shall have stated that the amendment of these Bylaws is one of the
purposes of the meeting. At any meeting at which every Director shall be
present, even though without any notice, any business may be transacted,
including the amendment of these Bylaws.
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SECTION 6. Quorum. Subject to the provisions of Section 2 of
this Article II, a majority of the members of the Board of Directors in office
(but in no case less than two Directors) shall constitute a quorum for the
transaction of business and the vote of the majority of the Directors present at
any meeting of the Board of Directors at which a quorum is present shall be the
act of the Board of Directors. If at any meeting of the Board there is less than
a quorum present, a majority of those present may adjourn the meeting from time
to time.
SECTION 7. Organization. The Chairman of the Board shall preside
at all meetings of the Board of Directors. In the absence of the Chairman, an
acting Chairman shall be elected from the Directors present to preside at ouch
meeting. The Secretary of the Corporation shall act as Secretary of all meetings
of the Directors; but in the absence of the Secretary, the Chairman may appoint
any person to act as Secretary of the meeting.
SECTION 8. Committees. The Board of Directors may, by resolution
passed by a majority of the whole 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 the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided by resolution passed by a majority of the whole Board, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and the affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority 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 a
dissolution, or amending these Bylaws; and unless such resolution, these
By-laws, or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 9. Conference Telephone Meetings. Unless otherwise
restricted by the Certificate of Incorporation or by these Bylaws, the members
of the Board of Directors or any committee designated by the Board, may
participate in a meeting of the Board or such 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 such
participation shall constitute presence in person at such meeting.
SECTION 10. Consent of Directors or Committee in Lieu of Meeting.
Unless otherwise restricted by the Certificate of Incorporation or by these
Bylaws, any action required or permitted to be-taken at any meeting of the Board
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or 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 committee, as the case may be.
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ARTICLE III
OFFICERS
SECTION 1. Officers. The officers of the Corporation may be a
Chairman of the Board, a Chief Executive Officer, a President, a Chief Financial
Officer, one or more Vice Presidents, a Secretary and a Treasurer, and such
additional officers, if any, as shall be elected by the Board of Directors
pursuant to the provisions of Section 8 of this Article III.
All officers shall hold office at the pleasure of the Board of
Directors. Any officer may resign at any time upon written notice to the
Corporation. Officers may, but need not, be Directors. Any number of offices may
be held by the same person. The removal of an officer without cause shall be
without prejudice to his contract rights, if any. The election or appointment of
an officer shall not of itself create contract rights. Any vacancy caused by the
death of any officer, his resignation, his removal, or otherwise, may be filled
by the Board of Directors, and any officer so elected shall hold office at the
pleasure of the Board of Directors. In addition to the powers and duties of the
officers of the Corporation as set forth in these Bylaws, the officers shall
have such authority and shall perform such duties as from time to time may be
determined by the Board of Directors.
SECTION 2. Powers and Duties of the Chief Executive Officer.
Subject to the control of the Board of Directors, the Chief Executive Officer
shall have general charge and control of all of its business and affairs and
shall have all powers and shall perform all duties incident to the office of the
Chief Executive Officer. He shall preside at all meetings of the stockholders
and at all meetings of the Board of Directors and shall have such other powers
and perform such other duties as may from time to time be assigned to him by
these Bylaws or the Board of Directors.
SECTION 3. Powers and Duties of the President. Subject to the
control of the Board of Directors or the direction of the Chief Executive
Officer, the President shall have general charge and control of all its business
and affairs and shall have all powers and shall perform all duties incident to
the office of President. He shall have such other powers and perform such other
duties as may from time to time be assigned to him by these Bylaws, the Board of
Directors or the Chief Executive Officer.
SECTION 4. Power and Duties of the Chairman of the Board. If a
Chairman of the Board is elected by the directors, the Chairman shall preside at
all meetings of the directors. The Chairman shall have such other powers and
duties as the Board may prescribe from time to time.
SECTION 5. Powers and Duties of the Vice Presidents. Each Vice
President shall have all powers and shall perform all duties incident to the
office of Vice President and shall have such other powers and perform such other
duties as may from time to time be assigned to him by these Bylaws or by the
Board of Directors, the President or the Chief Executive Officer.
SECTION 6. Powers and Duties of the Secretary. The Secretary
shall keep the minutes of all meetings of the Board of Directors and the minutes
of all meetings of the stockholders in books provided for that purpose; he shall
attend to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors, the President or the
Chief Executive Officer
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shall authorize and direct; he shall have charge of the stock certificate books,
transfer books and stock ledgers and such other books and papers as the Board of
Directors, the President or the Chief Executive Officer shall direct, all of
which shall at all reasonable times be open to the examination of any Director,
upon application, at the office of the Corporation during business hours; and he
shall have all powers and shall perform all duties incident to the office of
Secretary and shall also have such other powers and shall perform such other
duties as may from time to time be assigned to him by these Bylaws or by the
Board of Directors, the President or the Chief Executive Officer.
SECTION 7. Powers and Duties of the Chief Financial Officer. The
Chief Financial Officer shall have custody of, and when proper shall pay out,
disburse or otherwise dispose of, all funds and securities of the Corporation
which may have come into his hands; he may endorse on behalf of the Corporation
for collection checks, notes and other obligations and shall deposit the same to
the credit of the Corporation in such bank or banks or depositary or
depositaries as the Board of Directors may designate; he shall sign all receipts
and vouchers for payments made to the Corporation; he shall enter or cause to be
entered regularly in the books of the Corporation kept for the purpose full and
accurate accounts of all moneys received or paid or otherwise disposed of by him
and whenever required by the Board of Directors, the President or the Chief
Executive Officer shall render statements of such accounts; he shall, at all
reasonable times, exhibit his books and accounts to any Director of the
Corporation upon application at the office of the Corporation during business
hours; and he shall have all powers and shall perform all duties incident of the
office of Chief Financial Officer and shall also have such other powers and
shall perform such other duties as may from time to time be assigned to him by
these Bylaws or by the Board of Directors, the President or the Chief Executive
Officer.
SECTION 8. Additional Officers. The Board of Directors may from
time to time elect such other officers (who may but need not be Directors),
including Chief Operating Officers, a Treasurer, a Controller, Assistant
Treasurers, Assistant Secretaries and Assistant Controllers, as the Board may
deem advisable and such officers shall have such authority and shall perform
such duties as may from time to time be assigned to them by the Board of
Directors, the President or the Chief Executive Officer. The Board of Directors
may from time to time by resolution delegate to any Assistant Treasurer or
Assistant Treasurers any of the powers or duties herein assigned to the
Treasurer; and may similarly delegate to any Assistant Secretary or Assistant
Secretaries any of the powers or duties herein assigned to the Secretary. Each
of the Board of Directors, the President or Chief Executive Officer of the
Company is hereby authorized to appoint and remove from time to time such
officers of the Company, who will hold positions of vice president or assistant
vice president and who will not be corporate officers but shall be
administrative officers of the Company, as the Board of Directors, the President
or the Chief Executive Officer of the Company may deem advisable and such
officers shall have such authority and shall perform such duties as may from
time to time be assigned to them by the Board of Directors, the President or the
Chief Executive Officer of the Company.
SECTION 9. Giving of Bond by Officers. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish bonds
to the Corporation for the faithful performance of their duties, in such
penalties and with such conditions and security as the Board shall require.
SECTION 10. Voting upon Stocks. Unless otherwise ordered by the
Board of Directors, the President or any Vice President shall have full power
and authority on behalf of the Corporation
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to attend and to act and to vote, or in the name of the Corporation to execute
proxies to vote, at any meeting of stockholders of any corporation in which the
Corporation may hold stock, and at any such meeting shall possess and may
exercise, in person or by proxy, any and all rights, powers and privileges
incident to the ownership of such stock. The Board of Directors may from time to
time, by resolution, confer like powers upon any other person or persons.
SECTION 11. Compensation of Officers. The officers of the
Corporation shall be entitled to receive such compensation for their services as
shall from time to time be determined by the Board of Directors.
ARTICLE IV
INDEMNIFICATION
(a) The Corporation shall 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 the person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another Corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit, or proceeding if
the person acted in good faith and in a manner the person 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 the
person's 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 the person 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 the
person's conduct was unlawful.
(b) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees), actually and reasonably incurred
by the person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit 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 which the Court of Chancery or such other court shall deem proper.
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(c) To the extent that a present or former 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 subsections (a) and (b)
of this Article IV, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of
this Article IV (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 present or former director, officer, employee or agent is
proper in the circumstances because the person has met the applicable standard
of conduct set forth in subsections (a) and (b) of this Article IV. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (3) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or 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 of officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article IV. Such
expenses (including attorneys' fees) incurred by former directors and officers
or other employees and agents may be so paid upon such terms and conditions, if
any, as the Corporation deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of this Article IV
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office.
(g) A Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under this
Article IV.
(h) For purposes of this Article IV, references to "the
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, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent
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of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this Article IV with respect to the resulting or
surviving corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Article IV, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation 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 a person who acted in good faith and in a
manner such person 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 IV.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article IV shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) In the event of payment of indemnification to a
person described in this Article IV, the Corporation shall be subrogated to the
extent of such payment to any right of recovery such person may have and such
person, as a condition of receiving indemnification from the Corporation, shall
execute all documents and do all things that the Corporation may deem necessary
or desirable to perfect such right of recovery, including the execution of such
documents necessary to enable the Corporation effectively to enforce any such
recovery.
(l) The Corporation shall not be liable under this
Article IV to make any payment in connection with any claim made against a
person described in this Article IV to the extent such person has otherwise
received payment (under any insurance policy, by-law or otherwise) of the
amounts otherwise indemnifiable hereunder.
(m) The foregoing indemnification provisions shall be
deemed to be a contract between the Corporation and each indemnified party. Such
contract right may not be modified retroactively in any material respect as to
the indemnified party without the consent of the indemnified party. The
Corporation and an indemnified party may enter into an agreement providing for
indemnification and advancement of expenses including attorneys fees, that may
change, enhance, qualify or limit any right to indemnification or advancement of
expenses created by this Article IV.
ARTICLE V
STOCK-SEAL-FISCAL YEAR
SECTION 1. Certificates For Shares of Stock. The certificates
for shares of stock of the Corporation shall be in such form, not inconsistent
with the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the President or a Vice
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President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as
the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a
person owning a certificate for shares of stock of the Corporation alleges that
it has been lost, stolen or destroyed, he shall file in the office of the
Corporation an affidavit setting forth, to the best of his knowledge and belief,
the time, place and circumstances of the loss, theft or destruction, and, if
required by the Board of Directors, a bond of indemnity or other indemnification
sufficient in the opinion of the Board of Directors to indemnify the Corporation
and its agents against any claim that may be made against it or them on account
of the alleged loss, theft or destruction of any such certificate or the
issuance of a new certificate in replacement therefor. Thereupon the Corporation
may cause to he issued to such person a new certificate in replacement for the
certificate alleged to have been lost, stolen or destroyed. Upon the stub of
every new certificate so issued shall be noted the fact of such issue and the
number, date and the name of the registered owner of the lost, stolen or
destroyed certificate in lieu of which the new certificate is issued.
SECTION 3. Transfer of Shares. Shares of stock of the
Corporation shall be transferred on the books of the Corporation by the holder
thereof, in person or by his attorney duly authorized in writing, upon surrender
and cancellation of certificates for the number of shares of stock to be
transferred, except as provided in Section 2 of this Article IV.
SECTION 4. Regulations. The Board of Directors shall have power
and authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, as the case may be, the Board of Directors may fix, in
advance, a record date, which shall not be (i) more than sixty (60) nor less
than ten (10) days before the date of such meeting, or (ii) in the case of
corporate
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action to be taken by consent in writing without a meeting, prior to, or more
than ten (10) days after, the date upon which the resolution fixing the record
date is adopted by the Board of Directors, or (iii) more than sixty (60) days
prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is delivered to the Corporation; and
the record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating 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 of Directors may
fix a new record date for the adjourned meeting.
SECTION 6. Dividends. Subject to the provisions of the
Certificate of Incorporation, the Board of Directors shall have power to declare
and pay dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law. Subject to the
provisions of the Certificate of Incorporation, any dividends declared upon the
stock of the Corporation shall be payable on such date or dates as the Board of
Directors shall determine. If the date fixed for the payment of any dividend
shall in any year fall upon a legal holiday, then the dividend payable on such
date shall be paid on the next day not a legal holiday.
SECTION 7. Corporate Seal. The Board of Directors shall provide
a suitable seal, containing the name of the Corporation, which seal shall be
kept in the custody of the Secretary. A duplicate of the seal may be kept and be
used by any officer of the Corporation designated by the Board of Directors or
the President.
SECTION 8. Fiscal Year. The fiscal year of the Corporation shall
be such fiscal year as the Board of Directors from time to time by resolution
shall determine.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of
exchange, acceptances, notes or other obligations or orders for the payment of
money shall be signed and, if so required by the Board of Directors,
counter-signed by such officers of the Corporation and/or other persons as the
Board of Directors from time to time shall designate. Checks, drafts, bills of
exchange, acceptances, notes, obligations and orders for the payment of money
made payable to the Corporation may be endorsed for deposit to the credit of the
Corporation with a duly authorized depository by the Treasurer and/or such other
officers or persons as the Board of Directors from time to time may designate.
SECTION 2. Loans. No material loans and no renewals of any
material loans shall be contracted on behalf of the Corporation except as
authorized by the Board of Directors. When authorized to do so, any officer or
agent of the Corporation may effect loans and advances for the
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<PAGE> 15
Corporation from any bank, trust company or other institution or from any firm,
corporation or individual, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other evidences of indebtedness of the
Corporation. When authorized so to do, any officer or agent of the Corporation
may pledge, hypothecate or transfer, an security for the payment of any and all
loans, advances, indebtedness and liabilities of the Corporation, any and all
stocks, securities and other personal property at any time held by the
Corporation, and to that end may endorse, assign and deliver the same. Such
authority may be general or confined to specific instances.
SECTION 3. Contracts. Except as otherwise provided in these
Bylaws or by law or as otherwise directed by the Board of Directors, the
President or any Vice President shall be authorized to execute and deliver, in
the name and on behalf of the Corporation, all agreements, bonds, contracts,
deeds, mortgages, and other instruments, either for the Corporation's own
account or in a fiduciary or other capacity, and the seal of the Corporation, if
appropriate, shall be affixed thereto by any of such officers or the Secretary
or an Assistant Secretary. The Board of Directors, the President or any Vice
President designated by the Board of Directors may authorize any other officer,
employee or agent to execute and deliver, in the name and on behalf of the
Corporation, agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or other
capacity, and, if appropriate, to affix the seal of the Corporation thereto. The
grant of such authority by the Board or any such officer may be general or
confined to specific instances.
SECTION 4. Waivers of Notice. Whenever any notice whatever is
required to be given by law, by the Certificate of Incorporation or by these
Bylaws to any person or persons a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
SECTION 5. Offices Outside of Delaware. Except as otherwise
required by the laws of the State of Delaware, the Corporation may have an
office or offices and keep its books, documents and papers outside of the State
of Delaware at such place or places as from time to time may be determined by
the Board of Directors, the Chief Executive Officer or the President.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended or repealed as specified in the
Certificate of Incorporation.
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EXHIBIT 10.1
HORIZON PHARMACEUTICAL CORPORATION
1997 NON-QUALIFIED STOCK OPTION PLAN
AS AMENDED BY BOARD OF DIRECTOR RESOLUTIONS
ADOPTED ON DECEMBER 4, 1997, DECEMBER 7, 1998, AND MARCH 17, 1999
1. Purposes of the Plan: The purposes of this Stock Plan are:
* to attract and retain the best available personnel for
positions of substantial responsibility,
* to provide additional incentive to Eligible Participants, and
* to promote the success of the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under state corporate and securities laws
and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Horizon Pharmaceutical Corporation, a Delaware
corporation.
(h) "Continuous Status as an Employee" means that the employment
relationship with the Company, any Parent, or Subsidiary, is not interrupted or
terminated. Continuous Status as an Employee shall not be considered interrupted
in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, any Parent,
any Subsidiary, or any successor. A leave of absence approved by the Company
shall include sick leave, military leave, or any other personal leave approved
by an authorized representative of the Company.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined
in the Company's long-term disability plan or, in the event the Company does not
have a long-term disability plan, as defined in Section 22(e)(3) of the Code.
<PAGE> 2
(k) "Eligible Participant" means any Employee, Director (Employee
or non-employee), or Independent Contractor. If and to the extent any state
and/or federal securities laws, rules or regulations limit the eligible
participants to Employees of the Company or otherwise limits the eligible
participants, then the Eligible Participants in such jurisdiction shall be so
limited under this Plan.
(l) "Employee" means any person employed by the Company or any
Parent or Subsidiary of the Company. Each Officer is an Employee. A Director is
not necessarily an Employee; serving as a Director (including receiving a
director's fee from the Company) does not by itself constitute "employment" by
the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is fisted on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Independent Contractor" means any person who is an advisor or
consultant to the Company, but who is not an Employee.
(p) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option grant. The Notice of Grant is part
of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
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<PAGE> 3
(s) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(u) "Optioned Stock" or "Option Shares" means the Common Stock
subject to an Option.
(v) "Optionee" means an Eligible Participant who holds an
outstanding Option.
(w) "Parent" means a `parent corporation', whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Non-Qualified Stock Option Plan.
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(z) "Section 16 Insider" means an insider who is subject to
Section 16 of the Securities Exchange Act of 1934, as amended.
(aa) "Securities Act" means the Securities Act of 1933, as amended.
(bb) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(cc) "Subsidiary" means a `subsidiary corporation', whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 4,000,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexcerisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, if applicable, the Plan may be administered by different bodies with
respect to Directors, non-Employee
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<PAGE> 4
Directors, Officers who are not Directors, Employees who are neither Directors
nor Officers, and Independent Contractors.
(ii) Administration with Respect to Directors and Officers
Subject to Section 16(b). With respect to Option grants made to Employees who
are also Officers or Directors subject to Section 16(b) of the Exchange Act, the
Plan shall be administered by (A) the Board, if the Board may administer the
Plan in compliance with the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3, or (B) a committee designated by the Board
to administer the Plan, which committee shall be constituted to comply with the
rules governing a plan intended to qualify as a discretionary plan under Rule
16b-3. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by the rules governing
a plan intended to qualify as a discretionary plan under Rule 16b-3.
(iii) Administration with Respect to Directors and Officers
Not Subject to Section 16(b) and with Respect to Other Persons. With respect to
Option grants made to Directors and Officers not subject to Section 16(b),
Employees who are neither Directors nor Officers of the Company, and Independent
Contractors, the Plan shall be administered by (A) the Board or (B) a committee
designated by the Board, which committee shall be constituted to satisfy
Applicable Laws. Once appointed, such Committee shall serve in its designated
capacity until otherwise directed by the Board. The Board may increase the size
of the Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(m) of the Plan;
(ii) to select the Eligible Participants to whom Options
may be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited
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<PAGE> 5
to, the exercise price, the time or times when Options may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, any right to repurchase Option Shares by the Company,
and any restriction or limitation regarding any Option or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option (subject to Section
14(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to
Options; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Options may be granted to Eligible Participants. Employees
must also meet the eligibility requirements set forth in Section 21 of the Plan.
If otherwise eligible, an Eligible Participant who has been granted an Option
may be granted additional Options.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant.
(b) Neither the Plan nor any Option shall confer upon an Optionee
who is an Employee any right with respect to continuing such Optionee's
employment with the Company, nor shall they interfere in any way with such
Optionee's right or the Company's right to terminate such employment at any
time, with or without cause.
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<PAGE> 6
(c) The following limitations shall apply to grants of Options to
Eligible Participants:
(i) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(ii) If an Option is canceled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 12), the canceled Option will be counted against the limit
set forth in Section 6(c)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 18 of the Plan. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of.
(i) cash;
(ii) check;
(iii) other Shares, with the certificate(s) therefor
registered in the Optionee's name, which (A) in the case of an Optionee who is a
Section 16 Insider, have been owned by the Optionee for more than six (6) months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(iv) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
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<PAGE> 7
(v) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vi) a written instruction by the Optionee to the Company
to withhold from the Shares otherwise issuable upon the exercise of the Option
that number of Shares having a Fair Market Value as of the date of exercise
equal to the cash exercise price of the Shares being purchased; provided,
however, that in the case of an Optionee who is a Section 16 Insider, such
written instruction is received either (A) within ten (10) business days
beginning on the third (3rd) business day following release of the Company's
quarterly or annual summary of earnings and ending on the twelfth (12th)
business day following such day or (B) at least six (6) months prior to the date
of exercise of such Option;
(vii) any combination of the foregoing methods of payment;
or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no rights to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
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<PAGE> 8
(b) Termination of Employment.
The following provisions of this subsection (b) apply only to Optionees
who are Employees on the date of an Option grant. Unless otherwise specified by
the Administrator in writing at or subsequent to the grant, upon termination of
employment for any reason other than upon the Optionee's Disability, death or
retirement at or after age 65, the Option shall terminate and the Optionee's
right to exercise any Option shall end immediately upon the termination of
employment. For purposes of this Section 10(b), "termination of employment"
shall be deemed to have occurred at the close of business on the last day on
which the Optionee is carried as an active employee on the records of the
Company.
If the Optionee is given the right in writing to exercise such option
for a specified period of time following termination of employment, the Optionee
may exercise such Option, but only within such period of time as is specified in
such writing, and only to the extent that the Optionee was entitled to exercise
it at the date of termination of employment (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). If,
at the date of termination of employment, the Optionee is not entitled to
exercise the entire Option, the Shares covered by the unexercisable portion of
the Option shall revert to the Plan. If, after termination of employment, the
Optionee does not exercise the Option within the time specified, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. The following provisions of this
subsection (c) apply only to Optionees who are Employees on the date of an
Option grant. In the event that an Optionee's Continuous Status as an Employee
terminates as a result of the Optionee's Disability, the Optionee may exercise
the Option at any time within twelve (12) months from the date of such
termination, but only to the extent that the Optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
the term of such Option as set forth in the Notice of Grant). If, at the date of
termination, the Optionee is not entitled to exercise the entire Option, the
Shares covered by the unexercisable portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise the Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death Of Optionee. In the event of death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise the entire Option, the Shares covered by the unexercisable portion of
the Option shall immediately revert to the Plan. If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
(e) Rule 16b-3. Options granted to Section 16 Insiders must comply
with the applicable provisions of Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
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<PAGE> 9
(f) Retirement At or After Age 65. The following provisions of
this subsection (f) apply only to Optionees who are Employees on the date of an
Option grant. Upon retirement from the Company at or after age 65, the Option
may be exercised by the retired Employee at any time during the Option's term as
set forth in the Notice of Grant. In the event of the death of such retired
Employee prior to the expiration of the term of such Option as set forth in the
Notice of Grant, the provisions of Paragraph (d) of this Section 10 shall apply.
11. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise the Option
as to all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable.
(c) Merger, Reorganization Asset Sale. For purposes of this
Section 12, "Reorganization of the Company" shall mean a merger of the Company
with or into another corporation, a reorganization or consolidation in which the
Company is not the surviving or acquiring company, a sale of securities of the
Company whereby the Company becomes a wholly-owned subsidiary of another
company, or the sale of substantially all of the assets of the Company. In the
event of a Reorganization of the Company, each outstanding Option may be assumed
or an equivalent option or right may be substituted by the successor corporation
or a Parent of the successor corporation. For purposes of this paragraph, the
term "successor corporation" shall include the acquiring company, the purchaser
of substantially all of the assets
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<PAGE> 10
of the Company, and any successor company in a merger, reorganization or
consolidation, as the case may be. In the event each outstanding Option is not
so assumed or any equivalent option or right not so substituted, then (i) any
vesting period shall end and any unvested Options shall become immediately
exercisable, and (ii) the Administrator shall notify the Optionee that the
Option shall be fully exercisable to the extent not exercised for a period of
twenty (20) days from the date such notice is given, and the Option will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed it following the
Reorganization of the Company, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
Reorganization of the Company, the consideration (whether stock, cash or other
securities or property) received in the Reorganization of the Company by holders
of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Reorganization of
the Company was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the
Reorganization of the Company.
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan, except the following amendments shall
require majority shareholder approval:
(i) increase in the total number of shares subject to the
Plan, except under Section 12 of the Plan relating to Adjustments; or
(ii) change in the term of the Plan set forth in Section 7
hereof
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 (or any successor rule or statute or other applicable law, rule
or regulation, including the requirements of any exchange or quotation system on
which the Common Stock is fisted or quoted). Such shareholder approval, if
required, shall be obtained in such a manner and to such a degree as is required
by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
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<PAGE> 11
15. Conditions upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the company, such a
representation is required.
(c) Restrictions. Restrictions may be imposed on Shares issued
pursuant to an Option and a legend may be stamped or otherwise imprinted on the
Share certificates.
(d) Other Conditions. If the Company determines that listing,
registration or qualification of Shares (or attempt to obtain an exemption
therefrom) of any regulatory body is necessary or desirable, the Option may not
be exercised in whole or in part until such listing, registration,
qualification, consent or approval is effected free of any conditions not
acceptable to the Company.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional shareholder approval, such
Option shall be void with respect to such excess Optioned Stock, unless
shareholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section 14 of
the Plan.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required
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<PAGE> 12
under applicable Federal and state law. An Option shall not be exercisable in
whole or in part prior to the date of approval of the Plan by the shareholders
of the Company.
19. Exchange Act. At the time of adoption of the Plan, it is not
anticipated that the Company will be subject to the Exchange Act, but provisions
relating to the Exchange Act are included herein to be applicable at such time,
if any, as the Company becomes subject to the Exchange Act.
20. Taxes Withheld. At the time of the exercise of any Option, the Company
may require, as a condition of the exercise of such Option, the Optionee to pay
the Company an amount equal to the amount of the tax the Company may be required
to (A) withhold to obtain a deduction for federal and state income tax purposes
as a result of the exercise of such Option by the Optionee or to comply with
Applicable Laws, or (B) collect from the Optionee and pay to the applicable
taxing authorities. An Optionee may, with the approval of the Administrator,
make an election to satisfy the tax withholding obligation by either (1)
tendering to the Company shares of Common Stock owned by the Optionee, with the
certificates therefor registered in the Optionee's name, having a Fair Market
Value equal to the tax withholding obligation, and, in the case of an Optionee
who is a Section 16 Insider, which have been owned by the Optionee for more than
six (6) months on the date of surrender; or (2) instructing the Company to
withhold from the Shares otherwise issuable upon the exercise of the Option that
number of shares having a Fair Market Value equal to the tax withholding
obligation; provided, however, that in the case of an Optionee who is a Section
16 Insider, such instruction is in writing and is received either (A) within ten
(10) business days beginning on the third (3rd) business day following release
of the Company's quarterly or annual summary of earnings and ending on the
twelfth (12th) business day following such day or (B) at least six (6) months
prior to the date of exercise of such Option. The value of the shares of Common
Stock to be delivered or withheld shall be based on the Fair Market Value of the
shares of Common Stock on the date of exercise.
21. Eligibility for Consideration. Only the following Employees shall be
eligible to be considered to receive grant(s) of Options under the Plan:
(a) Employees who were in the employment of the Company before
January 1, 1996 and who have Continuous Status as an Employee as of the date of
grant.
(b) Employees who are employed by the Company on or after January
1, 1996, upon expiration of twelve (12) months' employment with the Company, and
who have Continuous Status as an Employee as of the date of grant.
22. Determinations of Administrator or Board. All determinations of the
Administrator and the Board in connection with the Plan or Options hereunder
shall be evidenced by minutes or other written documentation setting forth such
determinations.
23. Documentation with Respect to Options. Each Option granted hereunder
shall be evidenced by a written Stock Option Agreement dated as of the date of
grant and executed by the Company and the Optionee, in such form as the
Administrator shall approve from time to time.
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<PAGE> 13
24. Temporary or Permanent Suspension of Grant of Options. The
Administrator in its discretion may decide not to grant any Options at any time
or from time to time.
25. No Right to Continued Employment. Nothing in the Plan or in any Option
granted hereunder or in any Stock Option Agreement relating thereto shall confer
upon any Employee the right to continue in the employ of the Company.
26. Other Plans. The adoption of the Plan shall not affect any other stock
option, stock purchase, incentive or other compensation plans in effect for the
Company, nor shall the Plan preclude the Company from establishing any other
plans or forms of incentive or other compensation for Employees.
27. Miscellaneous.
(a) Whenever used herein, nouns in the singular shall include the
plural, and pronouns shall include the masculine and feminine gender as the
meaning shall require.
(b) Headings of Sections and Paragraphs hereof are inserted for
convenience of reference only and do not constitute a part of the Plan.
(c) All notices to be given pursuant to the terms of the Plan
shall be in writing. Notices required or permitted to be given under the Plan by
the Administrator or the Company under Sections 12 or 27 of the Plan shall be
deemed to have been given on the date which is five (5) days following deposit
of same in the U.S. mail, registered or certified mail or Express Mail, postage
prepaid, or with a nationally or internationally recognized courier service,
prepaid, for no more than five (5)-day delivery, addressed to the addressee at
the last address shown on the records of the Company.
[END OF PLAN]
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<PAGE> 1
EXHIBIT 10.2
adopted by the Board of Directors and the stockholders on February 14, 2000
FIRST HORIZON PHARMACEUTICAL CORPORATION
2000 STOCK PLAN
1. PURPOSE. The purpose of the 2000 Stock Plan (the "Plan") is to
(a) attract and retain persons eligible to participate in the Plan; (b) motivate
participants, by means of appropriate incentives, to achieve long-range goals;
and (c) further identify participants' interests with those of the Company's
shareholders through compensation that is based on the Company's common stock to
promote the long-term financial interest of the Company, including the growth in
value of the Company's equity and the enhancement of shareholder return. The
term "Company" means First Horizon Pharmaceutical Corporation and its
Subsidiaries. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute. The term "Subsidiary" shall have the meaning
set forth in Section 424(f) of the Code.
2. TYPES OF GRANTS. The Plan Committee (as defined below) may,
from time to time, take the following action separately or in combination under
the Plan:
(a) grant INCENTIVE STOCK OPTIONS, as defined in Section
422 of the Code, as provided in Section 7 hereof;
(b) grant NONQUALIFIED STOCK OPTIONS as provided in
Section 8 hereof;
(c) grant STOCK AWARDS as provided in Section 9 hereof;
or
(d) SELL SHARES as provided in Section 10 hereof.
3. ELIGIBILITY; MAXIMUM ANNUAL GRANTS TO ANY INDIVIDUAL.
Officers, directors employees, advisors and consultants of the Company shall be
eligible to participate in the Plan at the discretion of the Plan Committee;
provided, however, that if and to the extent any state or federal securities
laws, rules or regulations limit the eligible participants to employees of the
Company or otherwise, then the eligible participants in such jurisdiction shall
be so limited under this Plan; and further provided that only full-time
employees of the Company may receive incentive stock options. To comply with
Section 162(m) of the Code, the maximum number of shares that may be covered by
grants under this Plan to any one individual during any calendar year is no more
than 500,000 shares.
4. ADMINISTRATION. The Plan shall be administered by a plan
committee (the "Plan Committee") established by the Board of Directors of First
Horizon Pharmaceutical Corporation (the "Board"), which shall appoint and remove
members of the Plan Committee in its discretion subject only to the requirements
set forth herein. The Plan Committee shall consist of two or more members of the
Board who are nonemployee directors within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, if deemed
<PAGE> 2
appropriate are outside directors within the meaning of Section 162(m) of the
Code. The Plan Committee shall determine the meaning and application of the
provisions of the Plan and all grant agreements executed pursuant thereto, and
its decisions shall be conclusive and binding upon all interested persons.
Subject to the provisions of the Plan, the Plan Committee shall have the sole
authority to determine: (a) the persons to whom grants shall be made; (b) the
amount and nature of the grants; (c) the price to be paid for the Stock upon the
exercise of each option; (d) the period within which each option may be
exercised; and (e) the other terms and conditions of the grants.
5. NUMBER OF SHARES RESERVED UNDER PLAN. The Company shall
reserve for issuance under the Plan 2,000,000 shares of Common Stock of First
Horizon Pharmaceutical Corporation ("Stock") or the number of shares of Stock,
which, in accordance with the provisions of Section 6 below, shall be
substituted therefor. If an option, stock award or stock sale granted under the
Plan shall expire or terminate for any reason without having been exercised in
full or without having been vested, shares subject to the unexercised, unvested
or forfeited portion thereof shall again be available for the purposes of the
Plan; provided, however, that the availability of any such shares shall be
subject to the provisions of Section 162(m) of the Code.
6. ADJUSTMENT TO NUMBER OF SHARES AND EXERCISE PRICE. In the
event of changes in the outstanding Stock by reason of stock dividends,
split-ups, consolidations, recapitalizations, reorganizations or similar events
(as determined by the Plan Committee), an appropriate adjustment shall be made
by the Plan Committee in the number of shares reserved under the Plan, in the
number of shares set forth in Section 5 above, in the number of shares and the
option price per share specified in any stock option agreement with respect to
any unpurchased shares, and the maximum number of shares that may be covered by
grants under this Plan to any one individual during any calendar year. The
determination of the Plan Committee as to what adjustments shall be made shall
be conclusive. Adjustments for any options to purchase fractional shares shall
also be determined by the Plan Committee. The Plan Committee shall give prompt
notice to all grantees of any adjustment pursuant to this Section.
7. INCENTIVE STOCK OPTIONS. It is intended that options granted
pursuant to this Section 7 qualify as incentive stock options as defined in
Section 422 of the Code. Incentive stock options shall be granted only to
employees of the Company. Each stock option shall be subject to the following
terms and conditions and to such other terms and conditions not inconsistent
therewith as the Plan Committee may deem appropriate and may be set forth in the
grant agreement:
(a) Limitation on Amount of Incentive Stock Options
Becoming Exercisable in Any One Calendar Year. The aggregate Fair Market Value
(determined as of the time the option is granted) of Stock with respect to which
incentive stock options are exercisable for the first time by the grantee during
any calendar year (under the Plan and all other incentive stock option plans of
the Company) shall not exceed $100,000.
(b) Incentive Stock Option Price. The price to be paid
for each share of Stock upon the exercise of each incentive stock option shall
be determined by the Plan Committee at the time the option is granted, but shall
in no event be less than 100% of the Fair Market Value (as defined below) of the
shares on the date the option is granted, or not less than 110% of the Fair
Market Value of such shares on the date such option is granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or of its parent or Subsidiaries. The "date the
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<PAGE> 3
option is granted" means the date on which the Plan Committee authorizes the
grant of an option under this Plan. For purposes of determining the "Fair Market
Value" of a share of Stock under this Plan, the following rules shall apply:
(i) If the Stock is at the time listed or
admitted to trading on any stock exchange
(including the Nasdaq National Stock
Market), then the "Fair Market Value" shall
be the mean between the lowest and highest
reported sale prices of the Stock on the
date in question on the principal exchange
on which the Stock is then listed or
admitted to trading. If no reported sale of
Stock takes place on the date in question on
the principal exchange, then the reported
closing sale price of the Stock on such date
on the principal exchange shall be
determinative of "Fair Market Value."
(ii) If the Stock is not at the time listed or
admitted to trading on a stock exchange, the
"Fair Market Value" shall be the mean
between the closing reported sale price of
the Stock on the date in question in the
over-the-counter market.
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value
thereof shall be determined in good faith by
the Committee.
(d) Limitation on Duration of Incentive Stock Options.
The period within which an incentive stock option may be exercised shall be
determined by the Plan Committee at the time the option is granted; provided,
however, that in no event shall any incentive stock option granted hereunder be
exercisable more than ten years from the date the option was granted nor more
than five years from the date the option was granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company.
(e) Payment for Stock upon Exercise of Option. The option
exercise price for each share of Stock purchased under a stock option shall be
paid in full at the time of purchase. The payment of the exercise price of an
incentive stock option granted shall be subject to the following:
(i) The full exercise price for shares of Stock
purchased upon the exercise of any stock
option shall be paid at the time of such
exercise (except that, in the case of an
exercise arrangement approved by the Plan
Committee and described in paragraph
6(e)(iii) below, payment may be made as soon
as practicable after the exercise).
(ii) The exercise price shall be payable in cash
or by tendering (either actually or, if and
so long as the Common Stock is registered
under Section 12(b) or 12(g) of the Exchange
Act, by attestation) or constructively
surrendering Stock already owned by the
grantee of the stock option for at least six
months (or any shorter or longer period
necessary to avoid a charge to the Company's
earnings for financial reporting purposes)
having a Fair Market Value on the
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<PAGE> 4
day prior to the stock option's exercise
date equal to the aggregate exercise price.
(iii) The Plan Committee may permit a participant
to elect to pay the exercise price upon the
exercise of a stock option by authorizing a
third party to sell shares of Stock (or a
sufficient portion of the shares) acquired
upon exercise of the stock option and remit
to the Company a sufficient portion of the
sale proceeds to pay the entire exercise
price and any tax withholding resulting from
such exercise, or the Company may choose to
retain such shares in satisfaction of the
exercise price and any tax withholding.
8. NONQUALIFIED STOCK OPTIONS. Each nonqualified stock option
granted under the Plan shall be evidenced by a stock option agreement between
the person to whom such option is granted and the Company. Such stock option
agreement shall provide that the option is subject to the following terms and
conditions and to such other terms and conditions not inconsistent therewith as
the Plan Committee may deem appropriate and may be set forth in the grant
agreement:
(a) Nonqualified Stock Option Price. The price to be paid
for each share of Stock upon the exercise of a nonqualified stock option shall
be determined by the Plan Committee at the time the option is granted. To the
extent that the Fair Market Value of Stock is relevant to the pricing of the
option by the Plan Committee, Fair Market Value of the Stock shall be determined
as set forth in Section 7(b) above.
(b) Limitation on Duration of Nonqualified Stock Option.
The period within which a nonqualified stock option may be exercised shall be
determined by the Plan Committee at the time the option is granted, but in no
event shall such period exceed 10 years from the date the option is granted.
(c) Payment for Stock upon Exercise of Nonqualified Stock
Option. The option exercise price for each share of Stock purchased under a
nonqualified stock option shall be paid in full at the time of purchase and
shall be subject to the terms and provisions of Section 7(e) above.
9. STOCK AWARDS. The Plan Committee may award Stock under the
Plan as stock bonuses. Stock awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Plan Committee. The restrictions
may include restrictions concerning transferability, voting, repurchase by the
Company and forfeiture of the shares of Stock awarded, together with such other
restrictions as may be determined by the Plan Committee. If shares of Stock are
subject to forfeiture, all dividends or other distributions paid by the Company
with respect to the shares of Stock shall be retained by the Company until the
shares of Stock are no longer subject to forfeiture, at which time all
accumulated amounts shall be paid to the recipient. The Plan Committee may
require the recipient to sign an agreement as a condition of the award, but may
not require the recipient to pay any monetary consideration other than amounts
necessary to satisfy tax withholding requirements. The agreement may contain any
terms, conditions, restrictions, representations and warranties required by the
Plan Committee. The certificates representing the shares awarded shall bear any
legends required by the Plan Committee. Unless otherwise determined by the Plan
Committee, shares awarded as a stock bonus to an officer or director may not be
sold until six months after the date of the award. Upon the issuance of a stock
award, the
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<PAGE> 5
number of shares of Stock reserved for issuance under the Plan shall be reduced
by the number of shares of Stock issued.
10. SALE OF STOCK. The Plan Committee may issue Stock under the
Plan for such consideration (including promissory notes and services) as
determined by the Plan Committee. Stock issued under the Plan shall be subject
to the terms, conditions and restrictions determined by the Plan Committee. The
restrictions may include restrictions concerning transferability, voting,
repurchase by the Company and forfeiture of the shares issued, together with
such other restrictions as may be determined by the Plan Committee. If shares of
Stock are subject to forfeiture or repurchase by the Company, all dividends or
other distributions paid by the Company with respect to the shares of Stock
shall be retained by the Company until the shares of Stock are no longer subject
to forfeiture or repurchase, at which time all accumulated amounts shall be paid
to the recipient. All Stock issued pursuant to this Section 10 shall be subject
to a purchase or subscription agreement, which shall be executed by the Company
and the prospective recipient of the shares prior to the delivery of
certificates representing such shares to the recipient. The purchase agreement
may contain any terms, conditions, restrictions, representations and warranties
required by the Plan Committee. The certificates representing the shares of
Stock shall bear any legends required by the Plan Committee. Upon the issuance
of Stock under this Section 10, the number of shares of Stock reserved for
issuance under the Plan shall be reduced by the number of shares of Stock
issued.
11. NONTRANSFERABILITY. The options granted pursuant to the Plan
shall be nontransferable except by will or the laws of descent and distribution
of the state or county of the grantee's domicile at the time of death, or,
except in the case of incentive stock options, pursuant to a qualified domestic
relations order defined under the Code or Title I of the Employee Retirement
Income Security Act, and shall be exercisable during the grantee's lifetime only
by him (or, except with respect to incentive stock options, in the case of a
transfer pursuant to a qualified domestic relations order, by the transferee
under such qualified domestic relations order) and after grantee's death, by
grantee's personal representative or by the person entitled thereto under
grantee's will or the laws of intestate succession.
12. EFFECT OF TERMINATION OF GRANTEE'S EMPLOYMENT OR OTHER
RELATIONSHIP WITH COMPANY. Upon termination of the grantee's employment or other
relationship with the Company, grantee's rights to exercise vested options then
held by grantee shall be as follows, except that to the extent such periods are
more restrictive in the grantee's agreement with the Company the shorter period
specified in the agreement shall apply:
(a) Death of Grantee. Upon the death of a grantee, any
vested option may be exercised (to the extent exercisable on the date of death)
within 12 months following the date of death or within such shorter period as
the Plan Committee as the Plan Committee shall prescribe in the option
agreement, by the grantee's representative or by the person entitled thereto
under grantee's will or the laws of intestate succession.
(b) Disability of Grantee. Upon the disability (within
the meaning of Section 22(e)(3) of the Code) of a grantee, any vested option may
be exercised (to the extent exercisable as of the date of disability), within 12
months following disability, or within such shorter period as the Plan Committee
shall prescribe in the option agreement.
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<PAGE> 6
(c) Other Termination. In the event an officer, director
or employee ceases to serve as an officer or director or employee of the Company
or a nonemployee ceases to provide services to the Company for any reason other
than as set forth in (a) and (b), above, any option which grantee holds shall
terminate at either (i) 60 days after the date a grantee-employee employment
terminates or a grantee-nonemployee ceases providing services to the Company or
(ii) such later date as determined by the Plan Committee and set forth in the
grant agreement for any grants other than incentive stock options. The foregoing
shall not extend any option or beyond the term specified in the grant agreement
and such option shall be exercisable only to the extent exercisable at the date
of termination of employment or cessation of services. The Plan Committee may in
its sole discretion permit the grantee of incentive stock options in whole or in
part to convert such options into nonqualified stock options prior to expiration
of the incentive stock options.
13. CHANGE OF CONTROL. Upon the occurrence of a Change in Control
(as hereinafter defined): All outstanding options granted under this Plan shall
become fully vested and exercisable and all Stock awarded or sold under this
Plan shall become fully vested. "Change of Control" means a change in the
beneficial ownership of the Company's voting stock or a change in the
composition of the Board which occurs as follows:
(a) The acquisition (other than by a direct purchase of
shares from First Horizon Pharmaceutical Corporation ("Horizon")) by any
"person," including a "syndication" or "group", as those terms are used in
Section 13(d)(3) or 14(d)(2) of the Exchange Act, of securities of representing
20% or more of the combined voting power of Horizon's then outstanding voting
securities, which is any security that ordinarily possesses the power to vote in
the election of the Board of Directors of a corporation without the happening of
any precondition or contingency;
(b) Horizon is merged or consolidated with another
corporation and immediately after giving effect to the merger or consolidation
either (i) less than 80% of the outstanding voting securities of the surviving
or resulting entity are then beneficially owned in the aggregate by (x) the
stockholders of Horizon immediately prior to such merger or consolidation, or
(y) if a record date has been set to determine the stockholders of Horizon
entitled to vote on such merger or consolidation, the stockholders of Horizon as
of such record date;
(c) If at any time during a calendar year a majority of
the directors of Horizon are not persons who were directors at the beginning of
the calendar year; or
(d) Horizon transfers substantially all of its assets to
another corporation which is a less than 80% owned subsidiary of Horizon.
14. SECURITIES LAW REQUIREMENTS. The Company's obligation to issue
shares of its Stock upon exercise of an option upon the grant of Stock awards,
or upon the sale of Stock is expressly conditioned upon the completion by the
Company of any registration or other qualification of such shares under any
state or federal law or rulings and regulations of any government regulatory
body or the making of such investment representations or other representations
and undertakings by the grantee or the recipient, as the case may be (or
grantee's legal representative, heir or legatee, as the case may be), in order
to comply with the requirements of any exemption from any such registration or
other qualification of such shares which the Company
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<PAGE> 7
in its sole discretion shall deem necessary or advisable. The Company may refuse
to permit the sale or other disposition of any shares acquired pursuant to any
such representation until it is satisfied that such sale or other disposition
would not be in contravention of applicable state or federal securities law.
15. TAX MATTERS. As a condition to the exercise of an option, the
vesting or award of a Stock bonus or the vesting or sale of shares of Stock, the
Company may require the grantee to pay over to the Company all applicable
federal, state and local taxes which the Company is required to withhold. At the
discretion of the Plan Committee and upon the request of an grantee, the minimum
statutory withholding tax requirements may be satisfied by the withholding of
shares of Stock otherwise issuable to the grantee upon the exercise of an
option. In the event grantee makes an 83(b) election under Code with respect to
any grant under the Plan, or disposes of an incentive stock option in a
transaction deemed to be a disqualifying disposition under Section 421 of the
Code, then, within 30 days of such 83(b) election or disqualifying disposition,
the grantee shall inform the Company of such actions.
16. AMENDMENTS TO PLAN. The Board of Directors may amend the Plan
at any time, except that:
(a) The number of shares of Stock which may be reserved
for issuance under the Plan shall not be increased except as provided in Section
6 above without shareholder approval;
(b) The option price per share of Stock subject to
incentive options may not be fixed at less than 100% of the Fair Market Value of
a share of Stock on the date the option is granted;
(c) The expiration date of this Plan may not be extended;
(d) The maximum period of ten (10) years during which the
options may be exercised may not be extended;
(e) The class of persons eligible to receive grants under
the Plan as set forth in Section 3 shall not be changed without shareholder
approval; and
(f) The benefits accruing to participants under this Plan
may not be materially increased.
Except as otherwise provided in this Plan, in no event may action by the Board
or shareholders to amend this Plan alter or impair the rights of a then existing
grantee, without grantee's consent, under any stock option, award or right
previously granted to him hereunder.
17. EFFECTIVE DATE OF PLAN; DURATION OF PLAN. This Plan shall
become effective upon the approval of the stockholders of the Company (the
"Effective Date"); provided, however, that to the extent that grants are made
under this Plan prior to its approval by the stockholders, the grants shall be
contingent on approval of the Plan by the stockholders of the Company at such
meeting. The Plan shall have a duration of ten years from the Effective Date;
provided that in the event of Plan termination, the Plan shall remain in effect
as long as any unexercised or
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<PAGE> 8
unvested grants under it are outstanding. No grant may be made under the Plan on
a date that is more than ten years from the Effective Date.
18. GRANT AGREEMENTS. Each option granted and each Stock award or
sale of shares of Stock under the Plan shall be evidenced by a written agreement
("Agreement") executed by the Company and accepted by the grantee, which (i)
shall contain each of the provisions and agreements herein specifically required
to be contained therein or a copy of this Plan attached as an exhibit to the
Agreement, (ii) if applicable, shall indicate whether such option is to be an
incentive stock option or a nonqualified stock option, and if it is to be an
incentive stock option, such Agreement shall contain terms and conditions
permitting such option to qualify for treatment as an incentive stock option
under Section 422 of the Code (by reference to the Plan or otherwise), (iii) may
contain the agreement of the grantee to remain in the employ of, or to render
services to, the Company for a period of time to be determined by the Plan
Committee (or such terms may be included in a separate agreement with the
Company), and (iv) may contain such other terms and conditions as the Plan
Committee deems desirable that are consistent with the Plan.
19. NO IMPLIED RIGHT OF EMPLOYMENT. Nothing in this Plan or in any
grant hereunder shall confer upon any recipient any right to continue in the
employ of the Company or to continue to perform services for the Company, or
shall interfere with or restrict in any way the rights of the Company to
discharge or terminate any officer, director, employee, advisor, independent
contractor or consultant at any time for any reason whatsoever, with or without
good cause.
-8-
<PAGE> 1
EXHIBIT 10.3
HORIZON PHARMACEUTICAL CORPORATION
UNDER 1997 NONQUALIFIED STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
Optionee's Name and Address:
- -----------------------------
- -----------------------------
- -----------------------------
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Date of Grant
--------------------
Vesting Commencement Date
--------------------
Exercise Price per Share
--------------------
Total Number of Shares
--------------------
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
25% of the Shares subject to the Option shall vest twelve (12) months
after the Vesting Commencement Date; 25% of the Shares subject to the Option
shall vest twenty-four (24) months after the Vesting Commencement Date; 25% of
the Shares subject to the Option shall vest thirty-six (36) months after the
Vesting Commencement Date; and the remaining 25% of the Shares subject to the
Option shall vest forty-eight (48) months after the Vesting Commencement Date.
In the event of the first purchase of shares of Common Stock of the
Company pursuant to a tender or exchange offer for at least a majority of the
Company's outstanding shares of Common Stock by any person other than the
majority shareholder(s) at the effective date of the Plan, any vesting period
shall end and any unvested Options shall become immediately exercisable;
provided, however, that if such purchase constitutes a Reorganization of the
Company, the provisions of Section 12(c) of the Plan shall control.
<PAGE> 2
1. Grant of Option. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee"), an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth above (the "Exercise Price"), subject to the terms and conditions of the
Plan, which is incorporated herein by reference. Subject to Section 14(c) of the
Plan, in the event of a conflict between the terms and conditions of the Plan
and the terms and conditions of this Option Agreement, the terms and conditions
of the Plan shall prevail.
Your Option is not intended to be an "incentive stock option" within
the meaning of Section 422 of the Code.
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and the applicable provisions of the Plan and this Option Agreement. In the
event of the Optionee's death, Disability or other termination of the Optionee's
employment, the exercisability of the Option is governed by the applicable
provisions of the Plan and this Option Agreement. Reference is made to Section 5
below. (b) Notice of Intent to Exercise. Prior to exercising this Option or any
portion thereof, Optionee shall notify the Company that the Optionee is
considering exercising the Option, and the Company shall provide Optionee with
copies of information regarding the Company for evaluating the investment in the
Shares. If any of the information to be so disclosed is confidential, the
Company shall first require Optionee to execute a confidentiality or trade
secret agreement in form acceptable to the Company. In addition, the Company
will provide to Optionee such other non-confidential information regarding the
Company which Optionee shall reasonably request for evaluating the investment in
the Shares.
(b) Notice of Intent to Exercise. Prior to exercising
this Option or any portion thereof, Optionee shall notify the Company that the
Optionee is considering exercising the Option, and the Company shall provide
Optionee with copies of information regarding the Company for evaluating the
investment in the Shares. If any of the information to be so disclosed is
confidential, the Company shall first require Optionee to execute a
confidentiality or trade secret agreement in form acceptable to the Company. In
addition, the Company will provide to Optionee such other non-confidential
information regarding the Company which Optionee shall reasonably request for
evaluating the investment in the Shares.
(c) Method of Exercise. Following compliance with Section
2(b) above, an Option or any portion thereof is exercisable by delivery of an
exercise notice, in the form attached as EXHIBIT A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"'), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment of
the Exercise Price as to the Exercised Shares. This Option shall be deemed to be
exercised upon receipt by the Company of such fully executed Exercise Notice
accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with all relevant provisions
of law and the requirements of any stock exchange or quotation service upon
which the Shares are then listed. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised Shares.
2
<PAGE> 3
3. Method of Payment. Payment of the aggregate Exercise Price
shall be by any of the following, or a combination thereof, at the election of
the Optionee:
(a) cash;
(b) check;
(c) other Shares, with the certificate(s) therefor
registered in the Optionee's name, which (A) in the case of an Optionee who is a
Section 16 Insider, have been owned by the Optionee for more than six (6) months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(d) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(e) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(f) a written instruction by the Optionee to the Company
to withhold from the Shares otherwise issuable upon the exercise of the Option
that number of Shares having a Fair Market Value as of the date of exercise
equal to the cash exercise price of the Shares being purchased; provided,
however, that in the case of an Optionee who is a Section 16 Insider, such
written instruction is received either (A) within ten (10) business days
beginning on the third (3rd) business day following release of the Company's
quarterly or annual summary of earnings and ending on the twelfth (12th)
business day following such day or (B) at least six (6) months prior to the date
of exercise of such Option;
(g) any combination of the foregoing methods of payment;
or
(h) such other consideration and method of payment for
the issuance of Shares to the extend permitted by Applicable Laws.
4. Non-Transferability of Option. This Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
otherwise than by will or by the laws of descent or distribution and may be
exercised during the lifetime of the Optionee only by the Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
3
<PAGE> 4
5. Term of Option. The vested portion of this Option may be
exercised in whole or in part through the 10th anniversary of the date hereof;
provided, however, that the term of this Option shall earlier expire as follows:
(a) For Employees (as defined in the Plan), the term of
this Option shall expire on the 60th day following termination of employment,
except that if employment terminates as a result of the Optionee's disability or
death, then the Option shall expire on the first anniversary of the date of such
disability or death in accordance with Sections 10(c) and 10(d) of the Plan.
(b) For non-employee Directors or Independent Contractors
(as defined in the Plan), the Option shall expire on the 60th day following the
termination of Optionee's service as a non-employee Director or Independent
Contractor, as the case may be.
6. Tax Consequences. The Optionee may have tax consequences
relating to the Option. Reference is made to EXHIBIT B attached.
7. Securities Laws Restrictions and Other Restrictions on
Transfer of Option Shares. You represent that when you exercise your Option you
shall be purchasing Option Shares for your own account and not on behalf of
others. You understand and acknowledge that federal and state securities laws
govern and restrict your right to offer, sell or otherwise dispose of any Option
Shares unless your offer, sale or other disposition thereof is registered under
the Securities Act and state securities laws, or in the opinion of the Company's
counsel, such offer, sale or other disposition is exempt from registration or
qualification thereunder. You agree that you shall not offer, sell or otherwise
dispose of any Option Shares in any manner which would: (i) require the Company
to file any registration statement with the Securities and Exchange Commission
(or any similar filing under state law) or to amend or supplement any such
filing or (ii) violate or cause the Company to violate the Securities Act, the
rules and regulations promulgated thereunder or any other state or federal law.
You further understand that the certificates for any Option Shares you purchase
shall bear such legends as the Company deems necessary or desirable in
connection with the Securities Act or other rules, regulations or laws.
8. Rights of Participants. If you are an Employee of the Company,
nothing in this Agreement shall interfere with or limit in any way the right of
the Company to terminate your employment at any time (with or without Cause),
nor confer upon you any right to continue in the employ of the Company for any
period of time or to continue your present (or any other) rate of compensation,
and in the event of your termination of employment (including, but not limited
to, termination by the Company without Cause) any portion of your Option that
was not previously vested and exercisable shall be forfeited. With respect to
all Optionees, nothing in this Agreement shall confer upon you any right to be
selected again as a Plan participant, and nothing in the Plan or this Agreement
shall provide for any adjustment to the number of Option Shares subject to your
Option upon the occurrence of subsequent events except as provided in Section 9
below.
4
<PAGE> 5
9. Adjustments. In the event of a reorganization,
recapitalization, stock dividend or stock split, or combination or other change
in the shares of Common Stock, the Board or the Administrator may, in order to
prevent the dilution or enlargement of rights under your Option, make such
adjustments in the number of type of shares authorized by the Plan, the number
of type of shares covered by your Option and the Exercise Price specified herein
as may be determined to be appropriate and equitable. Reference is made to
Section 12 of the Plan which more specifically describes adjustments upon the
occurrence of certain events.
10. Withholding of Taxes. The Company shall be entitled, if
necessary or desirable, to withhold from you from any amounts due and payable by
the Company to you (or secure payment from you in lieu of withholding) the
amount of any withholding or other tax due from the Company with respect to any
Option Shares issuable under the Plan, and the Company may defer such issuance
unless indemnified by you to its satisfaction. Reference is made to Section 20
of the Plan which more specifically describes the terms and conditions of tax
withholding.
11. Restrictive Legend.
(a) Legend. The certificates representing the Option
Shares shall bear substantially the following legend, in addition to any other
legends as may be required by law:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO CERTAIN OTHER AGREEMENTS (WHICH MAY INCLUDE ADDITIONAL RESTRICTIONS
ON TRANSFER AND CERTAIN REPURCHASE OPTIONS) SET FORTH IN AN OPTION AGREEMENT
BETWEEN THE COMPANY AND THE INITIAL HOLDER OF THIS OPTION, A COPY OF WHICH MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE."
(b) Opinion of Counsel. You may not sell, transfer or
dispose of any Option Shares (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the Company an
opinion of counsel reasonably acceptable in form and substance to the Company
that registration under the Securities Act or any applicable state securities
law is not required in connection with such transfer.
(c) Holdback. You agree not to effect any public sale or
distribution of any equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during the
seven (7) days prior to and the one hundred eighty (180) days after the
effectiveness of any primary or secondary registration of the Company's Common
Stock, except as part of such registration if otherwise permitted.
5
<PAGE> 6
(d) Removal of Restrictive Legend. Whenever the
restrictions imposed by this Section on Shares issued pursuant to an Option
granted hereunder shall terminate, as provided above, any holder of the Shares
as to which such restrictions apply shall be entitled to receive promptly from
the Company, without expense, a new certificate, not bearing the restrictive
legends which would otherwise be applicable. 12. Restrictions on Transfer.
12. Restrictions on Transfer.
(a) Transfer of Option Shares. No sale, pledge or other
transfer of any interest in any Option Shares shall be made except pursuant to a
Public Sale or pursuant to the Plan and the foregoing provisions of this Option
Agreement ("Exempt Transfers"), and except pursuant to this Section. For
purposes hereof, "Public Sale" means any sale of Option Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
At least thirty (30) days prior to making any transfer other
than an Exempt Transfer, you shall deliver a written notice (the "Sale Notice")
to the Company. The Sale Notice shall disclose in reasonable detail the identity
of the prospective transferee(s) and the terms and conditions of the proposed
transfer. No such transfer shall be consummated until thirty (30) days after the
Sale Notice has been delivered to the Company, unless the parties to the
transfer have been finally determined pursuant to this Section prior to the
expiration of such thirty (30) day period. (The date of the first to occur of
such events is referred to herein as the "Authorization Date").
(b) First Refusal Rights. The Company may elect to
purchase all or any portion of the Option Shares to be transferred by the holder
thereof upon the same terms and conditions as those set forth in the Sale Notice
by delivering a written notice of such election to the holder within twenty (20)
days after the receipt of the Sale Notice by the Company. The Company shall have
up to thirty (30) days to consummate the purchase and sale of Option Shares. If
the Company has not elected to purchase all of the Option Shares specified in
the Sale Notice, the holder of the Option Shares may transfer the remaining
Option Shares specified in the Sale Notice at a price and on terms no more
favorable to the transferee(s) thereof than specified in the Sale Notice during
the sixty (60) day period immediately following the Authorization Date. Any
Option Shares not transferred within such 60-day period shall be subject to the
provisions of this subsection (b) of this Section upon subsequent transfer.
(c) Certain Permitted Transfers. The restrictions
contained in this Section shall not apply with respect to transfers of Option
Shares (i) pursuant to applicable laws of descent and distribution or (ii) among
the Optionee's Family Group (hereinafter defined); provided that the
restrictions contained in this Section shall continue to be applicable to the
Option Shares after any such transfer and the transferees of such Option Shares
have agreed in writing to be bound by the provisions of the Plan and Option
Agreement. For purposes hereof, "Family Group" means the Optionee's spouse and
descendants (by birth or adoption).
6
<PAGE> 7
13. Entire Agreement. The Plan, a copy of which is attached hereto
as EXHIBIT C, is incorporated herein by reference. The Plan and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and the Optionee.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. The Optionee
has reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. The Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: HORIZON PHARMACEUTICAL CORPORATION
By:
- ---------------------- --------------------------
Signature
Title:
- ---------------------- -----------------------
Print Name
7
<PAGE> 8
EXHIBIT A
HORIZON PHARMACEUTICAL CORPORATION
1997 NON-QUALIFIED STOCK OPTION PLAN
EXERCISE NOTICE
Horizon Pharmaceutical Corporation
660 Hembree Parkway
Suite 106
Roswell, Georgia 30076
Attention: Secretary
1. Exercise of Option. Effective as of today, _____________,
______, the undersigned ("Purchaser") hereby elects to purchase _____________
shares (the "Shares") of the Common Stock of Horizon Pharmaceutical Corporation
(the "Company") under and pursuant to the 1997 Non-Qualified Stock Option Plan
(the "Plan") and the Nonqualified Stock Option Agreement dated _____________,
______, (the "Option Agreement"). The purchase price for the Shares shall be as
set forth in the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the
Company the full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that
Purchaser has received, read and understood the Plan, the Option Agreement and
other information provided by the Company to the Purchaser for the purpose of
evaluating the investment in the Shares of the Company and agrees to abide by
and be bound by their terms and conditions, as applicable.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares and has read and understands EXHIBIT B to the Option
Agreement. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
8
<PAGE> 9
6. Entire Agreement. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser.
Submitted by: Accepted by:
PURCHASER: HORIZON PHARMACEUTICAL CORPORATION
By:
- ----------------------------- ----------------------------
Signature
Title:
- ----------------------------- ----------------------
Print Name
Residence Address:
- ---------------------------
- ---------------------------
- ---------------------------
9
<PAGE> 10
EXHIBIT B
Certain Federal Income Tax Considerations
Relating to Nonqualified Stock Options under the Plan
The following discussion addresses certain federal income tax
consequences to recipients of options under the Plan.
NONQUALIFIED STOCK OPTIONS
Nonqualified Stock Options granted under the Plan cannot qualify as
Incentive Stock Options pursuant to Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
GRANT OF NQSO. Under current interpretations of the Code, the grant of
a Nonqualified Stock Option to an optionee will not result in the recognition of
any taxable income to the optionee because a Nonqualified Stock Option does not
have a readily ascertainable fair market value on the date it is granted.
EXERCISE OF NQSO. Upon exercise of the Nonqualified Stock Option, the
optionee will generally recognize ordinary income equal to the excess of the
fair market value of the shares received upon exercise of the Nonqualified Stock
Option (the "NQSO Shares") over the exercise price.
However, taxation will be deferred after exercise of the Nonqualified
Stock Option (i) if the NQSO Shares are subject to restrictions imposed in the
stock option agreement which could result in a substantial risk of their
forfeiture or (ii) if the optionee is subject to the "short-swing profit"
forfeiture provisions of Section 16(b) of the Securities Exchange Act of 1934
(if the company is a public company), unless the optionee makes an election
pursuant to Section 83(b) of the Code (an "83(b) Election"), within 30 days of
receipt of the NQSO Shares to be taxed on the date of receipt of the NQSO
Shares. If NQSO Shares are subject to a substantial risk of forfeiture and no
83(b) Election is made, the optionee will recognize ordinary income when the
NQSO Shares are no longer subject to such restrictions or the optionee is no
longer subject to Section 16(b) liability in an amount equal to the excess of
the value of the NQSO Shares at such time over the exercise price.
TAX BASIS IN SHARES. The optionee's tax basis for the NQSO Shares will
be equal to the exercise price paid by the optionee plus the amount includible
in the optionee's ordinary income from such exercise.
SALE OF NQSO SHARES. The optionee's holding period for the NQSO Shares
for determining long, mid or short-term gains or losses on the subsequent sale
of the NQSO Shares will commence on the date on which the NQSO Shares are
acquired.
GENERAL
The discussion set forth above is intended only as a summary and does
not purport to be a complete enumeration or analysis of all potential tax
effects relevant to recipients of Options under the Plan. It is strongly
recommended that all award recipients consult their own tax advisors concerning
the federal, state and local income and other tax considerations relating to
such awards and rights thereunder. In particular, it is recommended that each
award recipient consult his or her own tax advisor as to the alternative minimum
tax consequences of an award, the special tax considerations for an award
recipient who is subject to Section 16(b), of the Securities Exchange Act of
1934 (if the Company is a public company), whether it would be beneficial to
make a Section 83(b) Election, and as to any state tax consequences relating to
grants under the Plan.
10
<PAGE> 11
EXHIBIT C
HORIZON PHARMACEUTICAL CORPORATION
1997 NON-QUALIFIED STOCK OPTION PLAN
As Amended by Board of Director resolutions
adopted on December 4, 1997, December 7, 1998, and March 17, 1999
1. Purposes of the Plan: The purposes of this Stock Plan are:
* to attract and retain the best available personnel for
positions of substantial responsibility,
* to provide additional incentive to Eligible Participants, and
* to promote the success of the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under state corporate and securities laws
and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Horizon Pharmaceutical Corporation, a Delaware
corporation.
(h) "Continuous Status as an Employee" means that the employment
relationship with the Company, any Parent, or Subsidiary, is not interrupted or
terminated. Continuous Status as an Employee shall not be considered interrupted
in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, any Parent,
any Subsidiary, or any successor. A leave of absence approved by the Company
shall include sick leave, military leave, or any other personal leave approved
by an authorized representative of the Company.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined
in the Company's long-term disability plan or, in the event the Company does not
have a long-term disability plan, as defined in Section 22(e)(3) of the Code.
(k) "Eligible Participant" means any Employee, Director (Employee
or non-employee), or Independent Contractor. If and to the extent any state
and/or federal securities laws, rules or regulations limit the eligible
participants to Employees of the Company or otherwise limits the eligible
participants, then the Eligible Participants in such jurisdiction shall be so
limited under this Plan.
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<PAGE> 12
(l) "Employee" means any person employed by the Company or any
Parent or Subsidiary of the Company. Each Officer is an Employee. A Director is
not necessarily an Employee; serving as a Director (including receiving a
director's fee from the Company) does not by itself constitute "employment" by
the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is fisted on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Independent Contractor" means any person who is an advisor or
consultant to the Company, but who is not an Employee.
(p) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option grant. The Notice of Grant is part
of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(u) "Optioned Stock" or "Option Shares" means the Common Stock
subject to an Option.
(v) "Optionee" means an Eligible Participant who holds an
outstanding Option.
(w) "Parent" means a `parent corporation', whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Non-Qualified Stock Option Plan.
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<PAGE> 13
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(z) "Section 16 Insider" means an insider who is subject to
Section 16 of the Securities Exchange Act of 1934, as amended.
(aa) "Securities Act" means the Securities Act of 1933, as amended.
(bb) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(cc) "Subsidiary" means a `subsidiary corporation', whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 4,000,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexcerisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, if applicable, the Plan may be administered by different bodies with
respect to Directors, non-Employee Directors, Officers who are not Directors,
Employees who are neither Directors nor Officers, and Independent Contractors.
(ii) Administration with Respect to Directors and Officers
Subject to Section 16(b). With respect to Option grants made to Employees who
are also Officers or Directors subject to Section 16(b) of the Exchange Act, the
Plan shall be administered by (A) the Board, if the Board may administer the
Plan in compliance with the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3, or (B) a committee designated by the Board
to administer the Plan, which committee shall be constituted to comply with the
rules governing a plan intended to qualify as a discretionary plan under Rule
16b-3. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by the rules governing
a plan intended to qualify as a discretionary plan under Rule 16b-3.
(iii) Administration with Respect to Directors and Officers
Not Subject to Section 16(b) and with Respect to Other Persons. With respect to
Option grants made to Directors and Officers not subject to Section 16(b),
Employees who are neither Directors nor Officers of the Company, and Independent
Contractors, the Plan shall be administered by (A) the Board or (B) a committee
designated by the Board, which committee shall be constituted to satisfy
Applicable Laws. Once appointed, such Committee shall serve in its designated
capacity until otherwise directed by the Board. The Board may increase the size
of the Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Applicable Laws.
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<PAGE> 14
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(m) of the Plan;
(ii) to select the Eligible Participants to whom Options
may be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, any
right to repurchase Option Shares by the Company, and any restriction or
limitation regarding any Option or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator, in its sole discretion,
shall determine;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option (subject to Section
14(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to
Options; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Options may be granted to Eligible Participants. Employees
must also meet the eligibility requirements set forth in Section 21 of the Plan.
If otherwise eligible, an Eligible Participant who has been granted an Option
may be granted additional Options.
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<PAGE> 15
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant.
(b) Neither the Plan nor any Option shall confer upon an Optionee
who is an Employee any right with respect to continuing such Optionee's
employment with the Company, nor shall they interfere in any way with such
Optionee's right or the Company's right to terminate such employment at any
time, with or without cause.
(c) The following limitations shall apply to grants of Options to
Eligible Participants:
(i) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(ii) If an Option is canceled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 12), the canceled Option will be counted against the limit
set forth in Section 6(c)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 18 of the Plan. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of.
(i) cash;
(ii) check;
(iii) other Shares, with the certificate(s) therefor
registered in the Optionee's name, which (A) in the case of an Optionee who is a
Section 16 Insider, have been owned by the Optionee for more than six (6) months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(iv) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(v) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
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<PAGE> 16
(vi) a written instruction by the Optionee to the Company
to withhold from the Shares otherwise issuable upon the exercise of the Option
that number of Shares having a Fair Market Value as of the date of exercise
equal to the cash exercise price of the Shares being purchased; provided,
however, that in the case of an Optionee who is a Section 16 Insider, such
written instruction is received either (A) within ten (10) business days
beginning on the third (3rd) business day following release of the Company's
quarterly or annual summary of earnings and ending on the twelfth (12th)
business day following such day or (B) at least six (6) months prior to the date
of exercise of such Option;
(vii) any combination of the foregoing methods of payment;
or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no rights to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment.
The following provisions of this subsection (b) apply only to Optionees
who are Employees on the date of an Option grant. Unless otherwise specified by
the Administrator in writing at or subsequent to the grant, upon termination of
employment for any reason other than upon the Optionee's Disability, death or
retirement at or after age 65, the Option shall terminate and the Optionee's
right to exercise any Option shall end immediately upon the termination of
employment. For purposes of this Section 10(b), "termination of employment"
shall be deemed to have occurred at the close of business on the last day on
which the Optionee is carried as an active employee on the records of the
Company.
If the Optionee is given the right in writing to exercise such option
for a specified period of time following termination of employment, the Optionee
may exercise such Option, but only within such period of time as is specified in
such writing, and only to the extent that the Optionee was entitled to exercise
it at the date of termination of employment (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). If,
at the date of termination of employment, the Optionee is not entitled to
exercise the entire Option, the Shares covered by the unexercisable portion of
the Option shall revert to the Plan. If, after termination
16
<PAGE> 17
of employment, the Optionee does not exercise the Option within the time
specified, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. The following provisions of this
subsection (c) apply only to Optionees who are Employees on the date of an
Option grant. In the event that an Optionee's Continuous Status as an Employee
terminates as a result of the Optionee's Disability, the Optionee may exercise
the Option at any time within twelve (12) months from the date of such
termination, but only to the extent that the Optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
the term of such Option as set forth in the Notice of Grant). If, at the date of
termination, the Optionee is not entitled to exercise the entire Option, the
Shares covered by the unexercisable portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise the Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death Of Optionee. In the event of death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise the entire Option, the Shares covered by the unexercisable portion of
the Option shall immediately revert to the Plan. If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
(e) Rule 16b-3. Options granted to Section 16 Insiders must comply
with the applicable provisions of Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(f) Retirement At or After Age 65. The following provisions of
this subsection (f) apply only to Optionees who are Employees on the date of an
Option grant. Upon retirement from the Company at or after age 65, the Option
may be exercised by the retired Employee at any time during the Option's term as
set forth in the Notice of Grant. In the event of the death of such retired
Employee prior to the expiration of the term of such Option as set forth in the
Notice of Grant, the provisions of Paragraph (d) of this Section 10 shall apply.
11. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
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<PAGE> 18
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise the Option
as to all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable.
(c) Merger, Reorganization Asset Sale. For purposes of this
Section 12, "Reorganization of the Company" shall mean a merger of the Company
with or into another corporation, a reorganization or consolidation in which the
Company is not the surviving or acquiring company, a sale of securities of the
Company whereby the Company becomes a wholly-owned subsidiary of another
company, or the sale of substantially all of the assets of the Company. In the
event of a Reorganization of the Company, each outstanding Option may be assumed
or an equivalent option or right may be substituted by the successor corporation
or a Parent of the successor corporation. For purposes of this paragraph, the
term "successor corporation" shall include the acquiring company, the purchaser
of substantially all of the assets of the Company, and any successor company in
a merger, reorganization or consolidation, as the case may be. In the event each
outstanding Option is not so assumed or any equivalent option or right not so
substituted, then (i) any vesting period shall end and any unvested Options
shall become immediately exercisable, and (ii) the Administrator shall notify
the Optionee that the Option shall be fully exercisable to the extent not
exercised for a period of twenty (20) days from the date such notice is given,
and the Option will terminate upon the expiration of such period. For the
purposes of this paragraph, the Option shall be considered assumed it following
the Reorganization of the Company, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
Reorganization of the Company, the consideration (whether stock, cash or other
securities or property) received in the Reorganization of the Company by holders
of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Reorganization of
the Company was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the
Reorganization of the Company.
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan, except the following amendments shall
require majority shareholder approval:
(i) increase in the total number of shares subject to the
Plan, except under Section 12 of the Plan relating to Adjustments; or
(ii) change in the term of the Plan set forth in Section 7
hereof
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 (or any successor rule or statute or other applicable law, rule
or regulation, including the requirements of any exchange or quotation system on
which the Common Stock is fisted or quoted). Such shareholder approval, if
required, shall be obtained in such a manner and to such a degree as is required
by the applicable law, rule or regulation.
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<PAGE> 19
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
15. Conditions upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the company, such a
representation is required.
(c) Restrictions. Restrictions may be imposed on Shares issued
pursuant to an Option and a legend may be stamped or otherwise imprinted on the
Share certificates.
(d) Other Conditions. If the Company determines that listing,
registration or qualification of Shares (or attempt to obtain an exemption
therefrom) of any regulatory body is necessary or desirable, the Option may not
be exercised in whole or in part until such listing, registration,
qualification, consent or approval is effected free of any conditions not
acceptable to the Company.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional shareholder approval, such
Option shall be void with respect to such excess Optioned Stock, unless
shareholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section 14 of
the Plan.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable Federal and state law.
An Option shall not be exercisable in whole or in part prior to the date of
approval of the Plan by the shareholders of the Company.
19. Exchange Act. At the time of adoption of the Plan, it is not
anticipated that the Company will be subject to the Exchange Act, but provisions
relating to the Exchange Act are included herein to be applicable at such time,
if any, as the Company becomes subject to the Exchange Act.
20. Taxes Withheld. At the time of the exercise of any Option, the Company
may require, as a condition of the exercise of such Option, the Optionee to pay
the Company an amount equal to the amount of the tax the Company may be required
to (A) withhold to obtain a deduction for federal and state income tax purposes
as a result of the
19
<PAGE> 20
exercise of such Option by the Optionee or to comply with Applicable Laws, or
(B) collect from the Optionee and pay to the applicable taxing authorities. An
Optionee may, with the approval of the Administrator, make an election to
satisfy the tax withholding obligation by either (1) tendering to the Company
shares of Common Stock owned by the Optionee, with the certificates therefor
registered in the Optionee's name, having a Fair Market Value equal to the tax
withholding obligation, and, in the case of an Optionee who is a Section 16
Insider, which have been owned by the Optionee for more than six (6) months on
the date of surrender; or (2) instructing the Company to withhold from the
Shares otherwise issuable upon the exercise of the Option that number of shares
having a Fair Market Value equal to the tax withholding obligation; provided,
however, that in the case of an Optionee who is a Section 16 Insider, such
instruction is in writing and is received either (A) within ten (10) business
days beginning on the third (3rd) business day following release of the
Company's quarterly or annual summary of earnings and ending on the twelfth
(12th) business day following such day or (B) at least six (6) months prior to
the date of exercise of such Option. The value of the shares of Common Stock to
be delivered or withheld shall be based on the Fair Market Value of the shares
of Common Stock on the date of exercise.
21. Eligibility for Consideration. Only the following Employees shall be
eligible to be considered to receive grant(s) of Options under the Plan:
(a) Employees who were in the employment of the Company before
January 1, 1996 and who have Continuous Status as an Employee as of the date of
grant.
(b) Employees who are employed by the Company on or after January
1, 1996, upon expiration of twelve (12) months' employment with the Company, and
who have Continuous Status as an Employee as of the date of grant.
22. Determinations of Administrator or Board. All determinations of the
Administrator and the Board in connection with the Plan or Options hereunder
shall be evidenced by minutes or other written documentation setting forth such
determinations.
23. Documentation with Respect to Options. Each Option granted hereunder
shall be evidenced by a written Stock Option Agreement dated as of the date of
grant and executed by the Company and the Optionee, in such form as the
Administrator shall approve from time to time.
24. Temporary or Permanent Suspension of Grant of Options. The
Administrator in its discretion may decide not to grant any Options at any time
or from time to time.
25. No Right to Continued Employment. Nothing in the Plan or in any Option
granted hereunder or in any Stock Option Agreement relating thereto shall confer
upon any Employee the right to continue in the employ of the Company.
26. Other Plans. The adoption of the Plan shall not affect any other stock
option, stock purchase, incentive or other compensation plans in effect for the
Company, nor shall the Plan preclude the Company from establishing any other
plans or forms of incentive or other compensation for Employees.
27. Miscellaneous.
(a) Whenever used herein, nouns in the singular shall include the
plural, and pronouns shall include the masculine and feminine gender as the
meaning shall require.
(b) Headings of Sections and Paragraphs hereof are inserted for
convenience of reference only and do not constitute a part of the Plan.
(c) All notices to be given pursuant to the terms of the Plan
shall be in writing. Notices required or permitted to be given under the Plan by
the Administrator or the Company under Sections 12 or 27 of the Plan shall be
deemed to have been given on the date which is five (5) days following deposit
of same in the U.S. mail, registered or certified mail or Express Mail, postage
prepaid, or with a nationally or internationally recognized
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<PAGE> 21
courier service, prepaid, for no more than five (5)-day delivery, addressed to
the addressee at the last address shown on the records of the Company.
[END OF PLAN]
21
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
2000, by and between HORIZON PHARMACEUTICALS, INC., a Delaware corporation (the
"Company") and _______________________ ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to accept such employment, upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the covenants and mutual agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Employment. Throughout the Term (as defined in Section 2
below), the Company shall employ Executive as provided herein,
and Executive hereby accepts such employment. In accepting
such employment, Executive states that, to the best of his
knowledge, he is not now, and by accepting such employment,
will not be, under any restrictions in the performance of the
duties contemplated under this Agreement as a result of the
provisions of any prior employment agreement or non-compete or
similar agreement to which Executive is or was a party.
2. Term of Employment. The term of Executive's employment by the
Company hereunder shall commence on January 1, 2000 (the
"Effective Date") and shall continue thereafter unless sooner
terminated as a result of Executive's death or in accordance
with the provisions of Section 7 below (the "Term").
3. Duties. Throughout the Term, and except as otherwise expressly
provided herein, Executive shall be employed by the Company as
the ___________________ of the Company. In such capacity,
Executive shall devote his full time to the performance of his
duties as _________________ of the Company in accordance with
the Company's By-laws, this Agreement and the directions of
the Company's Board of Directors. Without limiting the
generality of the foregoing, throughout the Term Executive
shall faithfully perform his duties as _________________ at
all times so as to promote the best interests of the Company.
4. Compensation.
(a) Salary. For any and all services performed by
Executive under this Agreement during the Term, in
whatever capacity, the Company shall pay
-1-
<PAGE> 2
to Executive an annual salary of ________________
dollars ($___________) per year (the "Salary") less
any and all applicable federal, state and local
payroll and withholding taxes. The Salary shall be
paid in the same increments as the Company's normal
payroll, but no less frequent than bi-monthly and
prorated, however, for any period of less than a full
month. The Salary will be reviewed annually by the
Compensation Committee of the Board and a
determination shall be made at that time as to the
appropriateness of an increase, if any, thereto.
b. Bonus. In addition to the Salary, Executive shall be
eligible to receive from the Company an incentive
compensation bonus (the "Bonus") based on a
percentage of his Salary. The Bonus, if any, shall be
determined based on the achievement by the Company
and/or Executive of certain specific strategic plans
and goals (the "Performance Goals") during the
preceding calendar year (the "Measurement Period") as
shall be determined by the Board in consultation with
the Executive. The initial Performance Goals will be
established by the Board within ____ (__) days of
Executive's employment hereunder. Thereafter, the
Performance Goals for each Measurement Period shall
be established as promptly as possible in each such
Measurement Period. Following each Measurement
Period, the Compensation Committee of the Board shall
review the Performance Goals for the prior
Measurement Period in light of the Company's and/or
Executive's actual performance during such
Measurement Period as reflected on the Company's
audited financial statements. Achievement of various
levels of the Performance Goals shall result in the
following payments as a percentage of Salary:
<TABLE>
<CAPTION>
<S> <C>
Level of Achievement Bonus as Percent of Salary
-------------------- --------------------------
<S> <C>
Below Threshold __%
Threshold Goal __%
Target Goal __%
Stretch Goal __%
</TABLE>
Payment of each year's Bonus, if any, shall
be made within thirty (30) days after the Company's
and/or Executive's performance for the Measurement
Period is established by the Compensation Committee
on the basis of the Company's audited financial
statements. In addition, and at its sole discretion,
the Board may award additional compensation to
Executive based on Executive's contributions to the
Company.
5. Benefits and Other Rights. In consideration for Executive's performance
under this Agreement, the Company shall provide to Executive the
following benefits:
(a) The Company will provide Executive with cash advances for or
reimbursement of all reasonable out-of-pocket business
expenses incurred
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<PAGE> 3
by Executive in connection with his employment hereunder. Such
reimbursement, however, is conditioned upon Executive adhering
to any and all reasonable policies established by Company from
time to time with respect to such reimbursements or advances,
including, but not limited to, a requirement that Executive
submit supporting evidence of any such expenses to the
Company.
(b) The Company will provide Executive and his family with group
medical coverage under the terms of the Company's health
insurance plan, but subject to completion of normal waiting
periods. During any such waiting period, or in the event that
at the date of this Agreement the Company's group medical
coverage is not yet in effect, then, in either case, Company
will pay, or reimburse Executive for, the cost of COBRA
coverage for Executive and his family under his prior health
plan.
(c) During the Term the Executive shall be entitled to ____ (__)
weeks paid vacation, it being understood and agreed that
unused vacation shall not be carried over from one year to the
next.
6. Options. The Company may, at its sole discretion, grant to the
Executive options pursuant to the Company's 1997 Non Qualified Stock
Option Plan (the "Option Plan"). In the event that options are granted
the Executive pursuant to the Option Plan, the Company agrees that such
options shall provide that upon a "Change of Control" (as herein
defined) all such options shall become fully vested and immediately
exercisable. For purposes of this Agreement, a Change of Control shall
mean the occurrence of any of the following events: (a) a merger,
consolidation or reorganization of the Company in which the Company
does not survive as an independent entity; (b) a sale of all or
substantially all of the assets of the Company; (c) the first purchase
of shares of common stock of the Company pursuant to a tender or
exchange offer for more than a majority of the Company's outstanding
shares of common stock by any person other than John N. Kapoor or an
entity affiliated with or controlled by John N. Kapoor; or (d) any
change of control of a nature that, if the Company were a publicly
owned company, would, in the opinion of the Board of Directors, be
required to be reported under the federal securities laws; provided
that such a change of control shall be deemed to have occurred if (i)
any person, other than John N. Kapoor or an entity affiliated with or
controlled by John N. Kapoor, is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing at
least a majority of the combined voting power of the Company's then
outstanding securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Board of Directors of the Company cease for any reason to constitute a
majority thereof unless the election of any director, who was not a
director at the beginning of the period, was approved by a vote of at
least 80% of the directors then still in office who were directors at
the beginning of the period.
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<PAGE> 4
7. Termination of the Term.
(a) The Company shall have the right to terminate the Term under
the following circumstances:
(i) Executive shall die; or
(ii) With or without Cause, effective upon written notice
to Executive by the Company.
(b) This Agreement may be terminated by the Executive at any time
upon sixty (60) days prior written notice to the Company.
(c) For purposes of this Agreement, "Cause" shall mean:
(i) Executive shall be charged with the commission of a
felony or a crime involving dishonesty, fraud or
moral turpitude;
(ii) Executive has engaged in acts of fraud, embezzlement,
theft or other dishonest acts against the Company;
(iii) Executive commits an act which negatively impacts the
Company or its employees including, but not limited
to, engaging in competition with the Company,
disclosing confidential information or engaging in
sexual harassment, discrimination or other human
rights-type violations;
(iv) Executive's gross neglect or willful misconduct in
the discharge of his duties and responsibilities; or
(v) Executive's repeated refusal to follow the lawful
direction of the Board of Directors or supervising
officers.
8. Effect of Expiration or Termination of the Term. Promptly following the
termination of the Term, and except as otherwise expressly agreed to by
the Company in writing, Executive shall
(a) immediately resign from any and all other positions or
committees which Executive holds or is a member of with the
Company or any subsidiary of the Company including, but not
limited to, as a director of the Company or any subsidiary of
the Company.
(b) provide the Company with all reasonable assistance necessary
to permit the Company to continue its business operations
without interruption and
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<PAGE> 5
in a manner consistent with reasonable business practices;
provided, however, that such transition period shall not
exceed thirty (30) days after termination nor require more
than twenty (20) hours of Executive's time per week and
Executive shall be promptly reimbursed for all out of pocket
expenses.
(c) deliver to the Company possession of any and all property
owned or leased by the Company which may then be in
Executive's possession or under his control, including,
without limitation, any and all such keys, credit cards,
automobiles, equipment, supplies, books, records, files,
computer equipment, computer software and other such tangible
and intangible property of any description whatsoever. If,
following the expiration or termination of the Term, Executive
shall receive any mail addressed to the Company, then
Executive shall immediately deliver such mail, unopened and in
its original envelope or package, to the Company; and
(d) Other than as provided in this Section 8, upon a termination
of employment all other benefits and/or entitlements to
participate in programs or benefits, if any, will cease as of
the effective date, except medical insurance coverage that may
be continued at Executive's own expense as provided by
applicable law or written Company policy.
(e) Upon termination of Executive pursuant to ss.7(a)(ii) without
Cause, the Company shall (i) provide Executive with Salary
continuance, subject to ss.8(g), for ______ (___) months (a
"Salary Continuance"), plus (ii) a lump sum payment equal to
(______)% of the Bonus, if any, paid to Executive for the
immediately preceding calendar year, plus (iii) provide _____
(___) months of COBRA coverage for Executive which shall be
substantially equivalent to that provided by the Company prior
to termination, plus (iv) provide _______ (___) months of car
allowance at __________ dollars ($__________) per month,
pursuant to return of existing company vehicle at time of
termination, plus (v) all of Executive's then unvested options
previously issued pursuant to the Company Option Plan shall
immediately vest and be exercisable as herein provided.
(f) Upon termination of Executive pursuant to ss. 7(a)(i), ss.
7(a)(ii) with Cause or ss. 7(b), the Company shall pay
Executive or Executive's estate all Salary accrued but unpaid
as of the date of such termination.
(g) In the extent that Executive shall be entitled to receive a
Salary Continuance and COBRA benefit pursuant to ss.8(e), such
Salary Continuance and COBRA benefit shall continue only until
such time as Executive shall have accepted another full-time
position. In addition, in the event that Executive shall
perform consulting or other services for
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<PAGE> 6
which he shall receive compensation, all compensation shall be
reported to the Company and shall be offset against any
remaining Salary Continuance payments. Failure of Executive to
promptly report the receipt of any compensation from a third
party or the acceptance of a new position shall entitle the
Company to terminate all remaining Salary Continuance and
COBRA benefits and to seek restitution for any payments made
to Executive subsequent to such job acceptance or compensation
receipt;
(h) Upon the expiration or termination of this Agreement for any
reason, Executive, or Executive's estate, will have a period
of 120 days from the date of such expiration or termination in
which to exercise any vested option.
(i) Any dollar amounts which are to be paid at the time of
termination under this Section 8, other than Salary
Continuance and COBRA payments, shall be paid within thirty
(30) days after the date of termination. Any Salary
Continuance or COBRA payments shall be made in accordance with
the usual payroll practice which were applicable prior to
termination. Any and all payments made pursuant to this
Agreement shall be net of any and all applicable federal,
state and local payroll and withholding taxes.
9. Restrictive Covenants for Executive. Executive hereby covenants and
agrees with the Company that for so long as Executive is employed by
the Company and for a period (the "Restricted Period") of thirty-six
(36) months thereafter, Executive shall not, without the prior written
consent of the Company, which consent shall be within the sole and
exclusive discretion of the Company, either directly or indirectly, on
his own account or as an executive, consultant, agent, partner, joint
venturer, owner, officer, director or shareholder of any other person,
firm, corporation, partnership, limited liability company or other
entity, or in any other capacity, in any way:
(a) Carry on, be engaged in or have any financial interest in any
business which is in competition with the business of the
Company. For purposes of this Section 9, a business shall be
deemed to be in competition with the Company if it involves
research and development work involving products which were,
at the time of termination, being marketed by the Company or
which at such time were under study by the Company and
expected to be marketed within six (6) months of the date of
termination. Nothing in this Section 9 shall be construed so
as to preclude Executive from investing in any publicly held
company, provided Executive's beneficial ownership of any
class of such company's securities does not exceed 5% of the
outstanding securities of such class;
(b) solicit any current supplier, customer or client of the
Company or any affiliate of the Company or anyone who was a
supplier, customer or client
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<PAGE> 7
at any time during the twelve (12) month period immediately
preceding termination, excluding customers such as
wholesalers, managed care agencies, shippers, commercial and
investment banks, IR/PR agencies, scientific and computer
consultants, lawyers and manufacturers; as long as
manufacturers have extra capacity, provided, however, that
where minimum alternative allocation sources would not be
available, requests for exceptions to this restriction will be
determined by the Company on a case by case basis; or
(c) solicit, employ or engage any person who was an employee of
the Company or any affiliate of the Company at any time during
the twelve (12) month period immediately preceding
termination.
10. Confidentiality. The Executive acknowledges that during the period of
his employment by the Company, and in his performance of services
hereunder, he will be placed in a relationship of trust and confidence
regarding the Company and its affairs. In the course of and due to that
relationship he will have contact with the Company's customers,
suppliers, affiliates, and distributors and their personnel. In the
course of the aforesaid relationship, he will have access to and will
acquire confidential information relating to the business and
operations of the Company, including, without limitation, information
relating to processes, plans and methods of operation of the Company.
The Executive acknowledges that any such information that is not a
trade secret, nonetheless constitutes confidential information as
between himself and the Company, that the disclosure thereof (or of any
information which he knows relates to confidential, trade, or other
secret aspects of the Company's business) would cause substantial loss
to the goodwill of the Company, and will continue to be made known to
Executive only because of the position of trust and confidence which he
will continue to occupy hereunder. In view of the foregoing, and in
consideration of the covenants and premises of this Agreement, the
Executive agrees that he will not, at any time during the term of his
employment, and for a period of twelve (12) months thereafter, disclose
to any person, firm or company any trade secrets or confidential
information or such ideas which he may have acquired or developed or
may acquire or develop relating to the business of the Company while
serving the Company.
11. Remedies.
(a) The covenants of Executive set forth in Sections 9 and 10 are
separate and independent covenants for which valuable
consideration has been paid, the receipt, adequacy and
sufficiency of which are acknowledged by Executive, and have
also been made by Executive to induce the Company to enter
into this Agreement. Each of the aforesaid covenants may be
availed of, or relied upon, by the Company in any court of
competent jurisdiction, and shall form the basis of injunctive
relief and damages
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<PAGE> 8
including expenses of litigation (including, but not limited
to, reasonable attorneys fees upon trial and appeal) suffered
by the Company arising out of any breach of the aforesaid
covenants by Executive. The covenants of Executive set forth
in this Section 11 are cumulative to each other and to all
other covenants of Executive in favor of the Company contained
in this Agreement and shall survive the termination of this
Agreement for the purposes intended.
(b) Each of the covenants contained in Sections 9 and 10 above
shall be construed as agreements which are independent of any
other provision of this Agreement, and the existence of any
claim or cause of action by any party hereto against any other
party hereto, of whatever nature, shall not constitute a
defense to the enforcement of such covenants. If any of such
covenants shall be deemed unenforceable by virtue of its scope
in terms of geographical area, length of time or otherwise,
but may be made enforceable by the imposition of limitations
thereon, Executive agrees that the same shall be enforceable
to the fullest extent permissible under the laws and public
policies of the jurisdiction in which enforcement is sought.
The parties hereto hereby authorize any court of competent
jurisdiction to modify or reduce the scope of such covenants
to the extent necessary to make such covenants enforceable.
(c) In the event that Executive believes that the Company is in
violation of a material obligation owed to Executive under
this Agreement, and the Executive has given notice of such
violation to the Company requesting that the Company cure such
violation, and within twenty (20) business days the Company
has not undertaken steps to cure such violation or to provide
information to Executive demonstrating that the Company is not
in violation of the Agreement, and as a result of such failure
to cure or dispute such violation, the Executive terminates
the Agreement in accordance with Section 7(b), Executive shall
not be barred from seeking employment with a competitor
notwithstanding the restriction of Section 8(a); provided,
however, that all other restrictions contained in this
Agreement, including, but not limited to, the covenants in
Section 8(b) and in Section 9, shall remain in full force and
effect.
12. Enforcement Costs. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any
provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorney's fees, court
costs and all expenses even if not taxable as court costs (including,
without limitation, all such fees, costs and expenses incident to
appeal and other post-judgment proceedings), incurred in that action or
proceeding, in addition to any other relief to which such party or
parties may be entitled. Attorney's fees shall include, without
limitation, paralegal fees, investigative fees,
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<PAGE> 9
administrative costs, sales and use taxes and all other charges billed
by the attorney to the prevailing party.
13. Notices. Any and all notices necessary or desirable to be served
hereunder shall be in writing and shall be
(a) personally delivered, or
(b) sent by certified mail, postage prepaid, return receipt
requested, or guaranteed overnight delivery by a nationally
recognized express delivery company, in each case addressed to
the intended recipient at the address set forth below.
(c) For notices sent to the Company:
Horizon Pharmaceuticals, Inc.
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Telephone No.: (770) 442-9707
Facsimile No.: (770) 442-9594
(d) For notices sent to Executive:
------------------------
------------------------
------------------------
Either party hereto may amend the addresses for notices to such party
hereunder by delivery of a written notice thereof served upon the other
party hereto as provided herein. Any notice sent by certified mail as
provided above shall be deemed delivered on the third (3rd) business
day next following the postmark date which it bears.
14. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto with respect to the subject matter hereof, and all prior
negotiations, agreements and understandings are merged herein. This
Agreement may not be modified or revised except pursuant to a written
instrument signed by the party against whom enforcement is sought.
15. Severability. The invalidity or unenforceability of any provision
hereof shall not affect the enforceability of any other provision
hereof, and except as otherwise provided in Section 11 above, any such
invalid or unenforceable provision shall be severed from this
Agreement.
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<PAGE> 10
16. Waiver. Failure to insist upon strict compliance with any of the terms
or conditions hereof shall not be deemed a waiver or such term or
condition, and the waiver or relinquishment of any right or remedy
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or remedy at any other time or times.
17. Governing Law. This Agreement and the rights and obligations of the
parties hereto shall be governed by and construed in accordance with
the laws of the State of Illinois, without regard to its conflicts of
laws provisions. Each party hereto hereby (a) agrees that any
litigation which may be initiated with respect to this Agreement or to
enforce rights granted hereunder shall be initiated in a court located
in Cook County, -Illinois and (b) consents to personal jurisdiction of
such courts for such purpose.
18. Benefit and Assignability. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns. The
rights and obligations of Executive hereunder are personal to him, and
are not subject to voluntary or involuntary alienation, transfer,
delegation or assignment.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
HORIZON PHARMACEUTICALS, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
EXECUTIVE:
------------------------------------------
<PAGE> 1
EXHIBIT 10.5
CONVERTIBLE TERM LOAN NOTE
$1,600,000 January 11, 1999
FOR VALUE RECEIVED, the undersigned does hereby promise to pay, in
immediately available funds, on or before December 1, 2001 to the order of the
Kapoor Pharma Investments, L.P. ("Lender") at its principal office at 225 East
Deerpath Road, Suite 250, Lake Forest, Illinois, the principal sum of ONE
MILLION SIX HUNDRED THOUSAND AND 00/100 Dollars ($1,600,000) or the aggregate
unpaid Principal amount set forth on Schedule A attached hereto, whichever is
less, and to pay interest on the unpaid principal amount hereof, computed on the
basis of the actual number of days elapsed in a year of 365/366 days, from the
date hereof at the rate of 200 basis points (2%) over the Prime Rate of
interest, adjusted quarterly on each April 1, July 1, October 1 and January 1
while this Note is outstanding. As used herein, "Prime Rate" shall mean the rate
of interest charged from time to time by and announced by the LaSalle National
Bank, Chicago, Illinois (the "Bank") as its Prime Rate, which rate, however, may
not be the lowest rate offered by such Bank to its customers. Interest shall be
payable at Maturity, as defined in the Convertible Term Note Agreement by and
between the Maker and Lender of even date herewith (the "Note Agreement") unless
accelerated by conversion of a portion of this Note or otherwise in accordance
with the terms of the Note Agreement, in which case interest on the portion of
this Note so converted or accelerated shall be Payable at such time. This Note
is issued pursuant to, and entitled to the benefits of, and is subject to, the
Note Agreement and is secured in accordance with the provisions of Section 2 C.
of the Note Agreement; but neither this reference to the Note Agreement or any
financing statement or other document which may be executed pursuant to the Note
Agreement to evidence the Lender's secured position in the undersigned's assets
shall effect or impair the absolute and unconditional obligation of the
undersigned maker of this Note to pay the principal of and interest on this Note
as herein provided.
The undersigned hereby agrees that except as may be inconsistent with
any other provision of this Note, the provisions of the Note Agreement are
incorporated in this Note by reference as though specifically set forth herein
and made with reference hereto (including all amendments or waivers given in
connection with such Note Agreement prior to the date hereof). The provisions of
the Note Agreement incorporated herein shall continue in full force and effect
with respect to this Note notwithstanding any amendment thereto or waiver
hereafter given to any provision thereof.
This Note has been subordinated to all indebtedness now or hereafter
owing by the undersigned to LaSalle National Bank (the "Senior Lender") as
provided in the Subordination Agreement by and among the undersigned, the Lender
and the Senior Lender (the "Subordination Agreement') dated as of December 22,
1998. Each holder by its acceptance of this instrument hereof agrees to be
subject to the terms and conditions of the Subordination Agreement to the same
extent that Lender is bound and, upon request of the Senior Lender, shall
execute a subordination agreement on the same terms and conditions.
<PAGE> 2
The undersigned authorizes the Lender, without giving notice and
without affecting the liability of the undersigned, to extend the time of
payment of, or assign, this Note in whole or in part.
No delay on the part of the Lender in exercising any right under this
Note, any security agreement, guaranty or other undertaking securing or
affecting this Note, shall operate as a waiver of such right or any other right
under this Note, nor shall any omission in exercising any right on the part of
the Lender under this Note operate as a waiver of any other right.
The undersigned promises and agrees to pay all costs of collection
(including reasonable paralegal and attorneys' fees and their expenses) incurred
or paid by the Lender in enforcing this Note upon the occurrence of any Event of
Default as defined in the Note Agreement.
If any provision of this Note is held to be void or unenforceable, such
provision, at the option of the Lender, shall be deemed omitted and this Note,
with such provision omitted, shall remain in full force and effect.
This Note shall be governed by and construed m accordance with the laws
of the State of Illinois in all respects, including matters of construction,
validity and performance.
HORIZON PHARMACEUTICALS CORPORATION
By:
--------------------------------
Its:
--------------------------------
2
<PAGE> 1
EXHIBIT 10.6
CONVERTIBLE TERM NOTE AGREEMENT
This Agreement, dated as of January 11, 1999, is entered into between
Horizon Pharmaceuticals Corporation, a Delaware corporation (the "Company") and
Kapor-Pharma Investments, L.P. (the "Lender").
WHEREAS, the Company wishes to borrow, and the Lender is agreeable to
lend to the Company under a fixed rate, convertible note arrangement, and
WHEREAS, the Company has received the unanimous written consent of its
Board of Directors to the execution of this Agreement the issuance of the note
provided for herein and the future issuance of shares of the Company's stock
upon a conversion of the note, as well as the consent of its Senior Lender (as
herein defined) to the execution of this Agreement and the Note, all on the
terms and conditions herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, it is agreed by the parties hereto as follows:
1. Commitment of the Lender
A. Subject to the terms and conditions of this Agreement, the
Lender agrees to lend to the Company on and after the date hereof, an amount not
to exceed One Million Six Hundred Thousand and no/100 dollars ($1,600,000.00) or
such lesser principal sum as may be owed by the Company to the Lender under the
terms of the Convertible Term Loan Note attached hereto as Exhibit A (the
"Convertible Note" or the "Note") as reflected in the schedule attached to the
Convertible Note. In consideration for Lender's commitment to lend up to
$1,600,000 to the Company, the Company agrees to execute and deliver to the
Lender the Convertible Note. The loan commitment provided for in this Section 1
is hereinafter referred to as the "Loan."
2. Conditions To Loans
Notwithstanding any other provision of this Agreement, the Loan
provided for herein shall not be required to be funded except on the following
conditions.
A. Lender shall not be required to make any loan except as
necessary to fund the Company's product acquisition needs and day to day
operations and then only:
(i) upon Lender's determination that the Company is in
compliance with the covenants contained in Sections 5, 6, and 7 of this
Agreement; and
(ii) upon Lender's determination that no Event of Default
(as herein defined) exists.
<PAGE> 2
B. LaSalle National Bank, Chicago, Illinois (the "Senior Lender")
shall have consented to the Loan and to the Company's granting to Lender, in
order to secure the Loan of a blanket security interest in the assets of the
Company, which interest, however, will be subordinated to the security interest
of the Senior Lender.
C. The Company shall have executed a mutually acceptable security
agreement (the "Security Agreement").
D. Notwithstanding any other provisions of this Agreement, in no
event shall the total outstanding principal amount of all Loans exceed One
Million Six Hundred Thousand Dollars ($1,600,000) in the aggregate.
3. Note Evidencing Borrowing
A. The Loan from Lender hereunder shall be evidenced by the
single Convertible Note of the Company substantially in the form of Exhibit "A"
hereto, dated as of the date hereof and maturing on the earlier of (i) the date
Lender shall elect to convert the full outstanding principal of the Convertible
Note in accordance with Section 8 or (ii) December 1, 2001 ("Maturity"). Unless
the Note shall have been fully converted in accordance with Section 8, all
principal shall be due and payable in a single balloon payment on December 1,
2001, or such earlier date as shall be consented to by the Lender in accordance
with Paragraph 4.
B. From and after the date hereof the principal amount of the
Loan outstanding and unpaid hereunder from time to time shall bear interest
calculated at 200 basis points (2%) over the "Prime Rate" of interest. "Prime
Rate" for the purposes hereof shall mean the rate or interest charged from time
to time by and announced by the Senior Lender as its prime rate, which rate,
however, may not be the lowest offered by the Senior Lender to its customers.
The effective date of any change in said Prime Rate shall for purposes hereof be
the date the rate is changed by the Lender and such rate shall be adjusted each
January 1, April 1, July 1 and October 1 during which time any part of the Loan
is outstanding.
Interest on the balance of the Loan outstanding from time to time shall
be payable simultaneous with the payment of principal provided for in the
Convertible Note or, upon conversion of the Note in accordance with Section 8
hereof, all interest due and owing on the portion of the Note so converted shall
be paid on or prior to the date of conversion. Interest shall be calculated on
the basis of a 360 day year for the actual number of days elapsed. All payments
received by the Lender from the Company shall first be applied to accrued
interest, if any, and unpaid expenses and then to principal. Any amount of
principal or interest on the Convertible Note which is not paid when due,
whether at stated maturity, by acceleration or otherwise shall bear interest
payable on demand at a fluctuating interest rate per annum equal at all times to
four percent (4%) above the rate in effect an the Loan.
If any payment to be made by the Company hereunder or under the
Convertible Note shall become due on a Saturday, Sunday or business holiday
under the laws of the State of Illinois, such payment shall be made on the next
succeeding business day and such extension of
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<PAGE> 3
time shall be included in computing any interest in respect of such payment.
Payment of any amounts owed to Lender hereunder or under the Convertible Note
shall be made to the Lender at 225 East Deerpath Road, Suite 250, Lake Forest,
Illinois 60045 or at such other address as shall be designated by the Lender.
The proceeds of the Loan will be used solely for the purpose of funding
the Company's acquisition of additional products and for day to day operations.
4. Prepayment
At any time during the term of the Loan, the Company may repay the
entire outstanding principal and interest of the Loan, without any prepayment
penalty whatsoever, provided, however, (i) the Company shall have first given
the Lender thirty (30) days prior written notice of the Company's intent to make
such prepayment, (ii) the Lender shall not, prior to the date set for
prepayment, have elected, or announced its intention to convert all or a portion
of the Loan into shares of stock of the Company pursuant to Section 8 hereof.
and (iii) the Company shall concurrently with the prepayment of the Loan pay all
interest then accrued and unpaid on the Loan.
5. Representations and Warranties
To induce the Lender to make the Loan provided for herein, the Company
represents and warrants to the Lender as follows ( it being acknowledged and
agreed that such representations and warranties shall be deemed to be restated
as of the date of each Loan request):
A. The Company is a corporation duly organized, existing and in
good standing under the laws of the State of Delaware, with full and adequate
corporate power to carry on and conduct its business as presently conducted, and
is duly licensed or qualified in all jurisdictions wherein the nature of its
activities require such qualification or licensing.
B. The Company has full right, power and authority to enter into
this Agreement and to make the borrowings and execute and deliver the
Convertible Note as herein provided, and the execution and delivery of the
Agreement and the Convertible Note will not, nor will the observance or
performance of any of the matters and things herein or therein set forth,
violate or contravene any provision of law or of the charter or by-laws of the
Company or of any indenture, loan agreement or other agreement of or affecting
the Company or any of its properties. All necessary and appropriate corporate
action has been taken on the part of the Company to authorize the execution and
delivery of this Agreement, the Convertible Note and the Security Agreement and
this Agreement, the Convertible Note and the Security Agreement are each the
valid and binding agreements and contracts of the Company in accordance with
their respective terms.
C. No Event of Default as defined herein has occurred and is
continuing, and no event has occurred and is continuing which, with the length
of time, the giving of notice, or both, would constitute such an event of
default under this Agreement.
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<PAGE> 4
D. The authorized and outstanding capital stock of the Company
consists of 40,000,000 shares of Common Stock, par value $.00025 per share, of
which 7,981,248 are outstanding and no shares of Preferred Stock, none of which
are outstanding. All of the Company's outstanding stock has been duly and
validly authorized and issued and is fully paid and nonassessable. The shares of
Common Stock and Preferred Stock initially to be reserved for issuance upon
conversion of the Convertible Note pursuant to this Agreement have been duly and
validly authorized and are sufficient in number for the conversion of the
Convertible Note at the initial Conversion Price (as herein defined). As of the
date hereof, and except as otherwise disclosed by the Company to the Lender in
writing on the Disclosure Schedule attached hereto, the Company has not granted
or issued, or agreed to grant or issue, any options or warrants or similar
rights to others to acquire or receive any of its authorized but unissued shares
of Common Stock, or securities convertible into its Common Stock other than the
Convertible Note to be issued pursuant to this Agreement.
E. Except as otherwise disclosed to the Lender in writing by the
Company, there is no litigation or governmental proceeding pending, nor to the
knowledge of the Company threatened, against the Company or any subsidiary of
the Company which if adversely determined would result in any material adverse
change in the financial condition, properties, business or operations of the
Company or any subsidiary of the Company including, without limitation, any
actual or threatened civil or criminal action brought under any federal, state,
or other environmental statute, regulation, ordinance, or other law. No
authorization, consent, license, exemption or filing or registration with any
court or governmental department, agency or instrumentality, is or will be
necessary to the valid execution, delivery or performance by the Company and its
subsidiaries of this Agreement, the Note, the Security Agreement or any other
documents provided for hereunder.
The foregoing representations and warranties shall survive the making
of this Agreement and the issuance of the Note pursuant hereto, and shall be
deemed to be continuing representations and warranties until such time as the
Company has fulfilled all obligations to the Lender and the Lender has been paid
in full.
6. Negative Covenants
From and after the date hereof and so long as any portion of the Loan
shall be outstanding, the Company, will not, directly or indirectly:
A. Create, assume, incur or have outstanding any indebtedness
(including purchase money indebtedness), nor become liable, whether as endorser,
guarantor or surety or otherwise, for any debt or obligation of any other
person, firm, or corporation, except (i) indebtedness of the Company to the
Senior Lender pursuant to that certain Amended and Restated Loan Agreement dated
as of December 22, 1998 as amended from time to time (the "Senior Loan"), or
with the consent of Lender, which consent will not be unreasonably withheld, to
another lender whose credit rating is as high or higher than the Senior Lender
and who agrees to take over all of the Senior Lender's debt or indebtedness
which is made subordinate to the Loan on terms acceptable to Lender; (ii)
indebtedness of the Company hereunder and any other indebtedness and liabilities
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<PAGE> 5
of the Company to the Lender; (iii) endorsement for collection or deposit of any
commercial paper secured in the ordinary course of business; (iv) indebtedness
of the Company for taxes, assessments, municipal or other governmental charges;
(v) indebtedness of the Company for accounts payable, other than for money
borrowed, incurred in the ordinary course of business; and (vi) indebtedness
existing on the date hereof which is disclosed on the financial statements
delivered to Lender in accordance with Section 7(C) hereof and all of which
indebtedness, other than the LaSalle Loan, will be subordinate to the
indebtedness herein created.
B. Create, assume, incur or suffer or permit to exist any
mortgage, pledge, encumbrance, security interest assignment, lien or charge of
any kind or character upon any asset of the Company whether owned at the date
hereof or hereafter acquired except (i) liens securing the Senior Loan or other
debt now or hereafter owed to the Senior Lender; (ii) liens for taxes,
assessments or other governmental charges not yet due or which are being
contested in good faith by appropriate proceedings in such a manner as not to
make the property forfeitable; (iii) other liens charges and encumbrances
incidental to the conduct of its business or the ownership of its property and
assets which were not incurred in connection with the borrowing of money or the
obtaining of an advance or credit, and which do not in the aggregate materially
detract from the value of its property or assets or materially impair the use
thereof in the operation of its business; (iv) liens arising out of judgments or
awards against the Company with respect to which it shall concurrently therewith
be prosecuting an appeal or proceeding for review and with respect to which it
shall have secured a stay of execution pending such appeal or proceedings for
review; (v) pledges or deposits to secure obligations under workmen's
compensation laws or similar legislation; (vi) good faith deposits in connection
with lending contracts or leases to which the Company is a party; and (vii)
liens and security interests granted to the Lender or otherwise approved in
writing by the Lender.
C. Make or have outstanding any new investments (whether through
purchase of stocks or obligations or otherwise) in, or loans or advances to, any
other person, firm or corporation, or acquire all or any substantial part of the
assets or business of any other person, firm or corporation except (a)
investments in direct obligations of the United States; (b) investments in
certificates of deposit issued by the Senior Lender or any bank with assets
greater than One Hundred Million Dollars ($100,000,000.00); or (c) investments
in Prime Commercial Paper (for purposes hereof, Prime Commercial Paper shall
mean short-term unsecured promissory notes sold by large corporations and rates
A-1/P-1 by Standard & Poors Ratings Group, a division of McGraw Hill, Inc., and
Moody's Investment Service, Inc.).
D. Merge or consolidate, nor sell, transfer, lease or otherwise
dispose of all or any substantial part of its property, assets or business, nor
in any event sell or discount (with or without recourse any of its notes or
accounts receivable.
7. Affirmative Covenants
From and after the date hereof and so long as the Loan, or any part
thereof, remains outstanding (except to the extent compliance is in any case or
cases waived in writing by the Lender), the Company will:
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<PAGE> 6
A. Maintain, preserve and keep its assets, properties and
equipment in good repair, working order and condition, and will from time to
time make all needed and proper repairs, renewals, replacements, and additions
thereto so that at all times the efficiency thereof shall be fully preserved and
maintained;
B. Pay and discharge all taxes, assessments and governmental
charges upon or against it or against any of its properties before the same
become delinquent and before penalties accrue thereon, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings;
C. To the extent that the Company shall be required to provide
financial or other information and notices to the Senior Lender, including, but
not limited to, monthly, quarterly and annual financial statements as well as
evidence of compliance with any affirmative or negative covenants required by
the Senior Lender. (collectively "Senior Lender Information") then simultaneous
with the Company's transmission of any such Senior Lender Information to the
Senior Lender, copies of such Senior Lender Information shall also be provided
to the holder of the Convertible Note, or its authorized representative;
D. At all times keep, in accordance with generally accepted
accounting principles, true and complete books and records in connection with
its assets and operations and allow Lender such access to its books and records,
as it may reasonably request;
E. Insure and keep insured with good and responsible insurance
companies, all insurable property owned by it which is of a character. usually
insured by companies similarly situated and operating like properties, against
loss or damage from fire and such other hazards or risks as are customarily
insured against by companies similarly situated and operating like properties;
and will similarly obtain insurance for products liability risks with good and
responsible insurance companies; and will upon request of the Lender furnish a
certificate setting forth in summary form the nature and extent of the insurance
maintained by the Company pursuant to this Section 7(E);
F. Immediately after the commencement thereof, give notice to the
holder of the Convertible Note in writing of all actions, suits, and proceedings
before any court or governmental department, commission, board or other
administrative agency which may have a material effect on the operations of the
Company;
G. Immediately after the commencement thereof, give notice to the
holder of the Convertible Note in writing of the occurrence of an Event of
Default (as herein defined), or an event which with notice or lapse of time or
both would constitute an Event of Default;
H. Preserve and maintain its corporate existence, rights,
franchises and privileges; and
I. Give notice to the holder of the Convertible Note within ten
(10) days after the Company shall have filed with the Securities and Exchange
Commission or with any national
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<PAGE> 7
securities exchange (as defined in the Exchange Act) an application to register
any of the securities of the Company pursuant to Section 12 of the Exchange Act,
or any comparable federal statute.
8. Conversion of Convertible Notes
A. Right to Convert Conversion Price. Subject to and upon
compliance with the provisions hereto the holder of the Convertible Note shall
have the right, at such holder's option, at any time up to and including
December 1, 2001 or until the Convertible Note shall have been paid in full (the
"Conversion Period"), to convert all or any portion of the unpaid amount of such
Convertible Note into either Common Stock or Preferred Stock (which will be by
its terms convertible into Common Stock) of the Company at a price per share (i)
during the first two years from the date of this Agreement, equal to the lesser
of (a) the price per share that Common Stock or Convertible Preferred Stock, as
the case may be (the "Conversion Stock") shall first be sold in an amount of at
least $5,000,000, to any persons or entities as a single offering (the "Equity
Investors") or (b) $12.50 per share (calculated on a pre 4 for 1 split basis)
and (ii) during the third year from the date of this Agreement and thereafter to
Maturity, equal to the greater of (a) three (3) times gross revenues during the
twelve months preceding the "Valuation Date" (as defined in Section 8(D)(vii))
or (b) two (2) times the "Aggregate Book Value" (as defined in Section
8(D)(vii)) of the Company's assets, in either case divided by the number of
issued and outstanding shares of the Company's Common Stock, or, in case an
adjustment of the conversion price set forth in (i) or (ii) has taken place
pursuant to the further provisions of this Section 8, then at the price as last
adjusted and in effect at the date such Convertible Note or portion thereof is
surrendered for conversion (the conversion price or such price as last adjusted,
as the case may be, being referred to herein as the "Conversion Price");
provided, however, that in no event shall the Conversion Price be reduced below
the then applicable par value of the Conversion Stock into which the Convertible
Note is being converted, and, provided further, that to the extent that there
have not been sales of at least $5,000,000 to Equity Investors of the Common
Stock or the Preferred Stock during the first two years while the Loan is
outstanding, with the result that a Conversion Price based on the amount per
share paid by Equity Investors has not been established for such securities,
then the holder of the Convertible Note may only convert the Convertible Note
during the first two years of the Loan into either Common Stock or Preferred
Stock, as the case may be at a price of $12.50 per share (calculated on a pre 4
for 1 split basis), but adjusted, if necessary, as provided in this Section 8.
The number of shares of the Conversion Stock of the Company into which any
Convertible Note shall be convertible shall be subject to adjustment pursuant to
the further provisions of this Section 8. The number of such shares into which a
portion of the Convertible Note shall be convertible shall be that proportion of
the total number of such shares, as adjusted, into which such Convertible Note
is then convertible which the principal amount of such portion to be so
converted bears to the then unpaid principal amount of the Convertible Note.
In order to convert the Convertible Note, the holder thereof shall
surrender such Convertible Note to the Company at its principal office at 660
Hembree Parkway, Suite 106, Roswell, Georgia (or such other office or agency of
the Company as the Company may designate by notice in writing to the holder of
the Convertible Note), accompanied by a written statement
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<PAGE> 8
designating the principal amount of such Convertible Note, or portion thereof,
to be so converted. If the Convertible Note is converted in part only, the
Company shall, upon such conversion, execute and deliver to the holder thereof
at the expense of the Company, a new Convertible Note in principal amount equal
to the unconverted portion of such Convertible Note.
B. Issuance of Stock: Continuing Obligation. Within a reasonable
time, not exceeding five days after the receipt of the written statement
referred to in subsection 8(A) and surrender of the Convertible Note as
aforesaid, the Company shall issue and deliver to the holder thereof
(hereinafter in this subsection, the term "holder" shall include the nominee of
any such holder), registered in the name of such holder, a certificate or
certificates for the number of full shares of Conversion Stock issuable upon the
conversion of such Convertible Note (or specified portion thereof), bearing the
restrictive legend required by subsection 8(H). To the extent permitted by law,
such conversion shall be deemed to have been effected and the Conversion Price
and the number of shares of Conversion Stock issuable in connection with such
conversion shall be determined as of the close of business on the date on which
such written statement shall have been received by the Company and the
Convertible Note shall have been surrendered as aforesaid, and at such time the
rights of the holder of the Convertible Note as to the converted portion of the
principal of the Convertible Note shall cease, and the person or persons in
whose name or names any certificate or certificates for shares of Conversion
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby. The Company will,
at the time of such conversion, in whole or in part, upon request of the holder
of the Convertible Note, acknowledge in writing its continuing obligation to
such holder in respect of any rights (including, without limitation, any right
of registration of the shares of Conversion Stock issued upon such conversion)
to which such holder shall continue to be entitled under this Agreement
(including issuance of a new Convertible Note for any non-converted portion of
the Convertible Note) after such conversion; provided, that the failure of such
holder to make any such requests shall not affect the continuing obligation of
the Company to such holder in respect of such rights.
C. Dividends and Interest. No payment or adjustments shall be
made upon any conversion on account of any cash dividends on the Conversion
Stock issued upon such conversion. The Company shall pay all interest on the
Convertible Note surrendered for conversion, accrued to the date upon which the
above-mentioned written statement shall have been received by the Company.
D. Anti-Dilution Provisions.
(i) Adjustment of Conversion Price. The Conversion Price
once established shall be subject to adjustment from time to time
thereafter only as follows:
(a) In case shares of Conversion Stock are
issued as a dividend or other distribution on any class of
stock of the Company, the Conversion Price which would
otherwise be in effect at the opening of business on the day
following the date fixed for determination of shareholders
entitled to receive such dividend or other distribution shall
be reduced by multiplying such Conversion
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<PAGE> 9
Price by a fraction of which the numerator shall be the number
of shares of Common Stock or Preferred Stock into which the
conversion will take place, as applicable, outstanding at the
close of business on the date fixed for such determination and
the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately
after the opening of business on the day following the date
fixed for such determination. For the purpose of this
subparagraph (a), the number of shares at any time outstanding
shall include shares held by the Company if such dividend or
distribution is paid or made in respect thereof.
(b) In case the applicable Conversion Stock
shall be subdivided into a greater or combined into a lesser
number of shares of Conversion Stock, the Conversion Price in
effect immediately prior thereto, or immediately prior to the
record date for such subdivision or combination if a record
date is fixed, shall be proportionately adjusted so that it
will bear the same relation to the Conversion Price in effect
immediately prior to such subdivision or combination, or such
record date, as the total number of shares of Conversion Stock
outstanding immediately prior to such subdivision or
combination, or such record date, shall bear to the total
number of shares of Conversion Stock outstanding immediately
after such subdivision or combination or such record date. For
purposes of this subparagraph (b), the number of shares at any
time outstanding shall include shares held by the Company if
such subdivision or combination affect such shares.
(c) In the case of any capital reorganization of
the Company, or of any reclassification of the Conversion
Stock, or in case of the consolidation of the Company with, or
the merger of the Company into, any other corporation or of
the sale of all or substantially all of the properties and
assets of the Company to any other corporation, the
Convertible Note shall after such capital reorganization,
reclassification, consolidation, merger, or sale entitle the
holder to receive upon conversion the number of shares of
stock or other securities or property of the Company, or of
the corporation resulting from such consolidation or surviving
such merger or to which such sale shall be made, as the case
may be, to which the holder of securities deliverable (at the
time of such capital reorganization, reclassification,
consolidation, merger, or sale) upon conversion of such
Convertible Note would have been entitled upon such capital
reorganization, reclassification, consolidation, merger or
sale; and in any such case the provisions of this Section 8(D)
with respect to the rights and interest thereafter of the
holder of the Convertible Note shall be appropriately adjusted
so as to be applicable, as nearly as may reasonably be, to any
shares of stock or other securities or any property thereafter
deliverable on the conversion of the Convertible Note. Any
such adjustment which shall be approved by the Board of
Directors of the Company shall for all purposes of this
paragraph conclusively be deemed to be an appropriate
adjustment. The subdivision or combination of shares of
Conversion
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<PAGE> 10
Stock deliverable upon conversion of the Convertible Note at
any time outstanding into a greater or lesser number of shares
of Conversion Stock (whether with or without par value) shall
not be deemed to be a reclassification of the Conversion Stock
for the purposes of this paragraph.
(d) In case the Company shall issue rights or
warrants to all holders of any of its Conversion Stock
entitling them to subscribe for or purchase shares of Common
Stock without consideration or at a price per share less than
the Current Market Value per share (as determined pursuant to
Section 8(D)(vii) on the record date for the issuance of such
rights or warrants, then the Conversion Price in effect on the
date immediately prior to such record date shall immediately
be adjusted to a price (computed to the nearest cent) equal to
the quotient obtained by dividing;
(1) an amount equal to the sum of (x)
the number of shares of Conversion Stock issued and
outstanding on such record date multiplied by the
Conversion Price in effect on such record date and
(y) the aggregate consideration to be received by the
Company if all such rights or warrants were exercised
by
(2) an amount equal to the sum of (x)
the number of shares of Conversion Stock issued and
outstanding on such record date and (y) the number of
shares issuable upon exercise of such rights or
warrants (in each case increased or decreased to the
extent that the number of such shares shall have been
increased by a dividend or distribution of the type
contemplated by subparagraph (a) of this Section
8(D)(i) or shall have been increased or decreased by
each subdivision or combination thereof);
provided, however, that such adjustment shall be made only if the aforesaid
quotient shall be less than the Conversion Price in effect immediately prior to
the issue of such rights or warrants. Such adjustment shall become effective
retroactively immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants.
(e) For the purpose of any adjustment of the
Conversion Price pursuant to this Section 8(D), the following
provisions shall be applicable:
(1) in case of the issuance of
Conversion Stock for a consideration part or all of
which shall be cash (including such issuance upon
exercise of rights, warrants or options, granted
without consideration, to subscribe for or purchase
such shares), the amount of the cash consideration
shall be the amount of such cash received by the
Company, provided that no deduction shall be made for
any commissions, discounts or expenses incurred by
the Company for any underwriting of the issue or
otherwise in connection therewith; and
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<PAGE> 11
(2) in case of the issuance of
Conversion Stock for a consideration in whole or in
part other than cash, the consideration other than
cash shall be deemed to be the lower of the fair
value thereof as determined by the Board of Directors
of the Company or the value of the shares issued
based on the Current Market Value of the Common Stock
(determined as provided in Section 8(D)(vii)).
(f) For the purpose of this Section 8(D)(i),
shares of Conversion Stock or other securities held in the
treasury of the Company shall not be deemed to be outstanding,
except as specifically provided herein, and the sale or other
disposition of any shares of Conversion Stock or other
securities held in the treasury of the Company shall be deemed
an issuance thereof
(g) Anything in this Section 8(D) to the
contrary notwithstanding, no adjustment of the Conversion
Price shall be required in any case in which the amount of the
adjustment would be less than 5 cents but in such case any
adjustment that would otherwise be required then to be made
will be carried forward and made at the time and together with
the next subsequent adjustment which, together with any and
all such adjustments so carried forward, shall amount to 5
cents or more per share of Conversion Stock. Regardless of any
subdivision or combination of shares of Conversion Stock said
amount of 5 cents shall not be proportionately decreased or
increased.
(h) The certificate of any firm of independent
public accountants of recognized standing selected by the
Board of Directors of the Company shall be conclusive evidence
of the correctness of any computation made under this Section
8(D).
(ii) In any case in which this Section 8(D) shall require
that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such
event (a) issuing to the holder of the Convertible Note converted after
such record date and before the occurrence of such event the additional
shares issuable upon such conversion by reason of the adjustment
required by such event over and above the shares issuable upon such
conversion before giving effect to such adjustment and (b) paying to
such holder any amount in cash in lieu of a fractional share pursuant
to Section 8(D)(vi); provided, however, that the Company shall deliver
to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares, and such cash,
upon the occurrence of the event requiring such adjustment.
(iii) Whenever the Conversion Price is adjusted as herein
provided the Company shall prepare a certificate signed by the Chairman
of the Board, the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of
the Company setting forth the adjusted Conversion Price and showing in
reasonable detail the facts (and computations) upon which such
adjustments
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<PAGE> 12
are based, and such certificate, as well as any accountants'
certificate provided for in Section 8(D)(i)(h) on which the Company has
relied in making such adjustments, shall forthwith be mailed (by first
class mail postage prepaid) to the registered holder of the Convertible
Note at such holder's last address as shown on the register of die
Company.
(iv) In case at any time after the date hereof
and prior to December 1, 2001:
(a) The Company shall authorize the granting to
the holders of Conversion Stock of rights to subscribe for or
purchase any shares of stock of any class or of any other
rights; or
(b) There shall be any reclassification of the
Conversion Stock of the Company (other than a subdivision or
combination of its outstanding common stock); or
(c) There shall be any capital reorganization by
the Company; or
(d) There shall be any consolidation or merger
involving the Company or sale, transfer or other disposition
of all or substantially all of the Company's property, assets,
or business (except a merger or other reorganization in which
the Company shall be the surviving corporation and except a
consolidation, merger or sale, transfer or other disposition
involving a wholly owned subsidiary); or
(e) There shall be a voluntary or involuntary
dissolution, liquidation, or winding up of the Company or any
partial liquidation by the Company or distribution to holders
of the Conversion Stock (other than the Company's customary
cash and stock dividend);
then in any one or more of said cases, the Company shall cause to be mailed (by
first class mail postage prepaid) to the registered bolder of the Convertible
Note at such holder's last address as shown on the register of the Company, at
the earliest practicable time (and, in any event, not less than 20 days before
any record date or other date set for definitive action), notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution, or subscription rights or such reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation, or
winding up shall take place, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect, if any, of such action (to the
extent such effect may be known at the date of such notice) on the Conversion
Price and the kind and amount of the shares of stock and other securities and
property deliverable upon conversion of the Convertible Note. Such notice shall
also specify the date as of which the holder of the shares of record shall
Participate in said dividend, distribution, or subscription rights or shall be
entitled to exchange their shares for securities or other property deliverable
upon such organization, reclassification, sale, consolidation, merger,
dissolution, liquidation, or winding up, as the case may be.
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<PAGE> 13
(v) The form of the Convertible Note need not be changed
because of any change in the Conversion Price and the Convertible Note
issued before or after such change, and may state the same Conversion
Price as stated in the Convertible Note theretofore issued pursuant to
this Agreement. However, the Company may at any time in its sole
discretion (which shall be conclusive) make any change in the form of
Convertible Note that it may deem appropriate and that does not affect
the substance thereof; and any Convertible Note thereafter issued may
be in the form as so changed.
(vi) Anything contained herein to the contrary
notwithstanding, the Company shall not be required to issue any
fraction of a share in connection with the conversion of the
Convertible Note, but in any case where any holder of the Convertible
Note would, except for the provisions of this paragraph (ii), be
entitled under the terms of this Agreement to receive a fraction of a
share upon the conversion of the Convertible Note, the Company shall
pay a sum in cash equal to such fraction multiplied by the Current
Market Value of the shares (determined as provided in Section 8(D)(vii)
except that the Current Market Value shall be deemed to be the market
price for the business day next preceding the day of conversion).
(vii) For the purposes of any computation under this
Section 8(D), the Current Market Value per share of the Conversion
Stock or any other security (herein collectively referred to as a
"security") at the date then specified shall be determined by the most
recent sale price for such security to Equity Investors (provided there
has been a sale to Equity Investors within six months) or, in the
absence of a sale price, the value per share calculated based on the
"Value Per Share" calculated by the Company's independent accountants
as follows: "Value Per Share" shall mean the greater of (a) three (3)
times gross revenues received by the Company during the twelve months
preceding the "Valuation Date" divided by the number of shares issued
and outstanding on the "Valuation Date" or (b) two (2) times the
"Aggregate Book Value of the Shares" of the Company divided by the
number of Shares issued and outstanding on the "Valuation Date". The
term "Aggregate Book Value of the Shares" shall mean the excess of the
sum of (i) all cash, U.S. Treasury bills at cost and other securities
and obligations at their cost (plus accrued interest); (ii) other
assets (excluding goodwill) valued at cost; and (iii) all leasehold
rights, if any, valued in accordance with generally accepted accounting
principles, over the sum of (A) all determinable liabilities and any
reserves for depreciation maintained on the books of the Company, (B)
treasury stock, if any (iv) all dividends payable to Shareholders of
record as of a date prior to the Valuation Date. Where not inconsistent
with this Section, Value Per Share shall be determined in accordance
with generally accepted accounting principles. The term "Valuation
Date" shall mean the last day of the month preceding the month in which
the need to calculate the Value Per Share arose.
E. Share Issuable Upon Conversion. The Company covenants and
agrees that all shares of Conversion Stock which may be issued upon the
conversion of all or any portion of the Convertible Note will, upon issuance, be
duly and validly issued and fully paid and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof, but
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<PAGE> 14
exclusive of any sum payable by Lender as a result of the Lender's receipt of
the shares of Conversion Stock. The Company further covenants and agrees that it
will at all times have authorized, and reserved and kept available solely for
the purpose of issue upon the conversion of the Convertible Note, as herein
provided, a sufficient number of shares of its shares of the Conversion Stock as
shall then be estimated to be issued upon the conversion of the Convertible
Note.
F. Registration, Approval or Listing of Common Stock. If any
shares of Conversion Stock required to be reserved for purposes of conversion of
the Convertible Note hereunder require registration with or approval of any
governmental authority under any federal (other that the Securities Act or
similar federal statute then in force) or state law, or listing on any national
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense, as expeditiously as possible exercise its best
efforts to cause such shares to be duly registered or approved or listed on the
relevant national securities exchange, as the case may be. Shares of Conversion
Stock issued upon conversion of the Convertible Note shall be registered by the
Company under the Securities Act if required by subsection (H) below and subject
to the conditions stated therein.
G. Issuance Tax and Expenses. Company shall Pay all expenses,
issuance taxes and other charges payable in connection with the preparation,
execution and delivery of certificates for Conversion Stock issuable upon each
conversion of the Convertible Note, except that, in case any such certificate
shall be registered in a name or names other than the name of the holder of the
Convertible Note, funds sufficient to pay all stock transfer taxes which shall
be payable upon the execution and delivery of such certificate shall be paid by
such holder to the Company at the time of the surrender of such Convertible Note
for conversion.
H. Restrictions.
(i) Legend: Restrictions On Conversion And Transfer. The
Convertible Note issued pursuant to this Agreement shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"This Note, and any shares or other securities acquired upon
the conversion of this Note, may not be transferred except
upon the conditions specified in the Convertible Term Note
Agreement dated as of January 11, 1999, providing for the
issuance of a Convertible Term Note, due December 1, 2001, of
Horizon Pharmaceuticals Corporation, a complete and correct
confirmed copy of which will be furnished to the holder of
such securities upon written request and without charge. This
Note, and any shares or other securities acquired upon the
conversion of this Note have not been registered under the
Securities Act of 1933 and may be offered and sold only if
registered pursuant to the provisions of that Act or if an
exemption from registration is available."
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<PAGE> 15
Each stock certificate issued upon the conversion of any Convertible
Note (except as permitted by this Section 8) shall be stamped or imprinted with
a legend in substantially the following form:
"These securities may not be transferred except upon
the conditions specified in the Convertible Term Note
Agreement, dated as of January 11, 1999, providing for the
issuance of a Convertible Note, due December 1, 2001, of
Horizon Pharmaceuticals Corporation and in the Shareholders'
Agreement dated as of November 6, 1998, complete and correct
conformed copies of which will be furnished to the holder of
such securities upon written request and without charge. These
securities have not been registered under the Securities Act
of 1933 and may be offered and sold only if registered
pursuant to the provisions of that Act or if an exemption from
registration is available."
The outstanding stock of the Company evidenced by a certificate or
certificates bearing such legend is herein sometimes called "Legend Stock" Any
certificate issued at any time in exchange or substitution for any certificate
bearing such legend (except a new certificate issued upon completion of a public
distribution under a registration statement of the securities represented
thereby) shall also bear such legend unless in the opinion of such holder's
counsel specified in Clause (ii) below (addressed to such holder), the
securities represented thereby need no longer be subject to the restrictions
contained in this Section 8. The provisions of this Section 8 shall be binding
upon all subsequent holders of Legend Stock, and shall also be applicable to and
inure to the benefit of all subsequent holders of the Convertible Note.
(ii) Notice of Intention to Convert or Transfer; Opinions
of Counsel: Registration Required by Holders of Convertible Note. The
Convertible Note and the Legend Stock to be issued upon a conversion
thereof shall not be transferable except upon the conditions specified
in this subsection 8(H) and the restrictions on transfers of the
Company's Common Stock as provided in the Shareholders' Agreement dated
as of November 6, 1998. The holder of the Convertible Note or Legend
Stock, by acceptance thereof, agrees, prior to any transfer of such
Convertible Note or Legend Stock or concurrently with any conversion of
such Convertible Note, to give written notice to the Company expressing
such holder's intention to effect such transfer or conversion and
describing briefly the manner of the proposed transfer or, in the case
of such conversion, such holder's intention as to the disposition (and
the intended method thereof) or retention to be made of Conversion
Stock issuable upon the proposed conversion, together, if registration
of such Convertible Note or Legend Stock or Conversion Stock is deemed
unnecessary, with a copy of the opinion of counsel selected by such
holder and reasonably satisfactory to the Company (addressed to such
holder) as to the non-necessity for registration under the Securities
Act of such Convertible Note or Legend Stock or Conversion Stock in
connection with such proposed transfer or disposition or retention upon
such proposed conversion. The following provisions shall apply if in
the opinion of such counsel, the proposed transfer of such Convertible
Note or Legend Stock, or the proposed disposition or retention of
Conversion Stock to be issued upon such conversion,
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<PAGE> 16
may be effected without such registration of such Convertible Note or
of such Legend Stock or of such Conversion Stock under the Securities
Act: such holder shall be entitled to transfer such Convertible Note or
Legend Stock or to dispose of or retain such Conversion Stock to be
issued upon conversion, all in accordance with the terms of the notice
delivered by such holder to the Company. Unless in the opinion of such
counsel subsequent disposition by such holder or by others of the
Conversion Stock to be issued upon conversion or of the Legend Stock to
be so transferred may require such registration, the Company will
promptly upon such conversion or transfer deliver certificates for
Conversion Stock not bearing a legend of the character set forth in the
first sentence of this subsection (H), all as contemplated by such form
of legend.
(iii) "Piggyback" Registration. If the Company at any time
proposes to register any of its securities under the Securities Act on
Form S-1, Form S-4, Form S-1 8, or on any other form upon which may be
registered securities similar written notice to the holder of the
Convertible Note and/or Legend Stock of its intention so to do. Upon
the written request to the Company by the holder or holders of
outstanding Convertible Notes and/or Legend Stock, given within 30 days
after receipt of any such notice, the Company will use its best efforts
to cause the Legend Stock which the Company has been requested to
register by the holder thereof to be registered under the Securities
Act, all to the extent requisite to permit the sale or other
disposition by such holders of the Legend Stock so registered,
provided, however, that, if the registration is in connection with an
underwritten public offering and the managing underwriter shall
determine that inclusion of the Legend Stock in the registration will
materially impair the marketability of the stock being registered, the
Company shall not be obligated to include such shares.
(iv) Company's Obligations in Registration. If and
whenever the Company is obligated, or required to use its best efforts,
by the provision of this subsection 8(H), to effect the registration of
any Legend Stock under the Securities Act, as expeditiously as possible
the Company will:
(a) prepare and file with the Securities and
Exchange commission (herein, along with any other Federal
Agency then administering the Securities Act, called the
"Commission") a registration statement with respect to such
Legend Stock and cause such registration statement to become
and remain effective;
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection thereafter as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the disposition of all Legend Stock covered by such
registration statement whenever the holders for whom such
Legend Stock are registered or are to be registered shall
desire to dispose of the same;
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<PAGE> 17
(c) furnish to the holders of outstanding Legend
Stock so registered or to be registered such numbers of copies
of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents as such holders may reasonably request in
order to facilitate the disposition of such Legend Stock;
(d) register or qualify the Legend Stock covered
by such registration statement under such other securities or
blue sky laws of such jurisdictions as the holders of the
Legend Stock so registered or to be registered shall
reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable such holders to
consummate the disposition in such jurisdictions of such
Legend Stock; provided, however, that the Company shall not be
obligated by reason thereof to qualify as a foreign
corporation or file any general consent to service of process
under the laws of any such jurisdiction or subject itself to
taxation as doing business in any such jurisdiction; and
(e) furnish to the holders of outstanding Legend
Stock so registered or to be registered at the time of the
disposition of Legend Stock by such holders an opinion of
counsel for the Company to the effect that a registration
statement covering such Legend Stock has been filed with the
commission under the Securities Act and has been made
effective by order of the Commission, that a prospectus
meeting the requirements of the Securities Act is available
for delivery, that no stop order has been issued by the
Commission suspending the effectiveness of such registration
statement and that, to the best of such counsel's knowledge,
no proceedings for the issuance of such a stop order are
threatened or contemplated, and that the applicable provisions
of the securities or blue sky law of each state in which the
Company shall be required, pursuant to clause (4) above, to
register or qualify such Legend Stock, have been complied
with.
(v) Payment of Registration Expenses. The cost and
expenses of all registrations and qualifications under the Securities
Act or otherwise, except as provided in Section 8(H)(iii) above, and of
all other actions, which the Company is required to effect or to take
pursuant to this Section 8(H), shall be paid by the Company (including
without limitation all registration and filing fees, printing expenses,
securities indemnities insurance premiums, fees and disbursements of
counsel for the Company and of special counsel for such holders of
outstanding Legend Stock and expenses of any special audits incident to
or required by any such registration). With respect to any registration
statement filed pursuant to clause (iii) of this Section 8(H), the
Company shall bear all the costs and expenses incidental thereto.
(vi) Information to be Furnished. Notices and requests
delivered pursuant to this Section 8(H) shall contain such information
regarding the Legend Stock and the intended method of disposition
thereof as shall reasonably be required in connection with the action
to be taken.
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<PAGE> 18
(vii) Exchange of Stock Certificates. As expeditiously as
possible after the effectiveness of any registration pursuant to this
Section 8(H), the Company will deliver in exchange for any certificates
representing shares of Legend Stock so registered new common stock
certificates not bearing the legend set forth above.
(viii) Indemnification.
(a) In the event of any registration pursuant to
this Section 8(H), the Company will indemnify each holder of
Legend Stock so registered and each other person, if any, who
controls such holder within the meaning of the Securities Act
and each other person (including underwriters) who
participates in the offering of such Legend Stock against any
losses, claims, damages, or liabilities, joint or several, to
which such holder or controlling person or participating
person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, or
liabilities (or proceedings in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective
date thereof, in any registration statement under which such
Legend Stock was registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein,
or in any amendment or supplement thereto, 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 such holder and each such controlling person or
participating person for any legal or any other expenses
reasonably incurred by such holder or such controlling person
or participating person in connection with investigating or
defending any such loss, claim, damage, liability, or
proceeding; provided, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage,
or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in such registration statement, said preliminary
or final prospectus or said amendment or supplement in
reliance upon and in conformity with written information
furnished to the Company by an instrument with respect to such
holder or person duly executed by such holder or person
specifically for use in the preparation thereof.
(b) Each holder of Legend Stock included in the
Registration Statement shall agree to indemnify and hold
harmless the Company and each person, if any (including
underwriters), who participate m the offering to the same
extent as the foregoing indemnity from the Company but only
with respect to any information furnished in writing by or on
behalf of and with respect to such holder expressly for use in
any Preliminary Prospectus, the Registration Statement or any
amendment or supplement thereof. In case any action shall be
brought against the Company or any underwriter or any other
person so indemnified based on any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or
supplement thereof or any application, and in respect of which
indemnity may be sought against the holder of Legend Stock,
such holder shall
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<PAGE> 19
have the rights and duties given to the Company by the
provisions in the preceding paragraph.
(ix) Survival of Obligations. The obligations of the
Company contained in this Section 8(H) shall survive payment in full of
the Convertible Note.
9. Events of Default.
If one or more of the following events of default occur:
A. Company defaults in the payment of the principal on the
Convertible Note executed pursuant to this Agreement or any part thereof when
the same shall become due and payable, either by its terms or as otherwise
herein provided, or does not pay any fee or interest on the Convertible Note
executed pursuant to this Agreement, within five days of when the same shall
become due and payable, either by its term or as otherwise herein provided;
B. There shall be a default under the Security Agreement;
C. Any representation or warranty in this Agreement, the Security
Agreement or any other agreement between the Company and the Lender shall be
false when made or at any time during the term of this Agreement or any
extension thereof, or the Company shall default in the performance of any
covenant, condition or agreement contained in this Agreement or any other
agreement with the Lender;
D. There shall be a default under the Senior Debt;
E. The Company makes an assignment for the benefit of creditors,
fails to pay, or admits in writing its inability to pay its debts as they
mature; or if a trustee of any substantial part of the assets of the Company is
applied for or appointed, and if appointed in a proceeding brought against the
Company, the Company by any action or failure to act indicates its approval of,
consent to, or acquiescence in such appointment, or within thirty (30) days
after such appointment, such appointment is not vacated or stayed on appeal or
otherwise, or shall not otherwise have ceased to continue in effect;
F. Default shall be made by the Company in the performance or
observance of any other of the covenants, conditions, or agreements on the part
of the Company, its successors, or assigns, set forth in this Agreement, or in
the Convertible Note, and such default shall continue for a period of thirty
(30) days; or
G. Any proceedings involving the Company are commenced by or
against the Company under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law or statute of
the federal government or any state government and if such proceedings are
instituted against the Company, the Company by any action or failure to act
indicates its approval of, consent to or acquiescence therein, or an order shall
be entered approving the petition in such proceedings and within thirty (30)
days after the entry thereof such
-19-
<PAGE> 20
order is not vacated or stayed on appeal or otherwise, or shall not otherwise
have ceased to continue in effect;
H. Company defaults in any payment of principal or interest on
any other obligation beyond any period of grace provided with respect thereto or
in the performance of any other term, condition or covenant contained in any
agreement, including, but not limited to, an agreement in connection with the
deferred purchase price of any property, under which any such obligation is
created the effect of which default is to cause or permit the holder of such
obligation to cause such obligation to become due prior to its stated maturity;
I. If there shall be entered against the Company one or more
judgments or decrees involving in the aggregate a liability of $25,000 or more
which is not covered by insurance, and any such judgment or decree shall not
have been vacated, discharged or stayed pending appeal within 30 days from the
entry hereof:
then, upon any such event, Lender shall have all rights and remedies provided by
applicable law and, without limiting the generality of the foregoing, may, at
its option, declare its commitments to be terminated and the Convertible Note
shall thereupon be and become forthwith, due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Convertible Note to
the contrary notwithstanding, and may, also without limitation appropriate and
apply toward full payment of the Convertible Note any indebtedness of the Lender
to the Company however created or arising. There shall be no obligation to
exercise any remedy available to the Lender in any order.
10. Miscellaneous.
A. No failure or delay on the part of the Lender in exercising
any right, power or remedy hereunder shall operate as a waiver thereto nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right power or
remedy hereunder. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
B. This Agreement and the Security Agreement together constitute
the entire agreement between the parties and there are no promises expressed or
implied unless contained therein. No amendment, modification, termination or
waiver of any provision of this Agreement, of the Convertible Note or any
Security Agreement nor consent to any departure by the Company therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Lender, and then such waiver or consent shall be effective only in the specific
instance for which given. No notice to or demand on the Company in any case
shall entitle the Company to any other or further notice or demand in similar or
other circumstances.
C. All notices. requests, demands and other communications
provided for hereunder shall be in writing and, if to the Company, mailed or
delivered to the Company, Attn: President, at the address of the Company
appearing at the end of this Agreement, and if to the Lender, mailed or
delivered to it at 225 E. Deerpath Road., Suite 250, Lake Forest, Illinois 60045
or, as
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<PAGE> 21
to each party, at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this subsection. All notices, requests, demand and other communications provided
for hereunder shall be effective when deposited in the mails or delivered to the
telegraph Company, addressed as aforesaid.
D. This Agreement may be executed in any number of counterparts
and by the different parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed to be an original and all of which
taken together shall constitute but one and the same instrument.
E. This Agreement shall become effective when it shall have been
executed by the Company and the Lender and thereafter shall be binding upon and
inure to the benefit of the Company and the Lender and thereafter respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lender.
F. This Agreement has been and the Convertible Note will be
delivered and accepted in and shall be deemed to be contracts made under and
governed by the laws of the State of Illinois, and for all purposes shall be
construed in accordance with the laws of said State and any action or other
legal proceeding relating to this Agreement or the Note may only be brought in a
federal or state court located in the County of Cook, State of Illinois.
G. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction, wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law.
H. All covenants, agreements, representations and warranties made
by the Company herein shall, notwithstanding any investigation by the Lender, be
deemed material and relied on by the Lender and shall survive the execution and
delivery to the Lender of this Agreement, the Note and the Security Documents.
I. This Agreement and the Security Documents shall secure and
govern the terms of any extensions or renewals to the Note.
J. The Company will pay all costs and expenses (including
reasonable attorney's fees), if any, in connection with the collection and
enforcement of this Agreement, the Note, the Security Documents, if any, and any
other instruments and documents to be delivered hereunder including, without
limitations, reasonable attorneys' fees and reasonable time charges of
attorney's who may be employees of the Lender. In addition, the Company shall
pay any and all stamp and other taxes determined to be payable in connection
with the execution and delivery of this Agreement, the Note, the Security
Agreement and the other instruments and documents to be
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<PAGE> 22
delivered hereunder, and agrees to save the Lender harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
[Signatures contained on following page]
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
KAPOR-PHARMA INVESTMENTS, L.P. HORIZON PHARMACEUTICALS CORPORATION
By: By:
--------------------------------- ---------------------------------
Its: Its:
--------------------------------- ---------------------------------
Address: 660 Hembree Parkway
Suite 106
Roswell, GA 30078
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<PAGE> 24
AMENDMENT NO. 1 TO THE CONVERTIBLE TERM NOTE
THIS AMENDMENT NUMBER NO. 1 TO THE CONVERTIBLE TERM NOTE AGREEMENT ("Amendment
No. 1") by and between Horizon Pharmaceuticals Corporation, a Delaware
Corporation (the "Company") and Kapoor Pharma Investment, L.P. (the "Lender") is
entered into as of this 30th day of November, 1999 by and between the Company
and Lender (the Company and the Lender and sometimes referred to herein
singularly as a "Party" or collectively as the "Parties").
RECITALS:
WHEREAS, the Parties entered into that certain Convertible Term Note Agreement
dated as of January 11, 1999 (the "Note Agreement") providing for the terms and
conditions under which the Lender would lend an amount not to exceed One Million
Six Hundred Thousand Dollars ($1,600,000) to the Company and the Company would
agree to allow the Lender, at the Lender's sole option, to convert its
indebtedness into equity securities of the Company at any time prior to maturity
(terms not otherwise defined herein shall have the same meaning ascribed to
those terms in the Note Agreement); and
WHEREAS, the Parties now wish to amend the Note Agreement in accordance
with the provisions of Section 10 (B) of the Note Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and agreements contained herein, and intending to be legally bound
hereby, the parties hereby agree to amend the Note agreement as follows:
1. Amendment. Section 8 (C) is hereby deleted in its entirety and
the following is substituted in its place:
"C. Dividends and Interest. No payment or adjustment shall be made upon
any conversion on account of any cash dividends on the Conversion Stock
issued upon such conversion. The Company shall pay all interest on the
Convertible Note surrendered for conversion, accrued to the date upon
which the above-mentioned written statement shall have been received by
the Company; provided, however, that in lieu of receiving interest, the
Lender, at its sole option, may elect to have the amount of interest
otherwise payable, converted into Conversion Stock on the same terms
and at the same Conversion Stock as is provided in this Section 8. In
the event that Lender shall elect to receive its interest payment in
the form of Conversion Stock, such election by the Lender shall be made
in the written statement to be delivered by the Lender to the Company
as provided in the second paragraph of Section 8 (A) hereof."
2. Reaffirmation of Note Agreement. Other than as specifically
set forth above, in all other respects the Note Agreement is hereby ratified and
confirmed by the Parties.
<PAGE> 25
IN WITNESS WHEREOF, the Parties have executed this Amendment No.1 as of
the day and date first above written:
HORIZON PHARMACEUTICALS CORPORATION
By:
---------------------------------------------
Its:
--------------------------------------------
KAPOOR PHARMA INVESTMENTS, L.P.
By:
---------------------------------------------
Its:
--------------------------------------------
2
<PAGE> 1
EXHIBIT 10.7
COVER PAGE
The capitalized terms in this Lease shall have the meanings ascribed to
them below, and each reference to such term in the Lease shall incorporate such
meaning therein as if fully set forth therein.
LANDLORD: ASC NORTH FULTON ASSOCIATES JOINT VENTURE, a Georgia joint
venture, with its principal office located at 4497 Park
Drive, Norcross, Georgia 30093
TENANT: HORIZON PHARMACEUTICAL CORPORATION, a corporation duly
organized and existing under the laws of the State of
Delaware.
LEASED PREMISES: (a) Address: 660 Hembree Parkway
(b) Suite : 106
(c) Rentable Area: 24,300 square feet
(d) Pro Rata Share: 25.71%
(e) Project: Northmeadow Distribution III
TERM: Five (5) years
COMMENCMENT
DATE: September 1, 1998
TERMINATION
DATE: August 31, 2003
BASE RENT
(PER YEAR): $176,175.00
BASE YEAR: 1998
SECURITY DEPOSIT: $2,470.98
TENANT'S AGENT: Zac Antonio
MZA Real Estate Services
i
<PAGE> 2
HORIZON PHARMACEUTICAL CORPORATION
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
SECTION PAGE
- ------- ----
<S> <C>
1. LEASED PREMISES ...................................................... 1
2. TERM ................................................................. 1
3. RENTAL ............................................................... 1
4. DELAY IN DELIVERY .................................................... 3
5. USE OF LEASED PREMISES ............................................... 3
6. UTILITIES ............................................................ 4
7. ACCEPTANCE OF PREMISES ............................................... 4
8. ALTERATIONS, MECHANICS' LIENS ........................................ 4
9. QUIET CONDUCT/QUIET ENJOYMENT ........................................ 5
10. FIRE INSURANCE, HAZARDS .............................................. 5
11. LIABILITY INSURANCE .................................................. 6
12. INDEMNIFICATION ...................................................... 6
13. WAIVER OF CLAIMS ..................................................... 7
14. REPAIRS .............................................................. 7
15. SIGNS, LANDSCAPING ................................................... 8
16. ENTRY BY LANDLORD .................................................... 8
17. TAXES AND INSURANCE INCREASE ......................................... 8
18. ABANDONMENT .......................................................... 10
19. DESTRUCTION .......................................................... 10
20. ASSIGNMENT AND SUBLETTING ............................................ 11
21. INSOLVENCY OF TENANT ................................................. 11
22. BREACH BY TENANT ..................................................... 12
23. ATTORNEYS' FEES/COLLECTION CHARGES ................................... 13
</TABLE>
ii
<PAGE> 3
STATE OF GEORGIA
FULTON COUNTY
This Lease Agreement is made this 28th day of June, 1998, by and
between ASC NORTH FULTON ASSOCIATES JOINT VENTURE, a Georgia joint venture,
hereinafter referred to as "Landlord," and HORIZON PHARMACEUTICAL CORPORATION,
hereinafter referred to as "Tenant."
LEASED PREMISES
1.01 Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, the property hereinafter referred to as the LEASED PREMISES,
described as approximately 24,300 rentable square feet of office/warehouse at
660 Hembree Parkway, Suite 106, Roswell, Georgia 30076, Fulton County, in
Northmeadow Business Park, as shown on the plan attached hereto as Exhibit "A"
and by reference incorporated herein. The building in which the Leased Premises
are located is herein referred to as the "Building;" and the real property on
which the building is situated is herein referred to as the "Land."
TERM
2.01 TO HAVE AND TO HOLD said Leased Premises for a term of five
(5) years, commencing on September 1, 1998, and continuing until midnight on
August 31, 2003.
RENTAL
3.01 As rental for the Leased Premises, Tenant agrees to pay to
Landlord, without offset or abatement, Base Rental as set forth below:
<TABLE>
<S> <C> <C>
September 1, 1998 - August 31, 2000 $14,681.25/month $176,175.00/year
September 1, 2000 - August 31, 2001 $15,121.69/month $181,460.28/year
September 1, 2001 - August 31, 2002 $15,575.34/month $186,904.08/year
September 1, 2002 - August 31, 2003 $16,042.60/month $192,511.20/year
</TABLE>
on or before the first day of each calendar month beginning on September 1, 1998
and thereafter for the remainder of the term, together with any other additional
rental as hereinafter set forth. Tenant shall pay interest at a rate of twelve
percent (12%) per annum on all late payments of rent, however, monthly rent
shall not be deemed late or past due unless said rent has not been paid to
Landlord on or before the fifth day of each calendar month provided however,
Landlord's acceptance of a late payment shall be accorded Tenant, if necessary,
only twice during any consecutive twelve (12) month period of the Term, and an
event of default shall be deemed to have immediately occurred upon the third
(3rd) failure by Tenant to make a timely payment as aforesaid within any
consecutive twelve (12) month period of the Term. If the Lease shall commence on
any date other than the first day of a calendar month, or end on any date, other
than the last day of a calendar month, rent for such month shall be prorated.
Tenant has
-3-
<PAGE> 4
deposited with Landlord, upon delivery of this Lease Agreement, an amount equal
to Fourteen Thousand Six Hundred Eighty-one and 25/100 Dollars ($14,681.25)
Dollars, which is to be applied as first month's Base Rental. Landlord shall
hold an amount equal to Two Thousand Four Hundred Seventy and 98/100 ($2,470.98)
Dollars from Tenant's previous lease agreement, and upon execution of this
Lease, shall apply said amount to be held as a refundable security deposit for
this Lease. Landlord may apply all or any part of the security deposit to cure
any default by Tenant hereunder and Tenant shall promptly restore to the
security deposit all amounts so applied upon invoice therefor. If Tenant shall
fully perform each provision of this Lease, any portion of the security deposit
which has not been appropriated by Landlord in accordance with the provisions
hereof shall be returned to Tenant, without interest, within thirty (30) days
after the expiration of the term of this Lease.
3.02 The rental provided in paragraph 3.01 "Rental" above, includes
an allowance ("Allowance") in the amount of $12.75 per square foot contained in
the Leased Premises, which is the sum of Three Hundred Nine Thousand Eight
Hundred Twenty-five and no/100 Dollars ($309,825.00) for the construction of
tenant improvements on the basis set forth in the plans and specifications
attached, or to be attached, hereto in Exhibit "B". In the event the cost of
tenant improvements exceeds the cost of tenant improvement Allowance, the excess
shall be paid by Tenant within thirty (30) days of Tenant's receipt of
Landlord's notice. Notwithstanding the foregoing, in the event Landlord
anticipates that the cost of tenant improvements will exceed the cost of tenant
improvement Allowance, by ten percent (10%) or more, Landlord shall give written
notice to Tenant of the projected cost overruns. Tenant shall have three (3)
days to advise Landlord of any objections to the notice, if Tenant does not so
advise Landlord within such period, Tenant shall be deemed to have approved such
cost overruns and the excess shall be paid by Tenant within thirty (30) days of
Tenant's receipt of Landlord's notice.
3.03 In addition to the Base Rental, Tenant agrees to pay Landlord
as additional rental, its pro rata share of the amounts described in
subparagraphs (a) and (b) below. Each year during the term hereof, Landlord
shall give Tenant written notice of its estimate of the amount of common area
maintenance charges and common area utility charges (collectively "Charges") for
the Leased Premises for the calendar year. Tenant shall, thereafter, during that
calendar year, pay to Landlord one-twelfth (1/12) of the amount set forth in
said statement at such time as its monthly installments of Base Rental hereunder
are due and payable. At such time as Landlord is able to determine the actual
Charges for such calendar year, Landlord shall deliver to Tenant a statement
thereof and in the event the estimated Charges differ from the actual Charges,
any adjustment necessary shall be made to additional rental payments next coming
due under this paragraph.
(a) Landlord agrees to maintain those areas around the
Building and in the Project, including parking areas, planted areas, signs and
landscaped areas which are from time to time designated by Landlord. Tenant
agrees to pay to Landlord as additional rental its pro rata share of all ground
maintenance charges and other common area charges and expenses for the Building
and the Land ("CAM Charges"). The term "grounds maintenance" shall include,
without limitation, all landscaping, planting, lawn and grounds care, all
repairs and maintenance to the grounds, signs and other common areas around the
Building and in the Project and to all sidewalks, driveways, loading areas and
parking areas. CAM Charges shall not include items of
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capital nature. Tenant's pro rata share of CAM Charges for the first year of the
Lease term are estimated to be $.36 per square foot contained in the Leased
Premises. Notwithstanding the provisions of this Section 3.03 in no event shall
any increase in the CAM Charges exceed ten percent (10%) over CAM Charges for
the preceding year.
(b) In the event any utilities furnished to the Building
or the Leased Premises are not separately metered, Tenant shall pay to Landlord,
as additional rental, Tenant's pro rata share of the gas, water, electricity,
fuel, irrigation costs, light and heat, garbage collection services and for all
other sanitary services rendered to the Leased Premises used by Tenant. Tenant's
prorated amount shall be determined on the basis of the size of the Leased
Premises, unless Landlord determines that Tenant's use of the Leased Premises
justifies a disproportionate allocation of utility costs to Tenant.
3.04 Tenant agrees to pay as additional rent to Landlord, upon
demand, its pro rata share of any utility surcharges, or any other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any Federal, State,
Municipal or local governmental authorities in connection with the use or
occupancy of the Leased Premises, unless such costs are caused by the usage of
other tenants.
DELAY IN DELIVERY OF POSSESSION
4.01 If Landlord, for any reason whatsoever, cannot deliver
possession of the Leased Premises to Tenant at the commencement of the term of
this Lease, this Lease shall not be void or voidable, nor shall Landlord be
liable to Tenant for any loss or damage resulting therefrom, but in that event
there shall be a proportionate reduction of rent covering the period between the
commencement of the term and the time when Landlord can deliver possession. If
delay is longer than three (3) months, Landlord will provide Tenant such space
(not exceeding in area the Leased Premises) as Landlord may have available,
until the Leased Premises can be completed, at no charge to Tenant. The term of
this Lease shall be extended by such delay.
USE OF LEASED PREMISES
5.01 The Leased Premises may be used and occupied only for general
manufacturing and assembly, testing, warehousing and distribution, showroom and
offices and for no other purpose or purposes, without Landlord's prior written
consent. Tenant shall promptly comply at its sole expense with all laws,
ordinances, orders, and regulations affecting the Leased Premises and their
cleanliness, safety, occupation and use. Tenant shall not do or permit anything
to be done in or about the Leased Premises that will in any way increase the
fire insurance upon the building. Tenant will not perform any act or carry on
any practices that may injure the building or be a nuisance or menace to tenants
of adjoining premises. Tenant shall not cause, maintain or permit any outside
storage on or about the Lease Premises, including pallets or other refuse. The
rear loading areas of the Tenant's unit must be clean and unobstructed. On or
before the Commencement Date, Tenant shall take possession of, and, thereafter,
continuously occupy the Leased Premises during the term of this Lease, and
operate thereon the normal business operations of Tenant.
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5.02 Tenant shall, at Tenant's sole cost and expense, comply fully
with all environmental laws and regulations, and all other legal requirements,
applicable to Tenant's operations at, on or within, or to Tenant's use and
occupancy of, the Leased Premises. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any biologically
or chemically active or other hazardous substances, or materials. Tenant shall
not allow the storage or use of such substances or materials in any manner not
sanctioned by law or by the highest standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the Project any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable state or local
laws and the regulations adopted under these acts. If any lender or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of hazardous materials, then the reasonable costs thereof shall be
reimbursed by Tenant to Landlord upon demand as additional charges if such
requirement applies to the Leased Premises. In addition, Tenant shall execute
affidavits, representations and the like from time to time at Landlord's request
concerning Tenant's best knowledge and belief regarding the presence of
hazardous substances or materials on the Leased Premises. In all events, Tenant
shall indemnify Landlord in the manner elsewhere provided in this Lease from any
release of hazardous materials on the Leased Premises occurring while Tenant is
in possession, or elsewhere if caused by Tenant or persons acting under Tenant.
The within covenants shall survive the expiration or earlier termination of the
lease term.
UTILITIES
6.01 Landlord shall not be liable in the event of any interruption
in the supply of any utilities unless the interruption in supply of utilities is
caused by the negligence of Landlord, its agents, servants or employees (but
Landlord shall not be responsible for the actions of independent contractors).
In the event Landlord is responsible for an interruption in the supply of
utilities as provided herein, and such interruption adversely affects Tenant's
ability to conduct its business in the Leased Premises for more than two
consecutive business days, Tenant shall be entitled to an abatement of base
rental for each day after the second business day during which the interruption
continues as its sole remedy for such interruption. Tenant agrees that it will
not install any equipment which will exceed or overload the capacity of any
utility facilities and that if any equipment installed by Tenant shall require
additional utility facilities, the same shall be installed by Tenant at Tenant's
expense in accordance with plans and specifications approved in writing by
Landlord. Tenant shall be solely responsible for and shall pay all charges for
use or consumption of sanitary sewer, water, gas, electricity and any other
utility services serving the Leased Premises. In the event Landlord determines
that it is advisable to separately meter any utility services provided to the
Leased Premises, Landlord shall have the right to install a sub-meter and bill
Tenant for the actual cost thereof, which shall be paid to Landlord within
fifteen (15) days following billing.
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ACCEPTANCE OF LEASED PREMISES
7.01 By entry hereunder, Tenant acknowledges that it has examined
the Leased Premises and accepts the same as being in the condition called for by
this Lease, subject to punchlist items, and as suited for the uses intended by
Tenant. Upon delivery of possession of the Leased Premises to Tenant, Tenant
agrees to execute and deliver to Landlord a Tenant's Acceptance of Premises, in
the form attached hereto as Exhibit "C".
ALTERATIONS, MECHANICS' LIENS
8.01 Alterations may not be made to the Leased Premises without
prior written consent of Landlord, and, unless otherwise agreed by Landlord and
Tenant, any alterations of the Leased Premises excepting movable furniture and
trade fixtures shall at Landlord's option become part of the realty and belong
to Landlord.
8.02 Should Tenant desire to alter the Leased Premises and Landlord
gives written consent to such alterations, at Landlord's option, Tenant shall
contract with a contractor approved by Landlord for the construction of such
alterations.
8.03 Notwithstanding anything in paragraph 8.02 above, Tenant may,
upon written consent of Landlord, install trade fixtures, machinery or other
trade equipment in conformance with all applicable laws, statues, ordinances,
rules, regulations, and the same may be removed upon the termination of this
Lease provided Tenant shall not be in default under any of the terms and
conditions of this Lease, and the Leased Premises are not damaged by such
removal. Tenant shall return the Leased Premises on the termination of this
Lease in the same condition as when rented to Tenant, reasonable wear and tear
only excepted. Tenant shall keep the Leased Premises, the building and property
in which the Leased Premises are situated free from any liens arising out of any
work performed for, materials furnished to, or obligations incurred by Tenant.
All such work provided for above, shall be done at such times and in such manner
as Landlord may from time to time designate. Tenant shall give Landlord written
notice five (5) days prior to employing any laborer or contractor to perform
work resulting in an alteration of the Leased Premises so that Landlord may post
a notice of non-responsibility.
QUIET CONDUCT/QUIET ENJOYMENT
9.01 Tenant shall not commit, or suffer any waste upon the Leased
Premises, or any nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building or any building in the project in
which the Leased Premises are located.
9.02 So long as Tenant is not in default in the payment of rent, or
other charges or in the performance of any of the other terms, covenants, or
conditions of the Lease, Tenant shall not be disturbed by Landlord or anyone
claiming by, through or under Landlord in Tenant's possession, enjoyment, use
and occupancy of the Leased Premises during the original or any renewal term of
the Lease or any extension or modification thereof.
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FIRE INSURANCE, HAZARDS
10.01 No use shall be made or permitted to be made of the Leased
Premises, nor acts done which might increase the existing rate of insurance upon
the building or cause the cancellation of any insurance policy covering the
building, or any part thereof, nor shall Tenant sell, or permit to be kept, used
or sold, in or about the Leased Premises, any article which may be prohibited by
the Standard form of fire insurance policies. Tenant shall, at its sole cost and
expense, comply with any and all requirements pertaining to the Leased Premises,
of any insurance organization or company, necessary for the maintenance of
reasonable fire and public liability insurance, covering the Leased Premises,
building and appurtenances.
10.02 Tenant shall maintain in full force and effect on all of its
inventory, fixtures and equipment in the Lease Premises a policy or policies of
fire and extended coverage insurance with standard coverage endorsement to the
extent of at least eighty percent (80%) of their insurable value. During the
term of this Lease the proceeds from any such policy or policies of insurance
shall be used for the repair or replacement of the fixtures, and Landlord will
sign all documents necessary or proper in connection with the settlement of any
claim or loss by Tenant. Landlord will not carry insurance on Tenant's
possessions. Tenant shall furnish Landlord with a certificate of such policy
within thirty (30) days of the commencement of this Lease, and whenever
required, shall satisfy Landlord that such policy is in full force and effect.
LIABILITY INSURANCE
11.01 Tenant, at its own expense, shall provide and keep in force
with companies acceptable to Landlord public liability insurance for the benefit
of Landlord and Tenant jointly against liability for bodily injury and property
damage in the amount of not less than Three Million Dollars ($3,000,000.00) in
respect to injuries to or death of more than one person in any one occurrence,
in the amount of not less than One Million Dollars ($1,000,000.00) in respect to
injuries to or death of any one person, and in the amount of not less than One
Million Dollars ($1,000,000.00) per occurrence in respect to damage to property,
such limits to be for any greater amounts as may be reasonably indicated by
circumstances from time to time existing. Tenant shall furnish Landlord with a
certificate of such policy within thirty (30) days of the commencement date of
this Lease and whenever required shall satisfy Landlord that such policy is in
full force and effect. Such policy shall name Landlord as an additional insured
and shall be primary and non-contributing with any insurance carried by
Landlord. The policy shall contain a contractual liability endorsement. The
policy shall further provide that it shall not be canceled or altered without
twenty (20) days prior written notice to Landlord.
INDEMNIFICATION
12.01 Tenant shall indemnify and hold harmless Landlord against and
from any and all claims arising from Tenant's use of the Leased Premises (other
than those arising solely from willful misconduct or negligence of Landlord or
its agents or employees), or the conduct of its business or from any activity,
work, or thing done, permitted or suffered by the Tenant in or about the Leased
Premises, and shall further indemnify and hold harmless Landlord against and
from any and all claims arising from any breach or default in the performance of
any obligation
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on Tenant's part to be performed under the terms of this Lease, or arising from
any act, neglect, fault or omission of the Tenant, or of its agents or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in or about such claim or any action or proceeding brought
relative thereto and in case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel, chosen by Tenant and who is
reasonably acceptable to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in or about the Leased Premises from any cause whatsoever
except that which is caused by the willful misconduct or negligence of Landlord
or its agents or employees or by the failure of Landlord to observe any of the
terms and conditions of this Lease and Tenant hereby waives all claims in
respect thereof against Landlord.
12.02 Landlord shall indemnify Tenant and hold Tenant harmless
against and from all claims arising from the negligence or willful misconduct of
Landlord, its agents, employees or contractors, with respect to the Leased
Premises that is not insured against or required to be insured against and
recoverable under the insurance policies Tenant is required to maintain under
this Lease.
12.03 The obligation of Landlord and Tenant under this paragraph
arising by reason of any occurrence taking place during the term of this Lease
shall survive the termination or expiration of this Lease.
WAIVER OF CLAIMS
13.01 Tenant, as a material part of the consideration to be rendered
to Landlord, hereby waives all claims against Landlord for damages to goods,
wares and merchandise in, upon or about the Leased Premises and for injury to
Tenant, its agents, employees, invitees, or third persons in or about the Leased
Premises from any cause arising at any time unless such damage is due to
Landlord's negligent act or omission and such damage is caused by an occurrence
which is not an insurable hazard under a standard fire and broad form coverage
insurance which is reasonably available to Tenant for inuring such property of
Tenant at the time of the loss. The parties acknowledge that it is not their
intent to relieve Landlord from liability to Tenant, but rather that Tenant
benefit from available insurance coverage without subjecting Landlord to
liability for losses that could have been insured against by Tenant and without
subjecting Landlord to subrogation claims of any insurer.
REPAIRS
14.01 Tenant shall, at its sole cost, keep and maintain the Leased
Premises and appurtenances and every part thereof (excepting exterior walls and
roofs which Landlord agrees to repair) including by way of illustration and not
by way of limitation all windows, and skylights, doors, any store front and the
interior of the Leased Premises, including all plumbing, heating, air
conditioning, sewer, electrical systems and all fixtures and all other similar
equipment serving the Leased Premises in good and sanitary order, condition, and
repair. Tenant shall be responsible for all pest control within the Leased
Premises, including, but not limited to the eradication of any ants or termites
should infestation be observed during the term of the
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Lease. Tenant shall, at its sole cost, keep and maintain all utilities, fixtures
and mechanical equipment used by Tenant in good order, condition, and repair.
All windows shall be washed and cleaned as often as necessary to keep them clean
and free from smudges and stains. In the event Tenant fails to maintain the
Leased Premises as required herein or fails to commence repairs (requested by
Landlord in writing) within thirty (30) day after such request, or fails
diligently to proceed thereafter to complete such repairs, Landlord shall have
the right in order to preserve the Leased Premises or portion thereof, and/or
the appearance thereof, to make such repairs or have a contractor make such
repairs and charge Tenant for the cost thereof as additional rent, together with
interest at the rate of twelve percent (12%) per annum from the date of making
such payments.
14.02 Landlord agrees to keep in good repair the roof, foundations,
and exterior walls of the Leased Premises except repairs rendered necessary by
the negligence of Tenant, its agents, employees or invitees. Landlord gives to
Tenant exclusive control of Leased Premises and shall be under no obligations to
inspect said Leased Premises. Tenant shall promptly report in writing to
Landlord any defective condition known to it which Landlord is required to
repair, and Landlord shall move with reasonable diligence to repair such item.
Failure to report such defects shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such defects.
14.03 Tenant shall obtain upon occupancy and keep current during the
lease term a service maintenance contract on the heating, ventilation and air
conditioning (HVAC) equipment serving the Leased Premises. The contract shall be
between Tenant and a dealer-authorized company acceptable to Landlord, and shall
at a minimum provide for an equipment check and tune-up service each spring and
fall, and filter and lubrication service every three months. A copy of said
contract shall be provided to Landlord, as well as any modification, extension,
renewal or replacement thereof.
SIGNS, LANDSCAPING
15.01 Landlord shall have the right to control landscaping and
Tenant shall make no alterations or additions to the landscaping. Landlord shall
have the right to approve the placing of signs and the size and quality of the
same. Tenant shall place no exterior signs on the Leased Premises without the
prior written consent of Landlord. Any signs not in conformity with the Lease
may be immediately removed by Landlord.
ENTRY BY LANDLORD
16.01 Tenant shall permit Landlord and Landlord's agents to enter
the Leased Premises, with reasonable prior notice to Tenant and with Tenant's
reasonable consent regarding the extent and timing of such entry, for the
purpose of inspecting the same or for the purpose of maintaining the building,
or for the purpose of making repairs, alterations, or additions to any portion
of the building, including the erection and maintenance of such scaffolding,
canopies, fences and props as my be required, or for the purpose of posting
notices of non-responsibility for alterations, additions, or repairs, or placing
upon the building any usual or ordinary "for sale" signs, without any rebate of
rent and without any liability to Tenant for any loss of occupation or
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quiet enjoyment of the Leased Premises thereby occasioned; and shall permit
Landlord at any time within six (6) months prior to the expiration of this Lease
and with prior notice to Tenant, to enter the Leased Premises for the purpose of
showing the Leased Premises to prospective tenants, without any rebate of rent
and without any liability to Tenant for any loss of occupation or quiet
enjoyment of the Leased Premises thereby occasioned, and to place upon the
Leased Premises any usual or ordinary "to let" or "to lease" signs. For each of
the aforesaid purposes, Landlord shall at all times have and retain a key with
which to unlock all of the exterior doors about the Leased Premises.
TAXES AND INSURANCE INCREASE
17.01 Tenant shall pay before delinquency any and all taxes,
assessments, license fees, and public charges levied, assessed, or imposed and
which become payable during the Lease upon Tenant's fixtures, furniture,
appliances and personal property installed or located in the Leased Premises.
17.02 Tenant shall pay, as additional rental during the term of this
Lease and any extension or renewal thereof, the amount by which all taxes (as
herein defined) for each tax year exceeds all taxes for 1998. In the event the
Leased Premises are less than the area of the entire property assessed for such
taxes for any such tax year, then the tax for any such year applicable to the
Leased Premises shall be determined by proration on the basis that the rental
floor area of the Leased Premises bears to the rentable floor area of the entire
property assessed. The term "taxes" shall include all ad valorem taxes, special
assessments, and governmental charges assessed against the Building or the Land;
and such term shall also include any reasonable expenses, including fees and
disbursements of attorneys, tax consultants, arbitrators, appraisers, experts
and other witnesses, incurred by Landlord in contesting any taxes or the
assessed valuation of all or any part of the Building or the Land. If the final
year of the lease term fails to coincide with the tax year, then any excess for
the tax year during which the term ends shall be reduced by the pro rata part of
such tax year beyond the lease term. The agent's commission shall not apply to
any such additional rental resulting from the provisions of this paragraph.
17.03 Tenant agrees to pay the amount for all taxes levied upon or
measured by the rent payable hereunder, whether as a so-called sales tax,
transaction privilege tax, excise tax, or otherwise (but no income taxes of
Landlord shall be payable by Tenant). Such taxes shall be due and payable at the
same time as and in addition to each payment of rent.
17.04 Commencing in the year 1999 and during each remaining year of
the lease term or any extension or renewal thereof, in the event that the
insurance premiums payable by the Landlord for insurance coverage on the
property are increased, whether such increase is due to an increase in the
valuation of the building, or in the applicable rate of insurance, then Tenant
agrees to pay Landlord as additional rental, Tenant's pro rata share of the
increase in said insurance premiums over the base amount paid in the year 1998.
The term "insurance" shall include all fire and extended coverage insurance on
the Building and all liability insurance coverage on the common areas of the
Building, and the grounds, sidewalks, driveways and parking areas on the Land,
together with such other insurance coverages, including, but not limited to,
rent interruption insurance, as are from time to time obtained by Landlord.
Tenant's
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pro rata share shall be based on the square footage of the Leased Premises
leased to Tenant (as specified in paragraph 1.01 hereof) compared to the total
square footage of leasable space in the entire building. If during the final
year of the Lease, or any extension or renewal thereof, the term does not
coincide with the year upon which the insurance rate is determined, the increase
in premiums for the portion of that year shall be prorated according to the
number of months during which Tenant is in possession of the Leased Premises.
17.05 On or about January 1 of each calendar year during the term of
this Lease, Landlord shall provide Tenant with a good faith estimate of the
amount by which taxes and insurance will exceed the base amounts during such
calendar year. Tenant shall thereafter pay one-twelfth (1/12) of its pro rata
share of such increase at such time as its monthly installments of Base Rental
hereunder are due and payable. When the actual bills have been received by
Landlord, Landlord shall notify Tenant of the actual taxes and insurance for
such calendar year. If Tenant has paid more than it would have paid had the
actual bills been known, Landlord shall credit such excess against the next
additional rent payments coming due; if Tenant has not paid enough, Tenant shall
pay the remainder to Landlord within fifteen (15) days following receipt of a
statement from Landlord.
17.06 The provisions of paragraphs 17.01, 17.02, 17.03, 17.04 and
17.05 hereof shall survive the expiration or earlier termination of this Lease.
ABANDONMENT
18.01 Tenant shall not abandon the Leased Premises at any time
during the term of this Lease; and if Tenant shall abandon, or surrender the
Leased Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Tenant and left on the Leased Premises shall, at
the option of the Landlord, be deemed abandoned and be and become the property
of Landlord.
18.02 Tenant shall have the right to vacate as long as (a) rental is
kept current, (b) security and maintenance is kept at acceptable levels and (c)
as long as any insurance rider required in the State of Georgia which maintains
the required protection is provided by Tenant.
DESTRUCTION
19.01 If the Leased Premises or any portion thereof are destroyed by
storm, fire, lightning, earthquake or other casualty, Tenant shall immediately
notify Landlord. In the event the Leased Premises cannot, in Landlord's
judgment, be restored within one hundred twenty (120) days of the date of such
damage or destruction, this Lease shall terminate as of the date of such
destruction, and all rent and other sums payable by Tenant hereunder shall be
accounted for as between Landlord and Tenant as of that date. Landlord shall
notify Tenant within thirty (30) days of the date of the damage or destruction
whether the Leased Premises can be restored within one hundred twenty (120)
days. If this Lease is not terminated as provided in this paragraph, Landlord
shall, to the extent insurance proceeds payable on account of such damage or
destruction are available to Landlord (with the excess proceeds belonging to
Landlord), within a reasonable time, repair, restore, rebuild, reconstruct or
replace the damaged or destroyed portion
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of the Leased Premises to a condition substantially similar to the condition
which existed prior to the damage or destruction. Provided, however, that with
respect to Tenant improvements, Landlord shall only be required to repair,
restore, rebuild, reconstruct and replace the Landlord's Work shown on Exhibit
"B", and Tenant shall, at its sole cost and expense, upon completion of the
Landlord's Work, repair, restore, rebuild, reconstruct and replace, as required,
any and all improvements installed in the Leased Premises by Tenant and all
trade fixtures, personal property, inventory, signs and other contents in the
Leased Premises, and all other repairs not specifically required of Landlord
hereunder, in a manner and to at least the condition existing prior to the
damage. Tenant's obligation to pay Base Rent shall abate until Landlord has
repaired, restored, rebuilt, reconstructed or replaced the Leased Premises, as
required herein, in proportion to the part of the Leased Premises which are
unusable by Tenant. If the damage or destruction is due to the act, neglect,
fault or omission of Tenant, there shall be no rent abatement except to the
extent of rent loss insurance. In the event of any dispute between Landlord and
Tenant relative to the provisions of this paragraph, they may each select an
arbitrator, the two arbitrators so selected shall select a third arbitrator and
the three arbitrators so selected shall hear and determine the controversy and
their decision thereon shall be final and binding on both Landlord and Tenant
who shall bear the cost of such arbitration equally between them. Landlord shall
not be required to repair any property installed in the Leased Premises by
Tenant. Tenant waives any right under applicable laws inconsistent with the
terms of this paragraph and in the event of a destruction Landlord agrees to
offer Tenant comparable space, to the extent such space is readily available,
within the project in which the Leased Premises are located on the same terms as
this Lease. Notwithstanding the provisions of this paragraph, if any such damage
or destruction occurs within the final one (1) year of the term hereof, then
Landlord, in its sole discretion, my, without regard to the aforesaid 90-day
period, terminate this Lease by written notice to Tenant.
ASSIGNMENT AND SUBLETTING
20.01 Landlord shall have the right to transfer and assign, in whole
or in part its rights and obligations in the building and property that are the
subject of this Lease. Tenant shall not assign this Lease or sublet all or any
part of the Leased Premises without the prior written consent of the Landlord,
which shall not be unreasonably withheld. In the event of any assignment or
subletting, Tenant shall nevertheless at all time, remain fully responsible and
liable for the payment of the rent and for compliance with all of its other
obligations under the terms, provisions and covenants of this Lease. If all or
any part of the Leased Premises re then assigned or sublet, Landlord, in
addition to any other remedies provided by this Lease or provided by law, may at
its option, collect directly from the assignee or subtenant all rents becoming
due to Tenant by reason of the assignment or sublease. Any collection directly
by Landlord from the assignee or subtenant shall not be construed to constitute
a novation or a release of Tenant from the further performance of its
obligations under this Lease. In the event that Tenant sublets the Leased
Premises or any part thereof, or assigns this Lese and at any time receives rent
and/or other consideration which exceeds that which Tenant would at that time be
obligated to pay to Landlord, Tenant shall pay to Landlord 100% of the gross
excess in such rent as such rent is received by Tenant and 100% of any other
consideration received by Tenant from such subtenant in connection with such
sublease or, in the case of any assignment of this Lease by Tenant, Landlord
shall receive 100% of any consideration paid to Tenant by such assignee in
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connection with such assignment. In addition, should Landlord agree to an
assignment or sublease agreement, Tenant will pay to Landlord on demand the sum
of $500.00 to partially reimburse Landlord for its costs, including reasonable
attorneys' fees, incurred in connection with processing such assignment or
subletting request.
20.02 Notwithstanding the foregoing, Tenant may freely transfer and
assign this Lease or sublet all or any portion of the Leased Premises (i) to any
affiliate or subsidiary of Tenant or (ii) in connection with any merger,
consolidation or sale of assets of Tenant, without having to obtain any consent
or approval of Landlord; provided, however that any such assignment or
subletting shall not result in Tenant being released or discharged from any
liability under this Lese except to the extent Tenant ceases to exist following
any such merger or consolidation. Tenant shall provide Landlord with written
notice of such assignment or subletting prior to or promptly following the
effective date of such assignment or subletting.
INSOLVENCY OF TENANT
21.01 Either (a) the appointment of a trustee to take possession of
all or substantially all of the assets of Tenant, or (b) a general assignment by
Tenant for the benefit of creditors, or (c) any action taken or suffered by
Tenant under any insolvency or bankruptcy act shall, if any such appointments,
assignments or action continues for a period of sixty (60) days, constitute a
breach of this Lease by Tenant, and Landlord may at its election without notice,
terminate this Lease and in that event be entitled to immediate possession of
the Leased Premises and damages as provided below.
BREACH BY TENANT
22.01 In the event of a monetary which is not cured within five (5)
days of receipt of written notice by Tenant of such default or in the event of
nonmonetary default by Tenant which is not cured within fifteen (15) days of
receipt of written notice by Tenant of such default, provided however, if the
default cannot reasonably be cured within such fifteen (15) day period, Tenant
shall not be in default if Tenant commences to cure the default within the
fifteen (15) day period and diligently and in good faith continues to cure the
default until completion. Landlord in addition to any and all other rights or
remedies that it may have hereunder, at law or in equity shall have the right to
either terminate this Lease or from time to time, without terminating this Lease
relet the Leased Premises or any part thereof for the account and in the name of
Tenant or otherwise, for any such term or terms and conditions as Landlord in
its sole discretion may deem advisable with the right to make reasonable
alterations and repairs to the Leased Premises. Tenant shall pay to Landlord, as
soon as ascertained, the costs and expenses incurred by Landlord in such
reletting or in making such reasonable alterations and repairs. Should such
rentals received from time to time from such reletting during any month be less
than that agreed to be paid during that month by Tenant hereunder, the Tenant
shall pay such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly.
22.02 No such reletting of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a notice of
such intention be given to Tenant or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding
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any such reletting without termination, Landlord may immediately or at any time
thereafter terminate this Lease, and this Lease shall be deemed to have been
terminated upon receipt by Tenant of notice of such termination; upon such
termination Landlord shall recover from Tenant all damages that Landlord may
suffer by reason of such termination including, without limitation, all
arrearages in rentals, costs, charges, additional rentals, and reimbursements,
the cost (including court costs and attorneys' fees actually incurred) of
recovering possession of the Leased Premises, the actual or estimated (as
reasonably estimated by Landlord) cost of any alteration of or repair to the
Leased Premises which is necessary or proper to prepare the same for reletting
and, in addition thereto, Landlord shall have and recover from Tenant the
difference between the present value (discounted at a rate per annum equal to
the discount rate of the Federal Reserve Bank of Atlanta at the time the Event
of Default occurs) of the rental to be paid by Tenant for the remainder of the
lease term, and the present value (discounted at the same rate) of the rental
for the Leased Premises for the remainder of the lease term, taking into account
the cost, time and other factors necessary to relet the Leased Premises;
provided, however, that such payment shall not constitute penalty or forfeiture,
but shall constitute full liquidated damages due to Landlord as a result of
Tenant's default. Landlord and Tenant acknowledge that Landlord's actual damages
in the event of a default by Tenant under this Lease will be difficult to
ascertain, and that the liquidated damages provided above represent the parties'
best estimate of such damages. The parties expressly acknowledge that the
foregoing liquidated damages are intended not as a penalty, but as full
liquidated damages, as permitted by Section 13-6-7 of the Official Code of Ga.
Annotated.
ATTORNEY'S FEES
23.01 If Landlord and Tenant litigate any provision of this Lease or
the subject matter of this Lese, the unsuccessful litigant will pay to the
successful litigant all costs and expenses, including reasonable attorneys' fees
and court costs, incurred by the successful litigant at trial and on any appeal.
If, without fault, either Landlord or Tenant is made a party to any litigation
instituted by or against the other, the other will indemnify the faultless one
against all loss, liability, and expense, including reasonable attorneys' fees
and court costs, incurred by it in connection with such litigation.
CONDEMNATION
24.01 If, at any time during the term of this Lease, title to the
entire Leased Premises should become vested in a public or quasi-public
authority by virtue of the exercise of expropriation, appropriation,
condemnation or other power in the nature of eminent domain, or by voluntary
transfer from the owner of the Leased Premises under threat of such a taking
then this Lease shall terminate as of the time of such vesting of title, after
which neither party shall be further obligated to the other except for
occurrence antedating such taking. The same results shall follow if less than
the entire Leased Premises be thus taken, or transferred in lieu of such a
taking, but to such extent that it would be legally and commercially impossible
for Tenant to occupy the portion of the Leased Premises remaining, and
impossible for Tenant to reasonably conduct his trade or business therein.
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<PAGE> 16
24.02 Should there be such a partial taking or transfer in lieu
thereof, but not to such an extent as to make such continued occupancy and
operation by Tenant an impossibility, then this Lease shall continue on all of
its same terms an conditions subject only to an equitable reduction in rent
proportionate to such taking.
24.03 In the event of any such taking or transfer, whether of the
entire Leased Premises, or a portion thereof, it is expressly agreed and
understood that all sums awarded, allowed or received in connection therewith
shall belong to Landlord, and any rights otherwise vested in Tenant are hereby
assigned to Landlord, and Tenant shall have no interest in or claim to any such
sums or any portion thereof, whether the same be for the taking of the property
or for damages, or otherwise; provided, however, that Landlord shall make no
claim which shall diminish or adversely affect any award claimed or received by
Tenant. Nothing herein shall be construed, however, to preclude Tenant from
prosecuting any claim directly against the condemning authority for loss of
business, moving expenses, damage to, and cost of, trade fixtures, furniture and
other personal property belonging to Tenant; provided, however, that Tenant
shall make no claim which shall diminish or adversely affect any award claimed
or received by Landlord.
NOTICES
25.01 All notices, statements, demands, requests, consents,
approvals, authorization, offers, agreements, appointments, or designations
under this Lease by either party to the other shall be in writing and shall be
sufficiently given and served upon the other party, (i) by depositing same in
the United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested; (ii) by recognized
overnight, third party prepaid courier service (such as Federal Express),
required signed receipt; (iii) by delivering the same in person to such party;
or (iv) by prepaid telegram, telecopy or telex with delivery of an original copy
of any such notice delivered pursuant to (ii) or (iii) above to be received no
later than the next business day. Notice personally delivered or sent by courier
service, telegram, telecopy or telex shall be effective upon receipt. Any notice
mailed in the foregoing manner shall be effective three (3) business days after
its deposit in the United States mail. Either party may change its address for
notices by giving notice to the other as provided above. For purposes of notice,
the addresses of the parties shall be as follows:
(a) To Tenant at the Leased Premises, with a copy to such
other place as Tenant may from time to time designate
by notice to Landlord;
(b) To Landlord, addressed to Landlord at 4497 Park
Drive, Norcross, Georgia 30093, with a copy to such
other place as Landlord may from time to time
designate by notice to Tenant.
WAIVER
26.01 The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any
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<PAGE> 17
preceding breach by Tenant of any term, covenant, or condition of this Lease,
other than the failure of Tenant to pay the particular rental so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent.
EFFECT OF HOLDING OVER
27.01 If Tenant should remain in possession of the Leased Premises
after the expiration of the lease term and without executing new lease, then
such holding over shall be construed as a tenancy from month to month, subject
to all the conditions, provisions, and obligations of this Lese insofar as the
same are applicable to a month to month tenancy, except that the rent payable
pursuant to subparagraph 3.01 hereof shall be 150% of the rent payable pursuant
to subparagraph 3.01.
SUBORDINATION
28.01 This Lease, at Landlord's option, shall be subordinate to any
ground lease, first priority mortgage, first priority deed of trust, or first
priority security deed now or hereafter placed upon the real property of which
the Leased Premises are a part and to any and all advances made on the security
thereof and to all renewals, modifications, consolidations, replacements and
extensions thereof.
28.02 Tenant agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any such ground
lease, mortgage, deed of trust, or security deed, as the case may be, including
specifically a subordination, non-disturbance and attornment agreement in the
form hereto attached as Exhibit "D", and failing to do so within ten (10) days
after written demand, does hereby make, constitute and irrevocably appoint
Landlord as Tenant's attorney in fact and in Tenant's name, place and stead, to
do so. If requested to do so, Tenant agrees to attorn to any person or other
entity that acquires title to the real property encompassing the Leased
Premises, whether through judicial foreclosure, sale under power, or otherwise,
and to any assignee of such person or other entity.
ESTOPPEL CERTIFICATE
29.01 Upon ten (10) days notice from Landlord to Tenant, Tenant
shall deliver a certificate dated as of the first day of the calendar month in
which such notice is received, executed by an appropriate officer, partner or
individual, in the form as Landlord may require and stating but not limited to
the following: (i) the commencement date of this Lease; (ii) the space occupied
by Tenant hereunder; (iii) the expiration date hereof; (iv) a description of any
renewal or expansion options; (v) the amount of rental currently and actually
paid by Tenant under this Lease; (vi) the nature of any default or claimed
default hereunder by Landlord and (vii) that Tenant is not in default hereunder
nor has any event occurred which with the passage of time or the giving of
notice would become a default by Tenant hereunder.
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<PAGE> 18
PARKING
30.01 Tenant shall be entitled to park in common with other tenants
of Landlord, at no additional cost to Tenant. Tenant agrees not to overburden
the parking facilities and agrees to cooperate with Landlord and other tenants
in the use of parking facilities. Landlord reserves the right in its absolute
discretion to determine whether parking facilities are becoming crowded and, in
such event, to allocate parking spaces among Tenant and other tenants. There
will be no assigned parking unless Landlord, in its sole discretion, may deem
advisable. Tenant agrees to park all Tenant' trucks in the parking spaces
provided at the rear of the building. "Parking" as used herein means the use by
Tenant's employees, its visitors, invitees, and customers for the parking of
motor vehicles for such periods of time as are reasonably necessary in
connection with use of and/or visits to the Leased Premises. No vehicle may be
repaired or serviced in the parking area and any vehicle deemed abandoned by
Landlord will be towed from the project and all costs therein shall be borne by
the Tenant. All driveways, ingress and egress, and all parking spaces are for
the joint use of all tenants. No area outside of the Leased Premises shall be
used by Tenant for storage without Landlord's prior written permission. There
shall be no parking permitted on any of the streets or roadways located in
Northmeadow Business Park.
MORTGAGEE PROTECTION
31.01 In the event of any default on the part of Landlord, Tenant
will give notice by registered or certified mail to any beneficiary of a deed or
trust or holder of a security deed or mortgage covering the Leased Premises
whose address shall have been furnished it, and shall offer such beneficiary or
holder thirty (30) days following such notice (with the effective time of such
notice as set forth in Section 25.01) to cure the default.
PROTECTIVE COVENANTS
32.01 This Lease is subject to the Protective Covenants of
Northmeadow Business Park, and to such rules and regulations as may hereafter be
adopted and promulgated. In addition, Tenant shall comply with all covenants,
restrictions and other matters of record in the deed records of the county in
which the Leased Premises are located which affect or encumber the Leased
Premises, the Building or the Land.
RELOCATION
33.01 Intentionally deleted.
BROKERAGE COMMISSIONS
34.01 Tenant's Agent and Landlord's Agent (collectively, "Agent")
shall each be entitled to receive a commission in the amounts, and upon the
terms and conditions, contained in a commission agreement between Landlord and
such parties.
34.02 Tenant warrants and represents to Landlord that, other than
Agent, no other party is entitled, as a result of the actions of Tenant, to
commission or other fee resulting from the execution of this Lease; and in the
event Tenant extends or renews this Lease, or expands the Leased Premises, and
Tenant's Agent is entitled to a commission under the above-referenced
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<PAGE> 19
commission agreement, Tenant shall pay all commissions and fees payable to any
party (other than Tenant's Agent) engaged by Tenant to represent Tenant in
connection therewith. Landlord warrants and represents to Tenant that, except as
set forth above, no other party is entitled, as a result of the actions of
Landlord, to a commission or other fee resulting from the execution of this
Lease. Landlord and Tenant agree to indemnify and hold each other harmless from
any loss, cost, damage or expense (including reasonable attorneys' fees)
incurred by the nonindemnifying party as a result of the untruth or
incorrectness of the foregoing warranty and representation, or failure to comply
with the provisions of this subparagraph.
34.03 Tenant's Agent is representing Tenant in connection with this
Lease, and is not representing Landlord. Landlord's Agent, or employees of
Landlord or its affiliates, are representing Landlord and are not representing
Tenant.
34.04 The parties acknowledge that certain officers, directors,
shareholders, or partners of Landlord or its general partner(s), are licensed
real estate brokers and/or salesmen under the laws of the State of Georgia.
Tenant consents to such parties acting in such dual capacities.
MISCELLANEOUS PROVISIONS
A. Whenever the singular number is used in this Lease and when
required by the context, the same shall include the plural, and the masculine
gender shall include the feminine and neuter genders, and the word "person"
shall include corporation, firm or association. If there be more than one
tenant, the obligations imposed upon Tenant under this Lease shall be joint and
several.
B. The headings or titles to paragraphs of this Lease are for
convenience only and shall have no effect upon the construction or
interpretation of any part of this Lease.
C. This instrument contains all of the agreements and conditions
made between the parties to this Lease and may not be modified orally or in any
other manner than by agreement in writing signed by all parties to this Lease.
D. Where the consent of a party is required, such consent will
not be unreasonably withheld.
E. This Lease shall create the relationship of Landlord and
Tenant between Landlord and Tenant; no estate shall pass out of Landlord; Tenant
has only a usufruct, not subject to levy and/or sale and not assignable by
Tenant except as provided in paragraph 20.01 hereof.
F. Except as otherwise expressly stated, each payment required to
be made by Tenant shall be in addition to and not in substitution for other
payments to be made by Tenant.
G. All covenants and agreements to be performed by Tenant under
any of the terms of this Lease shall be performed by Tenant at Tenant's sole
cost and expense, unless otherwise provided herein, and without any abatement of
rent.
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<PAGE> 20
H. No payment by Tenant or receipt by Landlord of a lesser amount
than any installment or payment of rent due shall be deemed to be other than on
account of the amount due, and no endorsement or statement on any check or
payment of rent shall be deemed an accord and satisfaction. Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or payment of rent, or pursue any other remedies
available to Landlord.
I. Subject to paragraph 20, the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of Landlord and Tenant. In the event of
any conveyance by Landlord of its interest in and to the Leased Premises, the
Building or the Land, all obligations under this Lease of the conveying party
shall cease and Tenant shall thereafter look solely to the party to whom the
Leased Premises were conveyed for performance of all Landlord's duties and
obligations under this Lease.
J. Tenant acknowledges and agrees that Landlord shall not provide
guards or other security protection for the Leased Premises and that any and all
security protection shall be the sole responsibility of Tenant.
K. This Lease shall be governed by Georgia law.
L. Time is of the essence of each term and provision of this
Lease.
M. Upon the request of Landlord, Tenant shall join in the
execution of a memorandum or so-called "short form" of this Lease for the
purpose of recordation. Upon the request of Tenant, Landlord shall join in the
execution of a memorandum or so-called "short form" of this Lease for the
purpose of recordation. Said memorandum or short form of this Lease shall
describe the parties, the Leased Premises and the lease term, and shall
incorporate this Lease by reference.
N. Landlord's liability for performance of its obligations under
the terms of this Lease shall be limited to its interest in the Leased Premises.
(SIGNATURES CONTAINED ON FOLLOWING PAGE)
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto who are individuals have set
their hands and seals, and the parties who are corporations have caused this
instrument to be duly executed by its proper officers and its corporate seal to
be affixed, as of the day and year first above written.
Signed, sealed and delivered as to LANDLORD:
Landlord, in the presence of:
ASC NORTH FULTON ASSOCIATES JOINT
VENTURE, a Georgia joint venture
By: Metropolitan Life Insurance Company,
- ---------------------------------- a New York Corporation, (successor-by-
merger to New England Mutual Life
Insurance Company, a Massachusetts
corporation) on behalf of its
Developmental Properties Account
("DPA")
- ----------------------------------
Notary Public By: AEW Real Estate Advisors, Inc., a
Massachusetts corporation (f/k/a
Copley Real Estate Advisors, Inc.)
its asset manager and advisor hereunto
duly authorized.
By:
---------------------------------------
Name:
-------------------------------------
Its:
-------------------------------------
Signed, sealed and delivered as to TENANT:
Tenant, in the presence of:
HORIZON PHARMACEUTICAL CORPORATION
By:
- ---------------------------------- ---------------------------------------
Name:
-------------------------------------
Its:
-------------------------------------
- ---------------------------------- ATTEST:
Notary Public
By:
---------------------------------------
Name:
-------------------------------------
Its:
-------------------------------------
(Corporate Seal)
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<PAGE> 22
EXHIBIT "C"
ACCEPTANCE OF PREMISES
Tenant:________________________________________________________________________
Landlord:______________________________________________________________________
Date Lease Signed:_____________________________________________________________
Term of Lease:_________________________________________________________________
Address of Leased Premises: Suite __________ containing approximately ________
square feet, located at:
_______________________________________________________
_______________________________________________________
Commencement Date:_____________________________________________________________
Expiration Date:_______________________________________________________________
The above described premises are accepted by Tenant as suitable for the purpose
for which they were let. The above described lease term commences and expires on
the dates set forth above. Tenant acknowledges that it has received from
Landlord ______________ number of keys to the Leased Premises. It is understood
that there is a punch list which will be completed after move-in and will be an
exhibit to the Tenant Estoppel.
TENANT LANDLORD
- -------------------------------- ------------------------------------
(Type Name of Tenant) (Type Name of Landlord)
By: By:
----------------------------- ---------------------------------
(Signature) (Signature)
- -------------------------------- ------------------------------------
(Type Name and Title) (Type Name and Title)
<PAGE> 23
EXHIBIT "D"
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made as of the __________ day of _____________________,
________, between _________________________ with offices at ____________________
_____________________________________ ("Tenant") and ___________________________
(herein, together with its successors, transferees and assigns, the
"Mortgagee");
W I T N E S S E T H:
WHEREAS, Mortgagee is about to or has heretofore granted to
_________________, a Georgia limited partnership (the "owner") a first mortgage
loan, which loan is secured by a security deed (herein "Mortgage") dated as of
____________________, 199___ and duly recorded on _____________________, 199___
in the land records of Fulton County, Georgia; and
WHEREAS, the Mortgage is to be a first and prior lien upon the Owner's
fee estate in the real property described in Exhibit "A" annexed hereto
("Mortgaged Premises"); and
WHEREAS, Tenant is occupying a portion of the Mortgaged Premises under
a lease dated as of _____________________, 199____ in which Owner is Landlord
(the "Lease") covering that portion of the Mortgaged Premises therein more
particularly described (the "Leased Premises"); and
WHEREAS, Tenant desires to be assured of its continued and undisturbed
occupancy of the Leased Premises should the Mortgage be foreclosed or the
Mortgaged Premises sold pursuant to any power of sale contained therein and
Mortgagee is agreeable thereto.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and in further consideration of the sum of ONE DOLLAR ($1.00)
each to the other in hand paid, the receipt whereof is hereby acknowledged,
Tenant and Mortgagee mutually covenant and agree as follows:
FIRST: The Lease and all Tenant's rights, interest and estate therein
and thereunder are hereby made subject and subordinate to the lien of the
Mortgage and to any extensions, renewals, replacements, modifications, additions
or consolidations thereof and to all rights, title and interest of Mortgagee and
its successors and assigns therein and thereunder.
SECOND: In the event, however, proceedings shall ever be instituted by
Mortgagee to foreclose or liquidate the Mortgage, the Tenant's possession of its
leased portion of the Mortgaged Premises shall not be disturbed by the
foreclosure proceedings and the Mortgaged Premises shall be sold at any
foreclosure sale subject to Tenant's possession on condition that:
<PAGE> 24
(a) there shall be, at the time of commencement of foreclosure
proceedings, as well as all subsequent times, no default by
Tenant in the due and timely observance and performance of any
covenant and agreement in the Lease to be observed and
performed by Tenant; and
(b) the Tenant shall not have entered into any agreement modifying
any term, condition or agreement of the Mortgagee-approved
Lease without the prior written consent of Mortgagee.
THIRD: Tenant shall attorn to Mortgagee while Mortgagee is in
possession of the Mortgaged Premises, or to a Receiver appointed in any action
or proceeding to foreclosure the Mortgage. In the event of the completion of
foreclosure proceedings and sale of the Mortgaged Premises or in the event the
Mortgagee should otherwise acquire possession of the Mortgaged Premises, the
Tenant will promptly upon demand attorn to the purchaser at the foreclosure sale
or to the Mortgagee, as the case may be, and will recognize such purchaser or
the Mortgagee as the Tenant's landlord. The Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of the Mortgagee or
the purchaser at the foreclosure sale, as the case may be, any instrument which
may be necessary or appropriate to such successor landlord to evidence such
attornment. The Tenant shall, upon demand of the Mortgagee or any Receiver or
purchaser at the foreclosure sale, pay to the Mortgagee or to such Receiver or
purchaser, as the case may be, all rental monies then due or as they thereafter
become due.
FOURTH: Upon the attornment provided for in preceding Paragraph THIRD
the Tenant's occupancy shall thereafter be in full force and effect as under a
direct Lease between Mortgagee, the Receiver or the purchaser at the foreclosure
sale, as the case may be, and Tenant. It is specifically understood and agreed
that Mortgagee or any such Receiver or purchaser shall not be:
(a) liable for any act, omission, negligence or default of any
prior landlord, or
(b) subject to any offsets, claims or defenses which Tenant might
have against any prior landlord; or
(c) bound by any rent or additional rent which Tenant might have
paid for more than one month in advance to any prior landlord;
or
(d) bound by any amendment or modification of the Lease made
without the prior written consent of the Mortgagee.
FIFTH: On and after the date Tenant in good standing attorns to
Mortgagee or any Receiver or subsequent owner in pursuance of its agreement
herein set forth, Mortgagee, the Receiver or such subsequent owner will
undertake and perform all subsequent obligations of the Landlord as set forth in
the Lease for the benefit of and undisturbed occupancy of Tenant under the
Lease.
<PAGE> 25
SIXTH: Tenant agrees it will not amend, modify nor abridge the Lease
in any way, nor cancel or surrender the same without prior written approval of
the Mortgagee other than by reason of a continued uncured material default of
the landlord under the Lease, nor will the Lease ever merge into the fee in the
event that Mortgagee acquires fee title to the Mortgaged Premises.
SEVENTH: Any notices or other communication to be given hereunder by
either party shall be in writing and shall be deemed to have been sufficiently
given or served for all purposes if sent by registered or certified mail with
return receipt requested to the other party hereto at its address above stated
or such other address of which written notification has been timely given to the
other party.
EIGHTH: Mortgagee has and shall have the continuing right to execute
and record in the Land Records of Fulton County, Georgia at any time, in its
unilateral discretion, a Declaration of Subordination for the purpose of thereby
subordinating its rights, title and interest in and under the Mortgage to the
rights, title and interest of Tenant under the Lease. Such Declaration of
Subordination shall, at Mortgagee's election, operate, function and be in full
force and effect for whatever period of time Mortgagee declares therein that it
shall be in force not exceeding the term of the Lease and any extensions thereof
and the said Declaration may be voided unilaterally by Mortgagee when it so
elects.
NINTH: Tenant waives any and all rights it may have to execute and
record after the date hereof any document purporting to again or further
subordinate its right, title or interest under the Lease to the lien of either
the Mortgage or any other mortgage or deed of trust or any ground lease or any
agreement modifying or amending the Mortgage except with the written consent of
Mortgagee.
TENTH: This Agreement cannot be changed orally but only in writing
signed by both parties hereto.
ELEVENTH: This Agreement may be recorded by either party at its own
expense in the Land Records of Fulton County, Georgia whenever, in its sole
discretion, either party elects so to do.
TWELFTH: All of the terms, covenants and conditions hereof shall run
with the Mortgaged Premises and shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, acknowledged and delivered the day and year first above written.
SIGNED, SEALED AND DELIVERED TENANT:
in the presence of:
- ----------------------------------
By:
- ---------------------------------- -------------------------------
MORTGAGEE:
- ----------------------------------
By:
- ---------------------------------- -------------------------------
The undersigned Owner of the leased and mortgaged premises hereby
consents to the foregoing Agreement and agrees to be bound by and subject to the
terms thereof.
By:
-------------------------------
<PAGE> 27
EXHIBIT "E"
SPECIAL STIPULATIONS
Right of First Refusal #1 (Suite 114):
Landlord hereby grants to Tenant the right of first refusal to lease
all of the adjacent space containing 5,400 rentable square feet, known as Suite
114, (the "Adjacent Space #1") upon the terms and conditions contained herein.
So long as Tenant is not then in default under the Lease, Landlord will
notify Tenant when it has made a proposal to lease any portion of the Adjacent
Space #1 to a third party (other than BellSouth Entertainment, Inc.) and the
terms and conditions upon which it is willing to lease such space.
Tenant shall provide written notice to Landlord, as to Tenant's
decision to lease or not to lease that portion of the Adjacent Space #1 within
seven (7) business days after Landlord's notice to Tenant is received. If Tenant
does not provide written notice or indicates that it will not exercise its right
of first refusal, this right will expire and Landlord shall have no future
obligations to Tenant with regard to that portion of the Adjacent Space #1 which
was subject to such notice.
If Tenant does provide such notice to lease the Adjacent Space #1 for a
term not to exceed the remaining initial term of this Lease, Landlord and Tenant
will execute a lease for the Adjacent Space #1 within a reasonable time after
Landlord's receipt of Tenant's notice of intent to lease on all the same terms
as this Lease except for the rental terms, and other matters which shall be
mutually agreed upon by Landlord and Tenant.
This right of first refusal to lease the Adjacent Space #1 is personal
to Horizon Pharmaceutical Corporation and may not be assigned in connection with
an assignment of this Lease or otherwise, except for an assignment as
contemplated in Section 20.02.
This right is subordinate to the rights to BellSouth Entertainment,
Inc. to lease the space as contained in that certain Lease Agreement by and
between ASC North Fulton Associates Joint Venture and BellSouth Entertainment,
Inc. dated July 2, 1997.
Right of First Refusal #2 (Suite 100):
Landlord hereby grants to Tenant the right of first refusal to lease
all of the adjacent space, known as Suite 100 (the "Adjacent Space #2") upon the
terms and conditions contained herein.
So long as Tenant is not then in default under the Lease, Landlord will
notify Tenant when it has made a proposal to lease any portion of the Adjacent
Space #2 to a third party (other
<PAGE> 28
than Accu-tech Corporation) and the terms and conditions upon which it is
willing to lease such space.
Tenant shall provide written notice to Landlord, as to Tenant's
decision to lease or not to lease that portion of the Adjacent Space #2 within
seven (7) business days after Landlord's notice to Tenant is received. If Tenant
does not provide written notice or indicates that it will not exercise its right
of first refusal, this right will expire and Landlord shall have no future
obligations to Tenant with regard to that portion of the Adjacent Space #2 which
was subject to such notice.
If Tenant does provide such notice to lease the Adjacent Space #2 for a
term not to exceed the remaining initial term of this Lease, Landlord and Tenant
will execute a lease for the Adjacent Space #2 within a reasonable time after
Landlord's receipt of Tenant's notice of intent to lease on all the same terms
as this Lease except for the rental terms, and other matters which shall be
mutually agreed upon by Landlord and Tenant.
This right of first refusal to lease the Adjacent Space #2 is personal
to Horizon Pharmaceutical Corporation and may not be assigned in connection with
an assignment of this Lease or otherwise.
This right is subordinate to the rights of Accu-tech Corporation to
lease the space as contained in that certain Lease Agreement by and between ASC
North Fulton Associates Joint Venture and Accu-tech Corporation dated January
26, 1998.
Option to Renew:
Tenant shall have the option to renew this Lease Agreement for one (1)
five (5) year term provided that Tenant gives written notice to Landlord of its
intention to renew at least one hundred eighty (180) days prior to the end of
the then current term thereof. Renewal shall be upon the same terms and
conditions as contained herein except that the annual base rental shall be the
fair market rental value (but in no event less than the current rental rate
under the Lease) which shall be determined as follows:
(a) Landlord and Tenant will have fifteen (15) days after Landlord
receives the renewal notice within which to agree on the then-fair market rental
value of the Leased Premises as defined in paragraph (c) below for the renewal
period. If they agree on the base monthly rent for the renewal period within
fifteen (15) days, they will amend this Lease by stating the base monthly rental
for the renewal period.
(b) If they are unable to agree on the base monthly rental for the
renewal period within fifteen (15) days and Tenant has not rescinded its option
to renew during said fifteen (15) day period, then the base monthly rental for
the renewal period will be the then-fair market rental value of the Leased
Premises as determined in accordance with paragraph (d) below.
(c) The "then-fair market rental value of the Leased Premises" means
what a Landlord under no compulsion to lease the Leased Premises and a Tenant
under no compulsion
<PAGE> 29
to lease the Leased Premises would determine as rents for
the renewal period, as of the commencement of the renewal period, taking into
consideration the uses permitted under this Lease, the quality, size, design,
and location of the Leased Premises, and the rent for comparable buildings
located in the vicinity of the Leased Premises. The then-fair market rental
value of the Leased Premises for the renewal period will not be less than that
provided during the initial term.
(d) Within seven (7) days after the expiration of the fifteen (15) day
period set forth in paragraph (b) above, Landlord and Tenant will each appoint a
real estate appraiser to appraise the then-fair market rental value of the
Leased Premises. The two appraisers will meet promptly and attempt to set the
then-fair market rental value of the Leased Premises. If they are unable to
agree within thirty (30) days, they will select a third appraiser within ten
(10) days to set the then-fair market rental value of the Leased Premises.
Landlord and Tenant will bear one-half (1/2) of the cost of appointing the third
appraiser and of paying the third appraiser's fee.
(e) Within thirty (30) days after the selection of the third appraiser,
a majority of the appraisers will set the then-fair market rental value of the
Leased Premises. If a majority of the appraisers are unable to set the then-fair
market rental value of the Leased Premises within thirty (30) days after
selection of the third appraiser, the three appraisals will be averaged and the
average will be the then-fair market rental value of the Leased Premises.
(f) It is expressly understood that Tenant shall have no option to
renew this Lease for the renewal term if at the time of the attempted exercise
of such option or at the commencement of such renewal term this Lease is not
then in full force and effect or if Tenant is then in default of any terms and
conditions of this Lease.
<PAGE> 1
EXHIBIT 10.8
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions of This Agreement Which Have Been
Redacted Are Marked With Brackets ("[***]"). The Omitted Material Has
Been Filed Separately With The Securities and Exchange Commission.
PRODUCT DEVELOPMENT AND SUPPLY AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of March 25, 1999 (the
"Effective Date") by and between Penwest Pharmaceuticals Co., a Washington
corporation with a principal place of business at 2981 Route 22, Patterson, New
York 12563 ("Penwest"), and Horizon Pharmaceutical Corporation, a Delaware
corporation with a principal place of business at 660 Hembree Parkway, Suite
106, Roswell, Georgia 30076 ("Horizon").
A. Whereas Penwest has developed a controlled-release agent covered by one
or more patents, patent applications, know-how and other proprietary technology,
which agent Penwest markets under the name "TIMERx" ("TIMERx"), and Penwest is
the owner of certain patents covering controlled release formulations of the
active ingredient [***];
B. Whereas Horizon is interested in developing for manufacture and
marketing a pharmaceutical product incorporating [***] in a solid-dosage
controlled-release delivery system for oral administration in humans; and
C. Whereas the parties desire to engage in certain research, development,
and testing activities designed to determine if Penwest's TIMERx
controlled-release system can be adapted and combined with [***] to make a
controlled-release version of [***] for oral solid-dosage administration in
humans in a 24 hour release form in a 200 mg dosage strength and, if such
activities are successful, Horizon desires to contract for a supply of TIMERx
for use in the manufacture of such a controlled-release form of [***], and
Penwest is willing to supply the same, provided that Horizon agrees to obtain
all of its requirements for controlled-release agents for [***] products in the
form of TIMERx from Penwest as provided herein;
NOW, THEREFORE, the parties hereby agree as follows:
1.Definitions.
1.1 "Affiliate" shall mean any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by, or is under common control
with a specified person or entity. For purposes of this Section 1.1, "control"
shall mean (a) in the case of corporate entities, direct or indirect ownership
of at least fifty percent (50%) of the stock or shares having the right to vote
for the election of directors, and (b) in the case of non-corporate entities,
direct or indirect ownership of at least fifty percent (50%) of the equity
interest with the power to direct the management and policies of such
non-corporate entities.
<PAGE> 2
[***] - CONFIDENTIAL TREATMENT REQUESTED
1.2 "Approval Date" shall mean the date on which the Designated Product is
first approved by the FDA for commercial sale in oral solid-dosage form for
administration in humans, pursuant to an NDA.
1.3 "Capable Entity" shall mean any third party that, in Penwest's
reasonable judgment, (a) has, as applicable, (i) a sales force in the Exclusive
Territory that exceeds Horizon's sales force therein, (ii) annual sales that
exceed those of Horizon, (iii) a financial capacity to market the Designated
Product that exceeds that of Horizon and (iv) a capacity to manufacture the
Designated Product in finished form that exceeds that of Horizon, and (b) does
not manufacture, market or promote any oral, controlled-release drug delivery
product.
1.4 "Certification Period" shall mean the period beginning on the
Submission Date and ending on the earlier of:
1.4.1 the Approval Date; or
1.4.2 the termination of this Agreement as provided herein.
1.5 "Confidential Information" shall mean all information, technology and
know-how disclosed hereunder that is, at the relevant time hereunder, protected
or required to be protected by both parties hereto as confidential information
pursuant to Article 8 hereof.
1.6 "Covered Infringement" shall have the meaning set forth for such term
in Section 9.1.
1.7 "Designated Product" shall mean the solid-dosage form of a
controlled-release pharmaceutical for oral administration in humans that
combines a racemic mixture of [***] with TIMERx and other excipients, as more
fully described in Exhibit A, which exhibit is subject to modifications as
Penwest and Horizon may mutually agree during the Development Period.
1.8 "Development Period" shall mean the period from the Effective Date
through the Submission Date or the earlier termination of this Agreement as
provided herein.
1.9 "Development Tasks" shall have the meaning set forth for such term in
Section 3.4.
1.10 "DMF" shall mean Drug Master File with respect to Formulated TIMERx as
defined in 21 CFR 300 et seq., including amendments and supplements which will
be filed by Penwest.
1.11 "FDA" shall mean the U.S. Food and Drug Administration.
1.12 "Formulated TIMERx" shall mean TIMERx and certain additives in a
formulation to be developed hereunder specifically for use in the Designated
Product.
<PAGE> 3
1.13 "Horizon Test and Regulatory Data" shall mean any and all test data,
test designs and protocols, clinical studies and results thereof, government
licenses and applications therefor, government certifications and findings, and
related materials, information and rights (including without limitation
information regarding bioavailability and bioequivalence, and any adverse drug
reactions), developed, commissioned or otherwise obtained by Horizon or any of
its Affiliates or sublicensees during the term of this Agreement (or, with
respect to such sublicensees, during the term of the respective sublicenses)
relating to TIMERx, TIMERx Improvements, the Designated Product, Penwest
Patents, Penwest Technology, and/or Penwest's Confidential Information, together
with all intellectual property and other rights and interests of Horizon and its
Affiliates or sublicensees thereto and therein, worldwide.
1.14 "Horizon Trademarks" shall mean trademarks which are the exclusive
property of and which shall remain at all times the exclusive property of
Horizon or its Affiliates.
1.15 "IMS Data" shall mean data published in the IMS Retail Perspective(,
published by IMS America, Ltd.
1.16 "IND" shall mean an investigational new drug application filed with
the FDA.
1.17 "Inpharmakon" shall mean Inpharmakon Corporation.
1.18 "Indication" shall mean the treatment and/or prophylaxis of migraine.
1.19 "Joint Developments" shall mean any and all inventions, improvements,
modifications, alterations, or enhancements, other than TIMERx Improvements,
that are made jointly by Horizon or any of its Affiliates or sublicensees, on
the one hand, and Penwest or any of its Affiliates or sublicensees, on the other
hand, in the course of this Agreement, together with all United States and
foreign intellectual property and other rights and interests of the parties and
their respective Affiliates thereto and therein, including without limitation
patents, trade secrets, copyright, periods of market exclusivity, and other
related rights or interests, to the extent the same remain protected by any such
rights and interests from being used freely by others; provided, however, that
none of the Penwest Test and Regulatory Data or Horizon Test and Regulatory Data
shall be considered Joint Developments.
1.20 "License Term" shall mean the cumulative period covered by the
Development Period, the Certification Period, and the Marketing Period.
1.21 "Marketing Period" shall have the meaning set forth for such term in
Section 5.1.
1.22 "Minimum Sales" shall have the meaning set forth for such term in
Exhibit G.
1.23 "NDA" shall mean a new drug application filed with the FDA.
1.24 "Net Sales" shall have the meaning set forth for such term in Exhibit
B.
<PAGE> 4
1.25 "Penwest Patents" shall mean:
1.25.1 those patents and patent applications listed in Exhibit C and
all divisions, continuations, reissues, or extensions thereof, any periods
of marketing exclusivity relating thereto, and any letters patent that
issue thereon; and
1.25.2 Penwest's rights in and to any United States patents or patent
applications other than those included in Section 1.20.1, obtained and in
force during the License Term covering any inventions included in the
Penwest Technology.
1.26 "Penwest Technology" shall mean any technology and know-how belonging
to Penwest from time to time during the term of this Agreement that directly
relate to, and/or are necessary for the production of, the Designated Product,
and Penwest's rights therein and thereto.
1.27 "Penwest Test and Regulatory Data" shall mean any and all test data,
test designs and protocols, clinical studies and results thereof, government
licenses and applications therefor, government certifications and findings, and
related materials, information and rights (including without limitation
information regarding bioavailability and any adverse drug reactions),
developed, commissioned or otherwise obtained by Penwest or any of its
Affiliates during the term of this Agreement relating to TIMERx, Penwest
Patents, Penwest Technology, and/or Penwest's Confidential Information, together
with all intellectual property and other rights and interests of Penwest and its
Affiliates thereto and therein in the Territory.
1.28 "Penwest Trademark(s)" shall mean those names, symbols and/or
characters described in Exhibit D hereto, as the same may be amended from time
to time during the terms of this Agreement by Penwest on at least six (6)
months' prior written notice to Horizon, that are owned and registered (or are
registrable) by Penwest and that have been designated by it for use in
conjunction with Horizon's packaging and promotion of the Designated Product
hereunder, pursuant to Section 6.10.
1.29 "Project Contact(s)" shall mean the persons appointed by each party to
serve as contact persons between the parties during the Development Period and
the Certification Period. The initial Project Contact for Penwest is Mr. Michael
Mallon and the initial Project Contact for Horizon is Mr. Bala Venkataraman.
Each party shall promptly notify the other party of any substitution of other
personnel as its Project Contact. Each party may select and supervise its other
project staff as needed.
1.30 "Royalties" (or "Royalty") shall mean the royalties payable to Penwest
pursuant to Article 5 hereof.
1.31 "Sales Differential" shall have the meaning set forth for such term in
Section 11.2.2.
<PAGE> 5
[***] - CONFIDENTIAL TREATMENT REQUESTED
1.32 "Specifications" shall mean such standards and analytical methods
established and mutually agreed to in writing by Penwest and Horizon as are
reasonably necessary or appropriate to assure the identity, strength, quality
and purity of the TIMERx and Formulated TIMERx, as set forth in Exhibit E, which
(a) shall be mutually agreed to by the parties hereto, and (b) may be modified
from time to time by mutual agreement of the parties hereto.
1.33 "Submission Date" shall mean the date on which Horizon submits to the
FDA an NDA for the Designated Product (in any dosage strength).
1.34 "Territory" shall mean Canada, the United States, Mexico and their
respective territories and possessions.
1.35 "TIMERx Improvements" shall mean any and all improvements,
modifications, alterations, or enhancements to any of the inventions covered by
the Penwest Patents or included in the Penwest Technology or Penwest's
Confidential Information, that are developed, owned, or controlled by Horizon or
any of its Affiliates or sublicensees, either alone or jointly with Penwest or
any of its Affiliates or sublicensees, or in which Horizon or any of its
Affiliates or sublicensees otherwise has any rights or interests during the term
of this Agreement (or, with respect to such sublicensees, during the term of the
respective sublicenses) together with all United States and foreign intellectual
property and other rights and interests of Horizon and its Affiliates and
sublicensees thereto and therein, including without limitation patents, trade
secrets, copyright, periods of market exclusivity, and other related rights or
interests, to the extent the same remain protected by any such rights and
interests from being used freely by others.
1.36 "Unit Price" shall mean [***] U.S. dollars (US$[***]) per kilogram of
Formulated TIMERx, subject to adjustment no more often than once annually to
reflect any increase in the Pharmaceutical Producers' Price Index.
2. Grant of Licenses and Transfer of Technology.
2.1 Grants by Penwest.
2.1.1 Penwest hereby grants to Horizon an exclusive, royalty-bearing
license, under the Penwest Patents, the Penwest Technology, the Joint
Developments, the TIMERx Improvements and Penwest's Confidential
Information disclosed to Horizon hereunder, to manufacture, use and sell
and register the Designated Product in the Territory during the License
Term. Such license does not extend to (a) the making of TIMERx or
Formulated TIMERx, but does cover the incorporation of Formulated TIMERx
into the Designated Product, or (b) any metabolite, isolated enantiomer or
non-racemic mixture of [***]. Horizon shall have the right to grant
sublicenses of its rights hereunder to any Affiliate(s) of Horizon (and
this Agreement shall thereby be binding upon and inure to the benefit of
such Affiliate(s) within the area of such sublicense), but shall otherwise
have no right to grant sublicenses hereunder without the prior written
consent of Penwest. Such consent of Penwest shall be based on whether, as
of the time the proposed sublicense is to be granted, the proposed
<PAGE> 6
sublicensee is a Capable Entity, unless Horizon is able to demonstrate to
Penwest's reasonable satisfaction that such proposed sublicensee, based on
the particular characteristics of such proposed sublicensee, including but
not limited to the region of the Territory in which such proposed
sublicensee would operate, is a suitable sublicensee despite its failure to
qualify as a Capable Entity. Penwest shall, throughout the License Term,
promptly notify Horizon of all Penwest Patents referred to in Section
1.20.2 and provide Horizon with access to all of the same, solely for use
within the scope of the license stated in this section.
2.1.2 Penwest hereby grants to Horizon and its Affiliates (with the
right to sublicense only as such right is granted under Section 2.1.1) a
nonexclusive, paid-up license under all rights of Penwest and its
Affiliates in and to the Penwest Test and Regulatory Data to use the same
as is necessary for purposes of complying with governmental requirements,
but solely with respect to the Designated Product for marketing or use in
the Territory. Penwest hereby consents to Horizon's and its Affiliates' and
such sublicensees' cross-referencing the DMF as is necessary for the filing
of an NDA for the Designated Product hereunder.
2.1.3 Penwest hereby grants to Horizon and its Affiliates an exclusive
license (with the right to sublicense only as such right is granted under
Section 2.1.1) under any and all rights of Penwest in and to the Penwest
Trademark(s), to use the Penwest Trademark(s) solely in connection with the
manufacture, distribution, and sale of the Designated Product in the
Territory for the term of this Agreement.
2.2 Grants by Horizon.
2.2.1 Horizon hereby grants to Penwest and its Affiliates a
nonexclusive, paid-up, license, with the right to sublicense, under any and
all patents, patent applications, trade secrets, copyrights, and other
intellectual property rights of any sort owned or controlled by Horizon or
its Affiliates or sublicensees, to make and have made anywhere in the
world, and to use and sell to Horizon and its Affiliates and permitted
sublicensees Formulated TIMERx for use in the Designated Product during the
License Term, if and to the extent such license is necessary for Penwest to
do so as agreed hereunder.
<PAGE> 7
[***] - CONFIDENTIAL TREATMENT REQUESTED
2.2.2 Horizon shall grant to Penwest and its Affiliates a
nonexclusive, paid-up license, with the right to sublicense, under all
rights of Horizon and its Affiliates and sublicensees in and to that
portion of the Horizon Test and Regulatory Data that is disclosed or
provided to Penwest hereunder, granting to Penwest the right to use the
same for purposes of complying with governmental requirements of any
country, other than with respect to the Designated Product for marketing or
use in the Territory. Horizon shall consent to Penwest's and its
Affiliates' and sublicensees' cross-referencing, in any filings that are
essentially the equivalent of the sorts of filings that are termed NDA
filings if made with the FDA, made by them within the scope of such
license, any NDA filing made or FDA master file created by Horizon or its
Affiliates or sublicensees relating to or containing any of the Horizon
Test and Regulatory Data. Such license under this Section 2.2.2 shall
survive any termination or expiration of the term of this Agreement, except
a termination under Section 11.5 due to an uncured breach by Penwest.
Horizon shall, throughout the License Term and solely for use within the
scope of such license, promptly provide to Penwest copies of all of the
Horizon Test and Regulatory Data in or coming into Horizon's possession or
otherwise reasonably available to it.
2.3 Penwest Technology Transfer to Horizon. Penwest shall, at its expense,
exert reasonable efforts to make knowledgeable personnel reasonably available
within thirty (30) days from the date of Horizon's written request, to consult
with Horizon to the extent necessary to enable Horizon to produce Designated
Product for Horizon and its Affiliates pursuant to this Agreement; provided,
however, that Horizon shall reimburse Penwest, at the rate of one thousand U.S.
dollars (US$1,000) per person per day, for Penwest personnel costs associated
with any such consultation that is not performed at Penwest. The parties
understand and agree that Horizon's performance under this Agreement depends
upon the communication of the Penwest Technology, and that, if for any reason,
it is not possible to transfer such technology to Horizon, this will not lead to
liability on Horizon's part. The Penwest Technology will be deemed to have been
successfully transferred upon completion of scale-up on production-scale
equipment and demonstration of dissolution results comparable to those obtained
for pilot scale batches.
2.4 Product Development Outside the Territory. In the event that, during
the License Term, either party hereto approaches the other party with a proposal
that development of the Designated Product be undertaken outside the Territory,
such other party agrees to reasonably consider negotiating a separate agreement
with such party concerning such development, provided that any such negotiation
shall take into account a variety of factors including but not limited to the
parties' respective costs relating to, and proceeds realized from, the
development of the Designated Product.
2.5 Horizon's Rights with Respect to Other TIMERx Products.
2.5.1 During the License Term, with respect to any product that (a) is
not the Designated Product and (b) combines TIMERx and [***], not including
any metabolite, isolated enantiomer or non-racemic mixture of [***] for any
therapeutic or prophylactic use(s) in humans, Penwest and Horizon agree to
discuss collaborations concerning the development and commercialization of
such product in the Territory. When Penwest recognizes the possibility for
<PAGE> 8
[***] - CONFIDENTIAL TREATMENT REQUESTED
developing any such product, it shall present such information to Horizon
in writing and Horizon shall have a period of forty-five (45) days in which
to initiate good faith negotiations concerning a potential collaboration
with respect to such product. If Horizon initiates such negotiations, the
parties shall have a period of ninety (90) days in which to execute a
definitive agreement, the terms and conditions of which shall govern any
collaboration between the parties with respect to such product. If either
(a) a negotiation concerning a potential collaboration with respect to any
such product is not initiated, or (b) the parties cannot agree to the terms
of a collaboration witH respect to such product, then Penwest shall have
the exclusive right, either alone or in collaboration with a third party,
to undertake the development and commercialization of such product, unless
(i) such product is for use for the Indication or (ii) Horizon demonstrates
to Penwest's reasonable satisfaction that such product is likely to be used
off-label for the Indication, in which case Penwest shall not have the
right, either alone or in collaboration with a third party, to undertake
the development and commercialization of such product in the Territory.
2.5.2 During the License Term, with respect to any product that (a) is
not the Designated Product and (b) combines TIMERx and any metabolite,
isolated enantiomer or non-racemic mixture of [***] for any therapeutic or
prophylactic use(s) in humans, Penwest agrees promptly to notify Horizon in
writing when Penwest recognizes the possibility for developing such product
in the Territory. Horizon shall have a period of forty-five (45) days
following such notification in which to provide to Penwest a written
request that Penwest refrain from pursuing the development and
commercialization of such product in the Territory. If (a) Horizon makes
such request and (b) (i) such product is for use for the Indication or (ii)
within thirty (30) days following Penwest's receipt of such request,
Horizon demonstrates to Penwest's reasonable satisfaction that such product
is likely to be used off-label for the Indication in the Territory, Penwest
shall refrain from pursuing the development and commercialization of such
product in the Territory either on its own or with a third party. If
Horizon (a) fails to provide such request or (b) makes such request but (i)
such product is not for the Indication or (ii) Horizon fails to make such
demonstration, then Penwest shall have the right to pursue the development
and commercialization of such product in the Territory either on its own or
with a third party.
2.6 Penwest Use of TIMERx. Horizon acknowledges that (a) subject to other
provisions of this Agreement, Penwest and its Affiliates, for themselves and for
others, apply, and will seek to apply, TIMERx and Formulated TIMERx to products
in and outside of the Territory and (b) subject to Sections 2.5.1 and 2.5.2, no
provision hereof, and no exclusivity hereunder, shall prevent Penwest from so
applying TIMERx, Formulated TIMERx or other oral, controlled release drug
delivery technology, so long as the end product is not the Designated Product
hereunder for commercial use and/or sale in the Territory; provided, however,
that, subject to Sections 2.5.1 and 2.5.2, Penwest hereby affirms that, in the
Territory, neither it nor its Affiliates shall apply, for themselves or for
others, TIMERx, Formulated TIMERx or other oral, controlled release drug
delivery technology to products containing [***].
2.7 Commercially Reasonable Efforts. During License Term, each of Penwest
and Horizon shall exert their continuing commercially reasonable efforts to
perform their respective tasks hereunder in order to create and produce the
<PAGE> 9
[***] - CONFIDENTIAL TREATMENT REQUESTED
Designated Product, and each shall cooperate with the other in such efforts. It
is understood that the exertion of a party's commercially reasonable efforts
shall mean that this project will receive a priority at least as high as any of
such party's other drug development efforts. Each party shall, promptly and
throughout the term of this Agreement, provide to the other all necessary
information in or coming into its possession or reasonably available to it for
such purposes. Notwithstanding anything else to the contrary contained herein,
nothing shall require either party to disclose confidential information for
which such party has an obligation of confidentiality to a third party.
3. Development Period.
3.1 Initial Fee. In consideration of Penwest's entering into this
Agreement, Horizon shall pay Penwest two (2) non-refundable, non-creditable
payments of [***] U.S. dollars (US$[***]) each, (a) the first such payment to be
made on the Effective Date, and (b) the second such payment to be made within
seventy-five (75) days following the Effective Date.
3.2 Non-Competition by Horizon. As additional inducement to Penwest to
enter into this Agreement, Horizon hereby affirms that, other than (a)
confidentiality agreements not binding either party to any further agreement and
(b) that certain Collaboration Agreement between Horizon and Inpharmakon, dated
October 31, 1998, it currently has no agreement or arrangement with any party
other than Penwest for or including the development, design, testing,
certification, manufacture or marketing by it or such other party (or the
Affiliate(s) of either) in the Territory of any controlled-release product that
incorporates [***], and agrees that it will refrain from entering into any such
agreement or arrangement (other than such confidentiality agreements) for the
term of this Agreement.
3.3 Development Period Obligations. Each party understands and agrees that
the other does not warrant or commit that the Designated Product will be
successfully developed, and neither party shall have any liability or
responsibility to the other or to third parties for any such failure of the
development process hereunder, except to the extent such failure results from
said party's intentional misconduct, gross negligence, or material breach of its
duties or obligations as set forth herein.
3.4 Development Period Schedule and Milestones. During the Development
Period, Penwest and Horizon shall use their commercially reasonable efforts to
perform their respective tasks set forth in the Development Tasks and Success
Criteria contained in Exhibit F hereto (the "Development Tasks") within the
estimated time periods set forth for such tasks therein in order to create and
produce the Designated Product. (The schedule laid out in Exhibit F shall serve
as a general guide for the parties' personnel in pursuing such tasks, but,
except as provided in Section 11.2, strict conformance to such schedule shall
not be an independent criterion of success.) Each party shall bear its own costs
associated with the Development Tasks, except as is otherwise specified in
Exhibit F and Section 3.7. The parties hereby agree to the following:
<PAGE> 10
[***] - CONFIDENTIAL TREATMENT REQUESTED
3.4.1 Within [***] days following the successful completion of
preformulation, formulation, dissolution testing, and biostudy formulation
finalization with respect to the Designated Product, Horizon shall pay
Penwest a non-refundable, non-creditable milestone payment of [***] U.S.
dollars (US$[***]).
3.4.2 Within [***] days following the successful completion of a
proof-of-principal biostudy for the Designated Product, Horizon shall pay
Penwest a non-refundable, non-creditable milestone payment of [***] U.S.
dollars (US$[***]).
3.5 Governmental Requirements. Subject to Section 2.4, in all countries of
the Territory where the Designated Product is being developed, manufactured,
used and/or sold by Horizon, its Affiliates and/or sublicensees, Horizon shall
be responsible for, and hereby agrees to conduct or arrange for, at the expense
of Horizon, substantial compliance with all material and relevant governmental
requirements imposed in the Territory with respect to such development,
manufacture, use, and/or sale.
3.6 Reports by Project Contacts. Each party's Project Contact shall provide
written reports to the other party's Project Contact at least monthly throughout
the Development Period, stating in detail all efforts made and in process, and
all significant progress achieved and difficulties encountered in the
development effort since the last such report. Each party's Project Contact
shall also be available throughout the Development Period to answer any
reasonable questions from the other party's Project Contact. The parties shall
cooperate reasonably during the Development Period such that the sites for
meetings among their respective personnel shall be alternated between the
parties' facilities to the extent practicable.
3.7 Supply of Materials. The price for any Formulated TIMERx purchased by
Horizon from Penwest during the Development Period shall be determined as set
forth in Section 6.2. Penwest shall supply, at its own expense, all TIMERx that
it requires for the conduct of its own Development Period activities hereunder.
Penwest shall manufacture, at its own expense, a clinical batch of the
Designated Product for the first proof-of-principal biostudy. Horizon shall pay
to Penwest [***] U.S. dollars (US$[***]) for each clinical batch of the
Designated Product for any additional proof-of-principal biostudy.
4. Certification Period.
4.1 Filing of NDA. During the Certification Period, Horizon shall be
responsible for the preparation of all documentation necessary for the filing of
an NDA for the Designated Product and shall file such NDA. Each party
understands and agrees that the other does not warrant or commit that the
Designated Product will be successfully certified for marketing by the FDA, and
neither party shall have any liability or responsibility to the other or to
third parties for any such failure of the certification process hereunder,
except to the extent such failure results from said party's intentional
misconduct, gross negligence, or material breach of its duties or obligations as
set forth herein.
<PAGE> 11
[***] - CONFIDENTIAL TREATMENT REQUESTED
4.2 Certification Period Milestones. Horizon agrees to pay Penwest, within
[***] days following the filing by Horizon of an NDA for the Designated Product,
a non-refundable, non-creditable milestone payment of [***] U.S. dollars
(US$[***]).
4.3 Reports by Project Contacts. Horizon's Project Contact shall provide
written reports to Penwest's Project Contact at least quarterly throughout the
Certification Period, stating in reasonable detail all efforts made and in
process, and all significant progress achieved and difficulties encountered in
the certification effort since the last such report. Horizon's Project Contact
also shall be available throughout the Certification Period to answer any
reasonable questions from Penwest's Project Contact.
4.4 Supply of Materials. During the Certification Period, Horizon shall
provide, at its own expense, all [***] and other materials and manufacturing and
testing services reasonably required to support the testing and certification
effort. Horizon shall purchase from Penwest, in accordance with the terms set
forth in Section 6.2, all Formulated TIMERx that Horizon requires for the
conduct of Horizon's Certification Period activities hereunder. Penwest shall
supply, at its own expense, all TIMERx that it requires for the conduct of its
own Certification Period activities hereunder.
5. Marketing Period.
5.1 Term of Marketing Period. The Marketing Period shall extend from the
Approval Date until fifteen (15) years thereafter, unless this Agreement is
terminated earlier pursuant to Article 11. The Marketing Period may be renewed
by agreement of the parties for one (1) or more additional terms of five (5)
years each, provided that such agreement is reached at least one hundred eighty
(180) days prior to the expiration of this Agreement or any such additional
term.
5.2 Reasonable Commercial Efforts by Horizon. Subject to the granting of
all necessary governmental approvals or concurrences to sell the Designated
Product, Horizon hereby agrees to market, promote and sell the Designated
Product throughout the Territory. Each party understands and agrees that the
other does not warrant or commit that the Designated Product will be
successfully marketed, and neither party shall have any liability or
responsibility to the other or to third parties for any such failure of the
development process hereunder, except to the extent such failure results from
said party's intentional misconduct, gross negligence, or material breach of its
duties or obligations as set forth herein.
5.3 Amount of Royalties. Horizon hereby agrees to pay to Penwest royalties
on Net Sales made during the Marketing Period ("Royalties"), as follows:
<PAGE> 12
[***] - CONFIDENTIAL TREATMENT REQUESTED
5.3.1 [***] of Net Sales on all Net Sales until cumulative Net Sales
of [***] U.S. dollars (US$[***]) have been attained;
5.3.2 [***] of Net Sales on all Net Sales after cumulative Net Sales
of [***] U.S. dollars (US$[***]) have been attained until cumulative Net
Sales of [***] US. dollars (US$[***]) have been attained; and
5.3.3 [***] of Net Sales on all Net Sales after Net Sales of [***]
U.S. dollars (US$[***]) have been attained.
Such Royalties shall be reduced by [***] (e.g. a [***] Royalty would become a
[***] Royalty) with respect to Net Sales of a Designated Product as to which (a)
no license to Penwest Patents or to patent applications or patents included in
the Joint Developments or TIMERx Improvements hereunder is applicable to the
manufacture, sale or use of such Designated Product, or (b) a license to a
patent application included in the Penwest Patents, Joint Developments or TIMERx
Improvements is applicable to the manufacture, sale or use of such Designated
Product, but no patent has yet issued thereon; provided, however, that, with
respect to Section 5.3.3(b), (i) as of the date of issue of any such patent, the
unreduced Royalty shall become payable on all subsequent Net Sales of such
Designated Product and (ii) within ten (10) days following such date, Horizon
shall pay to Penwest an amount equal to the unreduced Royalty that would have
been payable on Net Sales of such Designated Product up until such date less the
total amount of Royalties already paid on such sales.
5.4 Payment of Royalties. All Royalties payable pursuant to this Agreement
shall be due quarterly within sixty (60) days following the end of each calendar
quarter for Net Sales in such calendar quarter. Each such payment shall be
accompanied by a statement of Net Sales for the quarter and the calculation of
Royalties payable hereunder. All Royalties and all other amounts which are
overdue under this Agreement shall bear interest at the rate of one and one-half
percent (11/2%) per month from the date due through the date of payment. Horizon
shall keep and shall cause its Affiliates and its and their sublicensees to keep
complete, true and accurate records for the purpose of showing the derivation of
all Royalties payable to Penwest under this Agreement. Penwest's duly accredited
representatives (which representatives are approved for such purpose by Horizon,
which approval shall not be unreasonably withheld nor shall it be revocable by
Horizon following the start of any inspection hereunder) shall have the right to
inspect, copy, and audit such records at any time during reasonable business
hours upon reasonable prior notice to Horizon or any of its Affiliates or
sublicensees, respectively, but such right shall not be exercised more often
than once annually (it being understood that a single exercise of such right may
include a series of related or continuing inspections, copying and audits). Any
such audit shall be at the expense of Penwest, unless the audit reveals that,
with respect to the period under audit, less than ninety-five percent (95%) of
the Royalties due to Penwest hereunder have been reported, in which event
Horizon shall pay or reimburse Penwest for the reasonable expenses of such
audit, in addition to Penwest's other remedies for such underpayment. In the
event that any such audit reveals that, with respect to the period under audit,
Horizon has paid to Penwest Royalties in excess of those due hereunder, Horizon
shall be entitled to offset the full amount of such excess payment against
future Royalties due to Penwest.
<PAGE> 13
[***] - CONFIDENTIAL TREATMENT REQUESTED
5.5 Marketing Period Milestones. Horizon also agrees to pay Penwest the
following non-refundable, non-creditable milestone payments:
5.5.1 within [***] days following the first commercial sale of the
Designated Product, [***] U.S. dollars (US$[***]); and
5.5.2 [***] following the first commercial sale of the Designated
Product, [***] U.S. dollars (US$[***]).
5.6 Form of Payment. All monies due hereunder shall be paid in United
States Dollars to Penwest in Patterson, New York, USA. Said payment may be made
at Horizon's option by check or wire transfer.
6. Supply of Formulated TIMERx.
6.1 Supply and Requirements of Formulated TIMERx. During the term of this
Agreement, Penwest shall supply Horizon and its Affiliates and sublicensees, in
accordance with the terms set forth in Section 6.2, with sufficient quantities
of Formulated TIMERx to meet their reasonable requirements for TIMERx, and
Horizon shall purchase, all of its requirements, and shall ensure that its
Affiliates and sublicensees purchase all of their requirements, for
controlled-release agents for [***] products that are essentially equivalent to
the Designated Product in the form of Formulated TIMERx from Penwest.
6.2 Price of TIMERx. The price for all Formulated TIMERx sold hereunder
shall equal the Unit Price multiplied by the number of kilograms of Formulated
TIMERx purchased; provided, however, that the price for the first [***]
kilograms of Formulated TIMERx sold during the Development Period and/or the
Certification Period shall be [***] U.S. dollars (US$[***]) multiplied by the
number of kilograms of Formulated TIMERx purchased. All sales of Formulated
TIMERx hereunder shall be F.O.B. Patterson, New York, and Horizon shall bear all
transportation, insurance, taxes, duties, and other costs and risks of loss,
spoilage and damage associated with the shipping and delivery of Formulated
TIMERx to Horizon or its Affiliates or sublicensees. Horizon shall pay for all
Formulated TIMERx purchased from Penwest hereunder within thirty (30) days after
receipt by Horizon or any of its Affiliates or sublicensees of an invoice and
the Formulated TIMERx shipped by Penwest.
6.3 Changes to Penwest DMF. Penwest warrants that it will not change or
modify its DMF, the Specifications, or its method of manufacture for Formulated
TIMERx without prior written consent from Horizon, which consent shall not be
unreasonably withheld.
6.4 Quality Control. Penwest shall perform quality control tests with
respect to each lot or batch of Formulated TIMERx as required by the FDA as set
forth in the DMF, such testing to be at the expense of (a) Penwest to the extent
such testing pertains to TIMERx or Formulated TIMERx and (b) Horizon to the
extent such testing pertains to [***]. In addition, Penwest may perform such
<PAGE> 14
[***] - CONFIDENTIAL TREATMENT REQUESTED
other tests as Penwest deems necessary in accordance with its applicable
policies. No other or special tests by Penwest with respect to the raw materials
or Formulated TIMERx will be required during the License Term, unless and to the
extent that Horizon establishes that any such other or special tests are
required in order to obtain or maintain FDA approval to market the Designated
Product in the Territory, in which case any such other or special tests that are
to be performed by Penwest shall be agreed to by Penwest, such testing to be at
the expense of (a) Penwest to the extent such testing pertains to TIMERx or
Formulated TIMERx and (b) Horizon to the extent such testing pertains to [***].
Penwest shall, promptly upon completion of any such other or special tests,
deliver to Horizon a copy of the results of such other or special tests. Each
shipment of the Formulated TIMERx shall:
6.4.1 be accompanied by a Certificate of Analysis and a Certificate of
Origin;
6.4.2 meet all present applicable FDA requirements and the
Specifications; and
6.4.3 be manufactured, packaged, stored and shipped in conformance
with the Specifications and current Good Manufacturing Practices or other
relevant regulations and requirements promulgated by the FDA and applicable
to Formulated TIMERx.
6.5 Non-Acceptance of Formulated TIMERx by Horizon. Within a reasonable
period but not more than thirty (30) days after receipt, Horizon shall analyze
each shipment of the Formulated TIMERx. If Horizon considers any such shipment
not to conform to the Specifications, Horizon shall notify Penwest immediately
and provide Penwest with the relevant analysis. If Penwest does not agree, the
parties shall submit such disagreement to the arbitration of one mutually
accepted neutral analytical laboratory. The cost of the neutral analytical
laboratory shall be borne by the party whose testing results are determined to
have been in error. If Penwest or the neutral analytical laboratory agrees with
Horizon, Penwest shall not have any obligation to Horizon other than to
accomplish the following:
i) at its own expense accept return of any shipment not accepted or
reimburse Horizon for the cost of disposal or destruction, at
Horizon's option; and
ii) use commercially reasonable efforts to replace the non-conforming
shipment with conforming Formulated TIMERx.
6.6 Horizon Access to Penwest Facilities. Horizon shall have the right to
enter into Penwest's manufacturing facilities and the manufacturing facilities
of its Affiliates and sublicensees, of any, at times agreed by the parties
and/or to take other appropriate methods to check the quality of the Formulated
TIMERx manufactured or offered by Penwest and its Affiliates and sublicensees,
of any, from time to time during the term of this Agreement after reasonable
prior notice to Penwest and its Affiliates and sublicensees, if any.
<PAGE> 15
6.7 Forecasting of Orders by Horizon. Throughout the term of this
Agreement, Horizon shall deliver to Penwest, and shall ensure that its
Affiliates and sublicensees, if any, deliver to Penwest, a firm written order
stating their requirements for Formulated TIMERx for each calendar quarter to be
used for production of the Designated Product for commercial use or sale (a
"Firm Order") no less than ninety (90) days in advance of each required delivery
date during such calendar quarter (each a "Firm Order Quarter"). Horizon shall
be responsible for purchasing from Penwest one hundred percent (100%) of the
quantity of Formulated TIMERx specified in each such Firm Order. The first Firm
Order shall be submitted immediately following the reasonable determination by
Horizon that the NDA for the Designated Product will be approved by the FDA and
shall be accompanied by a written, non-binding estimate of Horizon's
requirements for Formulated TIMERx to be used for production of the Designated
Product for commercial use or sale (an "Estimated Order") during the next three
(3) calendar quarters following the first Firm Order Quarter. On or before the
first day of (a) the calendar quarter following the first Firm Order Quarter and
(b) each Firm Order Quarter thereafter, Horizon shall deliver to Penwest an
Estimated Order covering the three (3) calendar quarters following each such
Firm Order Quarter.
6.8 Adherence to Estimated Orders. Unless the parties otherwise agree in
writing, Penwest shall not be obligated to supply Horizon with quantities of
Formulated TIMERx during any calendar quarter in excess of one hundred forty
percent (140%) of the quantity estimated in Horizon's most recent Estimated
Order applicable to that quarter. Horizon shall be responsible for purchasing
from Penwest in each calendar quarter at least seventy-five percent (75%) of the
quantity estimated in Horizon's most recent Estimated Order applicable to that
quarter.
6.9 Product Safety; Government Inspections. Each party shall promptly
notify the other of any fact, circumstance, condition or knowledge dealing with
TIMERx, Formulated TIMERx or the Designated Product of which the party becomes
aware that bears upon the safety or efficacy of TIMERx, Formulated TIMERx or the
Designated Product. Each party shall immediately notify the other of any
inspection or audit relating to TIMERx, Formulated TIMERx or the Designated
Product by any governmental regulatory authority in the Territory. If a
representative of the governmental authority takes samples in connection with
such audit or inspection, the parties shall immediately provide each other, as
appropriate, with samples from the same batch. The party in receipt of such
notice shall provide the other party, within seventy-two (72) hours, with copies
of all relevant documents, including but not limited to FDA Forms 482, 483,
warning letters and other correspondence and notifications as such other party
may reasonably request. Penwest and Horizon agree to cooperate with each other
during any inspection, investigation or other inquiry by the FDA or other
governmental entity, including but not limited to providing information and/or
documentation, as requested by the FDA or other governmental entity. To the
extent permissible, Penwest and Horizon also agree to discuss any responses to
observations or notifications received and to give the other party an
opportunity to comment on any proposed response before it is made. In the event
of disagreement concerning the content or form of such response, Horizon shall
be responsible for deciding the appropriate form and content of any response
with respect to any of its cited activities and Penwest shall be responsible for
deciding the appropriate form and content of any response with respect to any of
<PAGE> 16
its cited activities. Each party shall inform the other of all comments
and conclusions received from the governmental authority.
6.10 Packaging of Designated Product; Use of Penwest Trademark(s). Horizon
shall manufacture and package the Designated Product in accordance with all
applicable laws and regulations in the Territory. Provided that the Penwest
Trademark(s) remain registered in the Territory, and that Penwest undertakes
reasonable efforts to protect and defend the same in the Territory, Horizon
agrees, upon and only upon Penwest's request, to market the Designated Product
in the Territory in conjunction with the appropriate Penwest Trademark(s). In
the event that Penwest so requests, the parties agree to the following:
6.10.1 Horizon acknowledges that all Penwest Trademark(s) and all
rights therein or registrations thereof, worldwide, shall belong
exclusively to Penwest, and Penwest shall use all reasonable efforts to
obtain and maintain registrations for the Penwest Trademark(s) in the
Territory. All use of the Penwest Trademark(s) as contemplated in this
Agreement by Horizon shall accrue to the benefit of Penwest. Neither
Horizon nor its Affiliates or sublicensees shall (a) make use of any of the
Penwest Trademark(s) except to identify and promote the Designated Product
as contemplated hereunder for sale in the Territory, or (b) continue using
the Penwest Trademark(s) after termination or expiration of this Agreement,
nor after the removal or alteration of any such Penwest Trademark(s) from
Exhibit D, except to complete sale of reasonable quantities of inventory of
the Designated Product on hand at the time of termination or expiration, or
at the time of such removal or alteration.
6.10.2 Horizon shall cooperate with Penwest, at Penwest's request and
at Penwest's expense, to protect the interest of Penwest in the Penwest
Trademark(s), and shall neither attempt to register nor authorize others to
register the Penwest Trademark(s) without the prior written consent of
Penwest in each instance.
6.10.3 Horizon shall use, and shall ensure that its Affiliates and
sublicensees, if any, use, all appropriate notices of trademark status of
the Penwest Trademark(s), including the "(tm)" designation (or the (r)
symbol for registered marks), in all labeling and promotional materials and
shall otherwise conform with, and shall ensure that its Affiliates and
sublicensees, if any, conform with, all policies and notices of Penwest's
rights in the Penwest Trademark(s) and for the protection of the Penwest
Trademark(s), including without limitation the inclusion of an appropriate
footnote acknowledging the use of the Penwest Trademark(s) under license.
6.10.4 Representative samples of the Designated Product and any
advertising, promotional materials or packaging related thereto shall be
provided by Horizon to Penwest, at Horizon's expense, at least thirty (30)
days prior to the first use or sale thereof, quarterly thereafter and at
other times upon the reasonable written request of Penwest. So long as
Horizon is using the Penwest Trademark(s) in the Territory, Penwest shall
have the right to enter into Horizon's manufacturing facilities and the
manufacturing facilities of its Affiliates and sublicensees, if any, at
<PAGE> 17
times agreed by the parties and/or to take other appropriate methods to
check the quality of the Designated Product manufactured or offered by
Horizon and its Affiliates and sublicensees, if any, from time to time
during the term of this Agreement after reasonable prior notice to Horizon
and its Affiliates and sublicensees, if any. If at any time or times
Penwest determines that the quality of the Designated Product manufactured
or offered by Horizon and its Affiliates and sublicensees, if any, or the
packaging or promotional materials therefor, does not comply with Penwest
standards as communicated in writing from time to time to Horizon and its
Affiliates and sublicensees, if any, Penwest (a) shall so notify Horizon
and its Affiliates and sublicensees, if any, in writing and (b) if Horizon
and/or its Affiliates and sublicensees, as the case may be, has not cured
such non-compliance within sixty (60) days following such notice, shall
have the right (as its only remedy as to trademark matters) to suspend or
prohibit the use of the Penwest Trademark(s), immediately upon written
notice to Horizon and its Affiliates and sublicensees; provided, however,
that Penwest need not give such opportunity to cure any non-compliance that
has been the subject of more than two such notices on prior occasions
during the preceding twelve (12) months.
7. Ownership of Technology and Intellectual Property.
7.1 Ownership of Intellectual Property. Horizon agrees to assign and ensure
that each of its Affiliates and sublicensees, if applicable, assigns its rights
in and to any and all TIMERx Improvements to Penwest. All right, title, and
interest in and to any and all Joint Developments shall be owned jointly by
Horizon and Penwest, and, except as specifically provided in this Agreement,
each party shall have the full right to practice and license such Joint
Developments, without obligation to obtain the approval of or to make payment of
any kind to the other party in respect thereof. Horizon shall have the right to
obtain, at its sole expense, and shall solely own any trademarks relating to the
Designated Product, subject to the approval of Penwest, which approval shall not
be unreasonably withheld. Neither party makes any grant of rights by
implication.
7.2 Prosecution and Maintenance of Intellectual Property. Penwest shall be
responsible for the filing and prosecution of any and all patent applications
with respect, in whole or in part, to its own intellectual property and for the
maintenance of any available patent protection with respect thereto; provided,
however, that Penwest does not represent that any such patent protection will be
available or continuous hereunder.
7.3 Marking of Patented Products. Horizon agrees to mark and to have marked
by its Affiliates and sublicensees (if any) every Designated Product
manufactured, used or sold by it or its Affiliates or sublicensees in the
Territory, in accordance with the laws of the United States relating to the
marking of patented articles with notices of patent.
8. Confidentiality
8.1 Non-Disclosure of Confidential Information. In the course of
<PAGE> 18
performance under this Agreement, a party may disclose to the other Confidential
Information belonging to such party in writing, orally or by demonstration or
sample, which information is marked or stated in writing at or within thirty
(30) days after its disclosure to be "confidential" or "trade secret"
information. All such Confidential Information of a party shall be maintained in
confidence by the other and shall not be used by the other party for any purpose
except as authorized hereunder. Each party shall exercise, and shall cause its
Affiliates, sublicensees, consultants, agents and employees to exercise, a
reasonable degree of care and at least the same degree of care as it uses to
protect its own confidential information of similar nature to preserve the
confidentiality of such information of the other party. Each party shall
safeguard such information against disclosure to third parties, including
without limitation employees and persons working or consulting for such party
that do not have an established, current need to know such information for
purposes authorized under this Agreement. This obligation of confidentiality
does not apply to information and material that:
8.1.1 were properly in the possession of the receiving party, without
any restriction on use or disclosure, prior to receipt from the other
party;
8.1.2 are at the time of disclosure hereunder in the public domain by
public use, publication, or general knowledge;
8.1.3 become general or public knowledge through no fault of the
receiving party or its Affiliates or sublicensees following disclosure
hereunder;
8.1.4 are properly obtained by the receiving party from a third party
not under a confidentiality obligation to the disclosing party hereto;
8.1.5 consist merely of an idea or conception for the combination of
one or more active drug ingredients with a controlled-release agent such as
TIMERx; or
8.1.6 are required to be disclosed by order of any court or
governmental authority.
8.2 Non-Disclosure of Terms of or Work Under Agreement. Neither party shall
make any disclosure, public announcement or other publication regarding this
Agreement (whether as to the existence, conditions or terms thereof) or the
development work or projects performed hereunder or the results thereof,
including but not limited to the results of any clinical trial involving the
Designated Product, without the prior, written consent of the other party, which
consent shall not be unreasonably withheld; provided, however, that either party
may disclose the terms and conditions of this Agreement (a) as required, in the
opinion of counsel to the disclosing party, by any court, administrative agency,
or other governmental body, after making all reasonable efforts to protect the
confidentiality thereof and providing notice to the disclosing party, (b) as
otherwise required by law, (c) in confidence, to legal counsel, accountants,
banks, and financing sources and their advisors, (d) in confidence, in
connection with the enforcement of this Agreement or rights under this
<PAGE> 19
Agreement, or (e) in confidence, in connection with a merger or acquisition or
proposed merger or proposed acquisition. Each party shall ensure that its
Affiliates, sublicensees, consultants, agents and employees comply with the
provisions of this Section 8.2.
9. Infringement.
9.1 Notice and Prevention of Infringement. Penwest shall (a) promptly
inform Horizon of any suspected infringement of any of the Penwest Patents or
Penwest Trademark(s) or the infringement or misappropriation of any of the
Penwest Technology, the Joint Developments or TIMERx Improvements by a third
party, to the extent such infringement involves the manufacture, use or sale of
the Designated Product in the Territory ("Covered Infringement") and (b)
consistent with its policies as to its TIMERx patent and trade secret portfolio
generally, exert reasonable efforts to monitor and to attempt to stop any
Covered Infringement. Horizon shall promptly inform Penwest of any suspected
infringement of any of the Penwest Patents or Penwest Trademark(s) or
infringement or misappropriation of any of the Penwest Technology, the Joint
Developments or TIMERx Improvements, whether or not the same involves a Covered
Infringement.
9.2 Penwest Action Against Infringers. If the suspected infringement or
misappropriation does not involve a Covered Infringement, Penwest may take, or
refrain from taking, any action it chooses, with written notice to Horizon, and
Horizon shall have no right to take any action with respect to such suspected
infringement or misappropriation, nor to any recoveries with respect thereto. If
the suspected infringement or misappropriation involves a Covered Infringement,
Penwest shall, within thirty (30) days of the first notice referred to in
Section 9.1, inform Horizon whether or not Penwest intends to institute suit
against such third party with respect to a Covered Infringement. Horizon shall
not take any steps toward instituting suit against any third party involving a
Covered Infringement until Penwest has informed Horizon of its intention
pursuant to the previous sentence, and then only in accordance with the terms
set forth in Sections 9.2.2 and 9.3.
9.2.1 If Penwest notifies Horizon that it intends to institute suit
against a third party with respect to a Covered Infringement, and Horizon
does not agree to join in such suit as provided in Section 9.2.2, Penwest
may bring such suit on its own and shall in such event bear all costs of,
and shall exercise all control over, such suit Horizon agrees to, at its
expense, provide any assistance to and cooperate as reasonably necessary
with Penwest to institute and/or maintain any such suit with respect to any
Covered Infringement. Recoveries, if any, whether by judgment, award,
decree or settlement, shall belong solely to Penwest.
9.2.2 If Penwest notifies Horizon that it intends to institute suit
against such third party with respect to a Covered Infringement, and
Horizon notifies Penwest within thirty (30) days after receipt of such
notice that Horizon desires to institute suit jointly, the suit shall be
brought jointly in the names of both parties and all costs thereof shall be
<PAGE> 20
borne equally. Recoveries, if any, whether by judgment, award, decree or
settlement, shall, after the reimbursement of each of Penwest and Horizon
for its share of the joint costs in such action, be shared between Penwest
and Horizon equally; provided, however, that any portion of such net
recoveries that constitutes the equivalent of, or damages or payments in
lieu of, defendant's net sales shall not be shared equally, but shall
belong to Horizon and be added to Horizon's Net Sales for the purpose of
determining Royalties payable to Penwest.
10. Representations, Warranties and Indemnities.
10.1 Authority to Enter into Agreement; Validity of Patents; Debarment.
Each party represents and warrants to the other that, to the best of its current
knowledge, it has the full right and authority to enter into this Agreement and
to grant the licenses granted herein. Each party believes, to the best of its
current knowledge, that any existing patents licensed by it to the other party
under this Agreement are valid. Each party represents and warrants to the other
that neither it nor any of its officers, directors, or employees performing
services under this Agreement has been debarred, or convicted of a crime which
could lead to debarment, under the Generic Drug Enforcement Act of 1992, 21
United States Code 306(a) and (b). In the event that either party, or any of its
officers, directors, or employees performing services under this Agreement, (a)
becomes debarred or receives notice of action or threat of action with respect
to its debarment or (b) becomes the object of any investigation or subject of
any report regarding such party, or any of its officers, directors, or employees
performing services under this Agreement, in connection with any activity that
could result in debarment or suspension or refusal of approval, including
without limitation any inspection report, warning letter, notice of opportunity
for hearing in a case of debarment, or any other Justice Department, FDA or
other federal or state government inquiry or action bearing on potentially
illegal activities, such party shall notify the other party immediately.
10.2 Penwest Warranties to TIMERx. Penwest represents and warrants that any
Formulated TIMERx supplied by it to Horizon hereunder for use in the Designated
Product, at the point of delivery (a) has been manufactured in accordance with
cGMP, (b) will conform to the Specifications, and (c) to the best of Penwest's
current knowledge, will not infringe upon an article patent of any third party.
PENWEST MAKES NO REPRESENTATIONS OR WARRANTIES AS TO ANY TIMERx OR FORMULATED
TIMERx SUPPLIED BY IT TO HORIZON EXCEPT AS ARE EXPLICITLY STATED HEREIN.
10.3 Government Licenses, Permits and Authorizations. Each party represents
and warrants to the other party that it has obtained and will at all times
during the term of this Agreement, hold and comply with all licenses, permits
and authorizations necessary to perform this Agreement and to test, manufacture,
market, export, and import the products and assistance to be provided by it
hereunder, as now or hereafter required under any applicable statutes, laws,
ordinances, rules and regulations of the United States and any applicable
foreign, state, and local governments and governmental entities.
<PAGE> 21
10.4 Government Regulatory Requirements. Horizon warrants that any
Designated Product manufactured, marketed or distributed by Horizon or its
Affiliates or sublicensees shall meet and be manufactured, packaged, labeled,
sold, and promoted in accordance with all applicable regulatory requirements
within the Territory.
10.5 Indemnification by Penwest Against Infringement Claims. Penwest shall
indemnify, defend and hold Horizon and its Affiliates and sublicensees harmless
from any claim, action or damages arising out of any alleged infringement by
reason of the manufacture, use, sale or distribution by Horizon of the
Designated Product to the extent such infringement would apply as well to the
manufacture, sale or distribution of TIMERx alone. If Horizon or its Affiliate
or sublicensee, by reason of its manufacture, sale or distribution of the
Designated Product, is accused of infringing the patent of a third party, and
such claim of infringement, as framed by the claimant, would apply as well to
the manufacture, sale or distribution of TIMERx alone, Horizon shall immediately
so notify Penwest and provide Penwest with all available information, and the
parties shall consult reasonably as to the proper course of action. If Penwest
and Horizon jointly determine that such claim is likely to prevail, or if an
arbitrator hereunder or a court of competent jurisdiction so determines, Horizon
shall be entitled to offset against any Royalties payable to Penwest hereunder
the full amount of any third party royalties for which Horizon or its Affiliate
or sublicensee becomes liable. For any given year following the Approval Date,
such offset shall not reduce the Royalties payable to Penwest to less than (a)
if such Royalties have not been reduced pursuant to Section 5.3, fifty percent
(50%) of the Royalty amount otherwise due Penwest absent such offset, or (b) if
such Royalties have been reduced pursuant to Section 5.3, twenty-five percent
(25%), of the Royalty amount otherwise due Penwest absent such offset and
reduction; provided, however, that Horizon may carry forward any unutilized
portion of such offset to future years.
10.6 Indemnification by Penwest Against Other Third Party Claims. Penwest
shall indemnify, defend and hold Horizon and its Affiliates and sublicensees
harmless from any and all third-party claims (other than infringement claims) to
the extent arising from, in connection with, based upon, by reason of, or
relating in any way to:
10.6.1 Penwest's contributions to the formulation or development of
the Formulated TIMERx and the Specifications therefor hereunder;
10.6.2 any failure of the Formulated TMERx supplied by Penwest to
Horizon hereunder for use in the Designated Product to conform to the
Specifications; or
10.6.3 any failure of Penwest to comply with its obligation under
Section 6.9 to notify Horizon of any information coming into Penwest's
possession and bearing on the safety of TIMERx or the Designated Product;
and, with respect to Sections 10.6.1, 10.6.2 and 10.6.3, not arising from any
other aspect of the Designated Product or its formulation, development, supply,
<PAGE> 22
production, manufacture, sale, delivery, distribution or use, or from any act or
omission of Horizon with respect to the Formulated TIMERx following its delivery
to Horizon hereunder.
10.7 Indemnification by Horizon Against Other Third Party Claims. Horizon
shall indemnify, defend and hold Penwest harmless from any and all third-party
claims to the extent arising from, in connection with, based upon, by reason of,
or relating in any way to, the formulation, development, supply, production,
manufacture, sale, delivery, distribution or use of the Designated Product,
except for any matters which are covered by Penwest's indemnities under Sections
10.5 and 10.6.
10.8 Indemnification by Horizon Against Infringement Claims. Horizon shall
indemnify, defend and hold Penwest harmless from and against any patent claims
or litigation (and all damages and expenses associated therewith, including
without limitation reasonable attorneys fees and other costs of defense and of
the preparation of a defense, at all stages of proceedings) based on any feature
of the Designated Product or its formulation, independent of the TIMERx
component by itself. Penwest shall cooperate and assist Horizon reasonably with
the defense of any such claims or litigation. It is understood that neither
Horizon nor Penwest shall have the right to force the other into any settlement
or compromise of any such litigation, nor to dictate the terms thereof.
10.9 Indemnification Disclaimer. Notwithstanding anything to the contrary
set forth elsewhere herein, neither Horizon nor Penwest shall be obligated to
indemnify the other party for claims or liabilities to the extent arising from
such other party's, or its Affiliates', sublicensees' or assigns', gross
negligence, intentional misconduct, or material breach of its duties,
obligations, warranties or representations set forth herein.
10.10 Indemnified Parties; Notice and Defense of Third Party Claims.
Whenever indemnification is provided for a party under this Agreement with
respect to any claim or action, such right of indemnification shall extend also
to the indemnified party's Affiliates, officers, directors, shareholders,
successors, assigns, agents, employees, and insurers to the extent the same
become subject to such claim or action in such capacity. The party seeking
indemnification shall provide the indemnifying party with written notice of such
claim or action within ten (10) days of its receipt thereof and shall afford the
indemnifying party the right to control the defense and settlement of such claim
or action. The party seeking indemnification shall provide reasonable assistance
to the indemnifying party in the defense of such claim or action. If the
defendants in any such action include both Horizon and Penwest and either party
concludes that there may be legal defenses available to it which are different
from, additional to, or inconsistent with, those available to the other, that
party shall have the right to select separate counsel to participate in the
defense of such action on its behalf, and such party shall thereafter bear the
cost and expense of such separate defense. Should the indemnifying party
determine not to defend such claim or action, the other party shall have the
right to maintain the defense of such claim or action and the indemnifying party
agrees to provide reasonable assistance to it in the defense of such claim or
action. Neither party to this Agreement shall settle or defend such claim or
action in a way that prejudices or adversely affects the other party to this
<PAGE> 23
Agreement without the prior approval of such other party (which approval shall
not be unreasonably withheld).
10.11 Disputes Concerning Indemnification. Any dispute concerning
indemnification shall be determined by arbitration in accordance with Section
12.10 of this Agreement.
10.12 LIMITATION OF WARRANTIES. THE FOREGOING WARRANTIES ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS, IMPLIED OR ARISING BY LAW, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
REPRESENTATION OR WARRANTY (A) BY PENWEST AS TO THE PATENTABILITY, VALIDITY
(EXCEPT AS STATED IN SECTION 10.1), OR SCOPE OF ANY PENWEST PATENTS, PENWEST
TECHNOLOGY, PENWEST'S CONFIDENTIAL INFORMATION, JOINT DEVELOPMENTS, OR PENWEST
TEST AND REGULATORY DATA; OR (B) BY HORIZON AS TO THE PATENTABILITY, VALIDITY
(EXCEPT AS STATED IN SECTION 10.1), OR SCOPE OF ANY TIMERX IMPROVEMENTS, JOINT
DEVELOPMENTS, OR HORIZON TEST AND REGULATORY DATA.
10.13 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, NEITHER PARTY SHALL UNDER ANY CIRCUMSTANCES BE LIABLE FOR ANY
THIRD PARTY CLAIMS (OTHER THAN THE INDEMNIFICATIONS STATED IN THIS ARTICLE 10)
OR FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES INCLUDING ANY
LOST PROFITS OR SAVINGS, ARISING FROM ANY BREACH OF WARRANTY OR THE PERFORMANCE
OR BREACH OF ANY OTHER PROVISION OF THIS AGREEMENT OR THE USE OR INABILITY TO
USE TIMERx, FORMULATED TIMERx, THE DESIGNATED PRODUCT, PENWEST PATENTS, PENWEST
TECHNOLOGY, PENWEST'S CONFIDENTIAL INFORMATION, JOINT DEVELOPMENTS, PENWEST TEST
AND REGULATORY DATA, TIMERX IMPROVEMENTS, OR HORIZON TEST AND REGULATORY DATA,
EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
<PAGE> 24
[***] - CONFIDENTIAL TREATMENT REQUESTED
10.14 Insurance Coverage. Each party shall, at its own cost and expense,
obtain and maintain from a qualified insurance company comprehensive general
liability and products liability insurance coverage during the term of this
Agreement (and any subsequent period of sale or distribution pursuant to Section
11.6). Such insurance shall be in an amount no less than [***] U.S. dollars
(US$[***]) combined single limit for each occurrence for bodily injury and/or
property damage. Each party agrees to provide the other party with a certificate
of insurance evidencing such insurance within thirty (30) days after the
Effective Date and again thereafter from time to time as reasonably requested by
such other party.
11. Term and Termination.
11.1 Term. The term of this Agreement shall begin on the Effective Date and
shall, unless extended or earlier terminated as provided herein, continue until
fifteen (15) years following the Approval Date.
11.2 Termination by Penwest. Penwest may at its option terminate this
Agreement upon thirty (30) days' prior written notice to Horizon if:
11.2.1 Horizon fails to:
11.2.1.1 file an IND for the Designated Product within [***]
following the Effective Date, unless Horizon's failure to do so is
attributable to Penwest;
11.2.1.2 initiate a program of clinical trials for the Designated
Product within [***] following successful completion of
preformulation, formulation, dissolution testing and biostudy
formulation finalization with respect to the Designated Product,
unless Horizon's failure to do so is attributable to Penwest; 11.2.1.3
complete a program of clinical trials for the Designated Product
within [***] following the initiation of such program, unless
Horizon's failure to do so is attributable to Penwest;
11.2.1.4 file an NDA for the Designated Product within [***]
following the successful completion of a program of clinical trials
for the Designated Product, unless Horizon's failure to do so is
attributable to Penwest; or
11.2.1.5 commercially launch the Designated Product within [***]
following approval by the FDA of an NDA for the Designated Product,
unless Horizon's failure to do so is attributable to Penwest.; or
11.2.2 Horizon fails to meet the relevant Minimum Sales, as specified
in Exhibit G, for any two (2) consecutive years following the Approval
Date, unless (a) the sum of the Minimum Sales for all years since the
Approval Date less the sum of Horizon's Net Sales for such years (the
"Sales Differential") is equal to or less than zero, or (b) if the Sales
Differential is greater than zero Horizon makes, within such thirty (30)
day period, an additional payment to Penwest equal to the product of (i)
<PAGE> 25
[***] - CONFIDENTIAL TREATMENT REQUESTED
the Sales Differential and (ii) the applicable royalty percentage set forth
in Section 5.3.
11.3 Termination by Horizon. Horizon shall have the right, at its option,
to terminate this Agreement:
11.3.1 at any time prior to the first anniversary of the Effective
Date upon ninety (90) days' prior notice to Penwest, if Horizon, despite
its commercially reasonable efforts, expects to be unable to meet the
Minimum Sales specified in Exhibit G for the first year following the
Approval Date; provided, however, that Horizon shall pay Penwest an early
termination fee of [***] U.S. dollars (US$[***]) at the time of any
exercise of Horizon's option to terminate for this reason; or
11.3.2 upon ninety (90) days' prior written notice to Penwest, if
Horizon fails to meet the relevant Minimum Sales, as specified in Exhibit
G, for any two (2) consecutive years following the Approval Date.
11.4 Extension of Licenses. Following any expiration or termination of this
Agreement, other than due to an uncured breach on the part of Penwest (but
subject to Section 11.8), Penwest may request that the license to Penwest under
Section 2.2.2 be extended to include (in addition to their coverage as stated in
such section) making, using and selling the Designated Product in the Territory
and the use of Horizon Test and Regulatory Data for purposes of complying with
governmental requirements with respect to the Designated Product for marketing
or use in the Territory, and otherwise continue to be governed by the terms
stated in such section. In the event of such a request by Penwest, Horizon
agrees to enter into good faith negotiations with Penwest concerning a
reasonable payment to be made by Penwest to Horizon in consideration of such an
extension.
11.5 Termination Due to Breach. In the event that either party materially
breaches any of the terms, conditions or agreements contained in this Agreement
to be kept, observed or performed by it, then the other party may terminate this
Agreement, at its option, by giving the party who committed the breach (a) in
the case of breach of obligations other than the payment of money, ninety (90)
days' notice in writing, unless the notified party within such ninety (90) day
period shall have cured the breach, and (b) in the case of breach of an
obligation for the payment of money, thirty (30) days' notice in writing, unless
the notified party within such thirty (30) day period shall have cured the
breach, including any required payment of interest on previously unpaid amounts
as set forth herein; provided, however, that:
11.5.1 no termination of this Agreement under this Section 11.5 shall
become effective during the pendency of a good faith dispute between the
parties as to the existence of grounds for such a termination, provided
that the parties are complying with the process in Section 12.10 in good
faith in order to resolve such dispute, and that such termination shall
<PAGE> 26
become effective immediately upon any binding determination that such
grounds did exist at the time the notice of termination was given; and
11.5.2 if a notice of termination is given pursuant to this Section
11.5 and it is subsequently determined that grounds for such a notice did
not exist, the giving of such notice shall not itself constitute a
repudiation or default under this Agreement, so long as such notice was
given in the good faith belief that such grounds did exist.
No termination of this Agreement under this Section 11.5 shall impair either
party's right to seek other legal or equitable rights or remedies.
11.6 Deletion of Inventory Following Termination. In the event of any
expiration or termination of this Agreement, Horizon shall be entitled to sell
and distribute reasonable inventories of Designated Product remaining on hand as
of the effective date of such expiration or termination, provided that such
sales and distribution are otherwise in conformance with this Agreement. Horizon
may continue to make, use or sell such Designated Product only until Horizon has
exhausted remaining raw materials in its possession at the time of expiration or
termination of this Agreement. Net Sales of the Designated Product pursuant to
this Section 11.6 shall be subject to the Royalty payment obligations set forth
in Section 5.3.
11.7 Termination or Assignment of Sublicensees. Any sublicenses granted by
Horizon or its Affiliates under this Agreement shall provide for termination or
assignment to Penwest, at the option of Penwest, of Horizon's or its Affiliate's
interest therein upon expiration or termination of this Agreement.
11.8 Survival of Terms. Horizon's obligations regarding payment of
Royalties accrued as of the date of expiration or termination of this Agreement,
and the provisions of Sections 7.1, 8, 10, 11 and 12 hereof shall survive any
expiration or termination of this Agreement.
11.9 Return of Data and Materials. In the event of any termination or
expiration of this Agreement, (a) Horizon shall return to Penwest all Penwest
data and materials and (b) Penwest shall return to Horizon all Horizon data and
materials, except to the extent such Horizon data and materials are necessary to
permit Penwest to fully exercise its retained rights hereunder.
12. Miscellaneous.
12.1 Furtherance of Agreement. Each of Penwest and Horizon agrees to duly
execute and deliver, or cause to be duly executed and delivered, such further
instruments and cause to be done such further acts and things as are reasonably
within its control and its responsibilities under this Agreement, including,
without limitation, the filing of such additional assignments, agreements,
documents and instruments, that may be necessary or as the other party hereto
<PAGE> 27
may from time to time reasonably request in connection with this Agreement to
carry out more effectively the provisions and purposes of this Agreement.
12.2 Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof.
12.3 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their Affiliates, successors and permitted
assigns; provided, however, that except for assignments or delegations to
Affiliates of a party (which shall not release such party from any of its rights
or responsibilities hereunder), or as part of the transfer of all or
substantially all assets to a single buyer or pursuant to a merger, sale of all
or substantially all of such party's stock or any similar transaction, or as
otherwise specifically permitted hereunder, neither party shall assign or
delegate any of its rights or obligations hereunder at any time without the
prior written consent of the other party hereto, which consent shall not be
unreasonably withheld. Penwest's decision with respect to such consent shall be
based on whether, as of the time of the proposed assignment, the proposed
assignee is a Capable Entity. Penwest shall notify Horizon of such decision
within sixty (60) days following Penwest's receipt from Horizon of any written
proposal concerning assignment of this Agreement. Notwithstanding the foregoing,
Horizon shall have the right to assign or delegate any of its rights or
oblations hereunder to Inpharmakon without the prior written consent of Penwest;
provided, however, that (a) any such assignment or delegation to Inpharmakon
shall be limited to Horizon's rights and obligations hereunder with respect to
the Designated Product for use for the Indication, and (b) six (6) months
following such assignment or delegation, (i) such right shall become ineffective
and (ii) Horizon shall terminate any such assignment or delegation, unless
Inpharmakon has entered into an agreement with a Capable Entity for development
of the Designated Product. Horizon shall reimburse Penwest for reasonable
attorneys' fees incurred by Penwest in connection with such assignment to
Inpharmakon, whether or not such assignment remains effective and continues
beyond the end of such six (6) month period. In no event shall Horizon assign
rights hereunder unless the proposed assignee agrees to assume those of
Horizon's obligations hereunder that are relevant to the scope of the proposed
assignment, including but not limited to Horizon's due diligence and
confidentiality obligations and Horizon's obligation to pay milestones. Out of
any Assignment-Related Compensation received by Horizon from any third party,
Horizon shall reimburse Penwest for Penwest's costs incurred in connection with
the development of the Designated Product, except to the extent such costs have
already been reimbursed by Horizon through the payment of milestones hereunder.
For the purposes of this Section 12.3, "Assignment-Related Compensation" shall
mean any payments of any kind whatsoever received by Horizon from a third party
in consideration for, or otherwise in connection with, the assignment of all or
any part of Horizon's rights under this Agreement. In the event that this
Agreement is assigned as part of the sale of all or substantially all of the
assets of Horizon, or Horizon is acquired pursuant to a merger, sale of stock or
similar transaction, then, out of the proceeds from such transaction, Horizon
shall reimburse Penwest for Penwest's costs incurred in connection with the
<PAGE> 28
development of the Designated Product, except to the extent such costs have
already been reimbursed by Horizon through the payment of milestones hereunder.
12.4 Notices. All notices, requests or other communication provided for or
permitted hereunder shall be given in writing and shall be hand delivered or
sent by facsimile, reputable courier or by registered or certified mail, postage
prepaid, return receipt requested, to the address set forth on the signature
page of this Agreement, or to such other address as either party may inform the
other of in writing. Notices will be deemed delivered on the earliest of
transmission by facsimile, actual receipt or three days after mailing as set
forth herein.
12.5 Modifications; Waivers. No change, modification, extension,
termination or waiver of any obligation, term or provision contained herein
shall be valid or enforceable unless same is reduced to writing and signed by a
duly authorized representative of each of the parties to be bound hereby. No
waiver of any right in any one instance shall constitute a waiver of that right
or of any other right in other instances under this Agreement.
12.6 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, such provision shall be enforced to the
maximum extent permitted by law and the parties' fundamental intentions
hereunder, and the remaining provisions shall not be affected or impaired.
12.7 Independent Contractors. Nothing herein contained shall constitute
this a joint venture agreement or constitute either party as the partner,
principal or agent of the other, this being an Agreement between independent
contracting entities. Neither party shall have the authority to bind the other
in any respect whatsoever. Except as provided herein, nothing contained in this
Agreement shall be construed as conferring any right on either party to use any
name, trade name, trademark or other designation of the other party hereto,
unless the express, written permission of such other party has been obtained.
12.8 Force Majeure. In the event that either party hereto is prevented from
carrying out its obligations under this Agreement by events beyond its
reasonable control, including without limitation acts or omissions of the other
party, acts of God or government, natural disasters or storms, fire, political
strife, labor disputes, failure or delay of transportation, default by suppliers
or unavailability of parts, then such party's performance of its obligations
hereunder shall be excused during the period of such event and for a reasonable
period of recovery thereafter, and the time for performance of such obligations
shall be automatically extended for a period of time equal to the duration of
such event or events.
12.9 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York without regard to
its conflict of laws rules.
<PAGE> 29
12.10 Dispute Resolution. Any dispute, controversy, or claim arising out of
or relating to this Agreement or to a breach thereof, including its
interpretation, performance, or termination, other than any dispute, controversy
or claim concerning patent infringement, validity or enforceability, shall be
finally resolved by arbitration. The arbitration shall be conducted by three (3)
arbitrators, one to be appointed by the party initiating the proceeding within
ten (10) days of filing its claim, one to be appointed within thirty (30) days
thereafter by the other party, and the third being nominated by the two
arbitrators so selected within thirty days thereafter or, if they cannot agree
on a third arbitrator, by the President of the American Arbitration Association.
The arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, which shall administer the
arbitration, and the laws of the State of New York. The arbitration, including
the rendering of the award, shall take place in New York, New York. The decision
of the arbitrators shall be binding upon the parties to this Agreement, and the
expense of the arbitration (including without limitation the award of the
attorneys' fees to the prevailing party) shall be paid as the arbitrators
determine. The decision of the arbitrators shall be final, and judgment thereon
may be entered by any court of competent jurisdiction. Notwithstanding this,
application may be made to any court for a judicial acceptance of the award or
order of enforcement. In the event of any dispute relating to patent
infringement, validity or enforceability, the parties agree to waive their
respective rights to a jury trial.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and acknowledge this Agreement as of the Effective Date.
This Agreement may be executed in one or more counterparts, each of which shall
be an original instrument, but all of which together shall constitute a single
agreement creating one set of rights and obligations.
Horizon Pharmaceutical Corporation: Penwest Pharmaceuticals Co.:
By ________________________________ By ________________________________
Brent Dixon Tod R. Hamachek
President Chairman and
Chief Executive Officer
Address: Address:
660 Hembree Parkway 2981 Route 22
Suite 106 Patterson, NY 12563
Roswell, GA 30076 FAX: (914) 878-3420
FAX: (770) 442-9594 Attn: Michael T. Mallon
Attn: Brent Dixon
<PAGE> 30
[***] - CONFIDENTIAL TREATMENT REQUESTED
Exhibit A
DESIGNATED PRODUCT
[***] form of a controlled-release pharmaceutical for oral administration in
humans in a 24 hour release form in a [***] strength that (a) combines a racemic
mixture of [***] with TIMERx and other excipients and (b) is eligible for
approval, or has been approved, by the FDA under an NDA.
<PAGE> 31
Exhibit B
NET SALES
"Net Sales" shall mean gross invoice price for sales by Horizon or its
Affiliates or sublicensees to unrelated third parties ("Customers"), less
deductions for (to the extent such amounts are included in the gross invoiced
sales price for the Designated Product) (a) statutory or contractual liability
for rebates to any governmental entity, rebates paid pursuant to the Medicaid
Rebate legislation, and any state and local governmental rebate programs; (b)
cash discounts generally available at the time of sale; (c) adjustments for
allowances or credits for returned Designated Product, free Designated Product
provided in lieu of discounts or rebates, damaged Designated Product, commercial
rebates, chargebacks, or trade discounts, whether or not paid directly to the
Customer; and (d) sales, excise, turnover, inventory, value-added, and similar
taxes and duties assessed on the sale of Designated Product. Notwithstanding the
foregoing, no discount, allowance, rebate, management fee, wholesaler
chargeback, or any similar amount however designated, that is given or
associated with the purchase by the Customer or its affiliates or associates of
any product other than the Designated Product, or with the purchase or provision
of any service, shall be taken into consideration in calculating any deductions
from the gross invoice. To the extent any of the amounts described in the
immediately preceding sentence are afforded to a Customer prior to the
calculation of the gross invoice price, such gross invoice price shall be
increased to reflect such amounts, solely for purposes of the calculation of Net
Sales under this Agreement. In the case of Designated Product sold to any
customer together with other products or services, the price of such Designated
Product, solely for purposes of the calculation of Net Sales under this
Agreement, shall be deemed to be no less than the price at which Designated
Product would be sold in a similar transaction to a customer not also purchasing
other products or services.
<PAGE> 32
[***] - CONFIDENTIAL TREATMENT REQUESTED
Exhibit C
PENWEST PATENTS
<TABLE>
<CAPTION>
U.S. Patent Date Title Inventor
Number
<S> <C> <C> <C>
[***] [***] [***] [***]
</TABLE>
<PAGE> 33
Exhibit D
PENWEST TRADEMARK(S)
TIMERx(r) Oral Delivery System
<PAGE> 34
Exhibit E
SPECIFICATIONS
(to be attached)
<PAGE> 35
Exhibit F
DEVELOPMENT TASKS AND SCHEDULE
(attached)
<PAGE> 36
[***] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
TIMERx - [***] Development Plan - DRAFT
Effective March 25,1999
ID Task Name Duration Start Finish December January February March April
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 [***] [***] [***] [***]
2 [***] [***] [***] [***]
3 [***] [***] [***] [***]
4 [***] [***] [***] [***]
5 [***] [***] [***] [***]
6 [***] [***] [***] [***]
7 [***] [***] [***] [***]
8 [***] [***] [***] [***]
9 [***] [***] [***] [***]
10 [***] [***] [***] [***]
11 [***] [***] [***] [***]
12 [***] [***] [***] [***]
13 [***] [***] [***] [***]
14 [***] [***] [***] [***]
15 [***] [***] [***] [***]
16 [***] [***] [***] [***]
17 [***] [***] [***] [***]
18 [***] [***] [***] [***]
19 [***] [***] [***] [***]
20 [***] [***] [***] [***]
21 [***] [***] [***] [***]
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
<PAGE> 37
[***] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
TIMERx - [***] Development Plan - DRAFT
Effective March 25,1999
ID Task Name Duration Start Finish December January February March April
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
22 [***] [***] [***] [***]
23 [***] [***] [***] [***]
24 [***] [***] [***] [***]
25 [***] [***] [***] [***]
26 [***] [***] [***] [***]
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
May June July August September October November December January
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
May June July August September October November December January
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
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[***] - CONFIDENTIAL TREATMENT REQUESTED
Exhibit G
MINIMUM SALES
The "Minimum Sales" shall be equal to the level of Net Sales of the Designated
Product for each of the years following the Approval Date set forth in the table
below.
Year Minimum Sales
1 [***] U.S. dollars
(US$[***])
2 [***] U.S. dollars
(US$[***])
3 [***] U.S. dollars
(US$[***])
4 and each [***] U.S. dollars
subsequent year (US$[***])
<PAGE> 1
EXHBIT 10.9
CONFIDENTIAL TREATMENT REQUEST
------------------------------
Confidential Portions Of This Agreement Which Have Been Redacted Are Marked
With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
HORIZON PHARMACEUTICAL & INPHARMAKON
COLLABORATION AGREEMENT
THIS AGREEMENT made as of the 31st day of October, 1998 ("Effective Date")
between Horizon Pharmaceutical Corporation, a Delaware corporation of 660
Hembree Parkway, Suite 106, Roswell, Georgia 30076 ("Horizon") and InpharmaKon
Corporation, a Delaware corporation of 191 Waukegan Road, Suite 206, Northfield,
Illinois 60099 ("Inpharmakon").
Recitals:
---------
A. Horizon is a pharmaceutical product development and marketing company;
B. Inpharmakon is in the business of developing and assembling literature
based product registration packages for the purpose of enabling marketing
partners to file NDAs (defined below) with the FDA (defined below) for marketing
approval of off label indications for FDA approved pharmaceutical products.
C. Horizon wishes to collaborate with Inpharmakon and Inpharmakon wishes to
collaborate with Horizon for the purpose of preparing a NDA for submission by
Horizon to the FDA requesting approval to market [***] for the indicated use of
migraine prophylaxis on the following terms and conditions.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
Definitions
-----------
In this Agreement the following expressions shall have the meaning set
forth in this Article.
1.01 Accounting Period. The term "Accounting Period" means a calendar
quarter.
1.02 Affiliate. The term "Affiliate" means a corporation or business entity
which, directly or indirectly, is controlled by one of the parties or controls
one of the parties. For this purpose, the meaning of the word "control" shall
include, but not be limited to, ownership of fifty percent (50%) or more of the
voting shares or interest of such corporation or business entity.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
1.03 ANDA. The term "ANDA" means an Abbreviated New Drug Application.
1.04 Clinical Trials. The term "Clinical Trials" refers to the clinical
trials which Horizon is required to perform under Section 3.01 (ii) below.
1.05 Confidential Information. The term "Confidential Information" is
defined in Article VII below.
1.06 FDA. The term "FDA" means the United States Food and Drug
Administration.
1.07 First Commercial Sale. The term "First Commercial Sale" means the
first sale of the Product to a third party purchaser after NDA approval of the
Product for the Indication.
1.08 Formulation. The term "Formulation" is defined in Section 3.01(i)
below.
1.09 Horizon Affiliate. The term "Horizon Affiliate" means an Affiliate of
Horizon.
1.10 Indication. The term "Indication" means the indication for migraine
prophylaxis.
1.11 Inpharmakon Affiliate. The term "Inpharmakon Affiliate" means an
Affiliate of Inpharmakon.
1.12 NDA. The term "NDA" means a New Drug Application submitted to the
FDA requesting approval to market the Product for the Indication.
1.13 Net Sales. The term "Net Sales" means the gross invoice price of all
Product using the Formulation actually billed by Horizon, Horizon Affiliates or
sublicensees and their Affiliates to unrelated third party customers less (i)
any direct or indirect credits and allowances or adjustments granted to such
customers, including, without limitation, credits and allowances on account of
price adjustments or on account of rejection or return of Product previously
sold, (ii) any trade and cash discounts, and rebates, (iii) any sales, excise,
turnover and similar taxes, and any duties and other governmental charges
imposed upon the production, use or sale of Product or partly processed Product,
and (iv) transportation, insurance and other handling charges provided that such
charges can be reasonably allocated to such billings and are not separately
invoiced.
1.14 Opportunity Package. The term "Opportunity Package" means the
existing opportunity package already delivered to Horizon, receipt of which is
hereby acknowledged, which describes the Product, the targeted indication, and
an overview of its off label usage and was based upon a review of the published
clinical data for the Product and a patent search to establish prima facie
feasibility.
1.15 Product. The term "Product" means [***].
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<PAGE> 3
1.16 Sublicense. The term "Sublicense" is defined in Section 4.02 below.
ARTICLE II
Collaboration
-------------
2.01 Scope. Horizon shall work to obtain NDA registration for and
commercialization of the Product indicated for the Indication. Horizon shall
develop a once a day proprietary formulation for the Product and have primary
responsibility for clinical, formulation, manufacturing, and regulatory issues,
and preparation of the NDA for the Product for the Indication.
2.02. Opportunity Package. Inpharmakon shall give Horizon the exclusive
right to use the Opportunity Package for the purposes of preparing and filing a
NDA for the Product with the FDA for the Indication. Subject to Inpharmakon's
rights upon termination under Article IX below, with effect from the Effective
Date, Inpharmakon shall assert against Horizon no claim to the ownership of the
following intellectual property related to the Product (i) the Formulation
developed by or for Horizon under Section 3.01(i) below, or (ii) the data
arising from the Clinical Trials, nor to the rights to sales, marketing and
distribution for the Product for the Indication. After Horizon has contracted
with a formulator to develop the Formulation, Horizon shall have the right and
power to sublicense its exclusive rights to use the Opportunity Package.
2.03 Sublicenses. In the event Horizon enters into any Sublicenses,
Horizon shall provide Inpharmakon with a copy of each such Sublicense within 10
days of its execution.
ARTICLE III
Responsibilities of the Parties
-------------------------------
3.01. Responsibilities of Horizon. Horizon's responsibilities are as
follows:
i) To develop or have developed for it a workable once a day
formulation (the "Formulation") for the Product or, with
Inpharmakon's consent which consent will not be unreasonably
withheld, substitute another formulation (also referred to as the
"Formulation") with strong marketable differences over available
generic formulations of the Product;
ii) To conduct such clinical trials ("Clinical Trials") as may be
necessary to prepare and file a NDA for the Product using the
Formulation and indicated for the Indication; and
iii) To prepare and file with the FDA a NDA registration package for
the Product using the Formulation indicated for migraine
prophylaxis, and exert all reasonable efforts to obtain approval
of the NDA and commercialize the Product in the United States of
America.
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<PAGE> 4
3.02 License of Formulation. In the event Horizon licenses the Formulation
from a third party, Horizon shall ensure that the license permits Horizon to
assign its interest in the Formulation to Inpharmakon should Inpharmakon
exercise its rights to assume Horizon's rights to the Formulation under Sections
9.01 and 9.02 below.
3.03 Responsibilities of Inpharmakon: Inpharmakon's responsibilities are
to provide Horizon with the following services:
i) To deliver the Opportunity Package to Horizon plus, at no
additional cost to Horizon, provide additional review of such
published clinical trials not found in the Opportunity Package as
the FDA may require after its initial review of the NDA for the
Indication;
ii) To cooperate with and assist Horizon to design, conduct, and
evaluate the Clinical Trials using the Formulation for the
purpose of establishing safety and efficacy for the Product
indicated for the Indication;
iii) To cooperate with and assist Horizon to assemble the NDA for the
Product indicated for the Indication, including assembly of
published clinical literature and summaries;
iv) To assist and advise Horizon concerning follow-up information
required by the FDA in support of the NDA, including attendance
at meetings with the FDA; and
v) Provide other reasonable services as may be agreed by the parties
in support of Horizon's efforts to obtain approval of the NDA for
the Product for the Indication.
3.04 FDA Regulatory Support. In the event that Horizon requires support
with regard to its activities regulated by the FDA over and above Inpharmakon's
services under Section 3.03(ii) through iv) above, Inpharmakon or an Inpharmakon
Affiliate shall provide reasonable support requested by Horizon. Such support
shall be free of charge during the first 8 months of the term of this Agreement.
Thereafter Inpharmakon shall charge Horizon at the provider's (Inpharmakon's or
the Inpharmakon Affiliate's) regular rates presently $120 per hour and Horizon
shall pay such charges within 30 days of the invoice date.
3.05 Inpharmakon Expenses. Horizon shall reimburse Inpharmakon for
Inpharmakon's documented out of pocket travel expenses related to the
performance of its responsibilities under Section 3.03(ii) through (v) above.
Horizon shall make such reimbursements within 30 days of the invoice date.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
ARTICLE IV
Compensation
4.01 Fees and Royalties. Horizon shall pay to Inpharmakon as compensation
for its services:
i) $[***] within 30 days after the Effective Date;
ii) $[***] within 30 days after filing the NDA for the Product for
the Indication
iii) $[***] within 30 days after approval of such NDA; and
iv) A royalty of [***] of the Net Sales by Horizon or Horizon
Affiliates payable 45 days after the end of each Accounting
Period on all sales of the Product using the Formulation for so
long as Horizon or a Horizon Affiliate sell the Product.
Under no circumstances shall payments received by Inpharmakon under paragraphs
(i) through (iii) of this Section be refundable in whole or in part.
4.02 Sublicenses. In the event that Horizon grants any third party a
sublicense or other rights (together referred to as a "Sublicense") to make,
have made, use, import, market or sell the Product for the Indication, Horizon
shall pay to Inpharmakon the following royalties:
i) If a Sublicense is granted after Horizon enters into a contract
for development of the Formulation, 50% of the consideration
(cash and in kind) other than royalties under paragraph (v) of
this Section received by Horizon less costs incurred by Horizon
on behalf of the sublicensee and reimbursed by the sublicensee;
ii) If a Sublicense is granted after development of the Formulation
has been completed, 33% of the consideration (cash and in kind)
other than royalties under paragraph (v) of this Section received
by Horizon less costs incurred by Horizon on behalf of the
sublicensee and reimbursed by the sublicensee;
iii) If a Sublicense is granted after completion of the Clinical
Trials, 25% of the consideration (cash and in kind) other than
royalties under paragraph (v) of this Section received by Horizon
less costs incurred by Horizon on behalf of the sublicensee and
reimbursed by the sublicensee; or
iv) If a Sublicense is granted after approval of the NDA for the
Product indicated for the Indication, 20% of the consideration
(cash and in kind) other than royalties under paragraph (v) of
this Section received by Horizon less costs incurred by Horizon
on behalf of the sublicensee and reimbursed by the sublicensee;
and
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<PAGE> 6
[***] - CONFIDENTIAL TREATMENT REQUESTED
v) With effect from the First Commercial Sale, 5% of Net Sales by
sublicencees and their Affiliates.
4.03 No Release of Section 4.01 Payments. The grant of Sublicenses by
Horizon shall not release Horizon from its obligations to make the payments
required by Section 4.01(i) through (iii) above.
4.04 Other Indications. Provided that Horizon has paid all of the payments
required by Section 4.01(i) through (iii) above, Horizon shall have the right to
prepare and file ANDAs and NDAs for the Product for indications other than the
Indication. In that event the following provisions shall apply:
i) If Product sold by Horizon or Horizon Affiliates for such
indications use the Formulation, Horizon shall pay to Inpharmakon
the royalties as provided under Section 4.01(iv) above.
ii) If Product sold by Horizon or Horizon Affiliates for such
indications does not use the Formulation (i.e. it uses another
formulation useful in the therapeutic range for migraine
prophylaxis which improves on generically available formulations
for the Product) but the Product is prescribed for migraine
prophylaxis, Horizon shall pay to Inpharmakon the royalties as
provided under Section 4.01(iv) above on all such sales of the
Product for such prescriptions.
iii) Horizon shall pay to Inpharmakon the royalties provided under
Section 4.02(v) on all sales of Product by sublicensees and their
Affiliates which, if made by Horizon, would be subject to royalty
payments under paragraphs (i) or ii) of this Section.
iv) No royalties shall be due or payable on the Product for such
indications where the Product uses a formulation that is neither
useful in the therapeutic range of migraine prophylaxis nor a
formulation which improves on generically available formulations
for the Product, and the formulation is not prescribed for
migraine prophylaxis.
For the purposes of paragraphs (ii) and (iv) of this Section the term "improves"
refers to a technical or non-technical difference in the formulation not found
in generically available formulations for the Product which difference
differentiates the Product from other [***] products (using either the
Formulation or a generically available formulation) for marketing purposes.
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<PAGE> 7
ARTICLE V
Clinical Trials
---------------
For the purposes of Section 3.01(ii) above, Horizon shall contract with LAB
Biosyn of Montreal, Canada or another clinical research organization to perform
clinical trials the same as or equivalent to (1) the program prepared by LAB
Biosyn, a copy of which Inpharmakon shall provide to Horizon contemporaneously
with the execution of this Agreement, or (2) that recommended by the FDA.
ARTICLE VI
Payment of Royalties; Audit
---------------------------
6.01 Payment of Royalties. Horizon shall remit all royalty payments to
Inpharmakon no later than 45 days after the close of each Accounting Period.
Each royalty payment shall be accompanied by a report of the Net Sales subject
to royalty during the Accounting Period. Horizon will deduct withholding taxes
from payments to Inpharmakon only if required by applicable law.
6.02 Audit Rights. The following provisions shall apply:
(i) Inpharmakon, at its own expense, shall have the right, upon
reasonable prior notice, but no more than once in any year, to
appoint independent auditors and have them during normal business
hours, inspect and copy the books and accounts of Horizon,
Horizon Affiliates and Horizon's sublicensees, if any, related to
the payment and calculation of royalties arising under this
Agreement. Horizon shall cooperate and cause Horizon Affiliates
and sublicensees, if any, to cooperate with such auditors. The
auditors performing the audit shall disclose to Inpharmakon only
information relating to the accuracy of records kept and the
payments made, and shall be under a duty to keep confidential any
other information obtained from such records.
(ii) If any such audit establishes that Horizon has underpaid or
overpaid the amount due, Horizon shall promptly pay any remaining
amounts due as established by such audit or, in the event of an
overpayment, Inpharmakon shall promptly refund any such over
payment. If the underpayment is by 5% or more during any
Accounting Period, Horizon shall reimburse Inpharmakon for its
out of pocket expense of such audit, and shall pay to Inpharmakon
interest on the amount of the underpayment at a rate of 3% above
the official prime rate, as announced from time to time by
Citibank NA, New York, or at such lower rate as shall then be the
maximum rate permitted by law that may be charged on any such
overdue payment from the date due until paid.
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<PAGE> 8
ARTICLE VII
Confidentiality
For a period of 5 years after first disclosure, the parties shall keep
completely confidential, shall not publish or otherwise disclose, and shall not
use for any purpose other than the purposes contemplated by this Agreement, any
Confidential Information without the consent of the disclosing party first had
and obtained. The term "Confidential Information" is that information furnished
by either party to the other in writing and marked "Confidential", or if first
disclosed orally, disclosed in writing and marked "Confidential" within 30 days
after first disclosure. Confidential Information shall not include information
that the receiving party can establish by competent proof:
(i) was already known to it prior to disclosure by the disclosing party as
evidenced by written record or other proof;
(ii) was or becomes public knowledge through no fault of the receiving
party;
(iii)has been received from a third party who did not acquire it directly
or indirectly from the disclosing party;
(iv) is independently developed by the receiving party without reference to
any Confidential Information received from the disclosing party under
this Agreement; or
(v) is compelled to be disclosed in the course of litigation with a third
party, provided that the compelled party provides the disclosing party
with notice of such compulsion sufficiently in advance of disclosure
so as to provide the disclosing party with a reasonable time period to
seek a protective order.
Notwithstanding the above, the parties may disclose such Confidential
Information to their legal representatives and employees, and to consultants, to
the extent such disclosure is reasonably necessary to achieve the purposes of
this Agreement, obtaining an NDA for the Product for the Indication, and
provided such representatives, employees, and consultants are covered by
obligations of confidentiality with respect to such information no less
stringent than those set forth above.
ARTICLE VIII
Term and Termination
--------------------
8.01 Term. The term of this Agreement shall commence on the Effective Date
and shall continue for a period of 10 years thereafter, with automatic renewal
for successive 5 year terms for so long as Inpharmakon, Horizon, and their
respective Affiliates are in substantial compliance with the terms of this
Agreement, unless otherwise terminated earlier pursuant to this Article VIII.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
8.02 Termination for Material Breach. Either party may terminate this
Agreement in the event the other party materially breaches in the performance of
its obligations under this Agreement, and such breach continues for 90 days
after written notice specifying the breach was provided to the breaching party
by the non-breaching party. Any such termination shall become effective at the
end of such 90 day period unless the breaching party (or any other party on its
behalf) has cured any such breach prior to the expiration of the 90 day period.
A material breach is (i) the assertion of ownership rights by Inpharmakon in
violation of Section 2.02, (ii) the failure by either party to perform in a
timely manner the respective obligations and responsibilities of the parties
under Article III above, (iii) the failure by Horizon to pay the compensation
due under Article IV above, or (iv) the breach by either party of the
confidentiality provisions of Article VII above.
8.03 Bankruptcy. Either party may terminate this Agreement upon the filing
or institution of bankruptcy, reorganization, liquidation or receivership
proceedings, or upon an assignment of substantially all of the assets for the
benefit of creditors by the other party; provided, however, in the case of an
involuntary bankruptcy proceeding such right to terminate shall only become
effective if the party consents to the involuntary bankruptcy or such proceeding
is not dismissed within 90 days after the filing thereof.
8.04 Termination by Inpharmakon. Inpharmakon shall have the right to
terminate this Agreement on notice to Horizon in the event of:
(i) The failure of Horizon, within [***] after the Effective Date to
acquire or authorize a formulator to develop a workable once a day
formulation for the Product.
(ii) The failure of Horizon, within [***] after the Effective Date to
complete, in connection with the development of the Formulation, all
necessary in-vitro clinical studies and complete a clinical
bioavailability study in a small group of at least 8 patients,
provided that in the event that technical difficulties with such study
are encountered, such [***] period will be extended by [***] to
[***] if the bioavailability study was initiated within such [***]
period.
(iii)The failure of Horizon, within [***] after completing the clinical
bio-availability study on the Formulation under paragraph (ii) above,
to authorize or initiate the Clinical Trials.
(iv) The failure of Horizon to file the NDA within [***] after completion
of the Clinical Trials, including the full statistical analyses.
(v) The failure of the FDA within [***] of the filing date of the NDA for
the Product for the Indication, to approve the NDA unless the FDA is
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[***] - CONFIDENTIAL TREATMENT REQUESTED
holding up approval pending agreement on labeling requirements for the
Formulation, in which case the period will be [***];
(vi) The failure of Horizon to make the First Commercial Sale within [***]
after receipt of the NDA approval for the Product for the Indication,
and to thereafter aggressively market and sell the Product for the
Indication.
Should Horizon have informed Inpharmakon in due time of serious reasons for
the delay in the achievement of the events under paragraphs (iii), (iv) or
(v) above, the parties shall negotiate in good faith an extension or
extensions of time for Horizon to complete the event delayed without
Inpharmakon exercising its termination rights provided that such serious
reasons do not delay the commercialization of the Product beyond [***]
after the Effective Date. Any waiver by Inpharmakon in one instance shall
not obligate Inpharmakon to grant any additional or other waivers of
Horizon's obligations.
ARTICLE IX
Consequences of Termination
---------------------------
9.01 Default of Horizon. If this Agreement is terminated for failure of
Horizon to pay any of the Article IV payments, or is terminated under Section
8.04(i) through (iv) and no default of Inpharmakon was the primary cause of the
default, Inpharmakon shall have the exclusive right to proceed with a NDA for
the Product for the Indication using the Formulation and the data from the
Clinical Trials as has been acquired or developed by Horizon at the date of
termination, and shall have the right to assume Horizon's rights to the same and
the NDA, if applicable, without cost to Inpharmakon or Inpharmakon Affiliates.
In that event Horizon shall release to Inpharmakon its rights to the Opportunity
Package, the Formulation, the related not publicly available information
provided by Inpharmakon or developed by or for Horizon, and registration data
related to the NDA for the Product for the Indication.
9.02 Failure to Commercialize. If this Agreement is terminated under
Section 8.04(vi) for failure to commercialize the Product for the Indication,
Inpharmakon shall have the exclusive option to purchase Horizon's rights to the
Formulation and the NDA for the Product for the Indication, if applicable, and
the exclusive right to use the data from the Clinical Trials, all for a price
equal to Horizon's booked costs incurred to obtain the same. In that event,
Inpharmakon shall have the right to proceed with a NDA for the Product for the
Indication by itself or through others.
9.03 No Fault Termination. If this Agreement is terminated under Section
8.04(v) Horizon shall have the right to proceed with an ANDA or NDA with any
formulation of [***] for any indication, including hypertension, without further
obligation to Inpharmakon, including but not limited to no obligation to pay
royalties on Net Sales of any and all formulations of the Product. In that event
Inpharmakon shall have an option to purchase Horizon's rights to the Formulation
and the data from the Clinical Trials at Horizon's booked costs incurred to
obtain the same, but only for the Indication.
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9.04 Conditions to Inpharmakon Rights. Inpharmakon's rights under Sections
9.01 and 9.02 above are conditioned upon the termination not arising primarily
from problems with the Opportunity Package or Inpharmakon's regulatory support
under Section 3.03ii) or iv). If the termination is as a result of such problems
Inpharmakon shall have no rights to the Formulation or the data from the
Clinical Trials. However, should Inpharmakon so request and have informed
Horizon in due time the reasons for the problems, the parties shall negotiate in
good faith an extension or extensions of time for Inpharmakon to repair or cure
the problems without Horizon exercising its termination rights hereunder. Any
waiver by Horizon in one instance shall not obligate Horizon to grant additional
or other waivers of Inpharmakon's obligations.
9.05 No Release of Prior Obligations. Termination of this Agreement for any
reason shall not release either party from any liability which, at the time of
such termination, has already accrued to the other party or which is
attributable to a period prior to such termination nor preclude either party
from pursuing all rights and remedies it may have under this Agreement or at law
or in equity with respect to any breach of the Agreement.
9.06 Survival of Terms. Articles IV, VI, VII, X, XI, XII and XIII, and
Sections 3.02 and 9.01 through 9.05 shall survive the expiration or termination
of this Agreement for any reason.
ARTICLE X
Representations & Warranties, Disclaimers & Indemnities
-------------------------------------------------------
10.01 Representations & Warranties.
(a) Horizon warrants and represents to Inpharmakon that it has or
prior to commercialization will have the right to manufacture, market and sell
[***], and that such manufacturing, marketing and sale will not infringe the
rights of any third parties.
(b) Inpharmakon warrants and represents that it has evaluated and, to
the best of its knowledge and belief, accurately reported all clinical
information, including safety and efficacy data, ft has included in the
Opportunity Package.
10.02 Inpharmakon Disclaimer. Inpharmakon specifically disclaims any
guarantee that the NDA for the Product for the Indication will be successful, in
whole or in part. Inpharmakon will evaluate and accurately report all clinical
information, including safety and efficacy data, it includes in the literature
package for the NDA, but expressly disclaims any responsibility to independently
verify such information for accuracy or completeness. Further, Inpharmakon
expressly disclaims any responsibility for independently verifying that such
clinical information pulled from publicly available or commercial sources does
not infringe third party proprietary rights. However, Inpharmakon has and will
exercise reasonable judgment in deciding whether or not such information should
be used in the NDA. Inpharmakon expressly disclaims responsibility for the
scientific methodologies, clinical protocols and results obtained and reported
in the published literature.
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10.03 Indemnification. Horizon shall indemnify, defend and hold Inpharmakon
harmless from and against all product liability claims, actions, suits and other
proceedings, and related costs, including legal fees and expenses, liabilities,
damages and other expenses arising from (i) Horizon's use of the scientific
methodologies, clinical protocols and results referenced in Section 10.02 above
and (ii) the manufacture and sale of the Product. In addition, in the event of
any claims, actions, suits or other proceedings alleging that Horizon's use,
manufacture, marketing or sale of the Product infringes the rights of third
parties, Horizon shall indemnify, defend and hold Inpharmakon harmless from and
against all such claims, actions, suits or other proceedings, and related costs,
including legal fees and expenses, liabilities, damages, and other expenses
incurred by Inpharmakon arising therefrom. Horizon shall not be obligated to
indemnify Inpharmakon as aforesaid unless Inpharmakon promptly notifies Horizon
of the claim, action, suit, or other proceeding and Inpharmakon thereafter
cooperates with and assists Horizon, at Horizon's expense, in the defense of
such claim, action, suit or other proceeding.
ARTICLE XI
Notices
-------
All information, reports, notices and other communications under this
Agreement will be in writing. Such information, reports, notices and other
communications, and payments will be deemed given to a party when sent to such
party by certified or registered mail, return receipt requested, postage
prepaid; by hand; by facsimile, receipt confirmed; or by overnight courier which
provides confirmation of delivery, at the appropriate address set forth above.
Either party may change its address for the giving of notice by written notice
to the other party as set forth above.
ARTICLE XII
Arbitration
-----------
Any dispute arising out of the interpretation or performance of this
Agreement or the breach thereof, shall be submitted to arbitration in Chicago,
Illinois in accordance with the Commercial Rules of the American Arbitration
Association. The arbitration award shall be final and binding on the parties.
The arbitrators' fees shall be borne by the losing party. If both parties are
found liable, the arbitrators' fees shall be borne in proportion to the extent
to which each party is found liable. In the event either party is forced to take
legal action in order to enforce an arbitral award hereunder, the defending
party shall pay the claimant party's costs and expenses, including reasonable
attorney fees and expenses, incurred to enforce such arbitral award.
ARTICLE XIII
Miscellaneous
-------------
13.01 Independent Contractors. The relationship of the parties is that of
independent contractors. The parties are not deemed to be agents, partners or
joint venturers with the other for any purpose as a result of this Agreement or
the transactions contemplated thereby.
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13.02 Amendment This Agreement may not be amended, supplemented, or
otherwise modified except by an instrument in writing signed by both parties.
13.03 Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parries relating to the subject matter of this Agreement.
It supersedes all previous communications, proposals, representations and
agreements (including the Confidential Disclosure Agreement dated June 25, 1998
and the Term Sheet dated October 13, 1998 between the parties), whether oral or
written, relating to the subject matter of this Agreement.
13.04 Severance. Should any provision of this Agreement be determined by a
court of competent jurisdiction to violate or contravene any applicable law or
policy, such provision shall be severed or modified to the extent necessary to
comply with the applicable law or policy, and such modified provision and the
remainder of the provisions hereof will continue in full force and effect.
13.05 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois, excluding any choice of law
rules which may direct the application of the law of any other jurisdiction.
13.06 Assignment. Neither party may assign its rights or obligations under
this Agreement without the prior written consent of the other.
13.07 Section Headings. All section headings are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
13.08 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement.
13
<PAGE> 14
IN WITNESS WHEREOF, the duly authorized officers of the parties have
executed this Agreement as of the Effective Date.
INPHARMAKON CORPORATION
By:
-----------------------------------
Title:
--------------------------------
HORIZON PHARMACEUTICAL
CORPORATION
By:
-----------------------------------
Title:
--------------------------------
14
<PAGE> 1
EXHIBIT 10.10
CONFIDENTIAL TREATMENT REQUESTED
Confidential portions of this agreement which have been redacted are marked
with brackets ("[***]"). The omitted material has been filed separately with the
Securities and Exchange Commission.
EXCLUSIVE PATENT LICENSE AGREEMENT
THIS AGREEMENT made and effective this 1st day of January, 2000, by and
between Jame Fine Chemicals, Inc., having a place of business at 100 West Main
Street, Bound Brook, New Jersey 08805 (hereinafter referred to as "Licensor").
and
Horizon Pharmaceutical, Corporation., having a place of business at 660
Hembree Parkway, Suite 106, Roswell, Georgia 30076 (collectively hereinafter
referred to as "Licensee").
WHEREAS, Licensor is the owner of the entire right, title and interest in,
to and under Letters Patent of the United States [***] (said patents
collectively referred to as the Licensed Patents); and
WHEREAS, Licensee is desirous of securing and Licensor is willing to grant
a semi-exclusive license under the Licensed Patents to use, sell and distribute
Finished Dosage Products (defined below) containing to [***];
NOW, THEREFORE, in consideration of the covenants and obligations
hereinafter set forth to be well and truly performed, the parties hereto hereby
agree as follows:
SECTION ONE
The following definitions will apply to the respective terms as used
throughout this Agreement.
<PAGE> 2
(a) "Net Sales" shall mean Licensee's gross invoice price of sales of
Finished Dosage Products covered by the claims of the Licensed Patents in the
Territory to third party customers after deduction of (i) cash, trade and/or
quantity discounts actually allowed; (ii) amounts repaid or credited by reason
of rejection or returns of goods, rebates (including government mandated
rebates) or because of retroactive price reductions unrelated to the sale or
pricing of another product of Licensee; and (iii) freight, postage, and duties
paid for and separately identified on invoices. A sale of a product is deemed to
have occurred upon the earliest of invoicing, shipment or transfer of title in
the product to a party other than Licensee or its affiliates or sublicensees.
(b) "Baseline Net Sales" shall mean Licensee's actual Net Sales for the
period January 1, 1999 through December 31, 1999.
(c) "Annual Net Sales" shall mean Licensee's actual Net Sales for a twelve
month period January 1 to December 31 of a given year.
(d) "Territory" means the United States of America, including its
territories and possessions and Puerto Rico.
(e) "Contract Year" shall mean the twelve (12) month period commencing on
January 1, 2000 and ending December 31, 2000 for the first Contract Year and
subsequent twelve (12) month periods commencing on the anniversary of the day
immediately following the end of the first Contract Year.
(f) "Finished Dosage Products" means products that contain active
pharmaceutical ingredients and are in a form ready for sale to a final consumer
(including, without limitation, a liquid suspension or tablet).
2
<PAGE> 3
[***] - CONFIDENTIAL TREATMENT REQUESTED
SECTION TWO
(a) Licensor agrees to grant and does hereby grant to Licensee under the
Licensed Patents the exclusive right and license to use, sell and distribute
Finished Dosage Products containing [***] covered by the Licensed Patents in the
Territory, except only as to the license rights of Unisource, Inc., a Colorado
corporation (Unisource) and or [***] pertaining to products that contain [***]
and are covered by the Licensed Patents.
(b) Licensee agrees that it will purchase or otherwise obtain Finished
Dosage Products containing [***] from Unisource, Inc. and its successors or
assigns.
SECTION THREE
(a) Upon execution of this Agreement, Licensee agrees to pay to Licensor a
license fee of [***] less the [***] advance paid by Licensee to Licensor.
(b) Effective at the beginning of the first Contract Year, Licensee further
agrees to pay to Licensor, as royalty, [***] of its Annual Net Sales derived by
Licensee from all sales of Finished Dosage Products covered by the Licensed
Patents and made in accordance with the inventions covered thereby; "sales" as
herein employed shall mean sales of the Finished Dosage Products covered by the
Licensed Patents which are made in the United States, its territories,
possessions and Puerto Rico.
(c) Suspension of royalties:
(i) Generic. For purposes of this Section THREE (c), "Generic" shall
mean a generic to [***] or Tanafed but shall not include (A) products that
infringe upon the Licensed Patents or (B) products made from raw material
supplied by Licensor prior to the effective date of this Agreement.
3
<PAGE> 4
[***] - CONFIDENTIAL TREATMENT REQUESTED
(ii) Suspension. If a Generic enters the market, then, per a
determination made as of December 31 of such year of entry and December 31
of each subsequent year of this Agreement (all of which calendar years,
including the year of entry, shall collectively be referred to as the
"Calendar Years Potentially Suspended"), Licensee's obligation for the
royalty may be suspended for one or more Calendar Years Potentially
Suspended as determined as follows. Licensee is not obligated for the
royalty for any given Calendar Year Potentially Suspended if i) the gross
sales in ounces in the entirety of such Calendar Year Potentially Suspended
do not exceed the Threshold Sales (hereinafter defined) applicable to that
Calendar Year Potentially Suspended AND ii) the Generic is available in the
Territory at any time during such Calendar Year Potentially Suspended.
(iii) Refund of Royalties. Accordingly, if Licensee is not obligated
for the royalty in a given Calendar Year Potentially Suspended, then,
within 30 days after the end of that calendar year, Licensor shall (A)
refund royalties to Licensee so that the net effect of such refund will be
that Licensee did not pay any royalties for such calendar year and (B) pay
Licensee interest on the royalties refunded at the prime rate as of
December 31 of the calendar year for which royalties are being refunded. In
the event Licensee is not obligated for the royalties in a given calendar
year, Licensee may still be obligated for the royalty in future year(s).
(iv) THRESHOLDS. The Threshold Sales are as follows:
<TABLE>
<CAPTION>
<S> <C>
Potential Threshold Sales applicable to the
corresponding Calendar Year
Suspension Potentially Suspended
Calendar Year
2000 Gross sales of [***] ounces (which is [***] of
Licensee's gross sales in ounces in 1999 which
was [***] ounces)
2001 [***] of the gross sales (in ounces) in
calendar years 1999 or 2000, whichever is
higher
2002 [***] of the gross sales (in ounces) in
calendar years 1999, 2000 or 2001, whichever
is highest
2003 and thereafter [***] of the gross sales (in ounces) in
ounces) in calendar years 1999, 2001, 2002
or any other subsequent Calendar Year
Potentially Suspended, whichever is highest
</TABLE>
4
<PAGE> 5
[***] - CONFIDENTIAL TREATMENT REQUESTED
(v) Partial Refund of Licensing Fee: If in the year 2000, there is a
Generic available AND Licensee's Gross Sales do not exceed [***] ounces,
then Licensor will refund one half of the up-front fees paid upon execution
of this agreement.
(v) Example:
2000
Based on a calculation made as of December 31, 2000, i) if Licensee's gross
sales (in ounces) for calendar 2000 (including gross sales in calendar 2000
prior to the entry of the generic) do not exceed [***] ounces, AND ii) the
Generic is available in the Territory at any time during such Calendar Year
Potentially Suspended then Licensee would not be obligated for royalties for the
entirety of calendar 2000 and would be refunded calendar 2000 royalties
accordingly; and
2001
Based on a calculation made as of December 31, 2001, i) if Licensee's gross
sales in ounces for calendar 2001 do not exceed [***] of the gross sales (in
5
<PAGE> 6
[***] - CONFIDENTIAL TREATMENT REQUESTED
ounces) in calendar years 1999 or 2000, whichever is highest, AND ii) the
Generic is available in the Territory at any time during such Calendar Year
Potentially Suspended then Licensee would not be obligated for royalties for the
entirety of calendar 2001 and would be refunded calendar 2001 royalties
accordingly; and
2002
Based on a calculation made as of December 31, 2002, i) if Licensee's gross
sales (in ounces) for calendar 2002 do not exceed [***] of the gross sales (in
ounces) of calendar years 1999, 2000 or 2001, whichever is highest, AND ii) the
Generic is available in the Territory at any time during such Calendar Year
Potentially Suspended then Licensee would not be obligated for royalties for the
entirety of calendar 2002 and would be refunded calendar 2002 royalties
accordingly; and
2003 and thereafter
Based on a calculation made as of December 31 of 2003 and of each year
thereafter, if i) Licensee's gross sales (in ounces) for any such calendar year
do not exceed [***] of the gross sales (in ounces) of the previous calendar year
of this Agreement in which Gross sales (in ounces) were the highest, AND ii) the
Generic is available in the Territory at any time during such Calendar Year
Potentially Suspended, then Licensee would not be obligated for royalties for
the entirety of the calendar year ending on the December 31 on which such
calculation was made, and would be refunded royalties for such calendar year
accordingly.
(d) The term of this Agreement shall be from the date hereof to the later
of the expiration of either of the Licensed Patents or any reissue, continuation
or extension of the Licensed Patents. In the event that Licensor becomes the
owner of or has rights to patents in addition to the Licensed Patents which
additional patents pertain to the products covered by the Licensed Patents, the
term of this Agreement shall automatically extend to the expiration of such
additional patents. In any event, Licensee may continue to renew this Agreement
for [***] year renewal periods beyond the above-referenced patent expiration
6
<PAGE> 7
dates by providing Licensor written notice of its intent to so renew prior to
such patent expiration dates.
SECTION FOUR
It is mutually understood and agreed that the sale of compositions covered
by the Licensed Patents may be subject to approval and/or regulation by the Food
and Drug Administration or other applicable government agency and in the event
that such approval is refused or such regulation prohibits the sale of products
covered by the Licensed Patents, Licensee shall have the right to cancel this
Agreement and the license herein granted to it; in the event of such
cancellation, Licensee shall not be liable to Licensor for the payment of any
royalties hereunder or any additional license fees, as the case may be.
SECTION FIVE
All royalties provided for by this License Agreement shall be due and
payable quarterly and Licensee agrees to pay to Licensor on or before the last
day of each of the months of February, May, August and November of each Contract
Year during which this Agreement is in force, the total amount of royalties due
and payable on account of its operations under this Agreement during the
calendar quarter immediately preceding said dates.
SECTION SIX
Licensee agrees that it will render to Licensor with each such
royalty payment a written statement setting forth the total Annual Net Sales
from its royalty-bearing sales during the period covered by such statement and
Licensee agrees to keep a separate record in a suitable book or set of books
provided for the purpose, in sufficient detail to enable the royalties payable
hereunder to be determined, and further agrees that it will permit such book or
set of books to be examined by an auditor or accountant, authorized by Licensor,
at any reasonable time during business hours to the extent necessary to verify
7
<PAGE> 8
[***] - CONFIDENTIAL TREATMENT REQUESTED
the records and payments here provided for, it being agreed that such auditor or
accountant shall make his report to Licensor in such manner that names of
customers or other information deemed confidential by Licensee will not be
disclosed to Licensor.
SECTION SEVEN
In the event that Licensor makes or acquires any improvements or additional
patents in or relating to the inventions covered by the Licensed Patents, such
improvements and patents shall be and are hereby included as part of the
Licensed Patents upon the same terms and conditions as the said Licensed
Patents; Licensee shall not be obligated to pay to Licensor any further or
additional royalty or other consideration for the license to any such additional
improvements or patents. Licensee's only obligation to Licensor shall be to
continue to pay the royalty stipulated in Section Three until the expiration of
the last such patent or any reissue or extension thereof unless otherwise
provided herein.
SECTION EIGHT
Licensee shall, at its option, with the prior written consent of Licensor,
have power to institute and prosecute, at its own expense, suits for
infringement of the Licensed Patents, and, Licensor will cooperate in such suits
by furnishing such evidence, documents, and testimony as may reasonably be
required, and if required by law, Licensor will join as a party plaintiff in
such suits. All expenses in such suits will be borne entirely by Licensee and
Licensee will pay to Licensor [***] of any excess of recoveries over expenses
(including without limitation attorney fees) in such suits.
8
<PAGE> 9
[***] - CONFIDENTIAL TREATMENT REQUESTED
SECTION NINE
(a) Licensor warrants, that effective as of the date hereof, Licensor and
Unisource have established a business relationship (the Relationship) whereby
Unisource Inc. may purchase [***] and [***] from Jame Fine Chemicals and the
Relationship shall continue for a duration at least as long as the duration of
this Agreement. Licensor further warrants that pursuant to the Relationship, for
a period of 12 months, and thereafter it will not increase the prices for such
Active Pharmaceutical Ingredients by an amount exceeding the percentage increase
in the PPI (except that Licensor may increase such price to reflect documented
increases in direct costs which include labor, raw materials, utilities and
direct overhead costs to maintain its existing profit margin which increases
will not be subject to the PPI cap, but which increases shall have been
documented to the satisfaction of Licensee and Unisource). Licensor will
decrease the prices of the Active Pharmaceutical Ingredients to reflect
decreases in the cost of such manufacturing components. Under the terms of the
Relationship, Licensor will notify Unisource and Licensee of the change in
dollars per Kg and the effective date of any price change of each Active
Pharmaceutical Ingredient utilized by Unisource for Finished Dosage Product
supplied to Licensee.
(b) Licensor warrants that, if for any reason Licensor is unable to supply
product to meet all of the needs of Unisource, Unisource shall have the
exclusive right, along with [***], to receive Licensor's production of the
products covered by the Licensed Patents based on the respective amounts of such
products ordered during the preceding twelve (12) month period.
SECTION TEN
(a) Licensor represents and warrants that, as of the date hereof, it has
entered into a license agreement with [***], a corporation having a place of
9
<PAGE> 10
[***] - CONFIDENTIAL TREATMENT REQUESTED
business in [***], in a form similar to this Agreement and whereby [***] has a
semi-exclusive license to the Licensed Patents as they pertain to [***]. (b)
Licensor warrants that in its Relationship and Licensing Agreement with
Unisource, (i) Unisource is prohibited from selling or distributing Finished
Dosage Products containing [***] to any person or entity other than Licensee and
(ii) Unisource does not have the right to sell [***] as a stand alone active
ingredient.
(b) Licensor warrants that (a) it owns the Licensed Patents; (b) it has the
right to license the Licensed Patents to Licensee; (c) no third party has filed
any civil action against Licensor in connection with the Licensed Patents or
notified Licensor that the Licensed Patents violate such third party's patent,
trademark, copyright, or trade secret rights; (d) to the best of Licensor's
knowledge, the Licensed Patents do not infringe any third party's copyright or
patent; (e) it has not granted to any third party any rights in or to the
Licensed Patents that are inconsistent with any right granted to Licensee under
this License Agreement or that will adversely affect any exercise by the
Licensee of its rights granted under this License Agreement.
(c) Licensor agrees to indemnify, defend, and hold harmless Licensee
against any losses, liabilities, claims, damages, costs, and expenses (including
reasonable attorney's fees) (the "Claims") that result from Licensor's material
breach of any of the above warranties. Licensor shall assume all expenses with
respect to the defense, settlement, adjustment, or compromise of any Claims as
to which this section requires Licensor to indemnify, defend, or hold harmless
Liensee and, upon such assumption, shall have sole control over the defense,
settlement, adjustment, or compromise of such Claims; provided, however, that
(i) Licensor shall obtain prior written approval of Licensee, which Licensee
shall not unreasonably withhold, before entering into any settlement,
adjustment, or compromise of such Claims; and (ii) Licensee may, if it so
desires, employ counsel at its own expense to assist in the handling of such
10
<PAGE> 11
claim or undertake sole control of the defense, settlement, adjustment, or
compromise of such Claims.
SECTION ELEVEN
In the event that Licensee defaults or breaches any of the provisions of
this License Agreement or fails to account for or pay to Licensor any of the
royalties due and payable to Licensor hereunder, Licensor reserves the right to
cancel the license here granted upon sixty (60) days' written notice to
Licensee; provided, however, that if Licensee, within the sixty (60) day period
referred to, cures the said default or breach, the license herein granted shall
continue in full force and effect until the expiration of the Licensed Patents
or any reissue, continuation or extension thereof. In the event of the
termination of the license herein granted by Licensor to Licensee, Licensee
shall not be relieved of the duty and obligation to pay in full royalties
accrued and due and payable at the effective date of such termination.
SECTION TWELVE
In the event of any adjudication of bankruptcy, appointment of a Receiver
by a court of competent jurisdiction, assignment for the benefit of creditors or
levy of execution directly involving Licensee, this Agreement shall thereupon
forthwith terminate and no longer be of any further force and effect.
SECTION THIRTEEN
This Agreement shall be governed by, interpreted in accordance with, and
enforced under the laws of the State of New Jersey, U.S.A. (regardless of its or
any other jurisdiction's choice of law principles), or, as necessary, the laws
of the United States of America.
11
<PAGE> 12
SECTION FOURTEEN
This Agreement constitutes the entire agreement between the parties hereto
respecting the subject matter hereof, and supersedes and terminates all prior
agreements respecting the subject matter hereof, whether written or oral, and
may be amended only by an instrument in writing executed by both parties hereto.
SECTION FIFTEEN
(a) Indemnification by Licensee - Licensee shall indemnify and hold
Licensor harmless against all liability, damage, cost or expense (including
reasonable attorneys' fees) arising out of the promotion, distribution, sale or
use of products made using the products supplied by Licensor or its designee to
Licensee hereunder, including those resulting from any personal injury
(including death) to any person including employees, servants, or agents of
Licensee, except to the extent such liability, damage, cost or expense is caused
by the negligence, omission, failure to act, intentional malfeasance, willful
misconduct, and/or breach of the warranties or other obligations of Licensor
under this agreement. In the event of any claim arising under this indemnity,
prompt notice of such claim shall be given by Licensor to Licensee which shall
have the right to conduct the defense in respect thereto, but Licensor may have
counsel present at its own expense and shall be entitled to participate in the
defense of any such claim. Licensor shall cooperate with Licensee in such
defense at the expense of Licensee. No settlement of any such matter shall be
made without the written approval of Licensee and Licensor, which will not be
unreasonably withheld.
(b) Indemnification by Licensor - Licensor shall indemnify and hold
Licensee harmless against all liability, damage, cost or expense (including
12
<PAGE> 13
reasonable attorneys' fees) arising out of any breach of this Agreement by
Licensor and/or the manufacturing, packaging and storing of products supplied by
Licensor.
SECTION SIXTEEN
This Agreement and the license herein granted shall be binding upon and
inure to the benefit of each of the parties hereto, their successors and the
assigns of the entire business relating thereto of each of the parties.
SECTION SEVENTEEN
If any term or provision of this Agreement is found held to be excessive,
or invalid, void or unenforceable, the offending term or revision shall be
deleted or revised to the extent necessary to be enforceable, and, if possible,
replaced by a term or provision which, so far as practicable, achieves the
legitimate aims of the parties.
SECTION EIGHTEEN
Any notice or other communication given by either party hereto to the other
party relating to this Agreement shall be sent by registered or certified mail,
return receipt requested, addressed to such other party at the address set forth
above. Changes of address shall be given in the same manner as any other notice.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized representatives as of the day and year first
above written.
JAME FINE CHEMICALS, IN.
Attest: By: ______________________________
Title: ___________________________
HORIZON PHARMACEUTICALS, INC.
Attest: By: ______________________________
Title: ___________________________
13
<PAGE> 1
EXHIBIT 10.11
CONFIDENTIAL TREATMENT REQUEST
Confidential Portions Of This Agreement Which Have Been Redacted Are Marked
With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
EXCLUSIVE DISTRIBUTION AGREEMENT
This Exclusive Distribution Agreement (the "Agreement") is dated effective
as of January 1, 1996 by and between UNISOURCE, INC., a Colorado corporation,
with its principal place of business at 1919-14th St., Suite 606, Boulder,
Colorado 80302 ("Unisource"), and HORIZON PHARMACEUTICAL CORPORATION, a Delaware
corporation, with its principal place of business at 1125 Northmeadow Parkway,
Suite #130, Roswell, Georgia 30076 ("Horizon").
W I T N E S S E T H :
A. Unisource is engaged in the business of developing, manufacturing and
selling pharmaceutical products;
B. Horizon is engaged in the business of marketing and distributing
pharmaceutical products;
C. Unisource and Horizon previously entered into an Exclusive Distribution
Agreement dated July 30, 1993 (the "Prior Agreement") for a pharmaceutical
product known as TANAFED (the "Product"), as described in Exhibit A hereto,
which exhibit is expressly incorporated herein by this reference; and
D. The parties desire to enter into a new Exclusive Distribution Agreement
superseding the "Prior Agreement" effective as of the date indicated above,
according to the following terms and conditions. It is the express intention of
the parties that this "Agreement" shall replace and supersede the "Prior
Agreement", curing any and all defaults which may exist under the "Prior
Agreement" by either Unisource or Horizon, without any time elapsing between the
termination of the "Prior Agreement" and the effective date of this "Agreement".
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, IT IS AGREED:
1
<PAGE> 2
[***] - CONFIDENTIAL TREATMENT REQUESTED
l. Exclusivity; Requirements Contract; Pricing; and Terms of Sale.
1.1 Exclusivity.
(a) Unless and until Horizon's exclusivity for the Product is
terminated pursuant to the provisions of Section 1.1(b) hereof, Unisource shall
supply the Product exclusively to Horizon and shall not sell the Product in the
Continent of North America or the Caribbean to anyone other than Horizon without
Horizon's prior written consent. Likewise, Horizon agrees during the term hereof
to purchase the Product exclusively from Unisource for North American and
Caribbean distribution. It is agreed that the mutual exclusivity provisions of
this Agreement shall apply to the Product regardless of package size or the
nature of any packaging.
(b) Unisource shall have the right to terminate Horizon's
exclusivity hereunder if Horizon's aggregate purchases for the Product during
any calendar year beginning in 1996 are less than the scheduled amount set forth
below for such year. Such right to terminate Horizon's exclusivity must be
exercised, if at all, by written notice given within thirty (30) days after the
end of any calendar year. Unisource's right to terminate Horizon's exclusivity
hereunder shall be Unisource's sole remedy for Horizon's failure to order the
scheduled amount during any calendar year. The scheduled amount for the Product,
regardless of package size is as follows:
(i) 1996 - [***];
(ii) 1997 - [***];
(iii) 1998 - [***];
(iv) 1999 and subsequent years - [***]
For purposes of this Agreement, if more gallons are purchased than scheduled
during a particular year, the overage above scheduled gallons will carry over to
the next year's scheduled obligations as a credit.
For purposes of this Agreement, a gallon shall be defined as 128-fl. oz. to be
packaged in various package sizes.
(c) Horizon shall have the right of first refusal on all other
dosage forms or pharmaceutical products containing Pseudoephedrine Tannate
developed by Unisource. Unisource agrees to offer said products in all forms to
Horizon first, and to negotiate terms with Horizon in good faith. Horizon shall
also have the right to match any bona fide offer from any third party for any
said products in all forms, and by agreeing to match the bona fide offer,
Horizon shall be granted exclusivity to the same extent granted herein for
TANAFED.
2
<PAGE> 3
1.2 Requirements Contract.
(a) During the term of this Agreement, Horizon shall purchase the
Product exclusively from Unisource and Unisource shall exclusively supply all of
Horizon's requirements of the Product for the distribution channels heretofore
defined. Horizon shall not during the term of this Agreement purchase or
manufacture a comparable Product (comparable Product is defined as any product
containing Pseudoephedrine Tannate, alone or in combination with other
ingredients, and which is intended for the same therapeutic use as the Product)
from anyone other than Unisource. The foregoing obligation of Unisource to
supply all of Horizon's requirements of the Product and Horizon's obligation to
purchase all of its requirements of the Product exclusively from Unisource shall
apply even if Horizon's exclusivity is terminated by Unisource pursuant to
Section 1.1 hereof. Horizon shall have the right to terminate Unisource's
exclusivity hereunder if Unisource is unable to fulfill all of Horizon's
requirements for the Product at any time, subject to the sixty (60)-day cure
period described in Subsection 6.2 below.
1.3 Price and Terms of Sale.
(a) The price to be charged to Horizon for Product in various
package sizes bearing the Horizon or a subsidiary label shall be the same as
those currently quoted to Horizon, as shown on Exhibit "B" attached hereto and
incorporated herein. However, the price charged to Horizon for the Product shall
be reduced if: (1) Unisource engages a new manufacturer who supplies Product to
Unisource at a lower cost, or (2) increased volume orders by Horizon result in
per-unit savings to Unisource because of economies of scale. In the event of the
occurrence of either of these contingencies, Unisource and Horizon agree to
negotiate a price reduction in good faith, promptly upon receipt of written
notice from Horizon of a desire to negotiate price reduction as a result of the
occurrence of one or both contingencies. No other price changes shall be made
without the written consent of both parties.
(b) Horizon shall pay Unisource for the Product within thirty
(30) days after shipment of the Product to the location specified. Unisource
warrants that when invoiced the Product will conform to those specifications
documented in Exhibit A and Unisource will cause the manufacturer to provide to
Horizon a Certificate of Assay, batch assay sheets and all current material
safety data sheets applicable to the Product for each batch shipped to Horizon.
Horizon will not be obligated to pay for a non-conforming batch of the Product
or a batch for which a Certificate of Assay has not been provided.
(c) All shipments of the Product to Horizon at the location
specified will be made FOB, Unisource site of manufacture.
2. Term of Agreement and Termination. This Agreement shall commence on
January 1, 1996, at which time the "Prior Agreement" shall be superseded
instantly and this Agreement shall continue for a period of seven (7) years
until December 31, 2003. If upon expiration of this initial term ending December
31, 2003, Horizon is not in default of any of the material terms and conditions
of this Agreement, Horizon shall have an option to extend this Agreement for an
additional term of seven (7) years. This option shall be automatically exercised
3
<PAGE> 4
[***] - CONFIDENTIAL TREATMENT REQUESTED
unless Horizon gives written notice to Unisource of its intent not to exercise
the option prior to December 31, 2003. This Agreement shall also terminate
immediately upon any voluntary or involuntary dissolution, act of bankruptcy or
reorganization for the benefit of creditors of either party, and may not be
reinstated thereafter except with the other party's written consent.
In the event that Horizon exercises the seven year option, Horizon agrees
to purchase [***] of Product in each of the first three years of the option
period, and [***] of Product in each of the remaining four years, pursuant to
the exclusivity and requirements provisions of subsection 1 above.
3. Representations and Warranties of Unisource. Unisource represents and
warrants to Horizon that the Product supplied hereunder will be merchantable and
that the Product supplied hereunder will be manufactured in accordance with the
then FDA current good manufacturing practices for comparable products. Unisource
shall cause the manufacturer of the Product (the "Manufacturer") to supply
Horizon with the standard form FDA continuing guaranty. Unisource further
represents and warrants to Horizon that it is the sole and exclusive owner of
the Product and that no consents are required from any person to grant Horizon
the rights granted to it hereunder. Unisource hereby agrees to indemnify and
hold harmless Horizon from and against any breach of its representations and
warranties set forth in this Agreement. In no event, however, will Unisource be
liable to Horizon for consequential damages.
4. Insurance. Unisource shall cause the Manufacturer to maintain product
liability insurance in a minimum amount of [***] Dollars and, prior to the
delivery of the first order of Product, Unisource shall cause the Manufacturer
to provide Horizon with a certificate of insurance naming Horizon as an
additional insured on Manufacturer's insurance policy. Thereafter, Unisource
shall cause the manufacturer to provide periodic verification of the liability
insurance coverage on each renewal of the policy, and in any event at least each
year on the anniversary date of the policy.
5. Default.
5.1 Notice of Default. Subject to Section 6.2, if a default occurs
hereunder, then the non-defaulting party shall be entitled to terminate this
Agreement upon sixty (60) days' written notice to the defaulting party, if the
defaulting party has not cured the default as provided in paragraph 6.2, which
notice shall describe the default in reasonable detail.
5.2 Effect of Default and Cure. The party in default shall have a
period of sixty (60) days from receipt of the Notice of Default provided for in
paragraph 6.1 within which to cure the specified default. If the default is
cured and corrected within sixty (60) days after proper notice, this Agreement
shall continue in full force and effect as if no default had existed. If the
default is not timely cured as set forth in this Subsection 6.2, then the
non-defaulting party shall have the option to terminate this Agreement, and such
termination shall be without prejudice to any claim for damages which the
non-defaulting party may have.
4
<PAGE> 5
6. Force Majeure and Termination.
6.1 Force Majeure A party to this Agreement shall be excused from
performance under this Agreement to the extent that and for so long as such
performance is substantially hindered or prevented by force majeure such as acts
of God, strikes, or acts of war.
6.2 Right of Termination. If any performance excused pursuant to
Subsection 6.1 is both protracted and material with reference to the
objectives and purposes of this Agreement, the party not excused thereby may
terminate this Agreement upon fifteen (15) days' written notice to the other
party, and such terminating party shall be entitled to an equitable
adjustment of its rights and obligations hereunder.
7. Applicable Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado without giving effect to the
principles of conflict of laws thereof.
8. Notices. Any notice, demand or other communication required or
authorized to be given under this Agreement shall, if reasonably practicable, be
transmitted by telecopier to the number specified below, confirmed by hard copy
via U.S. Mail, or such notice may be sent by personal delivery, national
overnight commercial delivery service which provides package tracking services
("Overnight Courier") or by U.S. Mail, certified, return receipt requested. Any
such notice shall be deemed received as of the first business day after it is
sent if delivered by telecopy, Overnight Courier or personal delivery, or on the
day actually received and signed for if sent by Certified U.S. Mail. All notices
shall be sent to the respective parties at the following telecopy numbers and
addresses, or such other telecopy number or address as a party may provide to
the other by written notice complying with this Section 9:
Horizon Pharmaceutical Corporation
1125 Northmeadow Parkway, Suite #130
Roswell, Georgia 30076
Attention: President
Fax No. 770-442-9594
Unisource, Inc.
1919-14th Street, Suite 606
Boulder, Colorado 80302
Attention: President
Fax No. 303-442-6919
9. Assignment; Binding Effect. This Agreement may not be assigned by either
party without the prior written consent of the other party, and any attempt by
either party to assign this Agreement without such consent shall be null and
void ab initio. This Agreement shall inure to the benefit of, and be binding
upon, the respective successors and permitted assigns of the parties.
5
<PAGE> 6
10. Modification. This Agreement may not be modified or amended in any
respect except in writing signed by both parties.
11. The Prior Agreement. The Prior Agreement is hereby superseded in its
entirety by mutual consent of both parties. Each party represents and warrants
to the other that no default exists under the terms of the Prior Agreement.
12. Entire Agreement. This is the entire Agreement between the parties and
no prior representations, statements, warranties or inducements form a part of
this contract or vary, modify or expand upon any of the terms or conditions
contained in this written Agreement.
IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered
this Agreement effective January 1, 1996.
Attest: UNISOURCE, INC.
_____________________________ By:_________________________________________
Attest: HORIZON PHARMACEUTICAL
CORPORATION
_____________________________
By:_________________________________________
6
<PAGE> 7
[***] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
---------
TANAFED
-------
FORMULA A
[***]
FORMULA B
[***]
7
<PAGE> 8
[***] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
---------
[***]
<TABLE>
<S> <C> <C> <C>
Quantity: [***] order [***] order or more
1. Packaging: Pints Pints
Price: $[***] $[***]
2. Packaging: [***] [***]
Price: $[***] $[***]
3. Packaging: [***] [***]
Price; $[***] $[***]
</TABLE>
8
<PAGE> 1
EXHIBIT 10.12
CONFIDENTIAL TREATMENT REQUEST
Confidential Portions Of This Agreement Which Have Been Redacted Are Marked
With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
MANUFACTURING AND SUPPLY AGREEMENT
THIS MANUFACTURING AND SUPPLY AGREEMENT (the "Agreement") is made and
entered into this 23rd day of April, 1999 (the "Effective Date"), by and between
HORIZON PHARMACEUTICAL CORPORATION ("Horizon") and MIKART, INC. ("Mikart").
Mikart is a Georgia corporation with its principal place of business at 1750
Chattahoochee Avenue, Atlanta, Georgia 30318. Horizon is a Delaware corporation
with its principal place of business at 660 Hembree Parkway, Suite 106, Roswell,
Georgia 30076.
BACKGROUND:
Subject to the terms and conditions contained in this Agreement, Horizon
desires to engage Mikart to manufacture the "Products" (as hereinafter defined)
for commercial distribution by Horizon, and Mikart desires to accept such
appointment.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premise, Ten Dollars
($10.00) in hand paid, the mutual promises, covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
-----------
The following words, terms and phrases, when used herein, shall have the
following respective meanings:
1.1 "Batch" shall mean either: (a) the quantity of [***] tablets of the
Product to be marketed and sold as "Robinul;" or (b) the quantity of [***]
tablets of the Product to be marketed and sold as "Robinul Forte."
1.2 "Contract Year" shall mean a twelve (12) consecutive month period after
the Qualification Date and during the term of this Agreement. The first Contract
Year shall commence as of the Qualification Date, and subsequent Contract Years
shall commence on each anniversary of the Qualification Date.
1.3 "FDA" shall mean the United States Food and Drug Administration or any
successor agency thereof.
1
<PAGE> 2
1.4 "Health Registrations" shall mean the NDA issued by the FDA with
respect to the Products and any other governmental or regulatory consents,
registrations, approvals or permits necessary to sell or manufacture the
Products in the Territory.
1.5 "Products" shall mean Glycopyrrolate 1 mg U.S.P. tablets (regardless of
how packaged), which Product shall be marketed and sold by Horizon as "Robinul,"
and Glycopyrrolate 2 mg U.S.P. tablets (regardless of how packaged), which
Product shall be marketed and sold by Horizon as "Robinul Forte."
1.6 "Qualification Date" shall mean the date on which Mikart satisfactorily
completes its validation and testing pursuant to Article 2 of this Agreement
such that it becomes authorized to begin manufacturing the Products under the
Health Registrations in accordance with the terms of this Agreement.
1.7 "Specifications" shall mean the specifications for the manufacturing,
packaging and labeling of the Products described on Exhibit A attached hereto
and incorporated herein by reference.
1.8 "Territory" shall mean the United States of America and its territories
and such other locations as may be designated by the parties hereto pursuant to
Section 2.6.
ARTICLE 2
VALIDATION AND TESTING
----------------------
2.1 General. Mikart shall become authorized to manufacture and package the
Products under the Health Registrations as contemplated by Section 2.3. To
accomplish the same, it is the current intention of Mikart and Horizon to effect
a transfer according to the SUPAC Guidelines; provided, however, if such a
transfer cannot be accomplished, Mikart shall (with Horizon paying Mikart's
reasonable out-of-pocket expenses therefor) develop an alternative manufacturing
process and prepare and file on behalf of Horizon with the FDA and any other
applicable agency or authority supplements to the Health Registrations which,
when and if approved, would permit Mikart to manufacture the Products pursuant
to this Agreement. In any event, Mikart will use all reasonable efforts to
become authorized to manufacture the Products as soon as reasonably practicable
after the Effective Date.
2.2 Ribbon Blender. Within sixty (60) days after the Effective Date, Mikart
will lease (for a period of five (5) years with monthly rental payments in the
amount of $405.00) and have installed a ribbon blender with a minimum working
capacity of thirty (30) cubic feet (the "Blender") for use in manufacturing the
Products. On or before the fifth (5th) day of such month during the term of such
lease, Horizon shall pay to Mikart an amount equal to $405.00, and Horizon shall
have the right, at its sole expense, to require Mikart to purchase the Blender
on Horizon's behalf.
2.3 Validation. After its receipt of the Blender, Mikart shall begin
analytical methods development validation and process and cleaning validation
2
<PAGE> 3
[***] - CONFIDENTIAL TREATMENT REQUESTED
with respect to the Products. All of Mikart's costs incurred in connection
therewith (up to a maximum aggregate amount of [$***]) shall be billed to and
paid by Horizon on a quarterly basis (but based on a three (3) year amortization
schedule).
2.4 Testing. Upon its successful completion of the validations described in
Section 2.3, Mikart will conduct stability testing on the Products as required
by federal law. All of Mikart's costs incurred in connection therewith shall be
periodically billed to and paid by Horizon on a quarterly basis (but based on a
three (3) year amortization schedule).
2.5 Health Registrations. Horizon shall maintain the Health Registrations
in full force and effect at all times during the term of this Agreement;
provided, however, upon the reasonable request of Horizon, Mikart shall assist
Horizon in connection therewith; provided further in exchange therefor Horizon
will pay Mikart its standard fees therefor. Mikart hereby acknowledges and
agrees that the Health Registrations are owned by, in the name of and for the
benefit of Horizon and that Mikart has no rights in or to any of the Health
Registrations, except to the extent it is expressly authorized to manufacture
the Products for Horizon pursuant to this Agreement.
2.6 Additional Locations. In the event Horizon desires to market,
distribute or sell the Products in any location not set forth in Section 1.8 (or
previously designated pursuant to this Section 2.6), then Mikart shall, at
Horizon's request, cooperate in good faith with Horizon to obtain any Health
Registrations necessary or appropriate therefor (and Horizon shall pay all of
Mikart's reasonable out-of-pocket expenses therefor); provided, however, Horizon
shall not market, distribute or sell any Products in such locations unless and
until Mikart obtains such Health Registrations.
ARTICLE 3
MANUFACTURE
-----------
3.1 Exclusivity. Subject to the terms and conditions contained herein,
Mikart shall manufacture, package and sell the Products exclusively to Horizon
from and after the Qualification Date and throughout the remainder of the term
of this Agreement (the "Manufacturing Period"), and Horizon shall purchase
exclusively from Mikart all of Horizon's requirements of the Products during the
Manufacturing Period. Except as otherwise permitted hereby, Mikart agrees not to
manufacture, package or sell to any other person or entity during the term of
this Agreement in any unit size or strength any other product which contains the
active ingredient Glycopyrrolate and either (a) contains no other active
ingredient, or (b) is approved for an indication for which the Products are or
become approved. Horizon hereby agrees that, in the event it desires to sell,
market or distribute any other product which contains the active ingredient
Glycopyrrolate during the term of this Agreement, it will negotiate exclusively
with Mikart regarding the manufacture thereof (which would be on commercial
terms other than price substantially similar to those contained herein) for a
period of at least ninety (90) days prior to negotiating therefor with any other
person or entity.
3.2 Limited Warranties. Mikart hereby represents and warrants to Horizon
that the Products manufactured and sold to Horizon hereunder shall conform to
3
<PAGE> 4
the Specifications and shall be free of all defects in materials and
workmanship. The Products, when manufactured, packaged and sold to Horizon shall
comply with all applicable federal, state and local laws, rules and regulations
in the Territory, including without limitation the current Good Manufacturing
Practices as published and amended from time to time by the FDA, and Mikart's
manufacturing and storage facilities shall comply with all applicable federal
state and local laws, rules and regulations in the Territory. EXCEPT AS SET
FORTH IN THIS SECTION 3.2, MILKART MAKES NO OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, REGARDING THE PRODUCTS MANUFACTURED BY IT HEREUNDER AND
SPECIFICALLY DISCLAIMS ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING,
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. With respect to each batch of a Product manufactured
hereunder, this Section 3.2 shall remain effective until the expiration date
noted on such Product.
3.3 Quality Control.
(a) Mikart will perform quality control testing on the Products in
accordance with normal industry standards to determine whether such
Products conform to the Specifications. Contemporaneously with each
shipment of Product hereunder, Mikart will provide Horizon with a
certificate of analysis with respect to such Product. In addition, Mikart
will perform, at Horizon's expense, any and all other testing relating to
the Products which is reasonably requested by Horizon and promptly provide
Horizon with the results thereof; provided, however, Horizon shall not be
responsible for the expenses associated with any such testing which shows
that such Product does not meet the Specifications.
(b) In addition, Mikart shall be responsible for conducting an ongoing
stability program for the Products as required by federal law. Mikart shall
provide the results of such testing to Horizon in a timely manner as this
data is generated or received by Mikart. Mikart's cost therefor shall be
billed to and paid by Horizon on a quarterly basis (but based on a three
(3) year amortization schedule).
(c) Mikart will, upon the reasonable request of Horizon, assay any
Product returned to Horizon by a third party purchaser. Horizon shall
reimburse Mikart for the costs of any such assay unless the results thereof
prove the cause of return is as a result of Mikart's negligence or willful
misconduct or the failure of such Product to comply with the limited
warranties contained in Section 3.2 hereof.
(d) In the event that any Batch is subject to a recall, Horizon, at
its expense, shall conduct the recall, except that Mikart shall reimburse
Horizon for the costs of such recall (including reimbursing Horizon for the
Product at the invoice prices paid by Horizon therefor) in the Territory to
the extent such recall results from the manufacture, packaging or storage
of such Product by Mikart.
(e) Each party hereto shall promptly notify the other of any recall of
either Product which has been directed by it or by any governmental or
regulatory entity or agency for any reason whatsoever. Such notice shall
identify the reason for the recall and all relevant details thereof.
4
<PAGE> 5
(f) Each party hereto shall promptly deliver to the other a copy of
all notices received by it from the FDA during the term of this Agreement
relating to the manufacture, packaging, storage or sale of the Products.
(g) Upon the reasonable advance request of Horizon, Mikart shall
permit a representative of Horizon to inspect its facilities where the
Products are manufactured, packaged and stored, provided such
representative first executes a copy of Mikart's standard visitor
confidentiality agreement.
3.4 Packaging Materials. Mikart shall order from time to time, at Horizon's
request and expense, labels, package inserts and other packaging materials in
sufficient quantities to permit the packaging of the Products ordered by Horizon
from time to time hereunder.
3.5 Trademarks. Mikart acknowledges that the trademarks "Robinul" and
"Robinul Forte" (the "Trademarks") are registered trademarks licensed to
Horizon. Mikart further agrees not to use either of such trademarks except as
specifically authorized by Horizon under this Agreement in connection with the
manufacture, packaging and sale of the Products to Horizon.
ARTICLE 4
ORDERS AND SALES
----------------
4.1 Forecasts. Commencing on the Qualification Date, and thereafter at
least thirty (30) days prior to the commencement of each calendar quarter,
Horizon shall provide Mikart with a non-binding, rolling twelve (12) month
forecast of its requirements for the Products.
4.2 Purchase Orders. Horizon shall place its orders for the Products no
later than ninety (90) days prior to the requested delivery date using
separately numbered, written purchase orders. Each purchase order must be for
one or more full Batches (provided Horizon shall have the right to specify the
size packaging requirements of each order from among 100 tablet bottles and any
other package sizes agreed to by the parties hereto). Purchase orders shall be
transmitted to Mikart via U.S. mail, private courier, or facsimile transmission.
Each purchase order shall include complete and accurate information with respect
to the requested Product, quantity, sizes, shipment dates, shipment method and
delivery destination. Subject to this Section 4.2, Mikart will ship Product
within five (5) days after the requested shipment date in the corresponding
purchase order. Mikart shall promptly notify Horizon upon its receipt of any
purchase orders containing shipment dates which need to be rescheduled, and
Mikart and Horizon shall work together in good faith to schedule a new shipment
date for such order (which shall not be later than thirty (30) days after the
date requested by Horizon). In addition, Horizon may postpone a requested
shipment date by providing Mikart at least sixty (60) days prior written notice
thereof.
5
<PAGE> 6
[***] - CONFIDENTIAL TREATMENT REQUESTED
4.3 Minimum Purchase. During each Contract Year, Horizon shall purchase
from Mikart the following minimum number of aggregate Batches of Products:
Contract Year Minimum Batches
------------- ---------------
1 [***]
2 [***]
3 [***]
4 [***]
5 [***]
ARTICLE 5
PRICES, TERMS OF PAYMENT
------------------------
5.1 Price. The prices to be paid for the Products by Horizon to Mikart for
shipments made during the first year after the Effective Date shall be based on
a Glycopyrrolate price of $12,000 per kilogram and are set forth below;
provided, however, in the event Mikart's price for Glycopyrrolate changes in any
material manner, the price of the Products shall be increased or decreased (as
the case may be) to reflect such change.
For Robinul: Size Price
------------ ---- -----
100 tablet $[***]
For Robinul Forte: Size Price
------------------ ---- -----
100 tablet $[***]
Notwithstanding anything else contained herein to the contrary, within thirty
(30) days after the end of any Contract Year in which Horizon purchases less
than [***] Batches, Horizon shall pay to Mikart an amount equal to the product
of (a) $[***] multiplied by (b) the difference between (i) [***] and (ii) the
number of Batches actually purchased by Horizon in such Contract Year.
5.2 Price Adjustments. Mikart shall have the right to increase the prices
charged for the Products pursuant to Section 5.1 hereof one time during each
year after the Effective Date to reflect any increase in the costs of goods and
services necessary to manufacture the Product ("Total Product Costs'); provided,
however, in the event Mikart so increases such prices in any such year and after
the effective date thereof, Mikart's cost of raw materials or components for
manufacturing the Products ("Materials Cost") further increases by more than
[***] during such year, Mikart shall have the right, by providing at least sixty
(60) days written notice to Horizon to further increase such prices in such year
by a percentage amount equal to the percentage increase in Total Product Costs
that are attributable to the percentage increase in Materials Cost in excess of
five percent (5%); provided further, that Mikart shall provide Horizon with
documented evidence of any such additional cost increases and shall use its
reasonable efforts to prevent any such cost increases from occurring. In
addition, Mikart shall reduce its prices charged hereunder to reflect any
material decrease in the prices paid by it for the active ingredient raw
materials used to manufacture the Products.
6
<PAGE> 7
5.3 Payment Terms. Mikart shall invoice Horizon for the price of the
Products sold at the time of shipment, and Horizon shall pay each such invoice
within thirty (30) days after its receipt thereof.
5.4 Exclusivity. Horizon shall not purchase either Product from any person
or entity other than Mikart during the term hereof without the prior written
consent of Mikart, which consent must specifically state that Mikart is
consenting to waive its exclusive rights hereunder. However, in the event that
Mikart notifies Horizon in writing that it will not or cannot supply any
Products ordered by Horizon in accordance with the terms hereof, or in the event
that Mikart has failed to deliver any Products ordered by Horizon within the
period of time required under Section 4.2 (exclusive of any cure period provided
by Section 7.2(a)), then Horizon may purchase a product identical to that of
such Product in the quantity specified in the unfilled purchase order from any
available alternate source without fast obtaining the written consent required
above. In the event Horizon is permitted to purchase Product from any person or
entity other than Mikart in accordance with this Section 5.4, any amounts so
purchased by Horizon shall apply toward the minimum batch purchase obligations
set forth in Section 4.3 for such year, and, upon Horizon's request, Mikart
shall provide reasonable assistance to enable such other person or entity to
manufacture the Products under the Health Registrations (provided Mikart shall
not be required to pay any out-of-pocket costs or expenses in connection
therewith). In the event that said notice or failure occurs on two or more
occasions within a one hundred eighty (180) day period, this Section 5.4 shall
no longer be of any force or effect and Horizon shall be relieved of its
obligations pursuant to Section 4.3 hereof. Nothing in this Section 5.4 shall be
construed so as to limit or eliminate any other remedies available to Horizon in
the event of a breach of Mikart's obligations under this Agreement, including
its obligation to manufacture, package and deliver the Products ordered by
Horizon.
ARTICLE 6
SHIPPING DEFECTS, RETURNS
-------------------------
6.1 Shipping. Mikart will ship all Products ordered hereunder to Horizon
f.o.b. Mikart's manufacturing facility, at which point the risk of loss for such
Products will pass to Horizon. Title to such Products shall pass to Horizon only
upon Mikart's receipt of payment in full therefor. Mikart shall ship the
Products to the location designated by Horizon on its purchase order. The
parties agree that the method and route of shipment are at Mikart's discretion
unless Horizon furnishes Mikart explicit instructions with the purchase order.
Horizon agrees to pay all costs of shipping and any costs of freight insurance
obtained by Mikart at the request of Horizon. Mikart agrees to provide
reasonable support to assist Horizon in pursuing any claims it may have against
carriers.
6.2 Notification of Defects. Horizon shall notify Mikart in writing as soon
as reasonably practicable after delivery to Horizon of any non-conforming
Product containing obvious defects in such Product discoverable without
affecting the integrity of such Product's packaging (but in any event within
twenty (20) days after delivery) and within thirty (30) days of the earlier of
its discovery or its notification by a third party of any latent defects.
Horizon shall be responsible for its costs to inspect all Products.
7
<PAGE> 8
6.3 Returns. Mikart shall accept for return and replacement or credit (at
invoiced cost) any Product sold to Horizon under this Agreement which does not
conform with the warranties set forth herein and for which proper notice has
been given in accordance with Section 6.2, provided Horizon obtains prior
shipping authorization from Mikart. All returns of Products with obvious defects
must be in the original manufactured condition. Mikart will pay reasonable
return freight and shipping charges, but Horizon shall assume the risk of loss
in transit associated with such returns.
ARTICLE 7
TERM AND TERMINATION
--------------------
7.1 Term. Unless earlier terminated in accordance with the provisions
hereof, the term of this Agreement shall commence on the Effective Date and
shall thereafter continue in effect until the fifth (5th) anniversary of the
Qualification Date (the "Initial Term"). At the end of the Initial Term and each
subsequent "Renewal Term" (as hereinafter defined), the term of this Agreement
shall be automatically renewed and extended for a one (1) year period (a
"Renewal Term"), unless either party delivers a written termination notice to
the other party at least six (6) months prior to the end of the Initial Term or
the then current Renewal Term, as the case may be.
7.2 Termination. Either party may terminate this Agreement on written
notice to the other party, effective immediately if:
(a) the other party commits a material breach of any of its
obligations hereunder which is not cured within sixty (60) days of written
notice from the other party specifying the breach;
(b) the other party is dissolved or liquidated, files or has filed
against it a petition under any bankruptcy or insolvency law, makes an
assignment to the benefit of its creditors, has a receiver appointed for
all or substantially all of its property, or has a petition under any
bankruptcy or insolvency law filed against it which is not dismissed within
sixty (60) days; or
(c) the Qualification Date has not occurred within two (2) years after
the Effective Date.
Such right of termination shall be in addition to any other remedy a
non-defaulting party may have at law or in equity due to the other party's
breach of is obligations hereunder.
7.3 Post-Termination Restrictions. Upon any expiration or termination
of this Agreement (other than by Horizon pursuant to Section 7.2), Horizon shall
grant Mikart at least sixty (60) days to produce all open orders in house in
accordance with the conditions of the open orders and this Agreement. In the
event Horizon terminates this Agreement pursuant to Section 7.2: (a) Mikart
shall not manufacture, package or sell to any other person or entity for a
period of two (2) years thereafter any product Mikart is prohibited from making
during the term of this Agreement pursuant to Section 3.1; and (b) upon the
8
<PAGE> 9
request of Horizon, Mikart will provide Horizon with reasonable assistance in
locating or establishing a new manufacturer for the Products.
7.4 Changed Circumstances. In the event that the market for the Products
materially changes or either party, in good faith, believes that a material
change in such party's circumstances beyond their control has occurred which
materially affects its ability to perform its obligations pursuant to this
Agreement, the parties hereto shall, in good faith, negotiate towards mutually
acceptable revisions to this Agreement to address the impact of such material
changes; provided, however, the terms of this Agreement shall continue in full
force and effect unless and until the parties hereto agree otherwise.
7.5 Force Majeure.
(a) The failure of either of the parties hereto to perform any
obligation under this Agreement solely by reason of any cause beyond its
control (and due to no fault of its own), including, without limitation,
acts of God, acts of government, riots, wars, strikes and accidents in
transportation, shall not be deemed to be a breach of this Agreement;
provided, however, that the party so prevented from complying herewith
shall continue to take all actions within its power, including payment of
outstanding invoices, to comply as fully as possible herewith.
(b) If, due to force majeure, Mikart is prevented or expected to be
prevented from supplying Horizon with the Products for a period exceeding
one hundred twenty (120) days, then Horizon shall have the right to
terminate this Agreement with immediate effect and upon the request of
Horizon at Horizon's expense Mikart will provide reasonable assistance in
establishing or locating a new manufacturer for the Products. Likewise,
should Horizon be unable to purchase the Products for a period exceeding
one hundred twenty (120) days, then Mikart shall have the right to
terminate this Agreement, provided Horizon shall remain obligated to pay to
Mikart any amounts owed hereunder.
7.6 Special Termination. Notwithstanding anything else contained herein to
the contrary, but subject to Section 7.5, in the event Horizon fails in any
Contract Year to meet its minimum Batch purchase requirements set forth in
Section 4.3 hereof for any reason other than a breach of this Agreement by
Mikart, then Mikart shall have the right to terminate this Agreement effective
immediately by delivering written notice thereof to Horizon; provided, however,
Horizon may apply purchases in excess of the minimum Batch purchases in any
Contract Year to meet such requirements in subsequent Contract Years.
7.7 Post-Termination Obligations. Notwithstanding anything else contained
herein to the contrary, following any termination or expiration of this
Agreement:
(a) Mikart, at its option, shall either deliver the Blender to Horizon
(in which case Horizon shall assume all of Mikart's remaining obligations
under its lease therefor) or pay to Horizon amount in cash equal to the
then-current net book value of the Blender;
9
<PAGE> 10
[***] - CONFIDENTIAL TREATMENT REQUESTED
(b) Horizon shall purchase from Mikart (at Mikart's cost therefor) all
of Mikart's remaining inventory of the active ingredient in the Products
(but only to the extent necessary to manufacture the Products equal to
Horizon's forecast for the subsequent four (4) month period); and
(c) Subject to Section 7.3 hereof, Mikart shall have not further
rights to use any of the Health Registrations.
ARTICLE 8
INDEMNIFICATION AND INSURANCE
-----------------------------
8.1 Indemnification. Mikart hereby indemnifies and agrees to defend and
hold Horizon harmless from and against losses, claims, damages, liabilities,
costs and expenses (including, without limitation, attorneys' fees and court
costs) incurred by Horizon as a result of any breach of this Agreement by Mikart
or the manufacture, package or storage of any Products by Mikart. Horizon hereby
indemnifies and agrees to defend and hold Mikart harmless from and against
losses, claims, damages, liabilities, costs and expenses (including, without
limitation, attorneys' fees and court costs) incurred by Mikart as a result of
any breach of this Agreement by Horizon, the storage, sale or distribution of
the Products, or any failure by Horizon to provide any instructions regarding
the proper use of the Products to any user thereof.
8.2 Insurance. Each party hereto shall maintain with a financially sound
and reputable insurer throughout the term of this Agreement comprehensive
general liability insurance, including, without limitation, product liability
insurance with liability limits of at least $[***] per occurrence and in the
aggregate. Each party hereto shall also name the other party as an additional
insured party on its policy and provide the other party with such evidence
thereof as is reasonably requested by the other party from time to time.
ARTICLE 9
WARRANTIES AND REPRESENTATIONS OF THE PARTIES
---------------------------------------------
9.1 Additional Representations and Warranties of Mikart. Mikart hereby
additionally represents and warrants to Horizon the following:
(a) Mikart is a corporation duly organized and existing in good
standing under the laws of the State of Georgia;
(b) There are no material adverse claims pending or, to the best of
Mikart's knowledge, threatened against Mikart by any entity with respect to
the Products;
(c) Mikart is neither a party to nor otherwise bound by any agreement
or instrument which prohibits or prevents it from performing its
obligations under this Agreement; and
10
<PAGE> 11
(d) Mikart's manufacturing, packaging and storage facilities comply in
all material respects with all applicable federal, state and local laws,
rules and regulations in the Territory.
(e) Mikart is using a combination of internal and external resources
to assess and make any necessary changes to its information technology
systems to ensure that they will function without error in connection with
the date January 1, 2000. Mikart has communicated with (and will continue
to communicate with) its suppliers and others with whom it does business to
monitor and evaluate such "Year 2000" conversion.
Nonetheless, Mikart does not expect such conversion to have a material adverse
effect on its ability to perform its obligations under this Agreement.
9.2 Additional Representations and Warranties of Horizon. Horizon hereby
additionally represents and warrants to Mikart the following:
(a) Horizon is a corporation duly organized and existing under the
laws of the State of Delaware;
(b) There are no material adverse claims pending or, to the best of
Horizon's knowledge, threatened against Horizon by any entity with respect
to any of its products or business;
(c) Horizon is neither a party to nor otherwise bound by any agreement
or instrument which prohibits or prevents it from performing its
obligations under this Agreement; and
(d) Horizon owns all of the Health Registrations and holds a valid
license to use the Trademarks and has the full power and authority to grant
to Mikart the right to manufacture and purchase the Products under the
Health Regulations and to use the Trademarks in connection therewith, all
in accordance herewith.
ARTICLE 10
CONFIDENTIALITY AND NONSOLICITATION OF PERSONNEL
------------------------------------------------
10.1 Confidentiality. Each party hereto acknowledges that it has been and
will be exposed to certain "Confidential Information" and "Trade Secrets" (both
as hereinafter defined) of the other party in connection with the transactions
contemplated by this Agreement and that its unauthorized use or disclosure of
such information or data could cause immediate and irreparable harm to such
other party. Accordingly, except to the extent that it is necessary to use such
information or data to perform its obligations under this Agreement, neither
party shall, without the express prior written consent of the other party,
redistribute, market, publish, disclose or divulge to any person or entity, or
use or modify for use, directly or indirectly, in any way for any person or
entity: (a) any of the other party's Confidential Information during the term of
this Agreement and for a period of three (3) years after any expiration or
termination of this Agreement; and (b) any of the other party's Trade Secrets at
any time during which such information constitutes a trade secret under
applicable law. For purposes hereof, "Confidential Information" shall mean all
competitively sensitive, non-public information (other than "Trade Secrets") of
or about a party which is not generally known by or available to such party's
competitors, and "Trade Secrets" shall mean "Trade Secrets" as defined under
applicable law.
11
<PAGE> 12
10.2 Nonsolicitation of Personnel. Neither party hereto shall, without the
prior written consent to the other party, either directly or indirectly, alone
or in conjunction with any other person or entity, solicit or attempt to solicit
any "key or material" employee, consultant, contractor or personnel of such
other party in the State of Georgia to terminate, alter or lessen his or her
affiliation with such other party at any time during the term of this Agreement
and for a period of one (1) year thereafter.
ARTICLE 11
ARBITRATION OF DISPUTES
-----------------------
All disputes arising out of or in connection with the interpretation,
application or enforcement of this Agreement shall be settled by final and
binding arbitration. Such arbitration shall be conducted in Atlanta, Georgia,
pursuant to the commercial arbitration rules of the American Arbitration
Association in effect at the time the arbitration is commenced. The decision of
the arbitrators, which may include interest, shall be final and binding on the
parties hereto and may be entered and enforced in any court of competent
jurisdiction by any party. The arbitration shall be pursued and brought to
conclusion as rapidly as possible. The prevailing party in the arbitration
proceeding shall be awarded reasonable attorneys' fees, expert witness costs and
expenses, and all other costs and expenses incurred in connection with such
proceeding, unless the arbitrators shall for good cause determine otherwise.
ARTICLE 12
NOTICES
-------
12.1 Delivery. All notices, consents, requests and other communications
hereunder shall be in writing and shall be sent by hand delivery, by certified
or registered mail (return-receipt requested), or by a recognized national
overnight courier service as set forth below:
If to Mikart: Mikart, Inc.
1750 Chattahoochee Avenue
Atlanta, Georgia 30318
Attention: Miguel I. Arteche
If to Horizon: Horizon Pharmaceutical Corporation
660 Hembree Parkway
Suite 106
Roswell, Georgia 30076
Attention: Brent Dixon
12
<PAGE> 13
12.2 Effective Time. Notices delivered pursuant hereto shall be deemed
given: (a) at the time delivered, if personally delivered; (b) at the time
received, if mailed; and (c) one (1) business day after timely delivery to the
courier, if by overnight courier service.
12.3 Changes. Either party hereto may change the address to which notice is
to be sent by written notice to the other party in accordance with the
provisions of this Article 12.
ARTICLE 13
MISCELLANEOUS
-------------
13.1 Severability. If any provision of this Agreement is held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired, and the
parties shall use their best efforts to substitute a valid, legal and
enforceable provision, which, insofar as practical, implements the purpose of
this Agreement.
13.2 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed one and the same instrument.
13.3 Governing Law. This Agreement shall be governed by, and any matter or
dispute arising out of this Agreement shall be determined by, the laws of the
State of Georgia.
13.4 Headings: Gender. "Article," "Section" and other headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. All personal pronouns used in
this Agreement shall include the other genders, whether used in the masculine,
feminine or neuter gender, and the singular shall include the plural and vice
versa, whenever and as often as may be appropriate.
13.5 Entire Agreement. This Agreement represents the entire agreement of
the parties with respect to its subject matter. Any and all prior discussions or
agreements with respect hereto are merged into and superseded by the terms of
this Agreement. This Agreement may be modified or amended only in writing signed
by both parties which expressly refers to this Agreement and states an intention
to modify or amend it. No such amendment or modification shall be effected by
use of any purchase order, acknowledgment, invoice or other form of either party
and in the event of conflict between the terms of this Agreement and any such
form, the terms of this Agreement shall control.
13.6 Notices. Any notice or payment required or permitted hereunder shall
be in writing and sent by certified mail, overnight express, or personally
delivered, addressed to the party to receive the notice as set out below.
13.7 No Assignment. Neither party hereto may assign this Agreement, in
whole or in part, without the prior written consent of the other party (which
consent shall not be unreasonably withheld or delayed), and any attempted
assignment not in accordance herewith shall be null and void and of no force or
effect.
13
<PAGE> 14
13.8 Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, heirs,
representatives and permitted assigns.
13.9 Interpretation. This Agreement was fully negotiated by both parties
hereto and shall not be construed more strongly against either party hereto
regardless of which party is responsible for its preparation.
13.10 No Consequential Damages. Neither party to this Agreement shall have
any liability to the other party for any consequential or indirect damages
arising out of any breach of this Agreement, including, without limitation, loss
of profit, loss of use or business stoppage.
13.11 Further Assurances. Upon the reasonable request of the other party,
each party hereto agrees to take any and all actions necessary or appropriate to
give effect to the terms set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the day and year first above
written.
"Mikart"
MIKART, INC.
By:__________________________________________
Miguel I. Arteche, President
"Horizon"
HORIZON PHARMACEUTICAL
CORPORATION
By:__________________________________________
Brent Dixon, President
14
<PAGE> 15
[***] - CONFIDENTIAL TREATMENT REQUESTED
Exhibit A: Product Specifications
---------------------------------
Robinul(R) Tablets [***]
- ------------------------
[***]
Robinul(R) Forte Tablets [***]
- ------------------------------
[***]
15
<PAGE> 1
EXHIBIT 10.13
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are Marked
With Brackets ([***]). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
PRODUCT SUPPLY AGREEMENT
THIS PRODUCT SUPPLY AGREEMENT (the "Agreement") is entered into as of
January 29, 1999 (the "Effective Date"), by and between AMERICAN HOME PRODUCTS
CORPORATION, located at Five Giralda Farms, Madison, New Jersey 07940
(hereinafter "AHP"), and HORIZON PHARMACEUTICAL CORPORATION located at 660
Hembree Parkway, Suite 106, Roswell, Georgia 30076 (hereinafter "Horizon"). AHP
and Horizon may each be referred to herein individually as a "Party" and
collectively as the "Parties."
WHEREAS, on January 29, 1999 Horizon and AHP entered into a license
agreement concerning AHP's grant of a license to Horizon of AHP's interest in
the Robinul(R) oral dosage form human pharmaceutical business in the United
States, its territories and possessions (including the Commonwealth of Puerto
Rico); and
WHEREAS, Horizon desires AHP to manufacture or have manufactured and supply
to Horizon certain Robinul(R) products for sale by Horizon in the Territory (as
such term is defined below) and AHP desires to manufacture or have manufactured
and supply Horizon with such products on the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
premises, covenants and conditions contained in this Agreement, the Parties
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "ACCEPTABLE PRODUCT" shall have the meaning set forth in Section 6.1
hereof.
1.2 "AFFILIATE" shall mean, in the case of either Party, any corporation,
joint venture, or other business entity which directly or indirectly
controls, is controlled by, or is under common control with that
Party. "Control", as used in this Section 1.2, shall mean having the
power to direct, or cause the direction of, the management and
policies of an entity, whether
<PAGE> 2
[***] - CONFIDENTIAL TREATMENT REQUESTED
through ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, for purposes of this Agreement, the term
"Affiliate" shall not include subsidiaries in which a Party or its Affiliates
owns a majority of the ordinary voting power to elect a majority of the board of
directors but is restricted from electing such majority by contract or
otherwise, until such time as such restrictions are no longer in effect.
1.3 "BINDING QUARTERLY FORECAST" shall have the meaning set forth in
Section 2.3.1.
1.4 "CALENDAR QUARTER" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30
or December 31, for so long as this Agreement is in effect.
1.5 "CERTIFICATE OF ANALYSIS" shall mean the certificate for each batch of
Product delivered hereunder in the form contemplated by Section 2.6 of
this Agreement.
1.6 "CGMP" shall mean current good manufacturing practices of the FDA,
including compliance with the FD&C Act, 21 C.F.R. parts 210 and 211
and all applicable FDA rules, regulations, policies and guidelines in
effect at a given time.
1.7 "COMMERCIALLY REASONABLE EFFORTS" shall mean efforts and resources
normally used by a Party for a compound or product owned by it or to
which it has rights, which is of similar market potential at a similar
stage in its product life, taking into account the competitiveness of
the marketplace, the proprietary position of the compound or product,
the regulatory structure involved, the profitability of the applicable
products, and other relevant factors.
1.8 "FDA" shall mean the United States Food and Drug Administration, and
any successor thereto.
1.9 "FD&C ACT" shall mean the United States Federal Food, Drug and
Cosmetic Act, as amended.
1.10 "FULLY ABSORBED COST" shall mean with respect to AHP's manufacture of
the Product, the sum of AHP's standard unit costs of raw materials,
direct labor and allocated overhead. The calculation of direct labor
and allocated overhead costs will be consistent with AHP's then
current cost accounting policies and procedures and in accordance with
generally accepted accounting procedures.
<PAGE> 3
[***] - CONFIDENTIAL TREATMENT REQUESTED
1.11 "KNOW-HOW" shall mean all proprietary technical and clinical
information, data and know-how relating to the manufacture of the
Product, whether or not patentable, owned or controlled, as of the
Effective Date or acquired during the term of this Agreement, by AHP
or its Affiliates (with the right to have or disclose). Know-How shall
include, without limitation, all processes, formulas, discoveries and
inventions whether relating to biological, chemical, pharmacological,
toxicological, pharmaceutical, physical and analytical safety, quality
control and clinical data, including, without limitation, phase IV
clinical study data. The term "Know-How", however, shall not include
(i) any know-how, processes, information and data which is, as of the
Effective Date or later becomes, generally available to the public or
(ii) any general manufacturing know-how not specific to the Product.
1.12 "LICENSE AGREEMENT" shall mean the License Agreement between AHP and
Horizon relating to, among other things, the grant by AHP to Horizon
of an exclusive license pertaining to certain of AHP's Robinul(R)
Products within the Territory which License Agreement was executed on
January 29, 1999.
1.13 "MATERIALS" shall mean any or all Substances, inactive ingredients,
excipients, components, labels, packaging materials and other
consumable materials used in the manufacture of the Products,
provided, however, that Materials shall not include any equipment used
in the manufacture of the Products.
1.14 "MG." shall mean milligrams.
1.15 "NDA" shall mean a New Drug Application as defined in the FD&C Act and
applicable regulations thereunder, as amended from time to time.
1.16 "PRODUCTS" shall mean the following compositions and dosage forms
containing Substance in the following amounts and supplied to Horizon
pursuant to this Agreement:
Product A (Robinul(R))
Tablets
Glycopyrrolate
1 mg.
Supplied in: Bottles of 100
Product B (Robinul(R) Forte)
Tablets
Glycopyrrolate
2 mg.
Supplied in: Bottles of 100
<PAGE> 4
[***] - CONFIDENTIAL TREATMENT REQUESTED
In addition, Products shall include 1 mg. Tablets (Product C) and 2
mg. Tablets (Product D) supplied in bulk but only for Horizon's
requirements to self-package for sampling purposes.
It is understood by the Parties hereto that the Products are to (a) be
substantially similar to those Products currently manufactured and
marketed by AHP in the Territory, (b) comply with the Specifications
and (c) be sold under the trademark Robinul(R).
1.17 "REGULATORY APPROVALS" shall mean all (i) authorizations by the
appropriate Regulatory Authorities which are required for the
manufacture (other than manufacturing facility licenses, approvals or
authorizations), marketing, promotion, pricing and sale of the
Products in the Territory, and (ii) investigational new drug
applications permitting the clinical study of the Product in the
Territory, each of which are owned by AHP or its Affiliates.
1.18 "REGULATORY AUTHORITY" shall mean any national, supra-national,
regional, state or local regulatory agency, department, bureau,
commission, council or other governmental entity in the Territory
involved in the granting of Regulatory Approval for the Product,
including, without limitation, the FDA.
1.19 "SPECIFICATIONS" shall mean specifications for or concerning the
manufacturing, testing, and packaging of Products as set forth in the
Regulatory Approvals for the Product and in Schedule 1.19 hereto, or
as may be agreed upon by the Parties in writing from time to time.
1.20 "SUBSTANCE" shall mean the chemical substance 3-[(cyclopentylhydroxy
phenylacety1)oxy]-1, 1-dimethylpyrrolidinium bromide, otherwise known
as glycopyrrolate.
1.21 "TERM" shall have the meaning set forth in Section 10.1 hereof.
1.22 "TERRITORY" shall mean the United States, its territories and
possessions (including the Commonwealth of Puerto Rico).
1.23 "THIRD PARTY(IES) shall mean any person(s) or party(ies) other than
Horizon, AHP or their respective Affiliates.
1.24 "TRANSACTION AGREEMENTS" shall mean this Agreement and the License
Agreement.
1.25 "$" shall mean United States dollars.
<PAGE> 5
[***] - CONFIDENTIAL TREATMENT REQUESTED
2. SUPPLY OF PRODUCTS.
2.1 OBLIGATION TO SUPPLY. Subject to the provisions of this Agreement,
during the Term of this Agreement, AHP shall manufacture or have
manufactured for and supply to Horizon Products for sale by Horizon,
its Affiliates or its permitted sublicensees in the Territory, and
Horizon shall purchase from AHP its entire requirements of Products
for sale in the Territory. All Products supplied under this Agreement
are to be supplied in finished form, as specified in Horizon's
purchase orders placed with AHP pursuant to Section 2.4 below.
2.2 SUBCONTRACTING; ASSIGNMENT OF OBLIGATIONS.
2.2.1RIGHT TO SUBCONTRACT OR ASSIGN. AHP may subcontract or assign any
part of its manufacturing and supply obligations hereunder if it
provides no less than six (6) months' written notice of its
intent to do so to Horizon, subject to Horizon's prior right to
take over such manufacturing and supply obligations. AHP and
Horizon agree that, prior to transfer of manufacturing
obligations to such subcontractor or assignee, such subcontractor
or assignee must (i) have an FDA approved facility for the
manufacture of Product and a supplement to the Regulatory
Approvals permitting the manufacture of Product in such
facilities must be approved by the FDA, and (ii) must agree in
writing to comply with the obligations set forth in this
Agreement. AHP shall assist in the qualification of such third
party manufacturers or Horizon; provided, however, that AHP's
assistance shall be limited to providing reasonable technical
assistance not to exceed 30 man-days and the delivery of the
following documentation: Batch records for both strengths of the
Product, copies of change control history, all method validations
(including new HPLC methods), active ingredient specification
sheets, raw material test procedures, copies of process and
cleaning validations, and a copy of the Product dossier made
available to Horizon during the due diligence process. AHP shall
notify Horizon or obtain Horizon's consent with respect to its
purchase of Materials from qualified Third Parties for use in its
manufacture of Product hereunder.
2.2.2COSTS. In the event that (i) during the Term of this Agreement
AHP subcontracts or assigns its manufacturing and supply
obligations to a Third Party pursuant to Horizon's request or
(ii) Horizon assumes, either directly or through a Third Party,
the responsibilities for manufacturing and supplying Product
during the Term of this Agreement as permitted under Section
2.2.1 hereof, Horizon shall pay the out-of-pocket expenses
incurred by either Party in transferring such manufacturing and
supply responsibilities.
<PAGE> 6
[***] - CONFIDENTIAL TREATMENT REQUESTED
2.3 FORECASTS
2.3.1ROLLING FORECASTS. Throughout the term of this Agreement, Horizon
shall provide AHP with a rolling one (1) year forecast of its
expected purchases of each Product, the mechanism for which shall
be as follows:
(i) On or before the Effective Date, Horizon shall have provided AHP
with a written forecast of its expected purchases of each of the
Products for the period extending three (3) Calendar Quarters
beyond the Calendar Quarter containing the Effective Date.
Subject to Section 2.3.2, the forecast for this period, excluding
the last two (2) Calendar Quarters, shall be binding upon
Horizon.
(ii) Beginning on the date of the first Calendar Quarter following the
Effective Date and then on or prior to the first day of each
subsequent Calendar Quarter, Horizon shall provide AHP with an
update to its previously submitted forecast of its expected
purchases of each of the Products. Such update shall consist of a
repetition of the previously forecasted three (3) Calendar
Quarters along with a newly introduced forecast for the Calendar
Quarter subsequent to the last Calendar Quarter previously
forecasted, provided, however, that the quantity forecasted for
each Product for any Calendar Quarter shall not, without AHP's
prior written consent, be more than one hundred twenty-five
percent (125%) of the quantity forecasted for such Product for
the immediately preceding Calendar Quarter. Subject to Section
2.3.2, the forecast for this period, excluding the last two (2)
Calendar Quarters, shall be binding upon Horizon.
(iii)Under each of Sections 2.3.1(i) and 2.3.1(ii) above, the forecast
for those quarters which is binding upon Horizon shall be a
"Binding Quarterly Forecast."
2.3.2QUANTITY LIMITATIONS. The quantity of each Product ordered by
Horizon to be supplied by AHP in accordance with such orders in
any Calendar Quarter shall not be less than seventy-five percent
(75%) of the quantity of such Product specified in the most
recent Binding Quarterly Forecast applicable to such Calendar
Quarter. Additionally, AHP shall not be obligated to supply that
quantity of any Product in any Calendar Quarter that is more than
one hundred twenty-five percent (125%) of the quantity of such
Product specified for the most recent Binding Quarterly Forecast
applicable to such Calendar Quarter, but shall use its
Commercially Reasonable Efforts to meet requirements in excess of
such quantity. AHP shall provide sixty (60) days' written notice
to Horizon in the event AHP determines that it cannot fill an
order.
<PAGE> 7
[***] - CONFIDENTIAL TREATMENT REQUESTED
2.4 PURCHASE ORDERS
2.4.1SUBMISSION OF PURCHASE ORDERS. From time to time, Horizon shall
place purchase orders with AHP, in a format agreed upon by the
Parties, for each of the Products specifying the quantities of
the Products desired, and the place(s) to which and the manner
and dates by which delivery is to be made; said delivery dates to
be no earlier than one hundred twenty (120) calendar days after
the purchase order date. All purchase orders shall be sent by
Horizon to the attention of the following employee of AHP or as
otherwise instructed by AHP.
Wyeth-Ayerst Pharmaceuticals
P.O. Box 861
Paoli, PA 19301
Attn: Mr. Tom Higgins,
Finished Stock Requirements Division
FAX: (610) 651-3659
Purchase orders made in accordance with the provisions of this
Article 2 shall be deemed to be accepted by AHP if AHP has not
rejected said purchase orders within ten (10) business days of
receipt of the same, provided, however, that AHP shall not reject
any purchase order specifying quantities within the quantity
limitations set forth in Section 2.3.2 hereof and which purchase
orders are otherwise in accordance with the provisions of this
Article 2. To the extent the terms of any purchase order or
acknowledgment thereof are inconsistent with the terms of this
Agreement, the terms of this Agreement shall control.
2.4.2SIZE OF ORDERS. All purchase orders for each Product placed by
Horizon shall be whole number multiples of the production batch
sizes used by AHP. These are set forth below (or as mutually
agreed in writing by the Parties):
Product Batch Size - Expected Yield
Products A and C
1 mg. tablets [***] tablets
Products B and D
2 mg. tablets [***] tablets
<PAGE> 8
[***] - CONFIDENTIAL TREATMENT REQUESTED
2.5 DELIVERY. AHP shall execute all accepted purchase orders consistent
with this Agreement by delivery ex works to Horizon's designated
carrier at AHP's manufacturing or distribution facility of all ordered
quantities of the Products no later than the delivery dates provided
in Horizon's purchase orders. Title and risk of loss will pass to
Horizon when each order of Products is delivered to the designated
carrier of Horizon at AHP's manufacturing or distribution facility.
2.6 SPECIFICATIONS; CERTIFICATE OF ANALYSIS. As of the time of such
delivery by AHP, each batch of the Products will conform to the
Specifications. AHP shall perform release testing in a manner
consistent with testing methods agreed upon by the Parties. AHP shall
provide to Horizon a Certificate of Analysis with each shipment of the
Products to Horizon or its designated recipient stating that the
Products conform to the Specifications and meet release
specifications. The Certificate of Analysis shall be in a format
agreed upon by the Parties and, if required under cGMP, such
Certificate of Analysis shall include the Specifications and the
results of release testing conducted by AHP on such Products. Upon
Horizon's written request, AHP will also provide Horizon with a copy
of the manufacturing and controls information for the applicable
batch(es) delivered.
2.7 LABELING. Within thirty (30) days after the Effective Date, Horizon,
at its own expense, will provide AHP with Horizon's new labeling for
the Product (including a new NDC number for each Product) bearing
Horizon's corporate name and trade dress. If such labeling is changed
in any manner other than a new NDC number and Horizon's corporate name
and tradedress, such labeling shall be subject to the approval of AHP,
which approval will not be unreasonably withheld. AHP agrees to either
approve or disapprove such labeling within thirty (30) business days
of AHP's receipt thereof from Horizon. AHP, at Horizon's expense, will
print, either directly or through a Third Party, labels and other
printed material to be included as part of the finished Product.
Product manufactured by AHP after AHP's receipt and approval of
Horizon's new labeling for the Product, shall bear such new labeling,
provided, however, that AHP shall have no responsibility with respect
to the content of such labeling, provided the content of the labeling
printed by AHP is the same as the content of the labeling provided by
Horizon. Horizon shall reimburse AHP for all reasonable costs incurred
(on a Fully-Absorbed Cost basis) by AHP in making modifications to
labeling, branding or imprinting, packaging and/or manufacturing
processes to accommodate Horizon's new labeling or to accommodate any
other changes requested by Horizon. Such reimbursement shall be made
pursuant to invoices submitted by AHP to Horizon, which invoices shall
be payable within thirty (30) days after Horizon's receipt thereof. In
addition, should such new labeling result in any increase in AHP's
cost of manufacturing the Product hereunder, the purchase price for
such Product as calculated under Section 5.1 hereof, shall be
increased by such additional costs. Notwithstanding the foregoing, AHP
may supply Horizon with Product bearing AHP's labeling if such Product
was manufactured and labeled prior to the Closing, it being agreed
that Product manufactured from and after the Closing shall bear (i)
AHP's label, or (ii) Horizon's new label.
2.8 PURCHASE OF RESIDUAL INVENTORIES. Upon expiration or upon termination
of this Agreement by AHP, upon AHP's request Horizon shall purchase
from AHP (i) reasonable quantities of AHP's residual inventories of
Products having not less than twelve months' remaining dating at the
then current purchase price as determined in accordance with Section
5.1 hereof, and (ii) reasonable quantities of AHP's residual
inventories of Product specific Materials, including, without
limitation, all labels and other Product specific packaging materials,
but excluding all stocks of Substance and Materials used for the
manufacture of Substance, at AHP's Fully Absorbed Cost for such
Materials.
2.9 INITIAL DELIVERY. AHP agrees to provide initial delivery of Products,
subject to the timely receipt of an appropriate purchase order from
Horizon in accordance with this Article 2, on or before Closing in
accordance with procedures and terms to be set forth in the Systems
Transfer documents developed by the Parties pursuant to Section 3.2 of
the License Agreement.
<PAGE> 9
[***] - CONFIDENTIAL TREATMENT REQUESTED
3. MANUFACTURE OF PRODUCTS.
3.1 MANUFACTURE OF PRODUCT. AHP agrees to manufacture and supply the
Products in accordance with (i) the Specifications, (ii) the
applicable Regulatory Approvals, as may be amended from time to time,
and (iii) cGMP requirements, and all other applicable laws, rules and
regulations. If
(a) upon Horizon's request the Parties mutually agree to change part
or all of the Product manufacturing process, or
(b) any Product specific change in the applicable Regulatory
Approvals (other than a change included under clause (a) above),
applicable laws, rules or regulations requires a change in the
Product manufacturing process
Horizon shall reimburse AHP for all Fully Absorbed Costs incurred
by AHP in connection with making such changes in the Product
manufacturing process. Additionally, if either making any such
change in the Product manufacturing process or any Product
specific change in the applicable Regulatory Approvals,
applicable laws, rules or regulations requires AHP to conduct
development, testing or other activities (e.g., process
development, stability testing, validation of new specifications,
etc...) (collectively referred to as "Activities") in addition to
those activities AHP conducted or is required to conduct in its
manufacture of the Product immediately prior to such change in
either the Product manufacturing process or the Product specific
applicable Regulatory Approvals, applicable laws, rules or
regulations being implemented, Horizon shall reimburse AHP for
all Fully Absorbed Costs incurred by AHP in connection therewith.
In addition to the foregoing, in the event that the Product
manufacturing process is changed or AHP is required to conduct
Activities in accordance with this Section 3.1, the purchase
price for Product, other than for Product already manufactured
and in inventory, shall be increased in an amount equivalent to
the increase in AHP's manufacturing cost for Product, which
increase shall be effective immediately upon AHP becoming aware
of any proposed changes in the Regulatory Approvals, applicable
laws, rules or regulations which requires either (i) a change in
the Product manufacturing process or (ii) to AHP to conduct
Activities, it will promptly notify Horizon and will consult with
Horizon regarding the proposed changes and Activities, and will
obtain Horizon's written consent prior to implementing the
Activities and the changes, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, in the
event that Horizon requests changes in the manufacturing process,
AHP shall not be obligated to make such change or conduct any
Activities with respect thereto unless the parties mutually agree
to make such change in the Product manufacturing process.
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3.2 PROCUREMENT OF MATERIALS. AHP shall use its Commercially Reasonable
Efforts to timely procure all Materials necessary for the production
of the Products. Title to all such Materials shall reside in AHP.
Notwithstanding the foregoing, AHP's obligation to supply Horizon with
Product hereunder is subject to AHP's ability to obtain from Third
Parties Materials in sufficient quantities to meet Horizon's and AHP's
requirements for the manufacture of Products. AHP may, during any
period of shortage of any Materials, prorate its supply of such
Materials between Horizon and AHP's other uses (e.g., for sales of
Products outside of the Territory or use in products other than
Products) according to the relative quantities purchased/used by each
during the immediately preceding twelve (12) months (or such shorter
period of time that AHP has actually been supplying Product to Horizon
hereunder if such shortage of Materials occurs prior to the first
anniversary of the Effective Date) without regard to price. AHP shall
use Commercially Reasonable Efforts to avoid entirely any such
shortage or, if avoidance is not possible, to limit such period and
amount and shall promptly inform Horizon if it becomes aware of any
potential shortage. [***]
3.3 REGULATORY FILINGS. Horizon shall provide to AHP copies of all annual
reports to the FDA.
3.4 COMPLIANCE WITH LAWS AND REGULATIONS. While the Products are in its
possession or under its control, AHP shall comply with all applicable
federal, state and local statutory and regulatory requirements
regarding the manufacture, packaging, handling and storage of the
Products.
3.5 PRODUCT COMPLAINTS. Horizon shall be solely responsible for
interacting with the public with respect to complaints regarding
Product quality. With respect to any such complaints, each Party shall
have the responsibility for promptly conducting an investigation of
any activities conducted by it under the Transaction Agreements which
may be relevant to the complaint and each Party shall promptly report
the results of such investigation to the other Party. The Parties
shall cooperate in any investigation by the other Party of each such
complaint which involves the Parties' duties under this Agreement.
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4. TECHNOLOGY TRANSFER.
4.1 TRANSFER OF PRODUCT MANUFACTURING KNOW-HOW. As soon as practicable
after Horizon's request, and only if Horizon has complied with all of
its obligations under the Transaction Agreements including, without
limitation, the payment of all fees and payments that become due and
payable prior to such time, AHP shall furnish Horizon with one copy of
the Know-How, including all technical, manufacturing and AHP's other
written information, including but not limited to process sheets, raw
material and process specifications, manuals, vendors lists, and other
writings specifically relating to the Products, which are currently
used by AHP, its Affiliates or sub-contractors to manufacture or have
manufactured Products according to the methods used by AHP or its
Affiliates or subcontractors. AHP agrees that Horizon, its Affiliates
or its permitted sublicensees, may use all Know-How listed in the
preceding sentence for the manufacture of Products for sale in the
Territory.
4.2 TRAINING. In connection with the transfer of information described in
Section 4.1, AHP shall permit a reasonable number of Horizon's
technically skilled personnel and consultants designated by Horizon
(with travel and living expenses paid by Horizon) to make one or more
visits to such facilities of AHP or its Affiliates as may be engaged
in the manufacture of Products for up to an aggregate of thirty (30)
man-days in order to inspect and be instructed in all manufacturing
techniques and procedures used by AHP, its Affiliates or
subcontractors in the manufacture of Products.
4.3 HORIZON'S USE OF KNOW-HOW. Horizon agrees that it shall use all
Know-How provided to Horizon by or on behalf of AHP, its Affiliates or
subcontractors pursuant to the Transaction Agreements for the sole
purpose of making, using and/or selling the Products only in the
Territory and shall not use or permit any Third Party to use such
Know-How for the purpose of making Products for sale outside the
Territory or for use as veterinary pharmaceutical products within or
outside of the Territory. In the event, due to Horizon's failure to
comply with any provision of the Transaction Agreements, such Know-How
is used for the purpose of making Products for either sale outside the
Territory or sale as veterinary pharmaceutical products within or
outside of the Territory during such time period, Horizon shall
immediately cease such use and/or sale and take such action as may be
necessary to prevent a Third Party from using such Know-How for the
purpose of making Products for sale outside the Territory and/or for
sale as veterinary pharmaceutical products within or outside the
Territory. The provisions of this Section shall not limit any other
remedy AHP has on account of the use of such Know-How for the purpose
of making Products for sale outside the Territory or for sale as
veterinary pharmaceutical products within or outside the Territory.
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5. PURCHASE PRICE.
5.1 PRICE. Horizon shall purchase from AHP and AHP shall sell to Horizon
Products at the purchase prices set forth in Schedule 5.1 hereof,
which purchase prices shall be increased once each year by [***].
5.2 FREIGHT, INSURANCE AND TAXES. Horizon shall pay all actual freight,
insurance and government sales tax imposed on purchasers for resale,
and duties and other fees (except tax on income to AHP) incurred in
connection with the sale and shipment of the Products to Horizon.
5.3 PAYMENT. Payments to AHP for the purchase price of delivered Products
(as well as any other payment due from Horizon to AHP under this
Agreement) shall be made by Horizon within thirty (30) days after the
date of invoice, except as to Product orders which are rejected by
Horizon in accordance with the procedures recited in Article 6, or
which the Parties dispute are in conformance with the Specifications.
In the event Product is rejected by Horizon, but is determined to be
Acceptable Product pursuant to Section 6.2 hereof, the payment for
such Product shall be due and payable within ten (10) days after the
determination with respect to such Product is made in accordance with
Section 6.2 hereof.
5.4 MAINTENANCE OF RECORDS; AUDITS. AHP shall keep complete records of
AHP's Fully Absorbed Costs for the manufacture and supply of Products
hereunder, and shall permit an independent certified public accountant
selected by Horizon and reasonably acceptable to AHP, at Horizon's
expense, at the time of (a) any price adjustment under Section 5.1, or
(b) request by AHP for reimbursement of costs incurred under Sections
2.7 and 3.1 hereof, but, in any event, no more than once per year, to
inspect and review such records during normal business hours and upon
reasonable prior notice, in order to verify or determine such costs
and whether an increase in such costs has occurred. The independent
certified public accountant may not disclose to Horizon specific
manufacturing cost breakdowns, but only whether or not the increase in
AHP's Fully Absorbed Cost reported by AHP are correct. Horizon shall
bear the costs and fees associated with such inspections and reviews
unless it is determined by the independent certified public accountant
that such price adjustment was unjustified (in excess of five percent
(5%) more than the price increase determined by the independent
certified public accountant to be justified), in which case AHP shall
bear the costs and fees of such audit and shall promptly refund to
Horizon any overpayments made by Horizon because of such unjustified
price adjustment.
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6. INSPECTION OF PRODUCT.
6.1 INSPECTION; REJECTION OF PRODUCT. Horizon shall analyze representative
samples of each lot of Product delivered to Horizon for purposes of
determining whether the same meets the Specifications and was
manufactured in accordance with the NDA and cGMP ("Acceptable
Product") and, if performed, will do so within thirty (30) days from
the date of delivery of such Products to Horizon's carrier. Horizon
shall notify AHP in writing within said thirty (30) days of any of the
Product or portion thereof, which Horizon is rejecting because it is
not Acceptable Product. If Horizon fails to notify AHP that it is
rejecting a lot of Product within such thirty (30) day period, such
lot of Product shall be deemed to be Acceptable Product. In the event
of a recall of Product, Section 9.1 hereof shall govern.
6.2 THIRD PARTY ANALYSIS. If AHP, after good faith consultation with
Horizon, disputes any finding by Horizon that Product is not
Acceptable Product, representative samples of such Product shall be
forwarded to a Third Party jointly selected by AHP and Horizon, in
their reasonable discretion, for analysis, which analysis shall be
performed in compliance with applicable FDA regulations for retesting
of pharmaceutical products. The findings of such Third Party regarding
whether the Product was Acceptable Product shall be binding upon the
Parties. The cost of such analysis by such Third Party shall be borne
by the Party whose findings differed from those generated by such
Third Party.
6.3 REPLACEMENT OF PRODUCT. AHP shall replace any Product order, or
portion thereof, which is not Acceptable Product (unless such
non-conformance is due to any negligent or wrongful act or omission by
Horizon or its agents or subcontractors), at its cost and expense,
including shipping costs.
6.4 DISPOSITION OF REJECTED PRODUCT. AHP shall instruct Horizon as to the
disposition of any Product order or portion thereof determined not to
be Acceptable Product. At the sole option of AHP, said Product may be
returned to AHP, at AHP's expense including shipping costs, or
destroyed in an environmentally acceptable manner, at AHP's expense.
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7. INSPECTION AND ACCESS TO FACILITY AND RECORDS.
7.1 INSPECTION BY REGULATORY AUTHORITIES. Upon the request of the FDA or
other regulatory agency, such agency shall have access to observe and
inspect AHP's or its Affiliates' facilities and procedures used for
the manufacture, testing or warehousing of the Products and to audit
such facilities for compliance with cGMP and/or other applicable
regulatory standards.
7.2 NOTIFICATION OF INQUIRIES AND INSPECTIONS. AHP also agrees to notify
Horizon within ten (10) business days or such shorter time as may be
required by the notification of the inspection, of any written or oral
inquiries, notifications or inspection activity by the FDA or other
regulatory agency in regard to any Product. AHP shall permit not more
than two (2) Horizon representatives to attend any such inspections,
and shall provide a reasonable description of any such governmental
inquiries, notifications or inspections promptly after such visit or
inquiry. AHP shall furnish to Horizon (i) within ten (10) business
days after receipt, any report or correspondence issued by the FDA or
other governmental agency in connection with such visit or inquiry,
including but not limited to, any FDA Form 483 (List of Inspectional
Observations) or applicable portions of any FDA Warning Letters which
pertain to the Products in the Territory and (ii) not later than ten
(10) business days prior to the time it provides to the FDA or other
regulatory agency, copies of proposed responses or explanations
relating to items set forth above (each, a "Proposed Response"), in
each case redacted of trade secrets or other confidential or
proprietary information of AHP that are unrelated to the obligations
under this Agreement or are unrelated to the Products. AHP shall
discuss with Horizon and consider in good faith any comments provided
by Horizon on the Proposed Response. After the filing of a response
with the FDA or other regulatory agency, AHP will notify Horizon of
any further contacts with such agency relating to the subject matter
of the response.
7.3 INSPECTION BY HORIZON. AHP shall permit Horizon to inspect once
annually that portion of the AHP facility where Product is
manufactured and review such Product documents as is reasonably
necessary for the purpose of assessing AHP's compliance with
applicable regulations. Such inspection and document review shall be
conducted upon reasonable prior notice by Horizon, but not less than
thirty (30) days prior to the proposed inspection, at a time and date
mutually agreeable to the Parties. In addition, in the event Horizon
has received two or more shipments of Product determined not to be
Acceptable Product pursuant to the procedures of Article VI hereof
within a single Calendar Quarter, Horizon shall be permitted to
conduct an additional such inspection to help determine the reason(s)
for delivery of such non-Accepted Product.
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8. WARRANTIES AND INDEMNITIES.
8.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY. As of the Effective
Date, each of Horizon and AHP hereby represents, warrants and
covenants to the other Party hereto a follows:
(a) it is a corporation or entity duly organized and validly existing
under the laws of the state or other jurisdiction of
incorporation or formation;
(b) the execution, delivery and performance of this Agreement by such
Party has been duly authorized by all requisite corporate action
and do not require any shareholder action or approval;
(c) it has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(d) the execution, delivery and performance by such Party of this
Agreement and its compliance with the terms and provisions hereof
does not and will not conflict with or result in a breach of any
of the terms and provisions of or constitute a default under (i)
a loan agreement, guaranty, financing agreement, agreement
affecting a product or other agreement or instrument binding or
affecting it or its property; (ii) the provisions of its charter
or operative documents or bylaws; or (iii) any order, writ,
injunction or decree of any court or governmental authority
entered against it or by which any of its property is bound; and
(e) it shall at all times comply with all applicable material laws
and regulations relating to its activities under this Agreement.
8.2 REPRESENTATIONS AND WARRANTIES OF AHP. In addition to the
representations and warranties made by AHP in Section 8.1 hereof, AHP
hereby represents and warrants to Horizon as follows:
(a) that all Products supplied hereunder conform to the
Specifications, will be (and with respect to the initial delivery
of Product to Horizon hereunder, were) manufactured in accordance
with the applicable Regulatory Approvals and cGMP, and, subject
to Section 2.7 hereof, will not be (and, with respect to the
initial delivery of Product to Horizon hereunder, were not)
adulterated or misbranded while in AHP's possession; and
(b) that it has not and will not use in any capacity the services of
any persons debarred under 21 U.S.C. ss.335(a) or 335(b) in
connection with the manufacture of the Products.
8.3 COVENANTS OF HORIZON. In addition to the representations and
warranties made by Horizon in Section 8.1 hereof and the covenants
made by Horizon elsewhere in this Agreement, Horizon hereby covenants
to AHP that it shall not sell the Products manufactured by AHP
hereunder in countries other than those within the Territory and that
it shall not sell such Products for veterinary use within or outside
the Territory. Horizon further covenants that it shall not sell such
Products to any Third Party which Horizon has reason to believe might
sell the Products in countries other than those within the Territory.
In the case of any such Third Party sales, Horizon shall exercise its
Commercially Reasonable Efforts, consistent with applicable law, to
gain a cessation of such Third Party sales of Products within such
countries, including, to the extent possible, terminating its sales of
Product to such Third Party.
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8.4 NO OTHER WARRANTIES. EXCEPT FOR THE WARRANTIES EXPRESSLY MADE BY AHP
IN SECTIONS 8.1 AND 8.2 HEREOF, AHP MAKES NO OTHER REPRESENTATION OR
WARRANTIES, EITHER EXPRESS OR IMPLIED (WHETHER WRITTEN OR ORAL),
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR ANY
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE
PRODUCTS OR AHP'S OBLIGATIONS HEREUNDER. ADDITIONALLY, EXCEPT FOR THE
WARRANTIES MADE BY HORIZON IN THIS AGREEMENT, HORIZON MAKES NO OTHER
REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED (WHETHER WRITTEN
OR ORAL) WITH RESPECT TO HORIZON'S OBLIGATIONS HEREUNDER.
8.5 INDEMNIFICATION BY AHP. AHP shall indemnify, defend and hold harmless
Horizon, its Affiliates and their respective officers, directors,
shareholders, employees, agents and representatives (each a "Horizon
Indemnified Party") from any claims, losses, liabilities, costs,
expenses (including reasonable attorney's fees) and damages to Third
Parties, including any related to property or personal injury (each a
"Liability") which the Horizon Indemnified Party may incur, suffer or
be required to pay resulting from or arising in connection with (a)
the breach by AHP of any representation or warranty contained in this
Agreement; (b) any violation by AHP of any applicable federal, state
or local regulation, statute or order in the manufacture and packaging
of Products arising out of AHP's duties under this Agreement which is
not attributable to printed materials provided by Horizon; or (c) any
negligent act or omission by AHP or its affiliates in carrying out its
obligations under this Agreement. Notwithstanding the foregoing, AHP
shall have no obligations to defend, indemnify or hold harmless any
Horizon Indemnified Party for any Liability that results from the
negligence or intentional misconduct of Horizon, its Affiliates, or
any of its permitted sublicensees or any of their respective officers,
directors, employees, agents, consultants or representatives.
8.6 INDEMNIFICATION BY HORIZON. Horizon shall indemnify, defend and hold
harmless AHP and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, an "AHP Indemnified
Party") from and against any Liability which the AHP Indemnified Party
may incur, suffer or be required to pay resulting from or arising in
connection with (a) the breach by Horizon of any representation or
warranty contained in this Agreement; (b) materials or promotional
claims (except to the extent that AHP has previously reviewed and
approved the specific material or promotional claim under Section 8.2
of the License Agreement), (c) the manufacture, packaging, promotion,
distribution, testing, use, marketing, sale or other disposition of
Products by Horizon, its Affiliates, its permitted sublicensees or
their respective subcontractors; or (d) the use of the Trademark by
Horizon, its Affiliates, its permitted sublicensees or their
respective subcontractors. Notwithstanding the foregoing, Horizon
shall have no obligations to indemnify, defend, or hold harmless any
AHP Indemnified Party for any Liability that results from the
international misconduct or negligence of AHP, its Affiliates, its
permitted sublicensees or any of their respective employees, officers,
directors or agents, consultants or representatives.
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8.7 CONDITIONS TO INDEMNIFICATION. The obligations of the indemnifying
Party under Sections 8.5 and 8.6 are conditioned upon the delivery of
written notice to the indemnifying Party of any potential Liability
promptly after the indemnified Party becomes aware of such potential
Liability. The indemnifying Party shall have the right to assume the
defense of any suit or claim relating to the Liability if it has
assumed responsibility for the suit or claim in writing; however, if
in the reasonable judgment of the indemnified Party, such suit or
claim involves an issue or matter which could have a materially
adverse effect on the business operations or assets of the indemnified
Party, the indemnified Party may waive its rights to indemnity under
this Agreement and control the defense or settlement thereof, but in
no event shall any such waiver be construed as a waiver of any
indemnification rights such Party may have at law or in equity. If the
indemnifying Party defends the suit or claim, the indemnified Party
may participate in (but not control) the defense thereof at its sole
cost and expense.
8.8 SETTLEMENTS. Neither Party may settle a claim or action related to a
Liability without the consent of the other Party, if such settlement
would impose any monetary obligation on the other Party or require the
other Party to submit to an injunction or otherwise limit the other
Party's rights under this Agreement. Except as otherwise expressly set
forth in this Article 8, any payment made by a Party to settle any
such claim or action shall be at its own cost and expense.
8.9 LIMITATION OF LIABILITY. With respect to any claim by one Party
against the other arising out of the performance or failure of
performance of the other Party under this Agreement, the Parties
expressly agree that the liability of such Party to the other Party
for such breach shall be limited under this Agreement or otherwise at
law or equity to direct damages only and in no event shall a Party be
liable for, punitive, exemplary or consequential damages. The
limitations set forth in this Section 8.9 shall not apply with respect
to the obligations of either Party to indemnify the other under
Sections 8.5 or 8.6 hereof in connection with a Liability to a third
party.
8.10 INSURANCE. Horizon shall obtain and maintain at all times during the
term of this Agreement Commercial General Liability Insurance,
including Products Liability, with limits of liability of not less
than [***] Dollars ($[***]) per occurrence and [***] Dollars ($[***])
in the aggregate. Horizon shall provide AHP with a Certificate of
Insurance evidencing this coverage within thirty (30) days of the
Effective Date. Such insurance policy shall name AHP as an additional
insured and Horizon shall use its Commercially Reasonable Efforts to
ensure such insurance policy contains a provision requiring ten (10)
day advance notification to AHP in the event of its cancellation or
termination. AHP shall maintain self insurance and/or insurance
obtained from Third Party insurers in amounts sufficient to cover its
obligations under Section 8.5. Upon Horizon's written request, AHP
shall provide Horizon with evidence of such insurance coverage.
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9. RECALLS.
9.1 PRODUCT RECALLS. In the event of an actual or threatened recall of any
Product required or recommended by a governmental agency or authority
of competent jurisdiction within the Territory or if recall of any
Product is (i) reasonably deemed advisable by AHP or by Horizon, or
(ii) jointly deemed advisable by AHP and Horizon, such recall shall be
promptly implemented and administered by Horizon in a manner which is
appropriate and reasonable under the circumstances and in conformity
with accepted trade practices. In the event that a recall is caused
because, due to negligent acts or omissions of AHP, its Affiliates or
subcontractors, Product supplied by AHP to Horizon does not conform to
the Specifications or was not manufactured in accordance with the
applicable Regulatory Approvals and cGMP, the cost, including
Horizon's reasonable out-of-pocket expenses, of any such recall shall
be borne by AHP. Horizon shall pay all costs, including AHP's
reasonable out-of-pocket expenses, associated with a recall for any
other reason, including without limitation, recalls (i) caused by
actions of Third Parties occurring after such Product is sold by
Horizon, (ii) due to packaging or label defects for which Horizon has
responsibility or (iii) due to any other breach by Horizon of its
duties under this Agreement.
9.2 NOTICE OF EVENTS THAT MAY LEAD TO PRODUCT RECALL. Each Party shall
keep the other fully and promptly informed of any notification, event
or other information, whether received directly or indirectly, which
might affect the marketability, safety or effectiveness of Products or
might result in a recall of Products by the FDA.
9.3 RECALL DUE TO BREACH BY AHP. In the event of any recall for which AHP
would be responsible for the costs in accordance with Section 9.1
hereof, AHP shall, at the election of Horizon either:
(a) supply Products, without chare to Horizon, in an amount
sufficient to replace the amounts of Products recalled, or
(b) refund to Horizon or give credit to Horizon against outstanding
receivables due from Horizon for the price of Products to be
delivered to Horizon in the future, in amounts equal to the price
paid by Horizon to AHP for Products so recalled plus the
reasonable transportation costs incurred by Horizon and not
recovered by Horizon in respect of such recalled Products.
In addition, if, as a direct result of any recall for which AHP
would be responsible for the costs in accordance with Section 9.1
hereof, Horizon's aggregate sales of Products in any consecutive
thirty (30) day period fall below fifty percent (50%) of
Horizon's average monthly sales of Products for the preceding six
(6) months, then Horizon may postpone payment of the first and
second payments following the recall otherwise due and payable
under Section 4.1(ii) of the License agreement for six (6)
months, after which Horizon shall resume making such payments,
including immediate payment of the two postponed payments.
9.4 DEFINITION OF RECALL. For Purposes of this Article 9, "recall" shall
mean any action by Horizon and its Affiliates, or AHP and its
Affiliates, to recover title or possession or halt distribution,
prescription or consumption of Products sold or shipped to Third
Parties. The term "recall" also applies to Product which would have
been subject to recall if it had been sold or shipped.
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9.5 SURVIVAL OF OBLIGATIONS. The provisions and obligations of this
Article 9 shall survive any termination of this Agreement.
10. TERM AND TERMINATION.
10.1 TERM. This Agreement shall become effective upon the Effective Date of
the License Agreement and, unless earlier terminated as provided
below, shall remain in full force and effect for a period ending on
the second (2nd) anniversary of the Effective Date (the "Term").
Thereafter, the term of this Agreement may be extended by Horizon on
six (6) months' prior written notice for up to six (6) additional
months provided that the Parties agree upon all terms and conditions
of such extension not later than the expiration of the Term. The
Supply Price would be negotiated but shall not be less than AHP's
Fully Absorbed Cost plus a [***] mark-up. If the Parties have not
extended the term of this Agreement or signed a new supply agreement
before the expiration of the Term, AHP shall have no obligation to
supply Horizon with any Product after expiration of the Term. Upon
expiration or termination of this Agreement for any reason, all unpaid
amounts due pursuant to Section 5.1 shall become immediately due and
payable.
10.2 TERMINATION BY AHP. AHP may terminate this Agreement, except as
limited hereinafter, immediately upon written notice, in the event
(a) Horizon fails to make any payment due and owing within thirty
(30) days after notice thereof from AHP that such payment has not
been made by Horizon by the date specified in Section 5.3; or
(b) Horizon commits a breach of any material provision of this
Agreement which breach remains uncured for sixty (60) days,
measured from the date written notice of such breach is given to
Horizon, or if such breach is not susceptible of cure within such
sixty (60) day period and Horizon uses good faith efforts to cure
such breach, for one hundred eighty (180) days after written
notice to Horizon; or
(c) the License Agreement is terminated for any reason, other than
AHP's breach of the License Agreement, prior to the expiration of
the Term of this Agreement.
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10.3 TERMINATION BY HORIZON. Horizon may terminate this Agreement, in whole
or with regard to a specific Product as applicable, immediately upon
written notice in the event (a) AHP commits a breach of any material
provision of this Agreement, which is not cured within thirty (30)
days in case of a failure to make any payment due and owing; or (b)
AHP commits a breach of any material provision of this Agreement which
breach remains uncured for sixty (60) days, measured from the date
written notice of such breach is given to AHP, or if such breach is
not susceptible of cure within such sixty (60) day period and AHP uses
good faith efforts to cure such breach, for one hundred eighty (180)
days after written notice to AHP; or (c) the License Agreement is
terminated for any reason other than Horizon's breach of the License
Agreement prior to the expiration of the Term of this Agreement.
10.4 INSOLVENCY. Either party may terminate this Agreement upon the filing
or institution of bankruptcy, reorganization, liquidation or
receivership proceedings, or upon an assignment of a substantial
portion of the assets for the benefit of creditors by the other Party,
or in the event a receiver or custodian is appointed for such party's
business, or if a substantial portion of such Party's business is
subject to attachment or similar process; provided, however, that in
the case of any involuntary bankruptcy proceeding such right to
terminate shall only become effective if the proceeding is not
dismissed within ninety (90) days after the filing thereof.
10.5 EFFECT OF TERMINATION. Upon termination or expiration of this
Agreement, except in the event of termination of the Agreement by AHP
pursuant to Sections 10.2 or 10.4, AHP shall have the obligations set
forth in Sections 4.1 and 4.2. If AHP terminates this Agreement
pursuant to either Section 10.2 or 10.4, the obligations set forth in
Sections 4.1 and 4.2 hereof shall survive termination if Horizon has
made or accelerates payment of all payments to AHP required under
Section 4.1 of the License Agreement, and otherwise the obligations
under Sections 4.1 and 4.2 hereof shall not survive termination. In
the event that Horizon terminates this Agreement pursuant to Section
10.3 hereof because of a failure to supply Product to Horizon which
failure to supply results in an uncured breach of this Agreement by
AHP, Horizon shall thereafter be permitted to manufacture Product
either directly or through a Third Party and the transfer of
manufacturing Know-How under Section 4.1 shall be accomplished as soon
as practicable, but in no event more than thirty (30) days, after this
Agreement is so terminated and the reasonable out-of-pocket costs
incurred by the Parties in transferring such Product manufacturing
responsibilities from AHP to either Horizon, its Affiliates or a Third
Party shall be borne by AHP.
10.6 ACCRUED OBLIGATIONS. Termination of this Agreement for any cause shall
not release either Party from any obligation theretofore accrued.
10.7 NO WAIVER. The failure on the part of either Party to exercise or
enforce any right conferred upon it hereunder shall not be deemed to
be a waiver of any such right nor operate to bar the exercise or
enforcement thereof at any time thereafter.
<PAGE> 21
[***] - CONFIDENTIAL TREATMENT REQUESTED
10.8 OUTSTANDING ORDERS. Upon termination of this Agreement for any reason
other than pursuant to Sections 10.2 or 10.5 hereof, AHP shall fill
all outstanding purchase orders of Horizon or its Affiliates for the
Products, unless otherwise instructed by Horizon.
10.9 BULK SUBSTANCE. To the extent permitted under the supply agreement
planned to be entered into between AHP and its supplier of Substance
(the "Bulk Substance Supply Agreement"), AHP will use commercially
reasonable efforts to have such supplier enter into a direct supply
agreement for Substance with Horizon upon expiration of this
Agreement, on the same terms and conditions, including price, as the
Bulk Substance Supply Agreement. AHP shall not be required, as part of
its commercially reasonable efforts, to pay any money or provide any
other form of consideration to such supplier. Upon expiration of this
Agreement, if such direct supply agreement is not entered into, AHP
and Horizon will cooperate in a mutually agreeable arrangement under
which to the extent feasible Horizon would obtain the benefits and
assume the obligations of AHP under the Bulk Substance Supply
Agreement as it relates to Substance, including subcontracting to
Horizon, or under which AHP would enforce for the benefit of Horizon,
with Horizon assuming AHP's obligations, any and all rights of AHP
against such supplier. The purpose of such an arrangement would be for
Horizon to obtain price, quantity, destination and delivery date terms
comparable to AHP's rights under the Bulk Substance Supply Agreement.
10.10 SURVIVAL. Subject to Section 10.5 hereof, the following provisions
shall survive expiration or termination of this Agreement: Sections
2.8, 3.3, 4.1, 4.2, 4.3, 5.4, 10.9, 10.10, 12.6 and 12.7 and Articles
8, 9 and 11.
11. CONFIDENTIALITY.
11.1 NONDISCLOSURE OBLIGATION. Each of Horizon and AHP shall use only in
accordance with this Agreement and shall not disclose to any Third
Party any information including, without limitation, Know-How,
received by it from the other Party (the "Information"), without the
prior written consent of the other Party. The foregoing obligations
shall survive the expiration or earlier termination of the last of the
Transaction Agreements to so expire or to be so terminated for a
period of five (5) years. These obligations shall not apply to
Information that:
(i) is known by the receiving Party at the time of its receipt, and
not through a prior disclosure by the disclosing Party, as
documented by business records;
(ii) is at the time of disclosure or thereafter becomes published or
otherwise part of the public domain without breach of this
Agreement by the receiving Party;
(iii) is subsequently disclosed to the receiving Party by a Third
Party who has the right to make such disclosure;
(iv) is developed by the receiving Party independently of the
Information received from the disclosing Party and such
independent development can be documented by the receiving
Party; or
(v) is required by law, regulation, rule, act or order of any
governmental authority or agency to be disclosed by a Party,
provided that notice is promptly delivered to the other Party in
order to provide an opportunity to seek a protective order or
other similar order with respect to such Information and
thereafter the disclosing Party discloses to the requesting
entity only the minimum Information required to be disclosed in
order to comply with the request, whether or not a protective
order or other similar order is obtained by the other Party.
<PAGE> 22
[***] - CONFIDENTIAL TREATMENT REQUESTED
11.2 PERMITTED DISCLOSURES. Information may be disclosed to employees,
agents, consultants, sublicensees or suppliers of the recipient Party
or its Affiliates, but only to the extent required to accomplish the
purposes of this Agreement and only if the recipient Party obtains
prior agreement from its employees, agents, consultants, sublicensees,
suppliers or Third Party manufacturers to whom disclosure is to be
made to hold in confidence and not make use of such Information for
any purpose other than those permitted by this Agreement. Each Party
will use at least the same standard of care as it uses to protect
proprietary or confidential information of its own to ensure that such
employees, agents, consultants, sublicensees, suppliers or Third Party
manufacturers do not disclose or make any unauthorized use of the
Information.
11.3 DISCLOSURE OF AGREEMENT. Neither Horizon nor AHP shall release to any
Third Party or publish in any way any non-public information with
respect to the terms of this Agreement or concerning their cooperation
without the prior written consent of the other, which consent will not
be unreasonably withheld or delayed, provided, however, that either
Party may disclose the terms of this Agreement to the extent required
to comply with applicable laws, including, without limitation, the
rules and regulations promulgated by the United States Securities and
Exchange Commission, provided, however, that prior to making any such
disclosure, the Party intending to so disclose the terms of this
Agreement shall (i) provide the nondisclosing Party with written
notice of the proposed disclosure and an opportunity to review and
comment on the intended disclosure which is reasonable under the
circumstances and (ii) shall seek confidential treatment for as much
of the disclosure as is reasonable under the circumstances, including,
without limitation, seeking confidential treatment of any information
as may be requested by the other Party. Notwithstanding any other
provision of this Agreement, each Party may disclose the terms of this
Agreement to lenders, investment bankers and other financial
institutions of its choice solely for purposes of financing the
business operations of such Party either (i) upon the written consent
of the other Party or (ii) if the disclosing Party uses reasonable
efforts to obtain a signed confidentiality agreement with such
financial institution with respect to such information on terms
substantially similar to those contained in this Article 11.
11.4 PUBLICITY. Subject to Section 11.3, all publicity, press releases and
other announcements relating to this Agreement or the transactions
contemplated hereby shall be reviewed in advance by, and shall be
subject to the approval of, both Parties. The Party responding to a
request for such approval shall respond to the other Party in writing
within five (5) days of such request.
11.5 WAIVER. AHP agrees that, upon AHP and its supplier of Substance
entering into the Bulk Substance Supply Agreement, AHP shall waive its
rights under the Confidentiality Agreement among AHP, Horizon, EJ
Financial and Mikart, the License Agreement and this Agreement to the
extent such agreements prohibit Horizon from communicating with such
supplier and entering into agreement(s) regarding the Substance with
such supplier.
12. MISCELLANEOUS.
12.1 FORCE MAJEURE. Neither Party shall be liable to the other for delay or
failure in the performance of the obligations on its part contained in
this Agreement if and to the extent that such failure or delay is due
to circumstances beyond its control (including, without limitation,
AHP's inability to obtain, from a Third Party, sufficient quantities
of the raw materials needed for the manufacture of Substance to meet
its manufacturing obligations hereunder) which it could not have
avoided by the exercise of reasonable diligence. It shall notify the
other Party promptly should such circumstances arise, giving an
indication of the likely extent and duration thereof, and shall use
all Commercially Reasonable Efforts to resume performance of its
obligations as soon as practicable.
<PAGE> 23
[***] - CONFIDENTIAL TREATMENT REQUESTED
12.2 ASSIGNMENT.
12.2.1 ASSIGNMENT BY HORIZON. Horizon may assign any or all of its
right or obligations under this Agreement in the Territory to any
of its Affiliates, for so long as they remain Affiliates. In
addition, Horizon may assign any or all of its rights or
obligations under this Agreement in the Territory in conjunction
with a merger or acquisition of Horizon. Horizon may not
otherwise assign any of its rights or obligations under this
Agreement without AHP's prior written consent, which consent
shall not be unreasonably withheld. AHP shall respond to such
requests by Horizon for assignment within thirty (30) days from
such request. Any permitted assignment shall not relieve Horizon
of its responsibilities for performance of its obligations under
this Agreement.
12.2.2 ASSIGNMENT BY AHP. AHP may assign any or all of its rights or
obligations under this Agreement to any of its Affiliates or to
any Third Party, provided, however, that AHP may assign all or
part of its obligations to a Third Party only after receiving
Horizon's prior written consent, which consent shall not be
unreasonably withheld or delayed; provided, further, that such
assignment shall not relieve AHP of its responsibilities for
performance of its obligations under this Agreement.
Notwithstanding the foregoing, Horizon's consent shall not be
required for any assignment made by AHP in connection with a
merger or similar reorganization of AHP or its parent company or
the sale of all or substantially all of AHP's or AHP's parent
company's pharmaceutical assets.
12.2.3 BINDING NATURE OF ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted
assigns of the Parties. Any assignment not in accordance with
this Section 12.2 shall be void.
12.3 NO WAIVER. The failure of either Party to require performance by the
other Party of any of that other Party's obligations hereunder shall
in no manner affect the right of such Party to enforce the same at a
later time. No waiver by any Party hereto of any condition, or of the
breach of any provision, term, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach, or of any other
condition or of the breach of any other provision, term,
representation or warranty hereof.
12.4 SEVERABILITY. If a court or other tribunal of competent jurisdiction
should hold any term or provision of this Agreement to be excessive,
or invalid, void or unenforceable, the offending term or provision
shall be deleted or revised to the extent necessary to be enforceable,
and, if possible, replaced by a term or provision which, so far as
practicable, achieves the legitimate aims of the Parties.
12.5 RELATIONSHIP BETWEEN THE PARTIES. Both Parties are independent
contractors under this Agreement. Nothing herein contained shall be
deemed to create an employment, agency, joint venture or partnership
relationship between the Parties hereto or any of their agents or
employees, or any other legal arrangement that would impose liability
upon one party for the act or failure to act of the other Party.
Neither Party shall have any express or implied power to enter into
any contracts or commitments or to incur any liabilities in the name
of, or on behalf of, the other Party, or to bind the other Party in
any respect whatsoever.
<PAGE> 24
[***] - CONFIDENTIAL TREATMENT REQUESTED
12.6 CORRESPONDENCE AND NOTICES.
12.6.1 ORDINARY NOTICES. Correspondence, reports, documentation, and
any other communication in writing between the Parties in the
course of ordinary implementation of this Agreement shall be
delivered by hand, sent by facsimile, overnight courier or by
airmail to the employee or representative of the other Party who
is designated by such other Party to receive such written
communication.
12.6.2 EXTRAORDINARY NOTICES. Extraordinary notices and communications
(including, without limitation, notices of termination, force
majeure, material breach, change of address) shall be in writing
and sent by prepaid registered or certified air mail, or by
facsimile confirmed by prepaid registered or certified air mail
letter, and shall be deemed to have been properly served to the
addressee upon receipt of such written communication.
12.6.3 ADDRESSES. In the case of Horizon, the proper address for
communications and for all payments shall be:
Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Mr. Brent Dixon
Fax: (770) 442-9594
and in the case of AHP, the proper address for communications and
for all payments shall be:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania 19087
Attn: Senior Vice President, Global Business Development
Fax: (610) 688-9498
with a copy to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
Fax: (973) 660-7156
<PAGE> 25
[***] - CONFIDENTIAL TREATMENT REQUESTED
12.7 CHOICE OF LAW. This Agreement is subject to and governed by the laws
of the State of Delaware, excluding its conflict of law provisions.
12.8 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the other
Transaction Agreements and the Confidential Disclosure Agreement
between AHP and E.J. Financial Enterprises Inc. (an equity holder in
Horizon) dated April 28, 1998, and all the covenants, promises,
agreements, warranties, representations, conditions and understandings
contained herein and therein sets forth the complete, final and
exclusive agreement between the Parties and supersedes and terminates
all prior and contemporaneous agreements and understandings between
the Parties, whether oral or in writing. There are no covenants,
promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Parties other than
as are set forth in the Transaction Agreements. No subsequent
alteration, amendment, change, waiver or addition to this Agreement
shall be binding upon the Parties unless reduced to writing and signed
by an authorized officer of each Party. No understanding, agreement,
representation or promise, not explicitly set forth herein, has been
relied on by either Party in deciding to execute this Agreement.
12.9 HEADINGS. The headings and captions used in this Agreement are solely
for the convenience of reference and shall not affect its
interpretation.
12.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be an original and all of which shall
constitute together the same document.
12.11 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all other acts, as may be
necessary or appropriate in order to carry out the purposes and intent
of this Agreement including, without limitation, any filings with any
antitrust agency which may be required.
IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized
representatives of the Parties as of the date set forth below.
AMERICAN HOME PRODUCTS CORPORATION HORIZON PHARMACEUTICAL CORPORATION
By:___________________________________ By:___________________________________
Name:_________________________________ Name:_________________________________
Title:________________________________ Title:________________________________
<PAGE> 26
SCHEDULE 1.19
SPECIFICATIONS
PRODUCT SPECIFICATIONS ARE SET FORTH ON THE FOLLOWING 22 PAGES
<PAGE> 27
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
<TABLE>
<S> <C>
LABEL CLAIM: [***]
DOSAGE FORM: [***]
LOT SIZE: [***]
PACKAGE SIZE: [***]
PRODUCT CODE: [***]
NDA NO.: [***]
RX OR OTC: [***]
OFFICIAL NF OR USP: [***]
DEA CLASS: [***]
FORM 6 NO.: [***]
EXPIRATION DATE: [***]
MFD. BY: [***]
</TABLE>
TABLE OF CONTENTS
PAGE 2 - GENERAL PRODUCT INFORMATION
PAGE 3 - IN-PROCESS - DURING COMPRESSION
PAGE 7 - BULK FINISHED PRODUCT - AFTER COMPRESSION
PAGE 17 - REGULATORY SPECIFICATIONS AND METHODS
PAGE 19 - PACKAGED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
<PAGE> 28
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
AFTER COMPRESSION
SAMPLING
This sample is the composite of in-process samples collected during the
compression of the lot and shall consist of at least [***] tablets.
TESTS
Description
Specification: A white, round, flat-face, beveled-edge, compressed
tablet, [***] mm in diameter and [***] mm thick.
One side is engraved AHR-[***], the obverse side is
scored. Odor shall be characteristic of product.
Test: [***]
Weight (Average of [***] Tablets)
Specification: Theoretical average weight [***]
Acceptable range [***]
Test: Record the average tablet weight of [***] tablets as
determined from [***].
Dissolution - Glycopyrrolate
Specification: [***]
Principle [***]
Reagants [***]
Calculation [***]
Discussion
Start-up and Shut-down of System
[***]
<PAGE> 29
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
Specification: [***]
Reagants: [***]
Procedure [***]
Calculation [***]
[***]
Calculation [***]
Discussion
Start-up and Shut-down of System
[***]
Specification: [***]
Reagents [***]
Procedure [***]
Calculation [***]
[***]
Uniformity of Dosage Units
Method: [***]
Specification: [***]
<PAGE> 30
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
Test: [***]
Principles [***]
Apparatus [***]
Reagents [***]
Procedure 1. [***]
2. [***]
3. [***]
Calculation [***]
<PAGE> 31
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
[***]
<PAGE> 32
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
[***]
<PAGE> 33
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
ACCEPT/REJECT
[***]
1. [***]
2. [***]
<PAGE> 34
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
INSPECTION
During the packaging of the product at A. H. Robins Company, the following
[***].
PRODUCT IDENTIFICATION
[***]
SHELF SAMPLE
[***]
NET CONTENTS OF CONTAINERS
Specification: [***]
Test: [***]
BOTTLES AND CAPS
Specification: Complies with standard
Test: Each bottle sampled shall be
examined for the following:
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
<PAGE> 35
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
LABELS
Specification: Complies with standard
Test: The label of each bottle sampled
shall be examined for the following:
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
CARTONS
Specification: Complies with standard
Test: Each carton sampled shall be
examined for the following:
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
INSERTS
Specification: Complies with standard
Test: The insert of each bottle sampled
shall be examined for the following:
1. [***]
2. [***]
3. [***]
4. [***]
<PAGE> 36
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
STANDARDS
[***]
ACCEPT/REJECT
[***]
1. [***]
2. [***]
Specification Approved May, 1990
Robert W. Alexander, Jr. A. Edwin Martin
Director, Quality Assurance Vice President, GMP
A. H. Robins Company A. H. Robins Company
- -------------------------------------- -----------------------------------
<PAGE> 37
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
GRAPHIC
WHITEHALL
ROBINS
WHITEHALL ROBINS
ANALYTICAL DEVELOPMENT - TEST METHOD
Method: [***]
WH#/Product: [***]
Method#: [***]
Date:
Supersedes: [***]
Developed by: [***]
Checked by:
Reviewed by:
<PAGE> 38
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
COMPOSITE ASSAY FOR GLYCOPYRROLATE [***]
Reagents
[***]
Apparatus
[***]
Preparation of Standard Solution
NOTE: Prepare this solution fresh daily.
1. [***]
2. [***]
3. [***]
4. [***]
<PAGE> 39
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
Preparation of Sample Solution
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
Procedure
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
<PAGE> 40
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
6. [***]
7. [***]
Manual Calculations
[***]
<PAGE> 41
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
where:
Au = absorbance of sample
As = absorbance of standard
Ws = weight of standard, in mg
n = number of tablets used
CONTENT UNIFORMITY FOR [***] [***]
Reagents
Refer to section under [***].
Apparatus
Refer to section under [***].
Preparation of Standard Solution
Refer to section under [***].
<PAGE> 42
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
Preparation of Sample Solution
1. [***]
2. [***]
3. [***]
4. [***]
Procedure
Refer to section under [***].
Manual Calculations
[***]
For [***] tablets:
<PAGE> 43
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
[***]
For [***] tablets:
[***]
<PAGE> 44
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
[***]
where:
Au = absorbance of sample
As = absorbance of standard
Ws = weight of standard, in mg
<PAGE> 45
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
SCHEDULE 5.1
INITIAL PURCHASE PRICES
Product Strength Package Size AHP NDC# Initial Purchase Price
<TABLE>
<S> <C> <C> <C> <C>
Robinul tablets 1 mg bottles of 100 7824-63 $ [***]
Robinul tablets 2 mg bottles of 100 7840-63 $ [***]
Robinul tablets 2 mg bulk N/A $ [***] per [***]
Robinul tablets 2 mg bulk N/A $ [***] per [***]
</TABLE>
<PAGE> 46
EXHIBIT G
PENDING LIABILITIES
1. The following civil actions are pending with respect to AHP's sale of the
Product in the Territory:
Shimshock v. Truta, et al., Superior Court of California,
County of San Mateo, No. 400614
<PAGE> 1
EXHIBIT 10.14
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions of This Agreement Which Have Been Redacted Are Marked
With Brackets ([***]). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is entered into as of the 29th day
of January, 1999, by and between HORIZON PHARMACEUTICAL CORPORATION, a company
incorporated under the laws of Delaware, with its principal place of business at
660 Hembree Parkway, Suite 106, Roswell, Georgia 30076 ("Horizon"), and AMERICAN
HOME PRODUCTS CORPORATION, a company incorporated under the laws of Delaware,
with its principal place of business at Five Giralda Farms, Madison, New Jersey
07940, USA ("AHP"). Both Horizon and AHP are referred to herein individually as
a "Party" and collectively as the "Parties".
WHEREAS, AHP has rights to certain Know-How (as hereinafter defined) and
Trademarks (as hereinafter defined) relating to the Products (as hereinafter
defined);
WHEREAS, Horizon is qualified to market pharmaceutical products in the
Territory (as hereinafter defined);
WHEREAS, Horizon desires to engage AHP's or its Affiliate's (as hereinafter
defined) facilities and services to manufacture (a) the Product for distribution
and sale by Horizon, and AHP is willing to enter into a separate manufacturing
and supply agreement contemporaneously herewith; and
WHEREAS, AHP desires to grant and transfer to Horizon and Horizon desires
to receive a license and other rights and assets under the terms and conditions
set forth herein;
NOW THEREFORE, in consideration of the foregoing premises and the mutual
promises, covenants and conditions contained in this Agreement, the Parties
agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the capitalized terms hereunder shall
have the meanings defined below:
1.1 "Affiliate(s)" shall mean, in the case of either Party, any
corporation, joint venture, or other business entity which directly or
indirectly controls, is controlled by, or is under common control with
that Party. "Control", as used in this Section 1.1, shall mean having
the power to direct, or cause the direction of, the management and
policies of an entity, whether through ownership of voting securities,
by contract or otherwise. Notwithstanding the foregoing, for purposes
1
<PAGE> 2
of this Agreement, the term "Affiliate" shall not include subsidiaries
in which a Party or its Affiliates owns a majority of the ordinary
voting power to elect a majority of the board of directors but is
restricted from electing such majority by contract or otherwise, until
such time as such restrictions are no longer in effect.
1.2 "Closing" shall have the meaning set forth in Section 3.3 hereof.
1.3 "Commercially Reasonable Efforts" shall mean efforts and resources
normally used by a Party for a compound or product owned by it or to
which it has rights, which is of similar market potential at a similar
stage in its product life, taking into account the competitiveness of
the marketplace, the proprietary position of the compound or product,
the regulatory structure involved, the profitability of the applicable
products, and other relevant factors.
1.4 "Customer Contracts" shall mean those contracts and outstanding bids
listed in Exhibit A hereto, between AHP or its Affiliates and certain
Third Parties pursuant to which such Third Parties, inter alia,
purchase Products from AHP or such Affiliates in the Territory.
1.5 "Effective Date" shall mean the date on which the Closing occurs in
accordance with Section 3.3 hereof.
1.6 "Field" shall mean use in humans, excluding injectable forms of the
Substance for human use.
1.7 "HSR Act" means the Hart-Scott-Rodino Antitust Improvements Act of
1976, as amended, and the rules and regulations promulgated
thereunder.
1.8 "Know-How" shall mean all proprietary technical and clinical
information, data and know-how relating to the Products, whether or
not patentable, owned as of the Effective Date or acquired during the
term of this Agreement, by AHP or its Affiliates. Know-How shall
include, without limitation, all processes, formulas, discoveries and
inventions whether relating to biological, chemical, pharmacological,
toxicological, pharmaceutical, physical and analytical safety, quality
control and clinical data, including, without limitation, phase IV
clinical study data. Know-How shall also include relevant medical
information relating to the Products (such as customer questions,
responses thereto and adverse drug event (ADE) history) in AHP's
possession. The term "Know-How", however, shall not include (i) any
know-how, processes, information and data which is, as of the
Effective Date or later becomes, generally available to the public or
(ii) any general manufacturing know-how not specific to the Products.
1.9 "Letter of Intent" shall mean that certain Letter of Intent which (i)
is dated as of December 14, 1998 and (ii) relates to the transaction
contemplated by this Agreement.
2
<PAGE> 3
1.10 "Net Sales" shall mean amounts invoiced for sales of the Products by
Horizon, its Affiliates and sublicensees to Third Parties in the
Territory, less the sum of (i) trade, quantity and cash discounts
actually allowed or paid, (ii) credits or allowances given or made for
return of previously sold products, (iii) rebates and chargebacks
specifically identified to the sale of the Products by Horizon, its
Affiliates and sublicensees, and (iv) taxes, duties or other
governmental charges levied on or measured by the billing amount, as
adjusted for rebates and refunds. Such amounts shall be determined
from the books and records of Horizon, its Affiliates and sublicensees
which shall be maintained in accordance with generally accepted
accounting principles. Sales of Products by and between Horizon, its
Affiliates and sublicensees are not sales to Third Parties and shall
be excluded from Net Sales calculations for all purposes.
1.11 "Product(s)" shall mean those Products listed in Exhibit B, for use in
the Field, each of which have been marketed by AHP as of the date this
Agreement was signed by the Parties.
1.12 "Product Supply Agreement" shall have the meaning set forth in Section
7.1 hereof.
1.13 "Regulatory Approval" shall mean all authorizations by the appropriate
Regulatory Authorities which are required for the manufacture (other
than manufacturing facilities licenses, approvals or authorizations)
marketing, promotion, pricing and sale of the Products in the
Territory, including an approved New Drug Application(s) for the
Product(s) which are owned by AHP or its Affiliates.
1.14 "Regulatory Authority" shall mean any national, supra-national,
regional, state or local regulatory agency, department, bureau,
commission, council or other governmental entity in the Territory
involved in the granting of Regulatory Approvals for the Product
including, without limitation, the United States Food and Drug
Administration ("FDA").
1.15 "Substance" shall mean the chemical substance 3-[(cyclopentylhydroxy
phenyl acetyl) oxy] -1, 1-dimethyl (pyrrolidinium bromide, otherwise
known as glycopyrrolate).
1.16 "Supply Price" shall mean the price paid by Horizon to AHP under the
Product Supply Agreement for the purchase of a unit of Product.
1.17 "Systems Transfer Plan" shall have the meaning set forth in Section
3.2 hereof.
1.18 "Territory" shall mean the United States of America, its territories
and possessions, and the Commonwealth of Puerto Rico.
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1.19 "Third Party(ies)" shall mean any person(s) or entity(ies) other than
Horizon, AHP, or their respective Affiliates.
1.20 "Trademarks" shall mean the trademarks listed on Exhibit C hereto,
which, as of the date this Agreement was signed by the Parties, has
been used by AHP in connection with the promotion, marketing and sale
of the Products.
1.21 "Transaction Agreements" shall mean this Agreement and the Product
Supply Agreement.
1.22 "$" shall mean United States Dollars.
2. RIGHTS GRANTED.
2.1 Licenses.
2.1.1 License of Know-How. Subject to the terms and conditions
contained in this Agreement, AHP, as of the Effective Date,
hereby grants to Horizon an exclusive license (exclusive, even
as to AHP, subject to the provisions of Section 2.3), under
the Know-How to make, have made, use, market, distribute,
offer for sale and sell the Product in the Territory. Horizon
accepts all the obligations set forth in this Agreement and
agrees to use the Know-How only in connection with the
manufacture, sale and promotion of the Products in the
Territory, only for so long as the licenses granted under this
Section 2.1.1 remain in effect.
2.1.2 License of Trademark. Subject to the terms and conditions
contained in this Agreement, AHP, as of the Effective Date,
hereby grants to Horizon an exclusive license (exclusive, even
as to AHP), to use the Trademark only in connection with the
manufacture, sale and promotion of the Products in the
Territory. Horizon accepts all the obligations set forth in
this Agreement and agrees to use the Trademark in the
Territory, only for so long as the license granted under this
Section 2.1.2 remains in effect.
2.1.3 Sublicenses. Horizon may grant one or more Affiliates or Third
Parties sublicenses under the licenses granted to Horizon
under Sections 2.1.1 and 2.1.2 in the Territory, provided
that:
(a) Horizon obtains AHP's prior written consent, such
consent not to be unreasonably withheld;
(b) The parties to and the economic terms of any such
agreement shall be fully disclosed to AHP, and the terms
of such agreement shall be consistent with all of the
relevant terms and provisions of this Agreement;
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(c) To the extent that any such Third Party is to Perform
any obligation of Horizon under this Agreement, Horizon
shall remain liable for such performance; and
(d) Horizon shall pay AHP the trademark royalties on all Net
Sales of Product by such Affiliate or Third Party, as
set forth in Section 4.2.1.
2.2 Assignment of Regulatory Approvals. Subject to the terms and
conditions contained in this Agreement, AHP shall assign to Horizon at
the Closing ownership of all its right, title and interest in and to
the Regulatory Approvals in the Territory. At the Closing, all of
AHP's obligations under this Agreement with respect to such Regulatory
Approvals shall immediately terminate (with the exception of
reporting, as required under Section 6.2 hereof, to Horizon
significant safety and efficacy issues relating to Product or
Substance of which AHP is aware and which are required for NDA
reporting in the United States) and thereafter, AET shall have no
further right in or to such Regulatory Approvals in the Territory,
except as provided in Section 6.1.2 hereof Subject to the notice and
cure provisions of Section 11.2.2, if Horizon fails to pay to AHP the
entire amount of the License Fee when due, Horizon shall immediately
reassign the Regulatory Approvals to AHP.
2.3 Retained Rights. Notwithstanding the licenses granted to Horizon under
Section 2.1, after the Closing, AHP shall retain ownership of and all
rights to (i) the current NDC numbers and Product Codes it uses for
each of the Products (subject to Horizon's right to sell Product under
Section 2.7 of the Product Supply Agreement), (ii) the real and
personal property (including, without limitation, all equipment) and
general manufacturing know-how used by AHP in manufacturing the
Products (either before, during or after the term of this Agreement)
other than Know-How, (iii) all accounts receivable from sales of the
Products by or on behalf of AHP, and (iv) all inventories of the
Products that have not otherwise been purchased by Horizon pursuant to
Section 7.1 hereof and the Product Supply Agreement. Additionally, AHP
retains ownership of and the right to use the Know-How (i) to
manufacture Products for Horizon pursuant to Section 7.1 hereof and
the Product Supply Agreement; (ii) to manufacture Products for sale
outside of the Territory (including, without limitation, for sale to
AHP's Affiliates or Third Parties in the Territory, for final
distribution and sale outside of the Territory); (iii) to manufacture
products containing Substance for use or sale, both in and outside of
the Territory, as veterinary pharmaceutical products and as injectable
product for human use; and (iv) to manufacture, use and sell Products
in the Territory if this Agreement is terminated by AHP pursuant to
Section 11.2.2 hereof and all payments due to AHP pursuant to Section
4.1.1 have not been fully paid to AHP.
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2.4 Horizon's Covenant Not To Compete. Horizon agrees that, during the
term of this Agreement, Horizon and its Affiliates will not utilize
the Know-How, Regulatory Approvals or Trademarks in any manner to
make, have made, use, market, offer to sell or sell any product
containing the Substance as a pharmaceutically active ingredient for
use as a veterinary pharmaceutical agent or for injectable dosage
forms for human use.
3. PRE-CLOSING ACTIVITIES; CLOSING.
3.1 Government Approvals. Each of Horizon and AHP shall use its good faith
efforts to eliminate any concern on the part of any court or
government authority regarding the legality of the proposed
transaction, including, if required by state antitrust authorities,
promptly taking all steps to secure government antitrust clearance,
including, without limitation, cooperating in good faith with any
government investigation including the prompt production of documents
and information demanded by a second request for documents and of
witnesses if requested. Horizon and AHP will cooperate and use
respectively all reasonable efforts to make all registrations, filings
and applications, to give all notices and to obtain by the Closing all
governmental or other consents, transfers, approvals, orders,
qualifications, authorizations, permits and waivers, if any, and to do
all other things necessary or desirable for the consummation of the
transactions as contemplated hereby. Neither Party shall be required,
however, to divest products or assets or materially change its
business if doing so is a condition of obtaining approval under the
governmental approvals of the transactions contemplated by this
Agreement.
3.2 Systems Transfer. During the time period between the signing of this
Agreement by the Parties and the Closing, the Parties will develop a
mutually acceptable post Closing operation plan substantially in the
form of Exhibit D hereto (the "Systems Transfer Plan") to transfer the
processing of chargebacks, government rebates, returns (including the
processing of customer credits), obligations under Customer Contracts,
customer service functions, and regulatory reporting functions from
AHP to Horizon and Know-How necessary to enable Horizon to use,
market, distribute and sell Product in the Territory. Such plan shall
be reduced to writing by Horizon and approved by both Parties and
shall be implemented by the Parties as soon as practicable after the
Closing.
3.3 The Closing.
3.3.1 Time and Place. The Closing of the transactions contemplated
hereby shall take place at 10:00 A.M. (local time) on January
29, 1999 at the offices of Wyeth-Ayerst Laboratories Division
of American Home Products Corporation, St Davids,
Pennsylvania, or at such other time and place as the Parties
may agree. The Closing shall be effective as of midnight on
the Effective Date.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
3.3.2 Payment of License Fee. At the Closing, Horizon shall make the
payment required by Section 4.1(i) hereof, which payment shall
be made by wire transfer in funds immediately available to
such bank account as AHP may designate at least three (3)
business days in advance.
3.3.3 Customer Information. To the extent the following items have
not previously been provided to Horizon, AHP, at the Closing,
will deliver to Horizon
(a) complete and accurate copies of AHP's relevant customer
lists including relevant sales data for the Products;
and
(b) copies of current and pending customer sales contracts
for the Product, which contracts shall be redacted for
purposes of deleting information that is not related to
the Product and other confidential information.
3.3.4 Other Agreements. At the Closing, Horizon and AHP shall each
execute and deliver to the other the Systems Transfer Plan and
the Product Supply Agreement in the form attached hereto as
Exhibit F.
3.3.5 Certifications of Representations and Warranties. At the
Closing, each Party shall certify to the other that the
representations and warranties set forth in Article 10 hereof
remain true and in effect as of the day of Closing. In the
event that one or more of the representations and warranties
do not remain true and in effect as of the day of Closing, the
Party receiving such certification shall have the option to
(i) complete the Closing (and such Party shall be required to
expressly waive its rights under the specific representation
and warranty which is no longer true and/or in effect as of
the day of closing) or (ii) terminate this Agreement as
provided in Section 11.2.1.
3.4 Conduct of Business from Signing to Closing. AHP covenants and
agrees that, during the period between the signing of this Agreement
and Closing, it will use its Commercially Reasonable Efforts to
conduct the business relating to Product in a manner consistent with
its prior practices.
4. CONSIDERATION.
4.1 License Fee. In partial consideration of the licenses granted to
Horizon under Section 2.1 hereof and the other rights and assets
transferred to Horizon hereunder, Horizon shall pay AHP a
nonrefundable, noncreditable license fee (the "License Fee") as
follows (i) [***] dollars ($[***]) which shall be due and payable at
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[***] - CONFIDENTIAL TREATMENT REQUESTED
the Closing and (ii) [***] payments each in the amount of [***]
dollars ($[***]) due [***], for a total of [***] dollars ($[***]) in
addition to the payment due under Section 4.1(i) above.
4.2 Royalties.
4.2.1 Royalty Rates. In further consideration of the trademark
license granted to Horizon under Section 2.1.2 hereof, during
the term of this Agreement, Horizon shall pay AHP royalties in
the amount of
(a) [***] of the Net Sales for all Products sold by or on
behalf of Horizon, its Affiliates and sublicensees prior
to the [***] anniversary of the Effective Date up to
annual Net Sales of $[***]; and
(b) [***] of the Net Sales for all Products sold by or on
behalf of Horizon, its Affiliates and sublicensees prior
to the [***] anniversary of the Effective Date of Net
Sales above annual Net Sales of $[***]; and
(c) [***] of the Net Sales for all Products sold by or on
behalf of Horizon, its Affiliates and sublicensees after
the [***] anniversary of the Effective Date.
4.2.2 Minimum Royalties. During the period from the Effective Date
to the fifth anniversary of the Effective Date, Horizon shall
pay a minimum royalty to AHP each calendar quarter of [***]
dollars ($[***]).
4.2.3 Scope of Royalty Obligations. No royalties shall be due upon
the sale or other transfer among Horizon and its Affiliates,
but in such cases the royalty shall be due and calculated upon
Horizon's or its Affiliates' Net Sales to the first
independent Third Party.
4.2.4 Royalties Paid Quarterly. For each calendar quarter, or part
thereof, in which Horizon sells Product and is obligated to
pay to AHP royalties with respect to such sales pursuant to
this Section 4.2, Horizon shall, for the first four calendar
quarters following the Effective Date within forty five (45)
calendar days, and for each calendar quarter thereafter within
thirty (30) calendar days, following the close of each such
calendar quarter furnish to AHP a written report for the
calendar quarter showing (i) the number of units of each
Product (by NDC number) sold by Horizon, its Affiliates and
sublicensees in the Territory during such calendar quarter,
(ii) the Net Sales of Product (by NDC number) sold by Horizon,
its Affiliates and sublicensees in the Territory during such
calendar month, and (iii) the royalties payable under this
Agreement for such calendar quarter. Simultaneously with the
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submission of the written report, Horizon shall pay to AHP a
sum equal to the aggregate royalty due for such calendar
quarter calculated in accordance with this Agreement
(reconciled for any previous overpayments, underpayments or
credits).
4.3 Method of Payment. All payments to be made by Horizon to AHP
pursuant to Section 4.2 hereof shall be made in United States
dollars by wire transfer simultaneously with the submission of the
report required under Section 4.2.4 hereof.
4.4 Maintenance of Records by Horizon; Audits.
4.4.1 Record Keeping by Horizon. Horizon and its Affiliates
shall, and shall cause its sublicensees to, keep
accurate books and accounts of record in connection
with the sale by or on behalf of Horizon, its
Affiliates and sublicensees of the Products in
sufficient detail (i) to permit accurate
determination of all figures necessary for
verification of payments required to be paid
hereunder and (ii) to verify compliance with the
provisions of Section 8.3 hereof. Horizon, its
Affiliates and sublicensees shall maintain such
records for a period of three (3) years after the end
of the year in which they were generated.
4.4.2 Audit by AHP. AHP, through an independent certified
public accountant reasonably acceptable to Horizon,
shall have the right, at its own expense, to access
the books and records of Horizon, its Affiliates and
sublicensees as may be reasonably necessary (i) to
verify the accuracy of the royalty reports and all
payments made hereunder and (ii) to verify compliance
with the provisions of Section 8.3 hereof, including,
without limitation, the determination of any
additional payments that may be due to AHP pursuant
to Section 8.3 hereof. Such access shall be conducted
after reasonable prior written notice to Horizon and
during ordinary business hours and shall not be more
frequent than once per calendar year, in respect of
any calendar year ending not more than thirty (30)
months prior to the date of such notice. Upon the
expiration of the thirty (30) month period described
in the immediately preceding sentence, the
calculation of amounts payable with respect to such
time periods shall be binding and conclusive upon
AHP, and Horizon, its Affiliates and sublicensees
shall be released from any liability or
accountability with respect to payments for such time
periods. The parties agree that such independent
certified public accountant shall disclose to AHP
only whether the royalty reports are correct or
incorrect, the specific details concerning any
discrepancies in such reports, whether the provisions
of Section 8.3 hereof have been complied with and the
specific details concerning any noncompliance with
the provisions of Section 8.3 hereof. AHP agrees to
keep in strict confidence all information learned in
the course of such
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audit, except when it is necessary to reveal such
information in order to enforce its rights under this
Agreement.
4.4.3 Underpayments/Overpayments. If such independent
certified public accountant's report shows any
underpayment, Horizon shall remit or shall cause its
Affiliates and sublicensees to remit to AHP within
thirty (30) days after AHP's receipt of such report,
(i) the amount of such underpayment (ii) interest on
such underpayment at the prime rate quoted by Chase
Manhattan Bank N.A. from the date payment was first
due until the date of payment of such underpayment
and (iii) if such underpayment exceeds five percent
(5%) of the total amount owed for the calendar year
then being audited, the reasonable fees and expenses
of such independent certified public accountant
performing the audit. Any overpayments, less the
reasonable fees and expenses of such independent
certified public accountant, shall be fully
creditable against amounts payable in subsequent
payment periods.
4.5 Taxes and Withholding. All taxes levied or incurred on account
of any payments from Horizon to AHP accruing under this
Agreement, by national, state or local governments, will be
assumed and paid by Horizon, except taxes levied thereon as
income to AHP and if such taxes are required to be withheld by
Horizon they will be deducted from payments due to AHP and
will be timely paid by Horizon to the proper taxing authority
for the account of AHP, a receipt or other proof of payment
therefor secured and sent to AHP as soon as practicable.
5. DISCLOSURE OF KNOW-HOW; ASSUMPTION OF OBLIGATIONS
5.1 Disclosure of Know-How. At or immediately after the Closing, in
accordance with Section 3.2, AHP shall promptly disclose to Horizon
that Know-How currently utilized by or on behalf of AHP or its
Affiliates which is necessary to enable Horizon to use, market,
distribute and sell the Product in accordance with the Transaction
Agreements.
5.2 Customer Contracts. A complete and accurate list of each of the
current and pending Customer Contracts pursuant to which AHP or an
AHP Affiliate is, with respect to the current Customer Contracts
immediately prior to the date of this Agreement, selling Products,
along with other products of AHP and its Affiliates, to Third Party
buyers is attached hereto as Exhibit A. AHP agrees that between the
date of signing of this Agreement and Closing, no new Customer
Contracts shall be executed without first consulting with Horizon.
AHP further agrees that between the date of signing of this
Agreement and Closing, no new bids shall be made without first
consulting with and obtaining the written consent of Horizon. The
parties agree that bids outstanding as of the date of the signing of
this Agreement shall be handled in AHP's normal course of business.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
The Parties understand and agree that because the right to sell
Product is being transferred to Horizon pursuant to this Agreement,
as of the Effective Date AHP will no longer have the right to sell
or, except as provided below, adjust the price of Product under the
Customer Contracts, provided, however, that Horizon agrees that it
will continue to honor all of AHP's commitments made in each such
Customer Contract with respect to supplying the Product, including,
without limitation, the sale prices as adjusted in accordance with
such Customer Contracts, for the Products throughout the term of
each such Customer Contract. After the Closing, upon Horizon's
request, AHP and Horizon will request each Third Party to the
Customer Contracts to relieve AHP of its obligations to provide
Product under each such Customer Contract. In addition, to the
extent that AHP and Horizon are unable to obtain a release from a
Third Party of AHP's obligations to supply the Product under such
Customer Contract, then upon the request of Horizon, AHP shall use
its Commercially Reasonable Efforts to take actions that are
permitted under the terms of such Customer Contract to minimize the
commitment for Product thereunder, including without limitation,
adjusting Product prices, reducing the term of such Customer
Contract solely with respect to the Product and terminating AHP's
obligations with respect to Product under any such Customer
Contract, provided, however, that AHP shall not be required to
either (i) adjust prices or terms relating to products other than
Products, (ii) make any payments to such Third Party in
consideration for making such price adjustments or modifications to
the Customer Contract or (iii) terminate any such Customer Contract
with respect to products other than Products. AHP agrees that
following the signing of this Agreement, it will not take any action
with respect to any Customer Contract which will extend the term of
such Customer Contract for any Product or otherwise adversely affect
Horizon with respect to any Product, without the prior written
consent of Horizon. All sales of the Product after the Closing shall
be booked by Horizon.
5.3 Chargebacks. As of the Closing, Horizon will be responsible for all
customer chargebacks for Product sold in the Territory, provided,
however, that, with respect to such Product sales, AHP, for a period
of [***] after the Effective Date, will reimburse Horizon for all
qualified customer chargebacks having Activity Dates prior to the
Effective Date. For purposes of this Section 5.3, the "Activity
Date" is the date a wholesaler ships the Product to a customer under
terms of a customer sales contract or pursuant to a purchase order
issued by such customer.
5.4 Rebates. As of the Closing, Horizon will be fully responsible for
all Federal, State and Third Party rebate programs for Product sold
in the Territory under Horizon's NDC numbers, including all
reporting activities associated with such programs. Additionally, as
of the Closing, Horizon will be financially responsible for all
Federal, State and Third Party rebate programs for Product sold in
the Territory under AHP's label, provided, however, that with
respect to such Product sales, AHP will continue to prepare the
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[***] - CONFIDENTIAL TREATMENT REQUESTED
appropriate Federal and State rebate reports and process Federal and
State rebates for the sale of such Product and Horizon will
reimburse AHP for [***]. For purposes of this Section 5.4, the
"Report Date" is the date a qualified rebate invoice is issued under
applicable Federal or State Rebate Programs.
5.5 Returns. As of the Effective Date, Horizon will be responsible for
all returns of Product sold in the Territory, provided, however,
that AHP will reimburse Horizon for all qualified returns of such
Product sold by AHP to Third Parties prior to the Effective Date.
The Parties agree to track sales and returns of Product by lot
number to determine whether such Product was sold to Third Parties
by AHP prior to the Effective Date or by Horizon after the Effective
Date. AHP's liability pursuant to this Section 5.5 for such returns
shall not exceed [***] and all returns in excess of such limitation
shall be borne solely by Horizon.
5.6 Reimbursement. AHP shall reimburse Horizon for chargebacks, rebates
and returns according to Sections 5.3, 5.4 and 5.5 as follows:
Horizon agrees to provide AHP with an invoice for amounts due under
Sections 5.3, 5.4 and 5.5 within thirty (30) days after the end of
each calendar month with the documentation required to verify the
same. AHP agrees to reimburse Horizon in accordance with Sections
5.3, 5.4 and 5.5 hereof within thirty (30) days after the receipt of
the invoice and all required documentation.
6. REGULATORY MATTERS.
6.1 Horizon Responsibilities.
6.1.1 Disclosure of Regulatory Approvals. Within thirty (30) days
after the Effective Date, AHP shall provide Horizon with a
copy of all correspondence or other documents reasonably
related to such Regulatory Approvals. Additionally, within
such thirty (30) day period, AHP shall provide to Horizon a
current list of suppliers for Materials used in the
manufacture of Products.
6.1.2 Right of Reference. Horizon irrevocably grants to AHP the
right to reference the Regulatory Approvals to support AHP's
Product related activities outside of the Territory and to
support any veterinary pharmaceutical products containing
Substance or any injectable products for human use, which
AHP currently markets or sells or may, in the future, market
or sell. Horizon shall not amend the Regulatory Approvals
without the prior written consent of AHP, such consent not
to be unreasonably withheld, and AHP shall respond to
Horizon's request for consent within thirty (30) days from
such request.
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6.1.3 Responsibilities. After the Effective Date, Horizon shall be
solely responsible for conducting all activities in connection
with such Regulatory Approvals, including, without limitation,
communicating and preparing and filing all reports (including,
without limitation, adverse drug experience reports) with the
appropriate Regulatory Authorities in the Territory and
interacting with any Third Parties with respect to Products
sold or distributed in the Territory; provided, however, that
for up to sixty (60) days after the Effective Date, AHP shall
assist and cooperate in the transition of such activities to
Horizon. Additionally, to the extent that Horizon is
obligated, under applicable laws and regulations, to report to
the Regulatory Authorities in the Territory, adverse drug
experiences associated with Product sold by or on behalf of
AHP outside of the Territory, AHP shall provide Horizon with
information about such adverse drug experiences in accordance
with the provisions of Section 6.2 hereof and to the extent
that, AHP is obligated under applicable laws and regulations
to report adverse drug experiences associated with Product
sold by or on behalf of Horizon inside the Territory, Horizon
shall provide AHP with information about such adverse drug
experiences in accordance with the provisions of Section 6.2
hereof. Upon written request of Horizon, AHP shall provide
Horizon with all additional written information in AHP's
possession which directly relates to the Products in the Field
as AHP shall have developed and which would be useful in
supporting the Regulatory Approvals.
6.1.4 Payment of Fees. After the Effective Date, Horizon shall pay
all NDA maintenance fees and any establishment license fees of
Horizon, its Affiliates or Third Parties which must be paid
with respect to facilities used in the manufacture of Product
by or on behalf of Horizon. Notwithstanding the foregoing, for
so long as AHP is supplying Product to Horizon in accordance
with the Product Supply Agreement, AHP shall pay any
establishment license fees which must be paid with respect to
AHP's, its Affiliate's or subcontractor's facilities used for
the manufacture of such Product.
6.2 Adverse Drug Experience Reporting. In order for the Parties to
comply with their respective responsibilities under this Article 6
and otherwise relating to the reporting of adverse drug experiences,
to the extent either Party receives any information regarding
adverse drug experiences related to the use of the Product, whether
such use is within or outside of the Territory, such Party shall
promptly provide the other Party with such information in accordance
with the Adverse Event Reporting Procedures (as may be amended from
time to time upon mutual agreement) set forth in Exhibit E.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
7. SUPPLY.
7.1 Supply of Product by AHP. For the term set forth in the Product
Supply Agreement, AHP, either directly or through one or more
subcontractors, shall manufacture and supply Products to Horizon for
sale in the Territory and Horizon shall purchase from AHP its entire
requirements of Products for sale in the Territory, all in
accordance with the terms and conditions of the Product Supply
Agreement, in the form attached hereto as Exhibit F, to be entered
into by the Parties at the Closing.
7.2 Supply of Product by Horizon. Following the term set forth in the
Product Supply Agreement and thereafter:
(a) Horizon shall be responsible, at its own expense, for
manufacturing its requirements of Product, either by itself or
through a Third Party;
(b) Upon AHP's request, Horizon shall purchase from AHP (i)
reasonable quantities of AHP's residual inventories of
Products having not less than twelve months remaining dating
at the then current purchase price and (ii) reasonable
quantities of AHP's useable, residual inventories of Product
specific Materials (as defined in the Product Supply
Agreement), including, without limitation, all labels and
other Product specific packaging materials at AHP's
fully-absorbed manufacturing costs;
(c) Upon AHP's request, Horizon would supply AHP's requirements of
Products for sale by AHPC outside the Territory at Horizon's
then fully-absorbed manufacturing cost plus a [***] mark-up,
which purchase prices shall be increased once each year by
[***].
(d) Upon AHP's request, Horizon will use its Commercially
Reasonable Efforts to facilitate discussions between AHP and
any Third Party manufacturer with which Horizon may be in
discussions regarding the manufacture of the Product following
the term of the Product Supply Agreement.
7.3 Supply of Substance by Horizon. Following the term set forth in the
Product Supply Agreement, and thereafter:
(a) Horizon shall be responsible, at its own expense, for
manufacturing its requirements of bulk Substance, either by
itself or through a Third Party;
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(b) Upon AHP's request, Horizon shall purchase from AHP (i)
reasonable quantities of AHP's residual inventories of the
bulk Substance and (ii) reasonable quantities of AHP's
residual inventories of Substance specific Materials (as
defined in the Substance Supply Agreement), including without
limitation, all labels and other Substance specific packaging
materials, in each case at AHP's fully-absorbed manufacturing
costs; and
(c) Upon AHP's request, Horizon will use its Commercially
Reasonable Efforts to facilitate discussions between AHP and
any Third Party manufacturer with which Horizon may be in
discussions regarding the manufacture of the Substance
following the term of the Product Supply Agreement.
8. PROMOTION, MARKETING AND SALE OF PRODUCTS.
8.1 Diligence. As of the Closing, Horizon shall be solely responsible
for and shall use its Commercially Reasonable Efforts to promote,
market, sell and distribute the Products in the Territory.
8.2 Materials and Promotional Claims. Horizon at all times shall be
solely responsible for complying with all applicable laws and
regulations in its promotion and marketing of the Products.
8.3 Timing of Sales. Horizon agrees that it and its Affiliates shall
not, by any action or act of omission cause sales of Products that
would have otherwise occurred prior to the end of the fifth
anniversary of the Effective Date, to occur after the fifth
anniversary of the Effective Date.
Such actions or acts of omission may include, without limitation,
announcing or implementing changes in the price of Products, or
delaying the filling of orders. AHP shall have the right to audit,
in accordance with Section 4.5.2 hereof all of Horizon's records
reasonably necessary to verify compliance with this Section and if
AHP determines that either Horizon or its Affiliates has taken any
such actions or committed any such act of omission then, for
purposes of the payment of royalties under Section 4.2 hereof, the
Net Sales of Product made during the three months after the fifth
anniversary of the Effective Date shall be treated as if such sales
occurred prior to the fifth anniversary of the Effective Date.
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9. TRADEMARKS.
9.1 Use of Trademarks. Horizon agrees to use the Trademarks only in
connection with the Products and in the manner and style which shall
have the prior written approval of AHP. Horizon shall submit to AHP
samples of all commercial materials containing any of the
Trademarks. AHP, within thirty (30) days of its receipt of such
materials, shall have the right to reasonably comment on the usage
of the Trademarks in such materials and Horizon, at its own cost and
expense, will promptly correct any improper usage of the Trademarks.
Horizon agrees not to claim or to assert any right of ownership in
or to such Trademarks or the goodwill associated therewith and shall
take no action which may destroy, damage or impair in any way the
ownership or rights of AHP in and to such Trademarks. Horizon shall
not register anywhere in the world in its own name, or on behalf of
any other person or entity, any trademark, trade dress, brands,
labeling, designs or other indicia of ownership identical to, or
confusingly similar to, the Trademarks, and shall not associate the
Trademarks with any articles other than the Products and shall, at
the request of AHP, do all such acts and things and execute all such
documents as AHP shall in its reasonable discretion consider
necessary or proper to register or maintain the registration of the
Trademarks in any country of the Territory. Should usage of the
Trademarks in any country vest title thereto in Horizon, then
Horizon shall at AHP's request, immediately assign and transfer such
title to AHP.
9.2 Quality Control. Horizon will not permit the quality of Products to
deteriorate while in its possession so as to adversely affect the
goodwill associated with the Trademarks. Horizon shall upon request
of AHP, from time to time furnish AHP, without charge,
specifications and samples of Products for quality review by AHP.
AHP or an authorized representative thereof shall have the right, at
all reasonable times, to inspect the finished goods in relation to
which the Trademarks are to be used, as part of appropriate quality
control.
9.3 Infringement of Trademarks. In the event that, either Horizon or AHP
learn that any of the Trademarks pertaining to Products is being
infringed in the Territory by any Third Party, it shall promptly
notify the other Party of such infringement. AHP shall have the
right, but not the obligation, to act to terminate any such Third
Party infringement, including, without limitation, prosecuting a
lawsuit or other legal proceeding, at AHP's own expense. In the
event that AHP takes any such action to terminate such infringement,
Horizon may, at its sole option, take appropriate steps to join AHP
in such action and share equally in the costs thereof. If and only
if Horizon joins such action as stated in the preceding sentence,
AHP and Horizon shall share equally in any recovery which may be
received as a result of such action less the reimbursement of each
Party for the out-of-pocket expenses incurred in taking, joining and
prosecuting such action. Notwithstanding the foregoing, Horizon
shall fully cooperate with AHP in any action AHP takes to terminate
such infringement and, to the
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extent AHP recovers damages from such Third Party, through
settlement or otherwise, shall be reimbursed by AHP for all
reasonable expenses incurred in connection therewith. If AHP fails
to take any action within sixty (60) days after Horizon's request,
Horizon shall have the right to act as it sees fit to terminate the
infringement, including without limitation, prosecuting a lawsuit or
other legal proceeding, at Horizon's own expense. Horizon may deduct
its costs and expenses for such action from trademark royalties
accruing under Section 4.2 after the date of filing of such action.
In the event that Horizon takes any such action to terminate such
infringement, AHP may, at its sole option, take appropriate steps to
join Horizon in such action and share equally in the costs thereof.
If and only if AHP joins such action as stated in the preceding
sentence, AHP and Horizon shall share equally in any recovery which
may be received as a result of such action less the reimbursement of
each Party for the out-of-pocket expenses incurred in taking,
joining and prosecuting such action. Notwithstanding the foregoing,
AHP shall fully cooperate with Horizon in any action Horizon takes
to terminate such infringement, including without limitation,
agreeing to be joined as party plaintiff and approving any
reasonable settlement agreement achieved by Horizon, and to the
extent Horizon receives damages from such Third Party, through
settlement or otherwise, shall be reimbursed by Horizon for all
reasonable expenses incurred in connection therewith and deductions
from trademark royalties pursuant to this Section 9.3.
10. REPRESENTATIONS AND WARRANTIES.
10.1 Representations and Warranties of Each Party. As of the signing of
this Agreement, each of Horizon and AHP hereby represents, warrants
and covenants to the other Party hereto as follows:
(a) it is a corporation or entity duly organized and validly
existing under the laws of the state or other jurisdiction
of incorporation or formation;
(b) the execution, delivery and performance of this Agreement by
such Party has been duly authorized by all requisite
corporate action and do not require any shareholder action
or approval;
(c) it has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(d) the execution, delivery and performance by such Party of this
Agreement and its compliance with the terms and provisions
hereof does not and will not conflict with or result in a
breach of any of the terms and provisions of or constitute a
default under (i) a loan agreement, guaranty, financing
agreement, agreement affecting a product or other agreement or
instrument binding or affecting it or its property; (ii) the
provisions of its charter or operative documents or bylaws; or
(iii) any order, writ, injunction or decree of any court or
governmental authority entered against it or by which any of
its property is bound; and
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(e) it shall at all times comply with all applicable material laws
and regulations relating to its activities under this
Agreement.
10.2 Representations and Warranties of AHP. As of the signing of this
Agreement, AHP hereby represents and warrants to Horizon as follows:
(a) Except as listed in Exhibit G, there are no (i) pending or, to
AHP's knowledge, threatened product liability, breach of
warranty or other claims, actions, arbitrations,
administrative or other proceedings regarding the Product or
the Trademarks, to which AHP is a party in the Territory; or
(ii) pending or, to AHP's knowledge, overtly threatened claim
against AHP asserting that any of the Know-How infringes or
violates the rights of Third Parties.
(b) AHP is the sole owner of the Trademarks, the Know-How and the
Regulatory Approvals for the Product in the Territory and AHP
has not sublicensed, pledged, encumbered, assigned,
transferred or granted any rights or interest therein to any
Third Party inconsistent with the rights granted to Horizon
under the Transaction Agreements, and prior to the Closing,
AHP will enter into no such agreement with any Affiliate or
Third Party.
(c) AHP has furnished Horizon with access to a complete copy of
the Regulatory Approvals, including all material amendments
and supplements thereto. To the best of AHP's knowledge, the
Regulatory Approvals are in good standing and nothing has come
to the attention of AHP which has, or reasonably should have,
led AHP to believe that the Regulatory Approvals are not in
good standing. To the best of AHP's knowledge, there is no
pending or overtly threatened action by the FDA which will
have a material adverse effect on the Regulatory Approvals.
(d) AHP represents and warrants that the list of Customer
Contracts provided herein is accurate and complete with
respect to current Customer Contracts and is, to the best of
AHP's knowledge, accurate and complete with respect to pending
Customer Contracts.
(e) AHP has not given any notice to any Third Parties asserting
misappropriation of trade secrets relating to the Know-How.
(f) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN
THE PRODUCT SUPPLY AGREEMENT, AHP MAKES NO OTHER
REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
PRODUCTS OR THE TRADEMARKS OR HORIZON'S USE THEREOF.
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10.3 Representations and Warranties of Horizon. As of the signing of this
Agreement, Horizon represents and warrants to AHP that it has
properly determined that the net present value of the transactions
contemplated by this Agreement is less than fifteen million dollars
($15,000,000) and no HSR filing is required in connection with the
transactions contemplated hereby.
10.4 Representation by Legal Counsel. Each Party hereto represents that
it has been represented by legal counsel in connection with this
Agreement and acknowledges that it has participated in the drafting
hereof. In interpreting and applying the terms and provisions of
this Agreement, the Parties agree that no presumption shall exist or
be implied against the Party which drafted such terms and
provisions.
11. TERM AND TERMINATION.
11.1 Term. This Agreement shall be effective as of the Effective Date
and, unless terminated earlier by mutual written agreement of the
Parties or pursuant to this Article 11, shall remain in full force
and effect for so long as Horizon sells Product in the Territory
(the "Term"). Notwithstanding the foregoing, upon the payment of all
amounts due pursuant to Section 4.1 hereof the Know-How license
granted to Horizon pursuant to Section 2.1.1 hereof shall become a
fully paid-up, perpetual exclusive (exclusive except as to
veterinary pharmaceutical products and injectable human uses by AHP
and its Affiliates neither of which shall have the right to
sublicense) license.
11.2 Termination.
11.2.1 Certifications of Representation and Warranties. Either
Party may terminate this Agreement if, in accordance with
Section 3.3.5 hereof, the other Party certifies that one or
more of its representations and warranties set forth in
Article 10 hereof do not remain true and in effect as of the
day of Closing.
11.2.2 Termination for Cause Both Parties. This Agreement may be
terminated by written notice by either Party (subject to the
provisions of Section 11.2.3) at any time during the Term of
this Agreement:
(a) for material breach by the other Party, which breach remains
uncured for thirty (30) days in the case of nonpayment of
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any amount due and ninety (90) days for all other breaches,
each measured from the date written notice of such breach is
given to the breaching Party, or, if such breach is not
susceptible of cure within such ninety (90) day period and the
breaching Party uses diligent good faith efforts to cure such
breach, for one hundred eighty (180) days after written notice
to the breaching Party; or
(b) upon the filing or institution of bankruptcy, reorganization,
liquidation or receivership proceedings, or upon an assignment
of a substantial portion of the assets for the benefit of
creditors by the other Party, or in the event a receiver or
custodian is appointed for such Party's business, or if a
substantial portion of such Party's business is subject to
attachment or similar process; provided, however, that in the
case of any involuntary bankruptcy proceeding such right to
terminate shall only become effective if the proceeding is not
dismissed within ninety (90) days after the filing thereof.
11.2.3 Effect of Termination for Cause on License.
(a) In the event that Horizon breaches this Agreement pursuant to
Section 11.2.2 then it shall be AHP's sole option:
(i) to terminate this Agreement, in which case all rights to
the Know-How, the Regulatory Approvals and the
Trademarks shall revert to AHP (unless all payments
under Section 4.1 have been fully paid to AHP) and
Horizon shall remain obligated to make all payments
under Sections 4.1 and 4.2 which have accrued as of the
date of termination; or
(ii) to accelerate the payments required under Section 4.1 so
that they shall become immediately due and payable, in
which case this Agreement shall remain in full force and
effect, and Horizon shall remain obligated to make all
payments required under Sections 4.1 and 4.2; or
(iii) to pursue all legal and equitable remedies available to
it, in which case the Agreement shall remain in full
force and effect and Horizon shall remain obligated to
make all payments required under Sections 4.1 and 4.2.
(b) In the event that AHP breaches this Agreement pursuant to
Section 11.2.2 then it shall be Horizon's sole option:
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(i) to terminate this Agreement, in which case all rights to
the Know-How and the Regulatory Approvals shall be
vested in Horizon (if all payments under Section 4.1
have been fully paid to AHP) and the license under the
Trademarks shall be deemed to be fully paid-up and
Horizon shall remain obligated to make only those
payments under Section 4.2 which have accrued as of the
date of termination; or
(ii) to pursue all legal and equitable remedies available to
it, in which case the Agreement shall remain in full
force and effect and Horizon shall remain obligated to
make all payments required under Sections 4.1 and 4.2.
11.3 Survival. The provisions of Articles 1, 2, 6, 12 and 13 and
Sections 4.4, 4.5, 11.2.3, 14.2.3, 14.6, 14.7, 14.8, 14.9, and
14.10 shall survive expiration or any earlier termination of
this Agreement. Any payments that become due and payable prior
to expiration, which have not been paid, shall survive
expiration or any earlier termination of this Agreement.
12. INDEMNIFICATION.
12.1 Notice and Assistance. Each Party shall promptly notify the other,
in writing, if it learns of any litigation, claim, administrative or
criminal proceedings (collectively "Actions"), related to the
Product, the Substance, the Trademark, or any Regulatory Approval,
asserted or threatened against such Party (the "Defending Party").
With respect to any Actions relating to the Product, the Substance,
the Trademark or any Regulatory Approval asserted against a
Defending Party, the other Party shall, at no out-of-pocket expense
to it except as otherwise provided in this Article 12, reasonably
cooperate with and provide such reasonable assistance to such
Defending Party as such Defending Party may reasonably request in
connection with its defense against such Actions. Such reasonable
assistance may include, without limitation, providing copies of all
relevant correspondence and other materials that the Defending Party
may reasonably request, provided, however, that any Confidential
Information so provided shall be treated in accordance with the
provisions of Article 13 hereof.
12.2 Indemnification by AHP. AHP shall indemnify, defend and hold
harmless Horizon, its Affiliates or its permitted sublicensees, and
each of its and their respective employees, officers, directors and
agents (each, a "Horizon Indemnified Party") from and against any
and all liability, loss, damage, cost, and expense (including
reasonable attorneys' fees) (collectively, a "Liability") which the
Horizon Indemnified Party may incur, suffer or be required to pay
resulting from or arising in connection with (i) the breach by AHP
of any representation or warranty contained in this Agreement, (ii)
the manufacture, promotion,
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distribution, testing, use, marketing, sale or other disposition of
the Substance or Products by AHP outside of the Territory and Field,
whether before or after the Effective Date; (iii) the manufacture,
promotion, distribution, testing, use, marketing, sale or other
disposition of the Substance or Products by AHP within the Territory
and Field before the Effective Date; or (iv) the use of the
Trademarks by AHP or its Affiliates within or outside the Territory,
whether before or after the Effective Date. Notwithstanding the
foregoing, AHP shall have no obligation under this Agreement to
indemnify, defend or hold harmless any Horizon Indemnified Party
with respect to claims, demands, costs or judgments which result
from willful misconduct or negligent acts or omissions of Horizon,
its Affiliates, its permitted sublicensees, or any of their
respective employees, officers, directors or agents.
12.3 Indemnification by Horizon. Horizon shall indemnify, defend and hold
harmless AHP and its Affiliates, and each of its and their
respective employees, officers, directors and agents (each, an "AHP
Indemnified Party") from and against any Liability which the AHP
Indemnified Party may incur, suffer or be required to pay resulting
from or arising in connection with (i) the breach by Horizon of any
representation or warranty contained in this Agreement; (ii) the
manufacture (but only upon the commencement of Horizon's
manufacturing the Products pursuant to the Product Supply
Agreement), promotion, distribution, testing, use, marketing, sale
or other disposition of Products by Horizon, its Affiliates, its
permitted sublicensees or their respective subcontractors; or (iii)
the use of the Trademark by Horizon, its Affiliates, its permitted
sublicensees or their respective subcontractors. Notwithstanding the
foregoing, Horizon shall have no obligation under this Agreement to
indemnify, defend, or hold harmless any AHP Indemnified Party with
respect to claims, demands, costs or judgments which result from
willful misconduct or negligent acts or omissions of AHP, its
Affiliates, its permitted sublicensees or any of their respective
employees, officers, directors or agents.
12.4 Conditions to Indemnification. The obligations of the indemnifying
Party under Sections 12.2 and 12.3 are conditioned upon the delivery
of written notice to the indemnifying Party of any potential
Liability promptly after the indemnified Party becomes aware of such
potential Liability. The indemnifying Party shall have the right to
assume the defense of any suit or claim related to the Liability if
it has assumed responsibility for the suit or claim in writing;
however, if in the reasonable judgment of the indemnified Party,
such suit or claim involves an issue or matter which could have a
materially adverse effect on the business operations or assets of
the indemnified Party, the indemnified Party may waive its rights to
indemnity under this Agreement and control the defense or settlement
thereof, but in no event shall any such waiver be construed as a
waiver of any indemnification rights such Party may have at law or
in equity. If the indemnifying Party defends the suit or claim, the
indemnified Party may participate in (but not control) the defense
thereof at its sole cost and expense.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
12.5 Settlements. Neither Party may settle a claim or action related to a
Liability without the consent of the other Party, if such settlement
would impose any monetary obligation on the other Party or require
the other Party to submit to an injunction or otherwise limit the
other Party's rights under this Agreement or otherwise. Except as
otherwise expressly set forth in this Article 12, any payment made
by a Party to settle any such claim or action shall be at its own
cost and expense.
12.6 Limitation of Liability. With respect to any claim by one Party
against the other arising out of the performance or failure of
performance of the other Party under this Agreement, the Parties
expressly agree that the liability of such Party to the other Party
for such breach shall be limited under this Agreement or otherwise
at law or equity to direct damages only and in no event shall a
Party be liable for punitive, exemplary or consequential damages.
The limitations set forth in this Section 12.6 shall not apply with
respect to the obligations of either Party to indemnify the other
under Sections 12.2 or 12.3 hereof in connection with a Liability to
a Third Party.
12.7 Insurance. Horizon shall obtain and maintain at all times during the
term of this Agreement, Commercial General Liability Insurance,
including Products Liability Insurance, with reputable and
financially secure insurance carriers to cover its indemnification
obligations under Section 12.3, with limits of not less than [***]
dollars ($[***]) per occurrence and [***] dollars ($[***]) in the
aggregate. Horizon shall provide AHP with a Certificate of Insurance
evidencing this coverage within thirty (30) days after the Closing.
Such insurance policy shall name AHP as an additional insured and
Horizon shall use its Commercially Reasonable Efforts to ensure that
such insurance policy contains a provision requiring ten (10) day
advance notification to AHP in the event of its cancellation or
termination. AHP shall maintain self-insurance and/or obtain
insurance from a Third Party insurer in amounts sufficient to cover
its obligations under Section 12.2. Upon Horizon's written request,
AHP shall provide Horizon with evidence of such insurance coverage.
13. CONFIDENTIALITY.
13.1 Nondisclosure Obligation. Each of Horizon and AHP shall use only in
accordance with this Agreement and shall not disclose to any Third
Party any information including, without limitation, Know-How,
received by it from the other Party (the "Information"), without the
prior written consent of the other Party. The foregoing obligations
shall survive the expiration or earlier termination of the last of
the Transaction Agreements to so expire or to be so terminated for a
period of five (5) years. These obligations shall not apply to
Information that:
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(i) is known by the receiving Party at the time of its receipt,
and not through a prior disclosure by the disclosing Party, as
documented by business records;
(ii) is at the time of disclosure or thereafter becomes published
or otherwise part of the public domain without breach of this
Agreement by the receiving Party;
(iii) is subsequently disclosed to the receiving Party by a Third
Party who has the right to make such disclosure;
(iv) is developed by the receiving Party independently of the
Information received from the disclosing Party and such
independent development can be documented by the receiving
Party, or
(v) is required by law, regulation, rule, act or order of any
governmental authority or agency to be disclosed by a Party,
provided that notice is promptly delivered to the other Party
in order to provide an opportunity to seek a protective order
or other similar order with respect to such Information and
thereafter the disclosing Party discloses to the requesting
entity only the minimum Information required to be disclosed
in order to comply with the request, whether or not a
protective order or other similar order is obtained by the
other Party.
13.2 Permitted Disclosures. Information may be disclosed to employees,
agents, consultants, sublicensees or suppliers of the recipient
Party or its Affiliates, but only to the extent required to
accomplish the purposes of this Agreement and only if the recipient
Party obtains prior agreement from its employees, agents,
consultants, sublicensees, suppliers or Third Party manufacturers to
whom disclosure is to be made to hold in confidence and not make use
of such Information for any purpose other than those permitted by
this Agreement. Each Party will use at least the same standard of
care as it uses to protect proprietary or confidential information
of its own to ensure that such employees, agents, consultants,
sublicensees, suppliers or Third Party manufacturers do not disclose
or make any unauthorized use of the Information.
13.3 Disclosure of Agreement. Neither Horizon nor AHP shall release to
any Third Party or publish in any way any non-public information
with respect to the terms of this Agreement or concerning their
cooperation without the prior written consent of the other, which
consent will not be unreasonably withheld or delayed, provided,
however, that either
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Party may disclose the terms of this Agreement to the extent
required to comply with applicable laws, including, without
limitation the rules and regulations promulgated by the United
States Securities and Exchange Commission, provided, however, that
prior to making any such disclosure, the Party intending to so
disclose the terms of this Agreement shall (i) provide the
nondisclosing Party with written notice of the proposed disclosure
and a opportunity to review and comment on the intended disclosure
which is reasonable under the circumstances and (ii) shall seek
confidential treatment for as much of the disclosure as is
reasonable under the circumstances, including, without limitation,
seeking confidential treatment of any information as may be
requested by the other Party. Notwithstanding any other provision of
this Agreement, each Party may disclose the terms of this Agreement
to lenders, investment bankers and other financial institutions of
its choice solely for purposes of financing the business operations
of such Party either (i) upon the written consent of the other Party
or (ii) if the disclosing Party uses reasonable efforts to obtain a
signed confidentiality agreement with such financial institution
with respect to such information on terms substantially similar to
those contained in this Article 13.
13.4 Publicity. Subject to Section 13.3, all publicity, press releases
and other announcements relating to this Agreement or the
transactions contemplated hereby shall be reviewed in advance by,
and shall be subject to the approval of, both Parties.
14. MISCELLANEOUS.
14.1 Force Majeure. Neither Party shall be liable to the other for delay
or failure in the performance of the obligations on its part
contained in this Agreement if and to the extent that such failure
or delay is due to circumstances beyond its control (including,
without limitation, AHP's inability to obtain, from a Third Party,
sufficient quantities of the raw materials needed for the
manufacture of Substance to meet its manufacturing obligations under
Article 7) which it could not have avoided by the exercise of
reasonable diligence. It shall notify the other Party promptly
should such circumstances arise, giving an indication of the likely
extent and duration thereof and shall use all Commercially
Reasonable Efforts to resume performance of its obligations as soon
as practicable.
14.2 Assignment.
14.2.1 Assignment by Horizon. Horizon may assign any or all of its
rights or obligations under this Agreement in the Territory to
any of its Affiliates, for so long as they remain Affiliates.
In addition, Horizon may assign any or all of its rights or
obligations under this Agreement in the Territory in
conjunction
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with a merger or acquisition of Horizon or its Affiliates.
Horizon may not otherwise assign any of its rights or
obligations under this Agreement without AHP's prior written
consent, not to be unreasonably withheld. AHP shall respond to
such requests by Horizon for assignment within thirty (30)
days from such request. Any permitted assignment shall not
relieve Horizon of its responsibilities for performance of its
obligations under this Agreement. Notwithstanding the
foregoing, Horizon may not assign or otherwise transfer the
Regulatory Approvals to any Third Party until the later to
occur of (i) all payments are made under Article 4.1, and (ii)
termination of the Product Supply Agreement.
14.2.2 Assignment by AHP. AHP may assign any or all of its rights or
obligations under this Agreement to any of its Affiliates or
to any Third Party, provided, however, that AHP may assign all
or part of its obligations to a Third Party only after
receiving Horizon's prior written consent, which consent shall
not be unreasonably withheld or delayed; provided, further,
that such assignment shall not relieve AHP of its
responsibilities for performance of its obligations under this
Agreement. Notwithstanding the foregoing, Horizon's consent
shall not be required for any assignment made by AHP in
connection with a merger or similar reorganization of AHP or
its parent company or the sale of all or substantially all of
AHP's or AHP's parent company's pharmaceutical assets.
14.2.3 Binding Nature of Assignment. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted
assigns of the Parties. Any assignment not in accordance with
this Article 14 shall be void.
14.3 No Waiver. The failure of either Party to require performance by the
other Party of any of that other Party's obligations hereunder shall
in no manner affect the right of such Party to enforce the same at a
later time. No waiver by any Party hereto of any condition, or of
the breach of any provision, term, representation or warranty
contained in this Agreement whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach, or of
any other condition or of the breach of any other provision, term,
representation or warranty hereof.
14.4 Severability. If a court or other tribunal of competent jurisdiction
should hold any term or provision of this Agreement to be excessive,
or invalid, void or unenforceable, the offending term or provision
shall be deleted or revised to the extent necessary to be
enforceable, and, if possible, replaced by a term or provision
which, so far as practicable achieves the legitimate aims of the
Parties.
14.5 Relationship between the Parties. Both Parties are independent
contractors under this Agreement. Nothing herein contained shall be
deemed to create an employment, agency, joint venture or partnership
relationship between the Parties hereto or any of their agents or
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employees, or any other legal arrangement that would impose
liability upon one Party for the act or failure to act of the other
Party. Neither Party shall have any express or implied power to
enter into any contracts or commitments or to incur any liabilities
in the name of, or on behalf of, the other Party, or to bind the
other Party in any respect whatsoever.
14.6 Correspondence and Notices.
14.6.1 Ordinary Notices. Correspondence, reports, documentation, and
any other communication in writing between the Parties in the
course of ordinary implementation of this Agreement shall be
delivered by hand, sent by facsimile, overnight courier or by
airmail to the employee or representative of the other Party who
is designated by such other Party to receive such written
communication.
14.6.2 Extraordinary Notices. Extraordinary notices and communications
(including, without limitation, notices of termination, force
majeure, material breach, change of address) shall be in writing
and sent by prepaid registered or certified air mail, or by
facsimile confirmed by prepaid registered or certified air mail
letter, and shall be deemed to have been properly served to the
addressee upon receipt of such written communication.
14.6.3 Addresses. In the case of Horizon, the proper address for
communications and for all payments shall be:
Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Mr. Brent Dixon
Fax: (770) 442-9594
and it the case of AHP, the proper address for communications and
for all payments shall be:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania 19087
Attn: Senior Vice President,
Global Business Development
Fax: (610) 688-9498
with a copy to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President
and General Counsel
Fax: (973) 660-7156
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14.7 Choice of Law. This Agreement is subject to and governed by the laws
of the State of Delaware, excluding its conflict of laws provisions.
14.8 Entire Agreement Amendment. This Agreement, together with the other
Transaction Agreements and the Confidential Disclosure Agreement
between AHP and E.J. Financial Enterprises Inc. (an equity holder in
Horizon) dated April 28, 1998, and all the covenants, promises,
agreements, warranties, representations, conditions and
understandings contained herein and therein sets forth the complete,
full and exclusive agreement between the Parties and supersedes and
terminates all prior and contemporaneous agreements and
understandings between the Parties, whether oral or in writing.
There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or
written, between the Parties other than as are set forth in the
Transaction Agreements. No subsequent alteration, amendment, change,
waiver or addition to this Agreement shall be binding upon the
Parties unless reduced to writing and signed by an authorized
officer of each Party. No understanding, agreement, representation
or promise, not explicitly set forth herein, has been relied on by
either Party in deciding to execute this Agreement.
14.9 Headings. The headings and captions used in this Agreement are
solely for the convenience of reference and shall not affect its
interpretation.
14.10 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be an original and all of which
shall constitute together the same document.
14.11 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all other acts, as may
be necessary or appropriate in order to carry out the purposes and
intent of this Agreement including, without limitation, any filings
with any antitrust agency which may be required.
IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized
representatives of the Parties as of the date set forth below.
AMERICAN HOME PRODUCTS HORIZON PHARMACEUTICALS, INC.
CORPORATION
- ------------------------------- --------------------------------
Name: Name:
Title: Title:
28
<PAGE> 29
EXHIBIT A
CUSTOMER CONTRACTS
------------------
The Customer Contracts are listed on the following two pages.
29
<PAGE> 30
[***] - CONFIDENTIAL TREATMENT REQUESTED
WYETH-AYERST LABORATORIES
BID ANALYSIS SYSTEM
CONTRACT PRODUCT PRICES BY NDC - ACTIVE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------- -------------------------------------------
NDC: 00031-7840-63 ROBINUL FORTE TABLETS PKG SIZE: [***]
- --------------------------------------------------------------------------------------- -------------------------------------------
CTLG PRICE: [***] FACTOR COST: [***] FSS PRICE: [***]
- --------------------------------------------- --------------------------------------------------------------- --------------------
CURRENT BEST: [***] CURRENT NOMINALS: [***] FUTURE BEST: [***] FUTURE NOMINAL: [***]
- ---------------------------------------------------------------------------------------------------------------------- ------------
GRP/CUST GRP/CUSTOMER NAME CITY STATE CLS CONTRACT START DATE END DATE SALES PRICE DISC %
- ------------------------------------------------------------- ----------------- ------------ ------------ ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01 - NON GUARANTEED TYPE
- ------------------------------------------------------------- ------------ -------------- ------------ ------------ -------- -----
000000489 PUERTO RICO HOSP GROUP SAN JUAN PR 0000046178 11/01/1997 11/30/1998 [***] [***]
- ---------------- ----------------------------- ------------- ------------ -------------- ------------ ------------ -------- ------
791000010 HOSPITAL DEL MAESTRO HATO REY PR 14 0000046045 11/01/1997 11/30/1998 [***] [***]
- ------------------------------------------------------------------- -------- -------------- ------------ ------------ -------- ---
02 - GUARANTEED
- ------------------------------------------------------------------- ------------ ---------- ------------ ------------ -------- ---
000000340 VETERANS STATE HOME HINES IL 0000046309 11/01/1998 11/30/1998 [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000000355 PHS FEDERAL GOVT ACCTS WASHINGTON DC 0000046308 11/01/1998 11/30/1998 [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000000406 MILITARY RADNOR PA 0000046199 11/01/1998 11/30/1998 [***] [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000000310 VA PRIME VENDOR RADNOR PA 0000046196 11/01/1998 11/30/1998 [***] [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000002003 STATE OF ARKANSAS LITTLE ROCK AR 0000043007 01/01/1998 12/31/1998 [***] [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000000027 MINNESOTA MULTI-STATE ST. PAUL. MN 0000046643 05/01/1998 04/30/1999 [***] [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
0000009585 NEW PUERTO RICO HOSP ST. DAVIDS PA 0000047764 04/30/1998 04/27/1999 [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000000253 TENET HEALTCARE DALLAS TX 0000022284 09/01/1998 08/31/1999 [***] [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000000309 HEALTH SERVS CORP AMER BRIDGETON MO 0000024878 10/01/1998 09/30/1999 [***] [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
04 - GUARANTEED W/OUT - CLAUSE
- ---------------- ----------------------------- -------------- ------------ -------------- ------------ ------------ -------- -----
0000009341 MICH STATE UNIV AFFIL EAST LANSING MI 0000046646 02/01/1998 01/31/9999 [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
05 - GUAR W/PRC ESC & OUT CLS
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000000407 OWEN HEALTHCARE HOUSTON TX 0000031263 07/01/1998 03/31/2000 [***] [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
000000418 PACT (G/MEDMGMNT) PLYMOUTH MN 0000046216 07/01/1998 03/31/2000 [***] [***]
- --------- ------------------------ ------------------------- ------------ ---------- ------------- ------- ------ ------
</TABLE>
30
<PAGE> 31
[***] - CONFIDENTIAL TREATMENT REQUESTED
WYETH-AYERST LABORATORIES
BID ANALYSIS SYSTEM
CONTRACT PRODUCT PRICES BY NDC - ACTIVE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------- ------------------------------------------
NDC: 00031-7824-63 ROBINUL TABLETS PKG SIZE: [***]
- --------------------------------------------------------------------------------------- ------------------------------------------
CTLG PRICE: [***] FACTOR COST: [***] FSS PRICE: [***]
- --------------------------------------------- ----------------------------------------- ---------------------------------- -------
CURRENT BEST: [***] CURRENT NOMINALS: [***] FUTURE BEST: [***] FUTURE NOMINAL: [***]
- --------------------------------------------- ----------------------------------------- ---------------------------------- -------
- ---------------- --------------------------------- ------------------ ---------- ------- --------------- ------------ ------------
GRP/CUST GRP/CUSTOMER NAME CITY STATE CLS CONTRACT START DATE END DATE SALES PRICE DISC %
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01 - NON-GUARANTEED TYPE
----------------- --------------- ------------ ------------ ----------
000000489 PUERTO RICO HOSP GROUP .. SAN JUAN PR 0000046178 11/01/1997 11/30/1998 [***] [***]
- ---------- ------------------------ ------------ ----------------- --------------- ------------ ------------ ----------
791000010 HOSPITAL DEL MAESTRO .... HATO REY PR 14 0000046045 11/01/1997 11/30/1998 [***] [***]
- ---------- ------------------------ ------------ ----------------- --------------- ------------ ------------ ---------
02 - GUARANTEED
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
000000344 PHS BETHESDA MD 0000058826 10/01/1998 12/31/1998 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
000000340 VETERANS STATE HOME HINES IL 0000046309 01/01/1998 11/30/1998 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
000000355 PYS FEDERAL GOVT ACCTS WASHINGTON DC 0000046308 01/01/1998 11/30/1998 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
000000406 MILITARY RADNOR PA 0000046199 01/01/1998 11/30/1998 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
000000310 VA PRIME VENDOR RADNOR PA 0000046196 01/01/1998 11/30/1998 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
000000164 ISD (INTERNAL SVCS DEPT) LOS ANGELES CA 0000027546 02/01/1998 01/31/1999 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
000000195 NEW YORK CITY HLTH & HOS NEW YORK NY 0000037145 09/15/1997 09/30/2000 [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000002003 STATE OF ARKANSAS LITTLE ROCK AR 0000043007 01/01/1998 12/31/1998 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000000027 MINNESOTA MULTI-STATE ST. PAUL MN 0000046643 05/01/1998 04/30/1999 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000002046 STATE OF SOUTH CAROLINA COLUMBIA SC 0000046472 05/01/1998 04/30/1999 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000009585 NEW PUERTO RICO HOSP ST. DAVIDS PA 0000047764 04/30/1998 04/27/1999 [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000000253 TENET HEALTHCARE DALLAS TX 0000022284 09/01/1998 08/31/1999 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000000309 HEALTH SERVS CORP AMER BRIDGETON MO 0000024878 10/01/1998 09/30/1999 [***] [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000002004 STATE OF CALIFORNIA SACRAMENTO CA 0000057964 10/05/1998 09/30/2000 [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000002048 STATE OF TENNESSEE NASHVILLE TN 0000060276 10/22/1998 07/31/1999 [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
04 - GUARANTEED W/OUT-CLAUSE
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
0000009341 MICH STATE UNIV AFFIL E.LANSING MI 0000046646 02/01/98 01/31/99 [***] [***]
- ---------- ------------------------ ------------ --------------- ------------ ------------ ------ ------ ------
</TABLE>
31
<PAGE> 32
[***] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
05 - GUAR W/PRC ESC & OUT CLS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------- ------------------------ --------------- ------------- ------------ ----------- ------- ------ -------
GRP/CUST GRP/CUSTOMER NAME CITY STATE CLS CONTRACT START DATE END DATE SALES PRICE DISC %
- -----------------------------------------------------------------------------------------------------------------------------
000000407 OWEN HEALTHCARE HOUSTON TX 0000031263 07/01/1998 03/31/2000 [***] [***] [***]
- --------- -------------------------- ------------- --------------- ------------- ------------ ------- ------- ------
000000418 PACT (C/MEDMGNT) PLYMOUTH MN 0000046216 07/01/1998 03/31/2000 [***] [***] [***]
- --------- -------------------------- ------------- --------------- ------------- ------------ ------- ------- ------
</TABLE>
32
<PAGE> 33
EXHIBIT B
---------
PRODUCTS
<TABLE>
<CAPTION>
Country NDC No. Strength Dosage Form Package Size
- ------- ------- -------- ----------- ------------
<S> <C> <C> <C> <C>
USA 7824-63 1 mg tablets bottles of 100
USA 7840-63 2 mg tablets bottles of 100
</TABLE>
33
<PAGE> 34
EXHIBIT C
---------
TRADEMARKS
<TABLE>
<CAPTION>
Country Trademark Registration No. Renewal Date
- ------- --------- ---------------- ------------
<S> <C> <C> <C>
United States Robinul 728,458 03/13/2002
</TABLE>
34
<PAGE> 35
EXHIBIT D
---------
SYSTEMS TRANSFER PLAN
Pursuant to Section 3.2 of that certain License Agreement entered into by
and between Horizon Pharmaceutical Corporation ("Horizon") and American Home
Products Corporation, acting through its Wyeth-Ayerst Laboratories Division
("AHP") on January 29, 1999 (the "License Agreement"), Horizon and AHP, by
signing below, each agree that the documents identified below and attached
hereto constitute the Systems Transfer Plan. Horizon and AHP each further agree
that to the extent any of the attached documents are inconsistent with the
License Agreement or the Product Supply Agreement which also was entered into by
Horizon and AHP on January 29, 1999, the terms and conditions of the License
Agreement or the Product Supply Agreement, as applicable, shall control. The
Parties recognize that this document serves as a guideline for the transition of
responsibilities for the Product from AHP to Horizon and that, to the extent
that this Systems Transfer Plan imposes timelines which are not expressly stated
within the License Agreement or the Product Supply Agreement, the failure to
strictly adhere to any such timelines set forth in this Systems Transfer Plan
shall not constitute a breach of either the License Agreement or the Product
Supply Agreement
Attachments
1. Initial inventory shipment; Outstanding sales orders;
Initial forecast; On-going purchase orders
2. Product/Quality Complaints
3. Labeling, Product Inserts, Tooling
4. Customer Contracts
5. Rebates
6. Manufacturing Plant Services
7. Regulatory
8. Returns
9. Chargebacks
HORIZON PHARMACUETICAL AMERICAN HOME PRODUCTS
CORPORATION CORPORATION acting through its
Wyeth-Ayerst Laboratories Division
By:_______________________________ By:__________________________________
Name:_____________________________ Name:________________________________
Title:____________________________ Title:_______________________________
Date:_____________________________ Date:________________________________
35
<PAGE> 36
EXHIBIT E
ADVERSE DRUG EVENT REPORTING PROCEDURE
The Parties hereby agree that the following terms will govern disclosures
of each Party to the other with respect to adverse event reporting relating to
the Product or Substance as clinically tested or marketed by or on behalf of
either Party.
1. Definitions.
1.1 An Adverse Drug Experience ("ADE") is defined as:
a) any experience which is adverse, including what are commonly
described as adverse or undesirable experiences, adverse events,
adverse reactions, side effects, or death due to any cause
associated with, or observed in conjunction with the use of a
drug, biological product, or device in humans, whether or not
considered related to the use of that product:
- occurring in the course of the use of a drug, biological
product or device,
- associated with, or observed in conjunction with product
overdose, whether accidental or intentional
- associated with, or observed in conjunction with product
abuse, and/or
- associated with, or observed in conjunction with product
withdrawal.
b) Any significant failure of expected pharmacological or biologic
therapeutical action (with the exception of in clinical trials).
1.2 Serious or Non-Serious is defined as:
a) A Serious ADE is any adverse drug experience occurring at any dose
that results in any of the following outcomes: death, a
life-threatening adverse drug experience, inpatient hospitalization
or prolongation of existing hospitalization, a persistent or
significant disability/incapacity, or a congenital anomaly/birth
defect. Other important medical events that may not result in death,
be life-threatening, or require hospitalization may be considered a
serious adverse drug experience when, based upon appropriate medical
judgment, they may jeopardize the patient or subject and may require
medical or surgical intervention to prevent one of the outcomes
listed in this definition. Examples of such medical events include
allergic bronchospasm requiring intensive treatment in an emergency
room or at home, blood dyscrasias or convulsions that do not result
in inpatient hospitalization, or the development of drug dependency
or drug abuse.
36
<PAGE> 37
b) A Non-Serious ADE is any ADE which does not meet the criteria for
a serious ADE.
1.3 Life-threatening adverse drug experience is defined as any adverse
drug experience that places the patient, in the view of the initial
reporter, at immediate risk of death from the adverse drug experience
as it occurred, i.e., it does not include an adverse drug experience
that, had it occurred in a more severe form, might have caused death.
1.4 Disability is defined as a substantial disruption of a person's
ability to conduct normal life functions.
1.5 An Unexpected ADE is defined as any ADE that is not listed in the
current labeling for the drug product. This includes events that may
be symptomatically and pathophysiologically related to an event listed
in the labeling, but differ from the event because of greater severity
or specificity.
1.6 Associated with or related to the use of the drug is defined as: A
reasonable possibility exists that the ADE was caused by the drug.
1.7 NDA Holder is defined as: An "Applicant" as defined in 21 CFR Part
314.3(b), for regulatory approval of a Product in any regulatory
jurisdiction, including a holder of a foreign equivalent thereto.
1.8 IND Holder is defined as: A "Sponsor" as defined in 21 CFR Part 313.1
(b) of an investigational new drug in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.
1.9 Capitalized terms not defined in this Exhibit shall have the meaning
assigned thereto in the Agreement.
2. With respect to the Product or Substance, the Parties agree as follows:
a. All initial reports and any follow-up information (oral or written)
for any and all Serious ADEs as defined above (other than with respect
to animal studies) which become known to either Party (other than from
disclosure by or on behalf of the other Party) must be communicated by
telephone, telefax or electronically directly to the other Party
and/or the NDA Holder, IND Holder (individually and collectively
referred to as "Holders") within forty-eight (48) hours of receipt of
the information. Written confirmation of the Serious ADE received by
such Party should be sent to the other Party and/or the Holders as
soon as it becomes available, but in any event within forty-eight (48)
hours of initial report of the Serious ADE by such Party.
37
<PAGE> 38
b. Both Parties shall exchange Medwatch and/or CIOMs forms and other
health authority reports within forty-eight (48) hours of
submission to any Regulatory Authority.
c. All initial reports and follow-up information received for all
Non-Serious ADEs for marketed Product which become known to a
Party (other than from disclosure by or on behalf of the other
Party) must be communicated in writing, by telefax or
electronically to the other Party within ten (10) days, on
Medwatch or CIOMs forms (where possible).
d. Each Party shall coordinate and cooperate with the other whenever
practicable to prepare a single written report regarding all
Serious and/or Non-Serious ADEs, provided, however, that neither
Party shall be obligated to delay reporting of any ADE in
violation of applicable law or regulations regarding the
reporting of ADEs.
3. The Parties further agree that:
a. A written report be forwarded to the other Party within
forty-eight (48) hours of receipt by the Party making the report,
for ADEs for animal studies which suggest a potential significant
risk for humans;
b. Each Party will give the other Party a report via a print-out or
computer disk of all ADEs reported to it and its Affiliates
relating to the Product or Substance within the last year, within
thirty (30) days of receipt of a request from the other Party but
not more often than four (4) times a year;
c. If either Party wishes access to ADE Reports of the other Party
relating to the Product or Substance, upon request of that Party,
the other Party shall make available its ADE records relating to
the Product or Substance (including computer disks) for viewing
and copying by the other Party. The Parties may discuss the
transfer of ADE Reports by computer disk.
d. Disclosure of information hereunder by a Party to the other Party
shall continue as long as either Party and/or its Affiliates or
designees continue to clinically test or market Product or
Substance.
4. Each Party shall diligently undertake the following further obligations
where both Parties are or will be commercializing the Product or Substance
pursuant to the Agreement and/or performing clinical trials with respect to
the Product or Substance:
38
<PAGE> 39
a. Upon the Effective Date, each Party shall identify individuals
who shall be responsible for identifying all ADE reporting
requirements in all countries of the Territory as set forth in
the Agreement, and any amendments thereto;
b. To immediately consult with the other Party, with respect to the
investigation and handling of any Serious ADE disclosed to it by
the other Party or by a third Party and to allow the other Party
to review the Serious ADE and to participate in the follow-up
investigation;
c. To immediately advise the other Party of any Product and/or
Substance safety communication received from a health authority
and consult with the other Party with respect to any Product
and/or Substance warning, labeling change or change to an
investigators' brochure involving safety issues proposed by the
other Party, including, but not limited to the safety issues
agreed to by the Parties;
d. To diligently handle in a timely manner the follow-up
investigation and resolution of each ADE reported to it;
e. To provide the other Party mutually agreed upon audit rights of
its ADE reporting system and documentation, upon prior notice,
during normal business hours, at the expense of the auditing
Party and under the confidentiality obligations set forth in the
Agreement;
f. To meet in a timely fashion from time to time as may be
reasonably required to implement the adverse event reporting and
consultation procedures described in this Exhibit E, including
identification of those individuals in each Party's Drug Safety
group who will be responsible for reporting to and receiving ADE
information from the other Party, and the development of a
written standard operating procedure with respect to adverse
event reporting responsibilities, including reporting
responsibilities to investigators;
g. Where possible, to transmit all data electronically;
h. To report to each other any addenda, revisions or changes to the
Agreement (e.g., change in territories, local regulations,
addition of new licensors/licensees to the Agreement, etc.) which
might alter the adverse event reporting responsibilities
hereunder;
i. To utilize English as the language of communication and data
exchange between the Parties;
j. To develop a system of exchange of documents and information in
the event that the Agreement involves more than two Parties;
k. To work together to develop an electronic system to transmit ADE
data.
39
<PAGE> 40
5. The Parties may meet after the Effective Date of the Agreement to establish
a separate agreement for adverse event exchange which will supersede this
Exhibit E.
<PAGE> 1
EXHIBIT 10.15
CONFIDENTIAL TREATMENT REQUEST
------------------------------
Confidential Portions Of This Agreement Which Have Been Redacted Are marked
With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
DISTRIBUTION AGREEMENT
between
G. Pohl Boskamp GmbH & Co.
Kieler Strasse 11
D-25551 Hohenlockstedt
Federal Republic of Germany
represented by Mrs. Marianne Boskamp, General Manager
of the Company
-hereinafter referred to as "POHL"
and
HORIZON Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, GA 30076/USA
represented by Dr. Mahendra Shah,
Chairman of the Board
-hereinafter referred to as "HORIZON"
Preamble
POHL intends to appoint a new distributor for the Territory as defined in ss.3
hereinafter HORIZON is willing to become a distributor for POHL Now, therefore,
the parties agree upon the following terms and conditions:
ss.1
Object of the Agreement
1.1 POHL hereby appoints HORIZON as its distributor to promote the PRODUCTS of
POHL as defined ss.2 in the Territory as defined ss.3. HORIZON shall
1
<PAGE> 2
have exclusive rights in the Territory to distribute, market and sell the
PRODUCTS and other products of POHL with the same active ingredient and the same
route of administration. In case that POHL wants to market other Nitroglycerin
Products in the Territory POHL has to offer the Products to HORIZON. HORIZON has
to give his final decision within 90 days to this offer. In case HORIZON is not
interested in the distribution of these products or has not informed POHL in
writing within 90 days after receipt of the offer about its interest in the
distribution of the products so is POHL free to transfer the distribution rights
for these products in the Territory to a third party. This is also valid
provided HORIZON has stated its interest in due time but both parties have not
agreed upon the terms (for instance price, minimum sales quantities) within 6
months after receipt of the offers.
1.2 HORIZON agrees to buy the PRODUCTS which are destined for distribution in
the Territory only from POHL.
1.3 HORIZON shall buy and sell POHL's PRODUCTS in its own name and for its own
account and acknowledges that it has no authority to act for or on behalf
of POHL except as otherwise specifically set forth herein. HORIZON is not
entitled to entrust third persons with any rights or claims deriving from
this Agreement without prior written consent of POHL. POHL hereby agrees
that HORIZON may engage under the following preconditions a third party to
distribute, market and sell the PRODUCTS in Puerto Rico and Caribbean
Islands. Provided HORIZON intends to appoint a third party with the
distribution of the PRODUCTS in Puerto Rico or Caribbean Islands so this
party should also be bound by the contents of this Distribution Agreement.
HORIZON shall guarantee this commitment and provide POHL with a copy of the
corresponding agreement. Upon written approval of this agreement by POHL
HORIZON is authorized to entrust a third party with the distribution rights
for the territories Puerto Rico and Caribbean Islands. Also in this case
HORIZON is still exclusive responsible according to this Agreement and
especially the breaches of duty by the third party which may give a cause
for the termination of this Agreement should be imputed to HORIZON. As
2
<PAGE> 3
independent contractor, HORIZON shall incur all expenses and costs of
-including without limitation - its office overhead, travel costs,
telephone, telefax, sales promotion and advertising costs. POHL shall not
be responsible for any portion of such expenses except as otherwise set
forth herein.
1.4 POHL agrees to refer to HORIZON all inquiries from the Territory received
by POHL with respect to the PRODUCTS.
ss.2
Products
The term "PRODUCTS" refers to all finished products listed on SUPPLEMENT I which
shall include samples ("The PRODUCTS") presently manufactured and sold by POHL.
SUPPLEMENT I may be amended in future for additions of products by mutual
consent of POHL and HORIZON. Upon mutual consent of POHL and HORIZON, such
products will become "PRODUCTS" for distribution of which this Agreement shall
apply accordingly.
ss.3
Territory
The Territory is the geographical area of the countries listed on SUPPLEMENT II.
ss.4
Duties of HORIZON
4.1 HORIZON shall exert best efforts to take advantage of all possibilities to
sell the PRODUCTS in the Territory and to maintain a continuous, full-time
in-Territory representation.
4.2 HORIZON further agrees
3
<PAGE> 4
- to maintain an effective sales organization within the Territory in
order to protect the distribution interests of HORIZON and POHL;
- to always have quantities of the PRODUCTS in stock sufficient to cover
three months of foreseeable sales in the Territory subject to PRODUCT
being supplied by POHL in accordance with HORIZON'S orders;
- to report regularly monthly its total stock position, turn-over
figures and sample movements as well as all important news on the
pharmaceutical market in the Territory, especially with regard to
competitive products and the price structure in the Territory and any
changes thereof. Monthly reports shall reach POHL by the tenth day of
each following month;
- to make the appropriate advertising and publicity in accordance with
ss.9;
- to employ trained personnel in a sufficient number for the sale and
distribution of the PRODUCTS;
- to buy from POHL minimum quantities of the PRODUCTS as specified in
SUPPLEMENT III to this Agreement;
- to notify POHL in writing prior to making any substantial operational
changes in personnel, ownership, legal structure, country of operation
and products represented by HORIZON;
- to sell the PRODUCTS only with the trademark of POHL and/or the
business logo and the original packaging and/or presentation of POHL,
HORIZON'S trade dress (logo and address) are added;
4
<PAGE> 5
- to report to POHL at the beginning of a calendar's quarter - no later
than the 3rd day of the calendar's quarter the planned sales figures
projected for the PRODUCTS for the next 12 months.
4.3 HORIZON is not entitled to
- produce or sell - neither directly nor indirectly - products which
contain any organic nitrates or any products that are indicated for
relief of angina pectoris, with the exception of the under ss.5.1
mentioned products;
- solicit customers outside the Territory for the PRODUCTS, to establish
and/or maintain branch offices and/or storage depots outside the
Territory.
ss.5
Distribution of Other Products
5.1 At the signature hereof, HORIZON produces or sells the following
competitive products containing following active ingredient.
5.2 The list of competitive products under ss.5.1 can only be extended with the
prior written consent of POHL which should be applied for before
distribution of these products.
5.3 In the event that a generic of a PRODUCT or a pump or spray product
containing the active ingredient of a PRODUCT is marked in the Territory by
an entity other than HORIZON, the parties shall in good faith agree upon a
reduced royalty rate and reduced minimum purchase requirements for such
PRODUCT.
5
<PAGE> 6
[***]-CONFIDENTIAL TREATMENT REQUESTED
ss.6
Purchase of PRODUCTS/Obligations of POHL
6.1 HORIZON shall be entitled to purchase the PRODUCTS on the basis of POHL's
general terms and conditions of sale applicable from time to time. The
terms and conditions of sale of POHL valid at present are attached hereto
as SUPPLEMENT IV.
6.2 POHL will, according to its general terms and conditions of sale, exert
best efforts to carry out the orders of HORIZON carefully and punctually.
In case that POHL is not able to execute an order in time totally or only
partially, it will notify HORIZON immediately; and if, as a result of such
inability, HORIZON does not meet minimum purchase requirement(s), HORIZON
shall not be in breach nor may POHL terminate this Agreement.
6.3 The purchase price for the respective PRODUCTS is the price listed on
SUPPLEMENT I.
6.4 POHL and HORIZON may mutually agree in writing to modify the terms and
conditions of sale. POHL may increase the price of the PRODUCTS to HORIZON
on an annual basis by the costs of raw materials and direct labor with such
increases being limited to [***] per annum. Additional price increases
caused by extraordinary circumstances will be discussed and mutually agreed
upon prior to increase.
6.5 Payment of the deliveries has to be made in net within 30 days after
receipt of goods in Deutsche Marks. POHL will invoice all of its deliveries
of PRODUCTS as of 01.01.2002 in Euro currency. Payments of the deliveries
have to be made as of 01.01.2002 in net within 30 days after receipt of
goods in Euro currency. The conversion of Deutsche Marks into Euro shall be
made on the basis of the official exchange rate. The parties agree that the
currency conversion of Deutsche Marks into Euro will not have any effect on
6
<PAGE> 7
the validity of the Distribution Agreement and not to entitle any party to
renegotiate the prices for the PRODUCTS listed in SUPPLEMENT I. Payment of
Royalties are done quarterly through wire 45 days after end of each
quarter.
6.6 HORIZON fixes its sales price for the PRODUCTS within the Territory at its
own discretion. POHL, however, will give a not binding recommendation on
the sales price for the PRODUCTS which will be discussed with HORIZON.
HORIZON and POHL will take into account that the competitiveness of the
PRODUCTS has to be maintained as far as possible. HORIZON undertakes to
notify POHL of all changes in prices and in the event of a change to
provide POHL with corresponding price lists.
6.7 Any claim of HORIZON concerning POHL's deliveries of PRODUCTS shall be
considered by POHL only in the event that such claim reaches POHL by
registered mail or telefax with confirmed letter within 30 days calculated
from the date of delivery arrival at the first port of the Territory.
6.8 The PRODUCTS, when shipped to HORIZON, shall confirm to the specifications
for said PRODUCTS, be free from defects in materials and comply with all
applicable laws of and within the Territory including the current Good
Manufacturing Practices of the United States Food and Drug Administration.
6.9 If POHL does not have enough raw materials to meet the order requirements
of HORIZON and the requirements for other product(s) containing the same
raw material, POHL shall apportion such raw material based on the previous
12 months sales of such products.
6.10 HORIZON may order PRODUCTS to be shipped 120 days from such order. POHL
shall have no obligation to ship PRODUCTS before the 120 days.
7
<PAGE> 8
ss.7
Registration/German Food and Drug Law
7.1 For the life of this Agreement, POHL grants to HORIZON the right to utilize
POHL's product registrations in the Territory in accordance with ss.2. POHL
undertakes to maintain the existing product registrations in the Territory.
HORIZON agrees to assist POHL in maintaining registrations and registering
new products, which are added to this Agreement pursuant to ss.2, in every
respect. HORIZON shall in particular give POHL advice concerning the
preparation of the set of necessary registration documents as provided for
in the laws valid in the Territory at the relevant time, and POHL shall
provide the respective documents in English as far as available against
receipt and free of charge.
7.2 All respective necessary formalities and steps required by the competent
health authorities of the Territory shall be effected by HORIZON in the
name and after prior written authorization by POHL.
7.3 If the law of the Territory necessitates the registrations to be in
HORIZON's name or as far as the registrations for the individual products
in the Territory have been arranged to be in HORIZON's name, then HORIZON
hereby agrees irrevocably and unconditionally to surrender such
registrations and the rights connected therewith to POHL immediately and
unconditionally when the cancellation of this Agreement becomes effective
or the Agreement terminates.
7.4 All registration fees of a successfully registered product shall be
refunded by POHL to HORIZON against presentation of the approval documents
and other evidence.
7.5 HORIZON shall arrange for any necessary translation to/from the language of
the Territory. POHL shall reimburse to HORIZON such expenses against
evidence.
8
<PAGE> 9
HORIZON affirms that it is not entitled to any claims against POHL for
compensation or indemnity in case of a fruitless registration attempt other
than those for fees for said fruitless registration attempt charged by the
competent national health authority of the Territory and hereby renounces
to any possible claim against POHL which accepts the renunciation.
7.6 HORIZON is not allowed to use any registration documentation outside the
Territory.
7.7 HORIZON further undertakes to comply with German Drug Law which requires
also from a distributor abroad that HORIZON reports to POHL any case of
actual or suspected side reactions or interactions which become known in
connection with POHL's delivered PRODUCTS.
ss.8
Scientific Use of PRODUCTS
8.1 In case that the PRODUCTS of POHL are used for scientific studies in the
Territory which are or might be intended for publication, it shall be the
duty of HORIZON to get in touch and keep close contact with the respective
scientists and to effect coordination with POHL particularly in stages of
protocol planning and of formulating results prior to actual publication.
This duty refers to all such studies regardless of whether PRODUCTS may be
involved alone or together with other drugs or placebos or regardless of
whether the initiative may have come to the knowledge of HORIZON through
the manufacturer and/or a third party.
8.2 HORIZON undertakes not to start, initiate or allow such studies without the
prior written authorization of POHL, which shall not be unreasonably
withheld and POHL's response to HORIZON'S request for the same shall be
given in a timely manner. Any such studies which are or may be already in
process, unauthorized or not, shall be reported to POHL immediately when
coming known to HORIZON and shall be followed up as specified above.
9
<PAGE> 10
ss.9
Advertisement/Publicity
9.1 POHL agrees to provide to HORIZON prospectuses for the PRODUCTS,
respectively drafts hereof, and reports of scientific tests as far as
available in respect of the PRODUCTS at no charge to HORIZON.
9.2 HORIZON undertakes to make continuous publicity for the PRODUCTS, in
particular by visiting medical specialists, by advertising in medical
journals and using pamphlets. For visiting medical specialists, HORIZON
shall keep available at all times a sufficient number of qualified
full-time representatives. A print proof of all advertising material shall
be sent to POHL immediately after completion.
9.3 Any and all expenses of any advertising and/or publicity shall be borne by
HORIZON.
ss.10
Presentations and Trademarks
10.1 HORIZON shall distribute the PRODUCTS only in the original product outfit
and packaging prescribed by POHL. Modifications of the original product
outfit and packaging are only allowed for serious reasons and with the
prior written consent of POHL. The PRODUCTS, labels, packaging,
presentations and product inserts shall have also HORIZON's trademark and
logo, which items shall be approved by POHL which approval shall not be
unreasonably withheld.
10
<PAGE> 11
10.2 This Agreement does not confer upon HORIZON and HORIZON will not claim any
proprietary interest or other rights in any trademark, trade name, slogan,
logo, copyright, design, inventory, product outfit or discovery owned or
controlled by POHL. POHL acknowledges that all promotional materials,
training materials, studies in connection with the PRODUCTS developed or
undertaken for or by HORIZON are sole property of HORIZON. HORIZON
acknowledges that all trademarks, trade names and product outfits in
connection with the PRODUCTS are sole property of POHL.
10.3 As soon as HORIZON gets knowledge that a presentation or trademark of POHL
used for the PRODUCTS is imitated or illegally used by a third person in
the Territory or in case of infringement of any industrial or intellectual
property right of POHL in the Territory, HORIZON will inform POHL
immediately. In such event POHL will either take the necessary steps to
prevent such misuse or authorize HORIZON to do the same. HORIZON agrees to
cooperate with POHL and to take all necessary steps to protect the
industrial or intellectual property rights of POHL at POHL's expense upon a
respective written request by POHL.
ss.11
Secrecy
11.1 All data, literature, information and know how in any form, not in the
public domain, that is transferred by POHL to HORIZON within the scope of
this Agreement will be considered as confidential data. HORIZON undertakes
to keep secret all data, literature, information and know how regarding the
PRODUCTS, especially concerning their formulations and the know how of the
manufacturing techniques. HORIZON is not allowed to make use of any such
data, literature, information and know how itself nor to render them
available nor to reveal or transfer such data, literature, information and
know how to third parties even after the expiration of this Agreement.
11
<PAGE> 12
11.2 HORIZON has to return all data, literature, information and know how in its
possession which was made available to it within the framework of this
Agreement to POHL within 30 days after the termination of this Agreement.
In case that HORIZON receives such documents from third parties especially
from the registration authorities - after the 30-day period, it has to
return them to POHL or a person appointed by POHL immediately after receipt
of such document.
ss.12
Term of the Agreement/Termination
12.1 This Agreement becomes effective on February 1, 20000 and has a term of
five (5) years. It will be renewed for an additional five-year period after
mutual agreement on new minimum sales which reflect the market situation.
12.2 A termination has to be effected by one contractual party to the other by
means of a registered letter/return receipt.
12.3 This Agreement may be terminated for cause. A cause shall be given if:
a) a petition in bankruptcy or for institution of composition proceedings
with respect to one of the contractual parties is filed or if a
contractual party is liquidated of if a trustee is appointed, provided
that in an involuntary bankruptcy proceeding, such right of
termination shall only become effective if the proceeding is not
dismissed within 90 days of the filing;
b) HORIZON does not fulfill the minimum sales quantity requirement of a
twelve-month-period as set forth in ss.4.2 unless HORIZON pays the
difference between the minimum unit sales and the actual unit sales
(difference in units multiplied by invoice price as defined in
Supplement l/1), but only in the case that the actual sales are not
12
<PAGE> 13
less than minimum sales minus 30%. However, if HORIZON does not make
the minimum sales during the next twelve-month period POHL can
terminate the agreement;
c) a party has not cured a breach of this Agreement within a period of at
least 90 days after receiving notice in writing by the other party to
cure such breach;
d) HORIZON comes under direct or indirect influence or control of a
competitor of the PRODUCTS of POHL or such competitor gains the right
to receive information on the distribution of the PRODUCTS as a result
of a contract or an agreement with HORIZON. Provided POHL has given
its written approval HORIZON is allowed to take over small competitors
and to control them in foreign countries in which POHL does not
distribute its PRODUCTS. POHL shall give its decision within 30 days
after the receipt of the information.
e) any other change (direct or indirect) of HORIZON'S shareholders or
management occurs, unless POHL has given its consent in writing. The
consent may not be withheld if the interests of POHL are not affected.
f) the PRODUCTS are not approved for distribution, marketing and sale in
the Territory by the United States Food and Drug Administration by the
date that is 3 (three) months after the effective date of this
Agreement. However approval for the 75 dose PRODUCT may be after 3
months after the effective date of this Agreement.
If a cause is given, POHL may terminate this Agreement either with
immediate effect or with any period up to 3 months.
13
<PAGE> 14
ss.13
Force Majeure
The parties hereto shall not be liable for any damage if the performance of all
or parts of this Agreement is hindered or prevented by causes beyond the
performing party's control and without its fault or negligence, including but
not limited to acts of God or of public enemy, nuclear incidents, acts, laws,
orders or regulations of any government or department or agency thereof acting
in either its sovereign or contractual capacity, fires, floods, epidemics,
quarantine restrictions, strikes, work stoppages, slowdowns or other job
actions, freight embargoes, shortages of fuel or other items, delays in
transportation, boycotts, unusually severe weather and riots, insurrections,
revolutions, wars or other civil or military disturbances.
ss.14
Written Requirements
14.1 This Agreement sets forth in writing all agreements and understandings
between POHL and HORIZON except for the Confidentiality Agreement between
the parties. Verbal agreements do not exist. All previous agreements or
arrangements (if any) between the parties, written or oral, relating to the
subject matter hereof are hereby cancelled and superseded, except for the
Confidentiality Agreement between the parties.
14.2 Modifications and changes of this Agreement, including this clause, require
a written form.
14.3 As for the rest POHL's general terms and conditions of trade for export
(SUPPLEMENT IV) are applicable insofar as other terms have not been
specific stipulated by the two parties in this Agreement.
14
<PAGE> 15
ss.15
Notices
All notices will be deemed to have been given when posted by certified or
registered mail, return receipt, courier express or when receipt of a facsimile
or telex has been acknowledged to the following address:
If to POHL: G. Pohl-Boskamp GmbH & Co.
Kieler Strasse 11
D-25551 Hohenlockstedt
Federal Republic of Germany
Facsimile: ++49 (4826) 59-161
If to Horizon: HORIZON Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, GA 30076
USA
Facsimile: (770) 442-9594
If notice is personally delivered, the individual accepting such notice, if
requested, will sign a duplicate of the notice to evidence receipt thereof.
ss.16
Partial Invalidity
Should any of the provisions of this Agreement be or become invalid, this shall
not prejudice the validity of the remaining provisions of this Agreement. The
same shall apply if it turns out that this Agreement contains any gap in its
regulations. Any such invalid provision shall be replaced or a gap in the
regulation shall be filled by a provision which legally and economically comes
closest to the desired purpose and intent of the invalid provision or fills the
gap in a way in which the parties would have filled it if they had been aware of
the gap. The parties to this Agreement undertake to agree on a relevant
amendment or adaptation of this Agreement.
15
<PAGE> 16
ss.17
Applicable Law/Jurisdiction
17.1 This Agreement is construed in accordance with and shall exclusively be
governed by the laws of the Federal Republic of Germany.
17.2 All disputes arising out of or relating to this Agreement shall be
submitted to the exclusive jurisdiction of the courts of Hamburg, Federal
Republic of Germany.
Date/Place Date/Place
Hohenlockstedt, July 22, 1999 Roswell, Georgia - July 22, 1999
- ---------------------------------- ----------------------------------------
G. Pohl-Boskamp GmbH& Co. HORIZON Pharmaceutical Corp.
- ---------------------------------- ----------------------------------------
N. Klapszus G. Brinkmeier, Mahendra G. Shah
Vice President - Director - Chariman of the Board
Legal Affairs Marketing
and Business International
Management
16
<PAGE> 17
[***]-CONFIDENTIAL TREATMENT REQUESTED
July 22, 1999
GB/Mu
SUPPLEMENT I/1
to the
DISTRIBUTION AGREEMENT dated 22/07/1999
- ---------------------------------------
between
G. Pohl-Boskamp GmbH & Co.
Kieler Strasse 11
D-25551 Hohenlockstedt
Federal Republic of Germany
represented by Mrs. Marianne Boskamp,
General Manager of the Company
and
HORIZON Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, GA 30076/USA
represented by Dr. Mahendra Shah,
Chairman of the Board
Definition of the PRODUCT/s and its PRICE/s
<TABLE>
<CAPTION>
Invoice Price Terms of Delivery
------------- -----------------
<S> <C> <C>
a) NITROLINGUAL Pumpspray, 200 doses DM [***] C I F MIAMI, Florida
b) NITROLINGUAL Pumpspray, 75 doses DM [***] C I F MIAMI, Florida
Launch after approval
Units exceeding quantities ex factory as specified below
up to 30% a) 200's DM [***] C I F MIAMI, Florida
b) 75's DM [***] C I F MIAMI, Florida
Units exceeding quantities ex factory as specified below
by more than 30% a) 200's DM [***] C I F MIAMI, Florida
b) 75's DM [***] C I F MIAMI, Florida
</TABLE>
plus [***] royalties on net sales (amount net of returns, rebates and
chargebacks) realized by HORIZON by selling the PRODUCTS in the Territory.
HORIZON shall render quarterly to POHL a report of the monthly sales. This
17
<PAGE> 18
[***]-CONFIDENTIAL TREATMENT REQUESTED
report shall contain the whole quantity of sales units, the gross turnover, the
discounts, the net turnover and the royalties resulting hereof. The sales to
Puerto Rico and the Caribbean Islands shall be separately specified in the
reports.
<TABLE>
<CAPTION>
Minimum Quantifies ex factory in packts/200's - 75's:
- -----------------------------------------------------
<S> <C>
1st year: [***] units
2nd year: [***] units
3rd year: [***] units
4th year: [***] units
5th year: [***] units
</TABLE>
For and on behalf of For and on behalf of
G. POHL-BOSKAMP GmbH& Co. HORIZON Pharmaceutical Corp.
- --------------------------------- ----------------------------------
N. Klapszus G. Brinkmeier, Mahendra G. Shah
Vice President - Director - Chairman of the Board
Legal Affairs and Marketing International
Business Management
Hohenlockstedt, July 22, 1999 Roswell, Georgia - July 22, 1999
GB/Mu
18
<PAGE> 19
July 22, 1999
GB/Mu
SUPPLEMENT II/1
to the
DISTRIBUTION AGREEMENT dated 22/07/1999
- ---------------------------------------
between
G. Pohl-Boskamp GmbH & Co.
Kieler Strasse 11
D-25551 Hohenlockstedt
Federal Republic of Germany
represented by Mrs. Marianne Boskamp, General Manager
of the Company
and
HORIZON Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, GA 30076/USA
represented by Dr. Mahendra Shah,
Chairman of the Board
Definition of HORIZON'S Territory:
- ----------------------------------
The Territory is the geographical area of
U S A
Puerto Rico,
Caribbean islands
and
For and on behalf of For and on behalf of
G. POHL-BOSKAMP GmbH& Co. HORIZON Pharmaceutical Corp.
- --------------------------------- ----------------------------------
N. Klapszus G. Brinkmeier, Mahendra G. Shah
Vice President - Director - Chairman of the Board
Legal Affairs and Marketing International
Business Management
Hohenlockstedt, July 22, 1999 Roswell, Georgia - July 22, 1999
GB/Mu
19
<PAGE> 20
[***]-CONFIDENTIAL TREATMENT REQUESTED
SUPPLEMENT III/1
to the
DISTRIBUTION AGREEMENT dated 22/07/1999
- ---------------------------------------
between
G. Pohl-Boskamp GmbH & Co.
Kieler Strasse 11
D-25551 Hohenlockstedt
Federal Republic of Germany
represented by Mrs. Marianne Boskamp, General Manager
of the Company
and
HORIZON Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, GA 30076/USA
represented by Dr. Mahendra Shah,
Chairman of the Board
Definition of the PRODUCT and their minimum sales in the Territory, during a 5
year's period after launch
Minimum Sales in packs
in the Territory:
-----------------
PRODUCT/S
NITROLINGUAL Pumpspray, 200 doses/75 doses
1st year: [***] units
2nd year: [***] units
3rd year: [***] units
4th year: [***] units
5th year: [***] units
20
<PAGE> 21
For and on behalf of For and on behalf of
G. POHL-BOSKAMP GmbH& Co. HORIZON Pharmaceutical Corp.
- --------------------------------- ----------------------------------
N. Klapszus G. Brinkmeier, Mahendra G. Shah
Vice President - Director - Chairman of the Board
Legal Affairs and Marketing International
Business Management
Hohenlockstedt, July 22, 1999 Roswell, Georgia - July 22, 1999
GB/Mu
21
<PAGE> 22
SUPPLEMENT IV
General Terms and Conditions of Trade (Foreign)
G. Pohl-Boskamp GmbH & Co. (Seller)
1. Validity
All our agreements and offers are subject to the following Conditions,
which are accepted as soon as an order is placed, a delivery accepted, or a
payment made, and shall also apply to any future orders placed with us.
Deviations from our General Terms and Conditions of Trade and price lists,
in particular any conditions used by Buyer, shall only apply if confirmed
by us in writing. They shall not bind us even if they have not been
explicitly rejected.
2. Orders
Any orders placed shall be binding on Buyer, but shall bind us only when
they are accepted by us in writing, or when goods are handed over, or when
the goods and the invoice are dispatched.
3. Delivery Times
Any delivery date quoted shall be approximate and non-binding. We shall be
entitled to make part deliveries and submit partial invoices. Execution of
orders on schedule is subject to our ability to deliver. Any circumstances
which impair the delivery or distribution of our products as set down in
the contract or which appear to jeopardize payment shall exempt us from our
supply commitment and shall entitle us to cancel the agreed order, to the
exclusion of further liability, wherever delivery has not yet been made.
4. Prices
The prices charged shall be those applicable on the day of delivery.
5. Payment and Default
Any obligations to pay shall be deemed to have been met only when we can
finally dispose of the proceeds of our claim. The amount shall be due as
agreed on, see ss. 6,5. Any delay in payment - in particular where credit
has been granted - shall be subject to default interest at a rate max. 4%
above the then current discount rate of the German Bundesbank, not
excluding further claims. Any delay in payment shall entitle us to withdraw
from any manufacturing or supply commitments not yet performed. In the
event that Buyer is in default with payment of an invoice amount, all other
invoices still outstanding shall be due and payable with immediate effect.
Cheques are only accepted "due payment provided".
6. Defences.
Buyer shall have no right of set-off or right of retention in respect of
any counterclaims which have not been recognized by us or by the courts.
7. Passing of Risk.
The risk of accidental loss, deterioration or similar obstacles to
performance shall pass to Buyer upon the goods leaving the factory. Where
shipment of any merchandise ready for dispatch is delayed for reasons for
which we are not answerable, the risk shall pass upon receipt of an advice
of dispatch.
22
<PAGE> 23
8. Warranty.
Complaints of whatever kind regarding deliveries and invoices shall only be
considered if forwarded to us at once in writing - in the case of obvious
defects, no later than 7 days after receipt, in the case of non-obvious
defects, as soon as they are detected. In the case of justified complaints
we shall, within a reasonable term, deliver merchandise free of defects to
replace any goods subject to complaint, or shall reimburse the value of the
goods. Buyer may assert no further claims. Any returns made without our
prior written consent shall be neither reimbursed nor sent back or stored;
we shall have the right to refuse acceptance.
9. Compensation
Compensation based on impossibility of performance, default, positive
breach of an obligation, culpa in contrahendo or tort shall be excluded
unless such claims are based on intent or gross negligence on our part. In
this case, Buyer shall have a right to cancel the agreed order, to the
exclusion of all other claims.
10. Retention of Title, Assignment of Claims
We shall retain title to the merchandise, incl. a rebate in kind, pending
payment in full of all, incl. future claims of our company against Buyer
from the business relationship. Buyer may dispose of the merchandise in the
normal course of business, but shall neither pledge nor assign the goods as
security. Any attachments made at the instance of third parties against
Buyer from the resale of the goods are assigned to us herewith by way of
security. In the event that the goods are sold by Buyer together with other
merchandise not belonging to us, the assignment of the claim to the
purchase price shall be limited to the amount of the proceeds for our goods
from the resale. We undertake to release any security that exceeds the
value of the claims to be secured by more than 25%. Subject to revocation,
Buyer is empowered to collect the claims from the resale. Upon demand,
Buyer shall inform us of the debtors behind the assigned claims and shall
notify them of the assignment.
11. Place of Performance
Place of performance for all contractual obligations, incl. warranty, shall
be the seat of our company.
12. Jurisdiction, Applicable Law
Any disputes arising from the business relationship shall be subject to the
law of the Federal Republic of Germany, to the exclusion of the unitary
laws on the international sale of goods and on the formation of sales
contracts for the international sale of goods. Place of jurisdiction shall
be Hamburg.
13. Final Provisions
Should any provision be invalid, this shall not affect the validity of the
remaining provisions. The invalid provision shall be reinterpreted to make
a valid provision in such a way as to achieve the economic intent of the
invalid provision.
23
<PAGE> 1
EXHIBIT 10.16
FIRST HORIZON PHARMACEUTICAL CORPORATION
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered
into as of the ____ day of ____________, 2000 by and between ____________
("Indemnitee") and FIRST HORIZON PHARMACEUTICAL CORPORATION, a Delaware
corporation (the "Corporation").
WITNESSETH:
WHEREAS, at the request of the Corporation, Indemnitee serves as a
director or executive officer of the Corporation, and in such capacity is
performing a valuable service for the Corporation; and
WHEREAS, the Board of Directors of the Corporation has determined that
it is reasonable, prudent, and necessary for the Corporation to obligate itself
contractually to indemnify its directors and executive officers under
Indemnification Agreements in order to induce them to serve the Corporation; and
WHEREAS, Indemnitee is willing to serve on the condition that he be
indemnified against risks associated with Indemnitee's service to the
Corporation as herein provided;
NOW, THEREFORE, in consideration of the premises, the mutual promises
hereinafter contained, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. INDEMNIFICATION.
(a) The Corporation shall indemnify Indemnitee if
Indemnitee 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 Indemnitee 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, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection with
such action, suit, or proceeding if Indemnitee acted in good faith and in a
manner Indemnitee 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 Indemnitee's 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 Indemnitee did not act in good
faith and in a manner which Indemnitee 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 Indemnitee's
conduct was unlawful.
<PAGE> 2
(b) The Corporation shall indemnify Indemnitee if
Indemnitee was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that
Indemnitee is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees), actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or suit if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit 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 which the Court of Chancery of Delaware
or such other court shall deem proper.
(c) To the extent that Indemnitee has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in subsections (a) and (b) of this Section 1, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of
this Section 1 (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
Section 1. Such determination shall be made, with respect to Indemnitee if
Indemnitee is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by
Indemnitee 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 Indemnitee to repay such amount if it shall
ultimately be determined that Indemnitee is not entitled to be indemnified by
the Corporation as authorized in this Section 1. The terms and provisions of
this Subsection 1(e) shall be enforceable against the Corporation regardless of
the terms and provisions of any directors and officers insurance maintained by
the Corporation pursuant to Section 2 below.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of this Section 1
shall not be deemed exclusive of any other rights Indemnitee may be entitled
under any law, bylaw, vote of stockholders or disinterested directors or
otherwise.
-2-
<PAGE> 3
(g) For purposes of this Section 1, references to "the
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, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Section 1 with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
(h) For purposes of this Section 1, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation 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 a person who acted in good faith and in a
manner such person 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 Section 1.
(i) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 1 shall, continue as to
Indemnitee once Indemnitee has ceased to be a director, officer, or employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(j) In the event of payment of indemnification to a
person described in this Section 1, the Corporation shall be subrogated to the
extent of such payment to any right of recovery Indemnitee may have and
Indemnitee, as a condition of receiving indemnification from the Corporation,
shall execute all documents and do all things that the Corporation may deem
necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
(k) The Corporation shall not be liable under this
Section 1 to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, by-law or otherwise) of the amounts otherwise indemnifiable
hereunder.
2. INSURANCE. The Corporation shall use its reasonable best
efforts to maintain directors and officers insurance in amounts approved by the
Board of Directors of the Company.
3. NOTICES. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be sent by Federal
Express or other nationally recognized overnight or same day courier service
providing a return receipt (and shall be effective when received, when refused
or when the same cannot be delivered, as evidenced on the return receipt) to the
following addresses:
-3-
<PAGE> 4
To Corporation: First Horizon Pharmaceutical Corporation
660 Hembree Parkway
Suite 106
Roswell, Georgia 30076
Attention: President and Board of Directors
To Indemnitee:
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
4. SEVERABILITY. If any provision or provisions of this Agreement
(or any portion thereof) shall be held to be invalid, illegal, or unenforceable
for any reason whatsoever: (a) the validity, legality, and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby; and (b) to the fullest extent legally possible, the provisions
of this Agreement shall be construed so as to give effect to the intent of any
provision held invalid, illegal, or unenforceable.
5. BINDING EFFECT; DURATION AND SCOPE OF AGREEMENT. This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto and their respective successors and assigns (including the
executors, administrators, and heirs of Indemnitee's estate, and any direct or
indirect successor, by purchase, merger, consolidation, or otherwise, to all or
substantially all of the business or assets of the Corporation), heirs, and
personal and legal representatives. This Agreement shall continue in effect
during the Indemnification Period, regardless of whether Indemnitee continues to
serve as a director, officer, employee, or agent. "Indemnification Period" means
in which Indemnitee may be subject to any possible proceedings arising out of
the act or omission of Indemnitee for which Indemnitee is entitled to be
indemnified under this Agreement.
6. GOVERNING LAW, INTERPRETATION OF AGREEMENT, AND JURISDICTION.
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware, as applied to contracts between Delaware
residents entered into and to be performed entirely within Delaware. The
Corporation and Indemnitee each hereby irrevocably consent other jurisdiction of
the courts of the State of Delaware for all purposes in connection with any
action or proceeding which arises out of or relates to this Agreement and agree
that any action instituted under this Agreement shall be commenced, prosecuted
and continued only in the Court of Chancery of the State of Delaware in and for
New Castle County, which shall be the exclusive and only proper forum for
adjudicating such a claim.
7. MODIFICATION, WAIVER, TERMINATION, AND CANCELLATION. No
supplement, modification, termination, cancellation, 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 provisions hereof (whether or not
similar), nor shall any such waiver constitute a continuing waiver.
-4-
<PAGE> 5
8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
CORPORATION:
FIRST HORIZON PHARMACEUTICAL
CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
INDEMNITEE:
----------------------------------------
Name:
-----------------------------------
-5-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the use of our reports
(and to all references to our Firm) included in or made part of this
registration statement.
Arthur Andersen LLP
Atlanta, Georgia
February 17, 2000
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