UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
August 26, 1997
ICOS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-19171 91-1463450
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
22021 20th Avenue Southeast, Bothell WA 98021
(Address of principal executive offices) (Zip Code)
(425)485-1900
(Registrant's telephone number, including area code)
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ITEM 5. Other Events
On August 15, 1997, ICOS Corporation (the "Company" or "ICOS")
announced that its affiliate, ICOS Clinical Partners, L.P. (the
"Partnership") completed the sale to private investors of interests in
Partnership. Proceeds from this offering will be used by the
Partnership to fund the continued development of products based on three
compounds from ICOS' research and development programs: Hu23F2G,
PAH-AH and ICM3 (the "Partnership Products").
The above proceeds include the proceeds of an initial sale of the
limited partnership interests on June 5, 1997 (the "Initial Closing").
The Initial Closing resulted in net proceeds due to the Partnership of
approximately $58 million with approximately $14 million payable to the
Partnership on the Initial Closing and the balance paid in installments
over a three-year period. In connection with the Initial Closing, ICOS
issued warrants to purchase an aggregate of 5,539,800 shares of ICOS
Common Stock. The warrants will be exercisable over a four-year period
commencing in October 1998 at an exercise price of $9.13 per share.
The final sale on August 15, 1997 (the "Final Closing"), resulted
in net proceeds due to the Partnership of approximately $21.0 million
with approximately $5.4 million payable to the Partnership on the Final
Closing with the balance paid in installments over a three-year period.
In connection with the Final Closing, ICOS issued warrants to purchase
an aggregate of 2,010,800 shares of ICOS Common Stock. The warrants
will be exercisable over a four year period commencing in October 1998
at an exercise price of $10.35 per share.
In addition, ICOS will issue in June 1999, subject to certain
requirements, warrants to purchase an aggregate of 7,548,400 shares of
ICOS Common Stock. Such additional warrants, if issued, will be
exercisable over a five year period commencing in July 1999 at an
exercise price to be determined at the time of issuance of such warrants
and which is expected to reflect a 25% premium over the then-prevailing
market price for ICOS Common Stock.
ICOS has granted the Partnership an exclusive license for the human
therapeutic uses of Partnership Products based on rPAF-AH in the United
States and Partnership Products based on Hu23F2G and ICM3 throughout the
world, excluding Japan (the "Territory"), in exchange for a one-time
nonrefundable license fee of approximately $3.3 million for each of the
three Partnership Products paid in connection with the Initial Closing.
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The Partnership granted ICOS a royalty-bearing exclusive right and
license (the "Interim License") to make, have made, use, modify, improve
and sell the Partnership Products. The Interim License will terminate
if ICOS does not exercise the Purchase Option, described below, and in
certain other circumstances.
ICOS will, to the extent of available Partnership funds, perform
research, development and experimentation on behalf of the Partnership.
Payments by the Partnership under a Product Development Agreement will
be based on the period from May 1, 1997 through June 30, 1997 and each
three-month period thereafter.
ICOS has an option to purchase all of the limited partnership
interests in the Partnership (the "Purchase Option"). ICOS may exercise
the Purchase Option to purchase all the Interests at any time prior to
the expiration of the Purchase Option. The Purchase Option will expire
on the earlier of (i) 48 months after the first commercial sale of a
Partnership Product under the Interim License and (ii) 45 days after the
last day of the first month in which the royalties paid by ICOS to the
Partnership under the Interim License equal fifteen percent (15%) of the
Limited Partners' capital contributions (but not earlier than 24 months
after the first commercial sale of a Partnership Product).
Upon exercise of the Purchase Option, ICOS will pay to each
Interest holder an advance royalty of 16% of such investor's contributed
capital (the "Advance Payment"). ICOS will then, on a quarterly basis,
make royalty payments to the investors on sales of Partnership Products
in the Territory. To the extent that the quarterly royalties do not
aggregate to 16% of the Interest holder's contributed capital in each of
the next four years and 20% in the fifth year (the "Minimum Royalty
Period"), ICOS will be obligated to make an annual minimum royalty
payment such that the total payments for each year will equal the
applicable percentages of the Interest holder's contributed capital (the
"Minimum Royalty Payment"). The Minimum Royalty Period will expire at
such time as the Interest holders have received payments from all
sources equal to 100% of their contributed capital.
Certain executive officers and directors of ICOS participated in
the financing by purchasing interests representing approximately 10% of
the total interests sold to the investors.
ICOS may, at its election, pay an unit holder's Advance Payment and
Minimum Royalty Payments with shares of Common Stock valued, with
respect to the Advance Payment, at the average Nasdaq National Market
closing price per share of Common Stock on the 30 trading days
immediately preceding the fifth trading day before ICOS delivers its
notice to exercise the Purchase Option and with respect to any Minimum
Royalty Payment, at the average Nasdaq National Market closing price per
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share of Common Stock on the 30 trading days immediately preceding the
last day of the year to which the Minimum Royalty Payment pertains.
Royalty payments to the unit holders on sales of Partnership
Products by ICOS or any licensee of ICOS will continue until the later
of (i) the last day of the calendar month of the thirteenth anniversary
of the date of the first commercial sale of the first Partnership
Product and (ii) the last day of the calendar month of the eleventh
anniversary of the date of exercise of the Purchase Option.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) See Exhibit Index
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
ICOS CORPORATION
Dated: August 26, 1997 By /s/ HOWARD S. MENDELSOHN
Howard S. Mendelsohn
Chief Accounting Officer
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EXHIBIT INDEX
Exhibit Number Description
10.1 Agreement of Limited Partnership dated as of
June 5, 1997, by and among ICOS Development
Corporation, as general partner, and each of
the limited partners of ICOS Clinical Partners, L.P.
10.2 Purchase Agreement dated as of June 5, 1997
between the Registrant and each of the Limited
Partners from time to time of ICOS Clinical
Partners, L.P. *
10.3 Product Development Agreement, dated as of
June 5, 1997, by and between the Registrant and
ICOS Clinical Partners, L.P. *
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* Portions of the Exhibit have been omitted and have been filed seperately
pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission under Rule 24(b)2 under the Securities
Act of 1934, amended.
EXHIBIT 10.1
TO
ICOS Corporation's
Report on Form 8-K
Dated
August 26, 1997
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ICOS CLINICAL PARTNERS, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
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TABLE OF CONTENTS
ARTICLE 1 Definitions..................................................1
Act.....................................................................1
Additional Limited Partners.............................................1
Adjusted Capital Contribution...........................................1
Affiliate...............................................................1
Agreement...............................................................1
Capital Account Balance.................................................1
Capital Contribution....................................................2
Certificate of Limited Partnership......................................2
Class A Limited Partner.................................................2
Class A Substituted Limited Partner.....................................2
Class B Limited Partner.................................................2
Class B Substituted Limited Partner.....................................2
Code....................................................................2
Defaulting Limited Partner..............................................2
Distributable Cash......................................................2
Distribution in Kind....................................................3
ERISA...................................................................3
Field of Activitity.....................................................3
General Partner.........................................................3
ICOS....................................................................3
Initial Limited Partner.................................................3
Interest................................................................3
Investor Note...........................................................3
License Fee.............................................................3
Limited Partner.........................................................3
Management Fee..........................................................3
Marketing Program.......................................................4
Memorandum..............................................................4
Partners................................................................4
Partnership.............................................................4
Person..................................................................4
Product.................................................................4
Product Development Agreement...........................................4
Profits or Losses.......................................................4
Purchase Agreement......................................................4
Purchase Option.........................................................4
Purchaser...............................................................4
Research Program........................................................4
Sales Agency Agreement..................................................5
Sales Agent.............................................................5
Subscription Agreement..................................................5
Substituted Limited Partner.............................................5
Territory...............................................................5
Treasury Regulations....................................................5
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Unit....................................................................5
Warrants................................................................5
ARTICLE 2. General Provisions..........................................5
2.1 Formation of Limited Partnership................................5
2.2 Name............................................................5
2.3 Registered Office, Registered Agent for Service of Process and
Principal Place of Business.....................................5
2.4 Purposes........................................................6
2.5 Term............................................................6
2.6 Filing of Certificates..........................................6
ARTICLE 3. Partners' Names, Addresses and Capital Contributions........6
3.1 General Partner.................................................6
3.2 Initial Limited Partner.........................................6
3.3 Additional Limited Partners.....................................7
3.4 General Partner, Class B Limited Partner or Initial Limited
Partner as Class A Limited Partner..............................8
ARTICLE 4. Allocation of Profits or Losses; Distributions..............9
4.1 Profits or Losses...............................................9
4.2 Allocation Among Partners Subsequent to an Assignment..........11
4.3 Allocation Among Partners Subsequent to a Default..............11
4.4 Capital Account Balance........................................11
4.5 Distributions of Partnership Funds.............................12
4.6 Return of Unexpended Capital Contributions.....................12
4.7 Distributions in Kind..........................................12
ARTICLE 5. Records and Accounting; Reports............................13
5.1 Records and Accounting.........................................13
5.2 Annual Reports.................................................13
5.3 Quarterly Reports..............................................14
5.4 Tax Information................................................14
5.5 Tax Returns....................................................14
5.6 Additional Information.........................................14
5.7 Trade Secrets..................................................15
ARTICLE 6. Fiscal Affairs.............................................15
6.1 Fiscal Year....................................................15
6.2 Partnership Funds..............................................15
6.3 Federal Income Taxes...........................................15
6.4 Tax Matters Partner............................................16
6.5 Interim Closing of the Books...................................16
ARTICLE 7. Rights and Duties of the General Partner...................16
7.1 Management Power...............................................16
7.2 Limitations on General Partner's Authority.....................17
7.3 Formation and Qualification of the Partnership.................18
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7.4 Obligations of the General Partner.............................19
7.5 Good Faith.....................................................19
7.6 No Compensation................................................19
7.7 Reimbursement of the General Partner...........................19
7.8 Limitation of Liability; Indemnification.......................19
7.9 Other Business Ventures........................................20
7.10 Timing of Installments Under Investor Notes....................21
7.11 Enforcement of Investor Notes..................................21
7.12 Sale of All Assets.............................................21
7.13 Partnership Purchase...........................................21
7.14 Contracts with the General Partner or its Affiliates...........22
7.15 Termination of Partnership; Appointment of a New General
Partner........................................................22
ARTICLE 8. Rights and Obligations of the Limited Partners.............22
8.1 No Participation in Management.................................22
8.2 Limitation of Liability........................................22
8.3 Transfer of Limited Partner's Interest.........................23
8.4 Assignee's Rights..............................................25
8.5 Satisfactory Written Assignment Required.......................25
8.6 Substituted Limited Partner....................................25
8.7 Indemnification and Terms of Admission.........................26
8.8 Substitution Required for Vote.................................26
8.9 Effective Date.................................................26
8.10 Death or Incapacity of a Limited Partner.......................26
8.11 Exercise of Rights of Limited Partners.........................26
ARTICLE 9. Termination and Distribution...............................27
9.1 Termination....................................................27
9.2 Assumption of Agreements.......................................27
9.3 Distribution...................................................27
9.4 Election to Carry on Business..................................28
ARTICLE 10. Amendments and Meetings...................................29
10.1 Amendment by Limited Partners..................................29
10.2 Amendment by General Partner...................................29
10.3 Voting Interest................................................30
10.4 Amendment of Certificate.......................................30
10.5 Meetings of Limited Partners...................................30
ARTICLE 11. Resignation or Removal of the General Partner.............30
11.1 Resignation of the General Partner.............................30
11.2 Removal of the General Partner.................................31
11.3 Successor......................................................32
11.4 Interest of Removed General Partner............................32
ARTICLE 12. Power of Attorney.........................................32
12.1 Power of Attorney..............................................32
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ARTICLE 13. Partner Register..........................................33
13.1 Register of Partners...........................................33
ARTICLE 14. Miscellaneous.............................................33
14.1 Waiver of Partition............................................33
14.2 Benefits of Agreement..........................................33
14.3 Entire Agreement, Amendment....................................34
14.4 Choice of Law..................................................34
14.5 Submission to Jurisdiction.....................................34
14.6 No Waiver......................................................34
14.7 Payments and Notices...........................................34
14.8 Legends........................................................35
14.9 Headings, etc..................................................35
14.10 Counterparts...................................................35
SCHEDULES
Schedule A Capital Contribution
Schedule B Operative Agreements
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ICOS CLINICAL PARTNERS, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP dated as of April 11, 1997, is
among ICOS Development Corporation, a Delaware corporation, as general
partner, the person indicated on Schedule A as Initial Limited Partner and
those parties who shall hereafter be admitted to the Partnership as
Additional Limited Partners or as Substituted Limited Partners.
In consideration of the mutual promises and agreements herein made and
intending to be legally bound, the Partners hereby agree as follows:
ARTICLE 1. Definitions
1.1 Definitions
As used in this Agreement, the following terms shall have the following
meanings:
''Act'' shall mean the Delaware Revised Uniform Limited Partnership Act,
6 Del. Code subsection 17-101 to 17-1110, as amended from time to time.
''Additional Limited Partners'' shall mean those Persons admitted to the
Partnership pursuant to subparagraph 3.3.1, which shall include the Class A
Limited Partners and the Class B Limited Partner.
''Adjusted Capital Contribution'' in the case of any Partner shall mean
the Capital Contribution of such Partner less returns to such Partner pursuant
to paragraph 4.6 (or, if such Partner is not the original holder of the
Interest of such Partner, to any prior holder of part or all of the Interest
of such Partner).
''Affiliate'' shall mean, when used with reference to a specified Person,
(i) any Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with the Person specified
or (ii) any Person that is an officer or director of, partner in or trustee of,
or serves in a similar capacity with respect to, the Person specified or of
which the Person specified is an officer, director, partner or trustee, or
serves in a similar capacity. Suncos Corporation shall not be treated as an
Affiliate of the Partnership, the General Partner or any Affiliate of the
General Partner.
''Agreement'' shall mean this Agreement of Limited Partnership, as
originally executed and as amended, modified, supplemented or restated from
time to time, as the context requires.
''Capital Account Balance'' shall mean the balance in each Partner's
capital account, determined as provided in paragraph 4.4.
''Capital Contribution'' shall mean, as the context shall require, the
aggregate amount contributed and to be contributed to the Partnership by all
the Partners or any class of Partners or any one Partner (or, if such Partner
is not the original holder of part or all of the Interest of such Partner, by
such Partner and any prior holder of part or all of the Interest of such
Partner) as set forth in Schedule A hereto, as amended or modified from time
to time, provided that, for purposes of paragraph 9.3, ''Capital Contribution''
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shall mean only the aggregate cash contributed to the Partnership by such
Partners or Partner prior to the termination of the Partnership. For all
purposes of this Agreement, (i) the ''Capital Contribution'' for one Class
A limited partnership interest shall be $100,000 and (ii) the ''Capital
Contribution'' for one quarter Class A limited partnership interest shall
be $25,000, in each case irrespective of the actual amount received by the
Partnership in exchange for such Class A limited partnership interest;
provided, however, that the ''Capital Contribution'' for (a) one Class A
limited partnership interest of a Defaulting Limited Partner shall be
$100,000 less the amount by which such Defaulting Limited Partner is in
default under its Investor Note and (b) one quarter Class A limited
partnership interest of a Defaulting Limited Partner shall be $25,000 less
the amount by which such Defaulting Limited Partner is in default under its
Investor Note; provided, further, however, that if ICOS shall exercise the
Purchase Option prior to the due date for the payment of any installments
under each Class A Limited Partner's Investor Note or if in accordance with
paragraph 7.10 the General Partner shall relieve each Class A Limited Partner
of its obligation to pay any installments under each Class A Limited Partner's
Investor Note, the ''Capital Contribution'' of each such Class A Limited
Partner shall be $100,000 (in the case of one Class A limited partnership
interest) or $25,000 (in the case of one quarter Class A limited partnership
interest), as applicable, less the aggregate amount of the installments due
and payable under such Class A Limited Partner's Investor Note after such
exercise of the Purchase Option or Installment Termination Date (as defined
in paragraph 7.10), as the case may be.
''Certificate of Limited Partnership'' shall mean the certificate of
limited partnership of the Partnership that was filed with the office of
the Secretary of State of the State of Delaware on April 10, 1997.
''Class A Limited Partner'' shall mean each Person admitted to the
Partnership as a Class A Limited Partner pursuant to subparagraph 3.3.1
and each Person admitted as a Class A Substituted Limited Partner.
''Class A Substituted Limited Partner'' shall mean each Person who
becomes the Substituted Limited Partner pursuant to paragraph 8.6 with
respect to the Interest of a Class A Limited Partner.
''Class B Limited Partner'' shall mean the Sales Agent, or its Affiliate,
and each Person admitted as a Class B Substituted Limited Partner.
''Class B Substituted Limited Partner'' shall mean each Person who becomes
the Substituted Limited Partner pursuant to paragraph 8.6 with respect to the
Interest of a Class B Limited Partner.
''Code'' shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute or subsequent codification or recodification of the Federal
income tax laws of the United States.
''Defaulting Limited Partner'' shall have the meaning given in
subparagraph 3.3.5.
''Distributable Cash'' shall mean all cash revenues of the Partnership
(not including (i) Capital Contributions, (ii) funds received by the
Partnership in respect of indebtedness incurred by the Partnership,
(iii) interest or other income earned on temporary investment of Partnership
funds pending utilization thereof and (iv) proceeds from the sale of assets in
partial or complete liquidation of the Partnership), less the sum of the
following: (a) all amounts properly expended by the Partnership (except (w)
repayment of the principal amount of Partnership borrowings, (x) amounts paid
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pursuant to the Product Development Agreement, (y) selling commissions,
financial advisory and marketing fees and other fees paid by the Partnership
in connection with the sale of Interests to the Additional Limited Partners
and (z) any offering expenses incurred by the Partnership in connection with
such sale of Interests or any organizational expenses of the Partnership) and
(b) working capital, reserves and such other amounts as the General Partner
reasonably determines to be necessary or appropriate for the proper operation
of the Partnership's business or its winding up and liquidation. The General
Partner in its sole discretion may, at any time and from time to time, declare
other funds of the Partnership to be Distributable Cash. Royalties which are
paid to the Partnership under the Interim License (as defined in the Product
Development Agreement) and used, to the extent necessary under the Product
Development Agreement, to fund the Research Program (as defined in the Product
Development Agreement) for the continued development of the Products, shall not
be deemed to be ''Distributable Cash.''
''Distribution in Kind'' shall have the meaning given in subparagraph
4.7.1.
''ERISA'' shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
''Field of Activity'' shall have the meaning set forth in Schedule I to
the Product Development Agreement.
''General Partner'' shall mean ICOS Development Corporation, a Delaware
corporation and a wholly owned subsidiary of ICOS, or any Person who, at the
time of reference thereto, serves as a General Partner of the Partnership
whether as a substitute General Partner or an additional General Partner.
''ICOS'' shall mean ICOS Corporation, a Delaware corporation.
''Initial Limited Partner'' shall mean the person so named in Schedule A
hereto.
''Interest'' shall mean the entire ownership interest of a Partner in the
Partnership at any particular time, including the right of such Partner to any
or all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all the
terms and provisions of this Agreement with which such Partner is required to
comply. Reference to a majority or a specified percentage or fraction in
interest of the Limited Partners or all Partners shall mean Limited Partners or
all Partners, as the case may be, whose aggregate Capital Contributions (not in
arrears) represent more than fifty percent (50%) (in the case of a majority in
interest) or the specified percentage or fraction (in other cases),
respectively, of the Capital Contributions of all Partners or all Limited
Partners.
''Investor Note'' shall have the meaning given in subparagraph 3.3.1.
''License Fee'' shall mean the fee payable by the Partnership to ICOS
pursuant to Section 4.01(a) of the Product Development Agreement.
''Limited Partner'' shall mean any Person who is a limited partner of
the Partnership (whether the Initial Limited Partner, an Additional Limited
Partner or a Substituted Limited Partner) at the time of reference thereto
in such Person's capacity as a limited partner of the Partnership.
''Management Fee'' shall mean the management fee payable by the
Partnership to ICOS pursuant to Section 4.01(b) of the Product Development
Agreement.
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''Marketing Program'' shall mean ICOS's implementation of the strategy to
provide for the distribution, marketing and sale of Products in the Field of
Activity within the Territory, including the execution of marketing agreements
with third parties subject to the provisions of Article 5.01 of the Product
Development Agreement.
''Memorandum'' shall mean the confidential private placement memorandum
to be used in connection with the placement of up to 1,000 Units, as such
memorandum may be amended or supplemented from time to time.
''Partners'' shall mean, collectively, the General Partner and the Limited
Partners, unless otherwise indicated.
''Partnership'' shall mean the limited partnership formed as indicated
in paragraph 2.1, as such limited partnership may from time to time be
constituted.
''Person'' shall mean any individual, partnership, joint venture,
corporation, trust, estate, unincorporated organization or other entity
or government or any department or agency thereof.
''Product'' shall have the meaning set forth in Schedule I to the Product
Development Agreement.
''Product Development Agreement'' shall mean the Product Development
Agreement to be entered into between the Partnership and ICOS, as such
agreement may be modified or amended from time to time.
''Profits or Losses'' shall mean with respect to any period the net
income (''Profit'') or net loss (''Loss'') of the Partnership for Federal
income tax purposes determined in accordance with Section 703(a) of the Code
(including, without limitation, all items of Partnership income, gain, loss,
deduction or credit that are required to be taken into account separately for
Federal income tax purposes) with the following adjustments: (i) items of
Partnership income or gains that are exempt from Federal income tax shall be
treated as an item of income; (ii) items of Partnership expenditure that are
not deductible in computing taxable income or loss and are not properly
chargeable as a capital expenditure shall be treated as an item of deduction;
and (iii) any Distribution in Kind shall be treated as a taxable disposition
of property in which gain or loss is recognized by the Partnership, measured
by the value of the property distributed as determined under subparagraph
4.7.3.
''Purchase Agreement'' shall mean the Purchase Agreement among ICOS, the
Class A Limited Partners, the Class B Limited Partner and the other parties
thereto, as amended or modified from time to time.
''Purchase Option'' shall have the meaning set forth in Schedule I to the
Purchase Agreement.
''Purchaser'' shall have the meaning given in subparagraph 3.3.5.
''Research Program'' shall mean any research, experimentation or
development relating to the Field of Activity in the Territory proposed to
be conducted or conducted, directly or indirectly, by ICOS pursuant to the
terms of the Product Development Agreement and generally in accordance with
the description of the proposed research program contained in the
Memorandum.
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''Sales Agency Agreement'' shall mean the Sales Agency Agreement to be
entered into among the Partnership, ICOS and the Sales Agent, relating to the
placement of up to 1,000 Units, as such agreement shall be modified or amended
from time to time.
''Sales Agent'' shall mean PaineWebber Incorporated, as sales agent under
the Sales Agency Agreement for the sale of Units to Class A Limited Partners.
''Subscription Agreement'' shall have the meaning given in subparagraph
3.3.1.
''Substituted Limited Partner'' shall have the meaning given in
subparagraph 8.6.1.
''Territory'' shall have the meaning set forth in Schedule I to the
Product Development Agreement.
''Treasury Regulations'' shall mean the income tax regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of such succeeding regulations).
''Unit'' shall mean a unit consisting of one Class A limited partnership
interest in the Partnership, Series A Warrants to purchase an aggregate of
8,000 shares of common stock of ICOS and the right to receive Series B
Warrants to purchase an aggregate of 8,000 shares of common stock of ICOS.
''Warrants'' shall have the meaning given in subparagraph 3.3.5.
ARTICLE 2. General Provisions
2.1 Formation of Limited Partnership
The General Partner and the Initial Limited Partner formed the Partnership
pursuant to the provisions of the Act upon the filing of the Certificate of
Limited Partnership in the Office of the Delaware Secretary of State, and the
rights and liabilities of the Partners shall be as provided in the Act, except
as otherwise expressly provided herein. The Partnership shall continue without
interruption as a limited partnership pursuant to the provisions of the Act
after the withdrawal from the Partnership of the Initial Limited Partner and
the admission of the Additional Limited Partners pursuant to subparagraph
3.3.1.
2.2 Name
The name of the Partnership shall be ICOS Clinical Partners, L.P. The
business of the Partnership may, however, be conducted under any other name,
designated in writing by the General Partner to the Limited Partners, upon
compliance with applicable laws.
2.3 Registered Office, Registered Agent for Service of Process and Principal
Place of Business
The address of the registered office of the Partnership in the State of
Delaware shall be Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware 19801. The name of the registered
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agent for service of process shall be the Corporation Trust Company. The
principal place of business of the Partnership is 22021 20th Avenue S.E.,
Bothell, Washington 98021. The Partnership may maintain such other offices
at such other places as the General Partner deems advisable.
2.4 Purposes
The purposes of the Partnership are to (a) conduct research and to develop,
produce and derive income from any Product within the Field of Activity in the
Territory and (b) engage in any and all activities related or incidental thereto
and to have and exercise all the powers necessary or useful to engage therein.
2.5 Term
The term of the Partnership shall be from the date of the filing of the
Certificate of Limited Partnership until December 31, 2020, unless earlier
terminated as hereinafter provided.
2.6 Filing of Certificates
The General Partner shall execute, file and publish all such certificates,
notices, statements or other instruments required by law for the formation or
operation of a limited partnership in all jurisdictions where the Partnership
may elect to do business.
ARTICLE 3. Partners' Names, Addresses and Capital Contributions
3.1 General Partner
3.1.1 The name, address and Capital Contribution of the General Partner
are set forth in Schedule A hereto, as amended from time to time. On the date
of admission of the Additional Limited Partners pursuant to subparagraph 3.3.1,
and thereafter, the General Partner shall, if necessary, contribute additional
cash capital to the Partnership so that the General Partner's aggregate Capital
Contribution in cash, as general partner, at all times will be at least one
percent (1%) of the aggregate Capital Contributions in cash of all the Partners.
3.1.2 The General Partner, as general partner, may, but shall not be
obligated or required to, make any additional contribution to the capital of
the Partnership.
3.2 Initial Limited Partner
3.2.1 The name, address and Capital Contribution of the Initial Limited
Partner are set forth in Schedule A hereto, as amended from time to time.
3.2.2 Upon the admission to the Partnership of the first Additional
Limited Partner pursuant to subparagraph 3.3.1, the Initial Limited Partner
shall withdraw from the Partnership and shall be entitled to receive forthwith
return of the Initial Limited Partner's Capital Contribution, without interest
thereon or any reduction thereof.
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3.3 Additional Limited Partners
3.3.1 The General Partner is authorized to admit Additional Limited
Partners to the Partnership. Each of such Additional Limited Partners will be
deemed to have acquired a partnership interest directly from the Partnership
pursuant to the Act. Any part of the Capital Contribution of any Additional
Limited Partner not paid in cash shall be evidenced by a non-interest-bearing
promissory note (an ''Investor Note'') by such Additional Limited Partner in
substantially the form set forth in the Subscription Agreement between such
Additional Limited Partner and the Partnership (a ''Subscription Agreement'')
executed by each such Additional Limited Partner and delivered by such
Additional Limited Partner to the Partnership at the time of such Additional
Limited Partner's admission to the Partnership. Such Investor Note may be
prepaid in whole or in part without penalty by such Additional Limited Partner
at any time and from time to time. The manner of the offering of the Class A
Limited Partners' Interests, the terms and conditions under which subscriptions
for such Interests will be accepted and the manner of the conditions to the
sale of Interests to subscribers therefor and the admission of such subscribers
as Additional Limited Partners will be as provided in the Memorandum in all
material respects and subject to any provisions thereof.
3.3.2 The name, address and Capital Contribution of each Additional
Limited Partner are set forth in Schedule A hereto, as amended from time to
time.
3.3.3 No Additional Limited Partner shall be required or authorized to
make any additional Capital Contribution to the Partnership.
3.3.4 Except as provided in subparagraph 3.2.2 or paragraph 4.6, no Partner
shall have any right to demand or receive the return of such Partner's Capital
Contribution to the Partnership. The General Partner, in its absolute discretion
at any time, may reduce the Capital Contributions of the Partners, pro rata, by
an amount not to exceed the difference between the aggregate Capital
Contributions of the Partners and all payments made by the Partnership
pursuant to the Product Development Agreement, the Sales Agency Agreement
or otherwise prior to the time of such reduction. No Partner shall be
entitled to interest on any Capital Contribution or on such Partner's
capital account.
3.3.5 If any Additional Limited Partner fails to pay any amount that such
Additional Limited Partner is required to pay to the Partnership pursuant to
such Additional Limited Partner's Investor Note on or before the date when such
amount is due and payable and does not cure such payment failure within ten
days, such Additional Limited Partner (a ''Defaulting Limited Partner'') shall
be deemed to be in default hereunder as of the date such amount was due and
payable and the General Partner, in its absolute discretion, shall have the
option, but not the obligation, exercisable as hereinafter provided, to sell
such Defaulting Limited Partner's Interest in the Partnership (and any
unexercised portion of the warrants to purchase common stock of ICOS acquired
by such Defaulting Limited Partner with such Interest (the ''Warrants'') and
any rights to receive Warrants acquired by such Defaulting Limited Partners
with such Interest (''Warrant Rights'') or any part thereof, including,
without limitation, all distributions of any nature whatsoever by the
Partnership attributable to such Interest that shall not have been distributed
to the Defaulting Limited Partner prior to the date of such default (and,
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notwithstanding whether such option is exercised, the Defaulting Limited
Partner shall have no right to receive such cash distributions, but any
successor to the Defaulting Limited Partner's Interest shall receive such
distributions), to any Person (a ''Purchaser'') who meets all of the
investor suitability requirements applicable to an Additional Limited
Partner set forth in the Memorandum and who is otherwise acceptable to the
General Partner. Such Purchaser shall purchase such Defaulting Limited Partner's
Interest in the Partnership, or any part thereof (and, if applicable, the
unexercised portion of such Defaulting Limited Partner's Warrants and such
Defaulting Limited Partner's Warrant Rights), unless otherwise agreed by the
General Partner and such Purchaser, by (a) paying such Defaulting Limited
Partner such an amount as the Purchaser and the General Partner shall agree
upon, (b) paying to the Partnership the amount in respect of which the
Defaulting Limited Partner shall have defaulted under such Defaulting Limited
Partner's Investor Note, (c) paying any selling commissions and financial
advisory and marketing fees due in connection with such purchase,
(d) undertaking, by executing an Investor Note, to make the remaining payments
to the Partnership required to be made by the Defaulting Limited Partner to
the extent that such payments have not been made by the Defaulting Limited
Partner or by the Purchaser pursuant to clause (b) above and (e) paying, if
practicable, any interest payable on the amount due and any expenses incurred
by the Partnership, in each case as specified in this subparagraph 3.3.5. If
the Defaulting Limited Partner's Interest and, if applicable, Warrants and
Warrant Rights are sold for less than contemplated by the preceding sentence,
the Defaulting Limited Partner shall continue to be liable for any deficiency.
Upon the consummation of a purchase pursuant to this subparagraph 3.3.5, which
shall occur on the date (the ''Purchase Date'') specified by the General
Partner in writing to the Purchaser, (i) the Purchaser shall become a
Substituted Limited Partner, with all of the rights and obligations as set
forth in subparagraph 8.6.1, (ii) the Defaulting Limited Partner shall be
relieved of such Defaulting Limited Partner's obligations under its Investor
Note (to the extent the Substituted Limited Partner agreed to pay such
obligation) and (iii) the Interest of such Defaulting Limited Partner shall
be decreased to the extent such Interest is purchased by a Purchaser pursuant
to this subparagraph 3.3.5. Each Additional Limited Partner hereby constitutes
and appoints the General Partner, and any officer of the General Partner, with
full power of substitution, such Additional Limited Partner's agent and
attorney-in-fact for the purpose of executing and delivering any and all
documents necessary to convey such Additional Limited Partner's Interest
(and, if applicable, the unexercised portion of such Additional Limited
Partner's Warrants and such Additional Limited Partner's Warrant Rights),
in the event that such Additional Limited Partner shall have become a
Defaulting Limited Partner, to the Purchaser pursuant to this subparagraph
3.3.5, which power of attorney, being coupled with an interest, is irrevocable
and shall survive the death, dissolution or incapacity of any Limited Partner.
Until the Interest of the Defaulting Limited Partner is purchased by a
Purchaser, the obligations of the Defaulting Limited Partner to the
Partnership hereunder shall not be extinguished by the existence of the
resale option granted to the General Partner pursuant to this subparagraph
3.3.5, and the Partnership may proceed to collect from the Defaulting
Limited Partner (x) any amount due from the Defaulting Limited Partner
as and when due, together with interest thereon from the date for payment
stated herein at the lesser of one and one-half percent (1 1/2%) per month
and the maximum rate permitted by law and (y) all costs and expenses of
collection incurred by the Partnership (including reasonable fees and
disbursements of counsel). The Class B Limited Partner shall receive written
notice whenever any Limited Partner becomes a Defaulting Limited Partner
under this subparagraph 3.3.5.
3.4 General Partner, Class B Limited Partner or Initial Limited Partner as
Class A Limited Partner
The General Partner, any Class B Limited Partner or the Initial Limited
Partner shall also be a Class A Limited Partner to the extent that such Partner
purchases an Interest as a Class A Limited Partner or either purchases or
becomes a transferee of all or any part of the Interest of a Class A Limited
Partner or Class A Substituted Limited Partner, and to such extent shall be
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treated in all respects as a Class A Limited Partner, and the consent of the
Limited Partners to such a purchase or transfer shall not be required in order
for such purchase or transfer to be effective. The General Partner's Capital
Contribution referred to in subparagraph 3.1.1 or 3.1.2 will be made in its
capacity as a General Partner and, except as provided in paragraphs 11.1 and
11.4, such Capital Contribution as a General Partner will not entitle the
General Partner to any rights of a Limited Partner, including, without
limitation, any rights set forth in Article 8.
ARTICLE 4. Allocation of Profits or Losses; Distributions
4.1 Profits or Losses
4.1.1 General Allocation of Losses. After giving effect to the special
and regulatory allocations set forth in Sections 4.1.3 and 4.1.4, Losses for
any fiscal year shall be allocated in the following order and priority:
(a) First, if in any prior fiscal year Profits have been allocated
to the Partners pursuant to Section 4.1.2(b), one percent (1%) to the General
Partner and ninety-nine percent (99%) to the Additional Limited Partners, to
the extent of and pro rata in accordance with the amount of (i) the cumulative
Profits allocated to the Partners pursuant to Section 4.1.2(b) hereof for all
prior fiscal years, over (ii) the cumulative Losses allocated to the Partners
pursuant to this Section 4.1.1(a) for all prior fiscal years.
(b) Second, one percent (1%) to the General Partner and ninety-nine
percent (99%) to the Additional Limited Partners in accordance with their
respective Adjusted Capital Contributions.
4.1.2 General Allocation of Profits. After giving effect to the special
and regulatory allocations set forth in Section 4.1.3 and 4.1.4, Profits for
any fiscal year shall be allocated in the following order and priority:
(a) First, if in any prior fiscal year Losses have been allocated
to the Partners pursuant to Section 4.1.1(b), one percent (1%) to the General
Partner and ninety-nine percent (99%) to the Additional Limited Partners, to
the extent of and pro rata in accordance with the amount of (i) the cumulative
Losses allocated to the Partners pursuant to Section 4.1.1(b) hereof for all
prior fiscal years, over (ii) the cumulative Profits allocated to the Partners
pursuant to this Section 4.1.2(a) for all prior fiscal years.
(b) Second, one percent (1%) to the General Partner and ninety-nine
percent (99%) to the Additional Limited Partners. The amounts allocated to the
respective Additional Limited Partners, pursuant to this Section 4.1.2(b) shall
be allocated (A) ninety-five percent (95%) to the Class A Limited Partners pro
rata in accordance with their respective Adjusted Capital Contributions; and
(B) five percent (5%) to the Class B Limited Partner.
4.1.3 Special Allocations. Notwithstanding anything to the contrary in
this Article 4:
(a) Any interest income imputed under Sections 483 or 1274 of the
Code with respect to the Investor Notes shall be specially allocated to the
Additional Limited Partners whose Investor Notes gave rise to such imputation.
(b) Selling commissions, financial advisory and marketing fees and
other fees paid by the Partnership in any Fiscal Year in respect of any Interest
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shall be specifically allocated among the Class A Limited Partners so as to
cause the Capital Account Balances of all such Class A Limited Partners to be
equal on a whole interest basis prior to all allocations of Profits and Losses
and assuming full payment of the Investor Notes.
(c) If there are one or more Interim Closings (as defined in the
Sales Agency Agreement) subject to the requirements of Section 706(d) of the
Code, (a) Profits and Losses allocated to the Limited Partners for the period
from each Interim Closing Date (as defined in the Sales Agency Agreement)
(a ''Starting Date'') to the earlier of (x) the next Interim Closing Date and
(y) the Final Closing Date (as defined in the Sales Agency Agreement) shall be
allocated solely to the Limited Partners admitted to the Partnership on or
before such Starting Date, and (b) Profits and Losses allocated to the Limited
Partners after the Final Closing Date shall be allocated to each Limited Partner
so that and until the aggregate amount of Profits and Losses allocated to such
Limited Partner equals the aggregate amount of Profits and Losses that would
have been allocated to such Limited Partner if all Limited Partners had been
admitted to the Partnership on the first Interim Closing Date.
(d) No payment of Additional Funds (as defined in the Product
Development Agreement) pursuant to the Product Development Agreement, whether
by contribution or otherwise, shall affect the relative share of allocations or
distributions (other than distributions upon termination of the Partnership as
provided in paragraph 9.3) pursuant to this subparagraph.
4.1.4 Regulatory Allocations. Notwithstanding anything to the contrary in
Article 4:
(a) No allocation of Losses shall create or increase (or shall
reasonably be expected to create or increase as of the end of any Partnership
taxable year) a negative Capital Account Balance for any Limited Partner in
excess of such Limited Partner's obligation to restore its Capital Account
Balance, computed in accordance with the rules of Treasury Regulation
Section 1.704-1(b)(2)(ii)(d). Losses that cannot, in accordance with the
preceding sentence, be allocated to a Limited Partner shall be allocated as
follows. First, to the Limited Partners who would not be subject to such
limitation, pro rata in accordance with their Adjusted Capital Contributions,
and thereafter, one hundred percent (100%) to the General Partner. If Losses
are allocated to Partners in accordance with this Section 4.1.4(a), Profits
shall be allocated to those Partners to the extent of and in proportion to the
cumulative amounts of Losses allocated to such Partners pursuant to this
Section 4.1.4(a).
(b) If any Limited Partner unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) that creates or increases a negative
Capital Account Balance for such Limited Partner, such Limited Partner shall
be allocated items of income and gain in an amount sufficient to eliminate
such negative Capital Account Balance as quickly as possible. Such allocation
of items of income and gain shall be in lieu of any other method for the
allocation of items of income and gain provided hereunder and shall continue
until the negative Capital Account Balance is eliminated for purposes of
Treasury Regulation Section 1.704-1(b)(2)(ii)(d). This provision is intended
to be a ''qualified income offset'' within the meaning of Treasury Regulation
1.704-1(b)(2)(ii)(d) and shall be interpreted and implemented as therein
provided.
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4.2 Allocation Among Partners Subsequent to an Assignment
The Profits or Losses of the Partnership attributable to any Interest
acquired by reason of an assignment by a Partner in any fiscal year of the
Partnership shall, subject to the requirements of Section 706 of the Code,
be allocated between the assignor and assignee based upon the length of time
during such fiscal year, as measured by the effective date of the assignment
(determined as specified in paragraph 8.4), during which the Interest so
assigned was owned by each of them; provided that, if the allocation made by
this paragraph shall not be made because an interim closing of the books of
account of the Partnership pursuant to paragraph 6.5 was made at the time of
any such assignment, the Profits and Losses of the Partnership up to the time
of such assignment shall be allocated to the assignor, and after the time of
such assignment shall be allocated to the assignee.
4.3 Allocation Among Partners Subsequent to a Default
The Profits or Losses of the Partnership attributable to the Interest
of a Defaulting Limited Partner shall be allocated after the default on the
Defaulting Limited Partner's Investor Note solely among the non-defaulting
Limited Partners. If the Interest of such Defaulting Limited Partner shall
be purchased by a Purchaser, or if such Defaulting Limited Partner pays to
the Partnership all amounts required to cure its default, a special allocation
of Profits or Losses of the Partnership arising after such purchase or cure
shall be made to the Purchaser or Defaulting Limited Partner or to the
non-defaulting Limited Partners until the Purchaser's or the Defaulting Limited
Partner's Capital Account Balance becomes or shall become equal in amount to the
Capital Account Balance that the Defaulting Limited Partner would have had if
the Defaulting Limited Partner had not defaulted.
4.4 Capital Account Balance
Each Partner's capital account shall be maintained in accordance with
the capital accounting rules of Section 704(b) of the Code and the regulations
thereunder (including particularly Treasury Regulation Section
1.704-1(b)(2)(iv)). In general, under such rules, a Partner's capital
account shall be credited with (i) such Partner's cash contributions to
the Partnership and the fair market value of any other property contributed
to the Partnership by such Partner and (ii) such Partner's share of Profits
as set forth in this Article 4, and shall be debited with (a) such Partner's
share of Losses and (b) the amount of any cash distributions (inclusive
of any amounts required to be withheld from distributions on account of
any U.S. federal, state or local tax) to such Partner and the fair market
value of any distributions of other property to such Partner. Upon the
assignment by any Limited Partner of its Interest or any portion of its Interest
pursuant to paragraph 8.3, the capital account of such assigning Limited Partner
which is attributable to its Interest, or such portion of its Interest, will
carry over and become the capital account of the assignee of such Interest,
or such portion, on the effective date of such assignment pursuant to
paragraph 8.4. The General Partner shall direct the Partnership's accountant
to make all necessary adjustments in each Partner's capital account as required
by the capital accounting rules of Section 704(b) of the Code and the
regulations thereunder.
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4.5 Distributions of Partnership Funds
4.5.1 Prior to termination of the Partnership pursuant to Article 9,
Distributable Cash for each fiscal quarter shall be distributed to the Partners
(except as otherwise provided in Section 3.3.5) as soon as practicable after the
end of such fiscal quarter in the following order and priority:
(a) First, one percent (1%) to the General Partner and ninety-nine
percent (99%) to the Additional Limited Partners, pro rata in accordance with
their respective Adjusted Capital Contributions (except as otherwise provided
in subparagraph 3.3.5) as of the end of such fiscal quarter until each Class A
Limited Partner shall have received distributions pursuant to this Article 4
aggregating one hundred percent (100%) of its Capital Contributions.
(b) Second, one percent (1%) to the General Partner and ninety-nine
percent (99%) to the Additional Limited Partners. The distributions to the
respective Additional Limited Partners, shall be split (A) five percent (5%)
to the Class B Limited Partner; and (B) ninety-five percent (95%) to the Class
A Limited Partners pro rata in accordance with their respective Adjusted Capital
Contributions (except as otherwise provided in subparagraph 3.3.5) as of the end
of such fiscal quarter.
4.5.2 In addition, distributions of cash in proportion to the Partner's
respective Adjusted Capital Contributions (except as otherwise provided in
Section 3.3.5) may be made at any time by the General Partner.
4.6 Return of Unexpended Capital Contributions
If any portion of the Capital Contributions of the Partners has not been
expended, or has not been or will not be, in the reasonable judgment of the
General Partner, committed for expenditures or otherwise required to satisfy
the obligations of the Partnership, at or after the date on which the General
Partner determines pursuant to the Product Development Agreement that the
purposes of the Partnership are unfeasible or uneconomic or that necessary
additional funds to achieve such purposes are not available, such portion of
the Capital Contributions shall be distributed by the Partnership pro rata to
the Partners in accordance with their Adjusted Capital Contributions
immediately prior to such distribution.
4.7 Distributions in Kind
4.7.1 The General Partner, in its discretion, may from time to time
distribute to the Partners in kind any property (other than cash) held by the
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Partnership. Any such distribution of property shall be referred to herein as
a ''Distribution in Kind.'' The value of any such Distribution in Kind at the
time of such distribution shall be determined in accordance with subparagraph
4.7.3 and such distribution shall be made to the Partners in accordance with
subparagraph 4.7.2. Distributions in Kind made pursuant to this subparagraph
4.7.1 shall be subject to such restrictions and conditions, if any, as the
General Partner shall have determined are necessary or appropriate in order
for such distributions to be made in accordance with applicable law. If a
Distribution in Kind may not legally be made to a Partner, the General Partner
shall sell the property that would otherwise be distributed to such Partner
and distribute the net proceeds thereof to the Partner entitled thereto.
4.7.2 Any Distribution in Kind pursuant to subparagraph 4.7.1 shall be
distributed to the Partners as follows: (i) first, one percent (1%) of the
distributions shall be made to the General Partner and ninety-nine percent (99%)
shall be made to the Additional Limited Partners, pro rata in accordance with
their respective Adjusted Capital Contributions (expect as otherwise provided
in subparagraph 3.3.5) as of the date of distribution until each Class A Limited
Partner shall have received distributions pursuant to this Article 4 aggregating
one hundred percent (100%) of its Capital Contributions; (ii) second, after each
Class A Limited Partner shall have received distributions pursuant to this
Article 4 aggregating one hundred percent (100%) of its Capital Contributions,
one percent (1%) of the distributions shall be made to the General Partner and
ninety-nine (99%) shall be made to the Additional Limited Partners. The
distributions to the respective Additional Limited Partners shall be split
five percent (5%) to the Class B Limited Partner and ninety-five percent (95%)
to the Class A Limited Partners pro rata in accordance with their respective
Adjusted Capital Contributions (except as otherwise provided in subparagraph
3.3.5) as of the date of distribution. No fractional share of any security shall
be distributed, but in lieu thereof, the General Partner shall sell such
fractional share and distribute the net proceeds thereof to the Partner
entitled thereto.
4.7.3 The value of any Distribution in Kind as of any date of determination
(or if such date is not a business day, as of the next preceding business day)
shall be the estimated fair market value of the property distributed as
determined by the General Partner.
ARTICLE 5. Records and Accounting; Reports
5.1 Records and Accounting
Proper and complete records and books of account of the business of the
Partnership shall be maintained at the Partnership's principal place of
business, and each Additional Limited Partner or such Additional Limited
Partner's duly authorized representative shall have access to such records
and books of account, upon reasonable notice and for a proper purpose, at
all reasonable times during business hours; provided, however, that no
Limited Partner will have access to Technology (as defined in the Schedule I
to the Product Development Agreement) or other proprietary technology or
trade secrets contained in such records and books. The Partnership shall
maintain its records and books using the same methods of accounting elected
by the Partnership in its federal income tax returns. The Partnership shall
prepare its financial statements on a tax basis of accounting using
disclosures consistent with generally accepted accounting principles.
5.2 Annual Reports
Within 90 days after the end of each fiscal year of the Partnership,
the General Partner shall cause to be delivered to each Person who was a
Partner at any time during such fiscal year, an annual report containing
the following:
(i) financial statements of the Partnership, prepared in accordance with
the last sentence of paragraph 5.1, using the same methods of accounting
elected by the Partnership in its federal income tax return and including,
without limitation, a balance sheet as of the end of the Partnership's fiscal
year and statements of income, Partners' equity and changes in financial
position for such fiscal year all accompanied by a report from a nationally
recognized firm of independent certified public accountants stating whether,
in their opinion, such financial statements of the Partnership fairly present
the assets, liabilities and capital accounts of the Partnership and its
revenues and expenses and changes in its Partners' capital accounts on the
accounting basis used for federal income tax purposes;
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(ii) a general description of the activities of the Partnership during
such fiscal year, including, without limitation, a description of the
progress of Product development and commercialization;
(iii) a summary of any material transactions between the Partnership
and the General Partner or any of its Affiliates, including fees or
compensation paid by the Partnership and the services performed by the
General Partner or any such Affiliate for such fees or compensation; and
(iv) a report of all distributions of Distributable Cash pursuant to
paragraph 4.5 hereof.
5.3 Quarterly Reports
Within 45 days after the end of each of the first three quarters of
each fiscal year of the Partnership, the General Partner shall cause to be
delivered to each Person who was a Partner at any time during such quarter
an unaudited quarterly report containing a balance sheet as at the end of
such quarter and a statement of income for the period covered by the report,
which shall be certified by an officer of the General Partner as fairly
presenting, on the accounting basis used for federal income tax purposes,
the financial position and results of operations of the Partnership during
the period covered by the report. The report shall also contain a description
of other pertinent information regarding the business of the Partnership
during the period covered by the report, including, without limitation,
information regarding the progress of Product development and
commercialization.
5.4 Tax Information
Within 45 days after the end of each fiscal year of the Partnership,
the General Partner will cause to be delivered to each Person who was a
Partner at any time during such fiscal year all information concerning the
Partnership required to be furnished to the Partners by law
(e.g., Section 6031(b) of the Code) and as shall be necessary for the
preparation of such Partner's federal income tax return, including a
statement showing such Partner's share of each item of Partnership income,
gain, loss, deduction and credit for such year for federal income tax purposes
and the amount of any distribution made to or for the account of such Partner
pursuant to this Agreement. In the event the General Partner does not deliver
to each such Person all information necessary to enable such Person to prepare
such Person's federal income tax return within 45 days of the end of any
fiscal year.
5.5 Tax Returns
The General Partner shall cause tax returns for the Partnership to be
timely prepared and filed with the appropriate authorities.
5.6 Additional Information
In addition to the foregoing, each Limited Partner shall have the
right, upon reasonable notice and for a proper purpose, to obtain from the
General Partner:
(i) a copy of the Partnership's federal, state and local income tax
returns for each year;
(ii) a current list of the name and address of each Partner;
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(iii) a copy of this Agreement and certificate of limited partnership
and all amendments thereto, together with executed powers of attorney pursuant
to which any of such documents have been executed; and
(iv) a list containing the amount of cash and a description and
statement of the agreed value of any property or services contributed by each
Partner, and which each Partner has agreed to contribute in the future, and
the date on which each became a Partner.
5.7 Trade Secrets
Anything in this Agreement to the contrary notwithstanding, the
Partnership shall have no obligation to, and the General Partner shall not,
disclose to any Limited Partner any trade secret or confidential or similar
information, the disclosure of which the General Partner reasonably believes
may (i) adversely affect the Partnership's business, (ii) be prohibited by
any law or regulation or (iii) violate the terms of any agreement with any
other Person.
ARTICLE 6. Fiscal Affairs
6.1 Fiscal Year
The fiscal year of the Partnership shall be the calendar year or such
other taxable year as may be required by the Code or Treasury Regulations.
Where appropriate herein, references to a fiscal year shall also be deemed to
include fiscal periods that constitute only a portion of a fiscal year,
including those caused by interim closings of the books of account of the
Partnership pursuant to paragraph 6.5.
6.2 Partnership Funds
Pending use in the business of the Partnership or distribution to the
Partners, the funds of the Partnership shall be deposited in such bank account
or accounts, or invested in interest-bearing taxable or non-taxable investments,
as shall be designated and deemed appropriate by the General Partner, provided
that the General Partner shall not make any such deposits or investments that
would require registration of the Partnership under the Investment Company Act
of 1940, as amended. Except with respect to investments meeting the
requirements of paragraphs 7.2(a) and 7.2(i), funds of the Partnership shall
not be commingled with funds of any other Person. Withdrawals of funds of
the Partnership from any accounts or investments shall be made upon such
signatures as the General Partner may designate.
6.3 Federal Income Taxes
Unless otherwise provided in this Agreement, the General Partner may,
in itssole and absolute discretion, make any election on behalf of the
Partnership that is authorized by the Code and the Treasury Regulations
in determining the Federal taxable income of the Partnership. For Federal
income tax purposes, each item of income, gain, loss, deduction or credit
of the Partnership shall be allocated among the Partners in accordance with
the manner in which Partnership Profits or Losses are allocated pursuant to
Article 4, unless a different manner of allocation is required by the Code
and the Treasury Regulations, including, without limitation, any special
allocation that may be necessary to give effect to any election under
Section 754 of the Code which the General Partner, in its sole and absolute
discretion, may cause the Partnership to make. The General Partner shall
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not elect to treat the Partnership as an association taxable as a
corporation for Federal or state income or franchise tax purposes.
6.4 Tax Matters Partner
The General Partner shall at all times be the Partnership's tax matters
partner (''TMP''). Upon the resignation, dissolution or bankruptcy of the
General Partner, the successor General Partner shall be the TMP. The TMP
shall employ experienced tax counsel to represent the Partnership in
connection with any audit or investigation of the Partnership by the Internal
Revenue Service (''IRS'') and in connection with all subsequent administrative
and judicial proceedings arising out of such audit. The fees and expenses
of the TMP, and all expenses incurred by the TMP in serving as the TMP, shall
be expenses paid by the Partnership. Notwithstanding the foregoing, it shall
be the responsibility of the General Partner and of the Limited Partners, at
their expense, to employ tax counsel to represent their respective separate
interests. If the TMP is required by law or regulation to incur fees and
expenses in connection with tax matters not affecting all of the Partners,
then the TMP may, in its sole discretion, seek reimbursement from or charge
such fees and expenses to the capital accounts of those Partners on whose
behalf such fees and expenses were incurred. The TMP shall keep the Partners
informed of all administrative and judicial proceedings, as required by
Section 6223(g) of the Code, and shall promptly furnish in writing to each
Partner who so requests a copy of each notice or other communication
received by the TMP from the IRS, except such notices or communications as
are sent directly to such requesting Partner by the IRS. The relationship
of the TMP to the Limited Partners is that of a fiduciary, and the TMP has
a fiduciary obligation to perform its duties as TMP in such manner as will
serve the best interests of the Partnership and all of the Partners. To the
fullest extent permitted by law, the Partnership agrees to indemnify the
TMP and its agents, and save and hold them harmless, from and in respect
to all (i) fees, costs and expenses in connection with or resulting from
any claim, action or demand against the TMP, the General Partner or the
Partnership that arise out of or in any way relate to the TMP's status as
TMP for the Partnership, and (ii) all such claims, actions and demands and
any losses or damages therefrom, including amounts paid in settlement or
compromise of any such claim, action or demand, provided that this indemnity
shall not extend to conduct by the TMP adjudged (x) not to have been
undertaken in good faith to promote the best interests of the Partnership
or (y) to have constituted gross negligence, recklessness or intentional
wrongdoing of the TMP.
6.5 Interim Closing of the Books
There shall be an interim closing of the books of account of the
Partnership (i) at the date of the admission of Additional Limited Partners
pursuant to subparagraph 3.3.1, (ii) at any time a taxable year of the
Partnership ends pursuant to the Code and (iii) at such other times as the
General Partner shall determine are required by good accounting practices
or may be appropriate under the circumstances.
ARTICLE 7. Rights and Duties of the General Partner
7.1 Management Power
The General Partner shall have exclusive management and control of the
business of the Partnership. The General Partner shall have all the rights
and powers of a general partner as provided in the Act and as otherwise
provided by law and, except as otherwise expressly provided in this
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Agreement, the General Partner is hereby granted the right, power and
authority to do on behalf of the Partnership all things that, in its sole
judgment, are necessary, proper or advisable to carry out the aforementioned
duties and responsibilities, including but not limited to the right, power
and authority from time to time to do the following:
(a) incur all expenditures permitted by this Agreement;
(b) employ and dismiss from employment any and all employees, agents,
independent contractors, consultants, attorneys and accountants;
(c) enter into any sales agency or other agreements with respect to the
sale of Interests to Additional Limited Partners;
(d) admit an assignee of a Limited Partner's Interest or the Purchaser
of a Defaulting Limited Partner's Interest to be a Substituted Limited Partner
in the Partnership, pursuant to and subject to the terms of subparagraph
3.3.5 and paragraphs 8.3 and 8.6, without the consent of any Limited Partner;
(e) to the extent that funds of the Partnership are, in the General
Partner's judgment, not required for the conduct of the Partnership's
business, temporarily invest the excess funds in the manner set forth in
paragraph 6.2;
(f) prosecute and protect and defend or cause to be prosecuted, protected
and defended all copyrights, patents, patent rights, trade names, trademarks
and service marks and all applications with respect thereto that may be
held or licensed by the Partnership;
(g) borrow money on behalf of the Partnership from ICOS and give as
security for such borrowing Investor Notes of the Limited Partners;
(h) in addition to the borrowing set forth in clause (g) above, (x) borrow
money on behalf of the Partnership from lenders other than the General
Partner or its Affiliates and give as security for any such loan a security
interest in any or all assets of the Partnership or (y) borrow money on
behalf of the Partnership from the General Partner or its Affiliates, at
an interest rate not to exceed an interest rate that would be charged such
General Partner or Affiliate for its borrowings of like maturity; and
(i) subject to paragraph 7.4(d), enter into, execute, amend, supplement,
acknowledge and deliver any and all contracts, agreements, licenses or
other instruments (including without limitation the agreements listed in
Schedule B hereto and guarantees of the obligations of third parties)
necessary, proper or advisable to carry out the purposes of the Partnership.
7.2 Limitations on General Partner's Authority
The General Partner shall have no authority to:
(a) do any act prohibited by law or in contravention of this Agreement;
(b) permit or cause the funds of the Partnership to be commingled with
the funds of any other Person, except with respect to investments meeting
the requirements of paragraphs 7.2(a) and 7.2(i);
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(c) permit any creditor who makes a non-recourse loan to the Partnership
to acquire, at any time as a result of making such loan, any direct or
indirect interest in the profits, capital or property of the Partnership
other than as a secured creditor;
(d) permit the Partnership to redeem or repurchase any Interest
(except that the foregoing shall not apply to the Purchase Option); provided,
however, that the General Partner may, but shall not be obligated to,
purchase any Interest for its own account from the Partnership or from any
Limited Partner or other holder of any Interest and become a Limited Partner
in respect of such Interest;
(e) pay or award any finder's fee, commission or other compensation
to any person engaged by a potential investor for investment advice as an
inducement to such advisor to advise the purchase of Interests; provided,
however, that this provision shall not prohibit payment of customary selling
commissions to registered broker-dealers or other properly licensed persons
in connection with the offering and sale of the Interests;
(f) except as otherwise specified herein, permit the General Partner
or any of its Affiliates to receive any rebate or concession to participate
in any reciprocal business arrangements that would have the effect of
circumventing the provisions hereof;
(g) except as provided herein with respect to Additional Limited
Partners, Substituted Limited Partners, substitute General Partners or
additional General Partners, admit any additional Partners into the
Partnership or establish any additional classes of Limited Partner;
(h) except as permitted by this Agreement, perform any act which would
impair or make impossible the ordinary conduct of the Partnership business;
and
(i) receive, or permit any Affiliate of the General Partner to receive,
any fees from the Partnership other than (i) the Management Fee and (ii)
the License Fee.
7.3 Formation and Qualification of the Partnership
The General Partnert will use its best efforts to cause the Partnership
to be formed, reformed, qualified or registered under assumed or fictitious
name statutes or similar laws in any jurisdiction in which the Partnership
owns property or transacts business if such formation, reformation,
qualification or registration is necessary in order to protect the limited
liability of the Limited Partners or to permit the Partnership lawfully to
own property or transact business.
7.4 Obligations of the General Partner
The General Partner shall:
(a) devote to the Partnership and apply to the accomplishment of
Partnership purposes so much of its time and attention as is necessary or
advisable in the opinion of the General Partner to manage properly the
affairs of the Partnership;
(b) cause the Partnership to have insurance against such risks and
pursuant to such terms (including deductible limits or self-insured
retentions) as is appropriate in the prudent judgment of the General
Partner;
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(c) maintain a Partnership capital account for each Partner; and
(d) cause the Partnership to enter into and carry out the obligations
of the Partnership contained in the agreements listed in Schedule B hereto
and cause the Partnership not to take any action in violation of such
agreements, or to amend such agreements to the extent that such amendments
materially adversely affect the Limited Partners.
7.5 Good Faith
Subject to paragraph 7.8, the General Partner shall manage and control
the affairs of the Partnership to the best of its ability, and the General
Partner shall use its commercially reasonable best efforts to carry out
the purposes of the Partnership for the benefit of all of the Partners.
In exercising its power, the General Partner recognizes its fiduciary
responsibility to the Partnership. The General Partner shall not solicit
any Partner to waive or contract away such fiduciary responsibility.
7.6 No Compensation
The General Partner shall receive no compensation for performing its duties
as General Partner under this Agreement. This provision shall not affect
the General Partner's rights to receive its share of distributions of
Partnership funds as set forth in Article 4 or subparagraph 9.3.1, to
receive reimbursement for amounts expended as set forth in paragraphs 6.4
and 7.7 or to receive repayment of any loans made by it to the Partnership
pursuant to paragraph 7.1(h) or to receive the Management Fee, the License
Fee or any other compensation or payments pursuant to contracts entered
into as provided in paragraph 7.14.
7.7 Reimbursement of the General Partner
The General Partner shall be entitled to receive, out of Partnership
funds available therefor, reimbursement of all amounts expended by the
General Partner out of its own funds in payment of properly incurred
Partnership obligations, including amounts expended prior to the entry of
Additional Limited Partners into the Partnership.
7.8 Limitation of Liability; Indemnification
7.8.1 Neither the General Partner nor any of its officers, directors,
employees or agents shall be liable to the Partnership or to the Limited
Partners for any act or omission based upon errors of judgment or other
fault in connection with the business or affairs of the Partnership,
provided that the Person against whom liability is asserted acted in good
faith on behalf of the Partnership and in a manner reasonably believed by
such Person to be within the scope of its authority under this Agreement
and in the best interests of the Partnership, and provided further, that
such action or failure to act does not constitute gross negligence or
willful misconduct. The Partnership agrees to indemnify the General Partner
and its officers, directors, employees and agents to the fullest extent
permitted by law and to save and hold them harmless from and in respect of
all (a) fees, costs and expenses (including fees of counsel) incurred in
connection with or resulting from any claim, action or demand against the
General Partner, the Partnership or any of their respective officers,
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directors, employees or agents that arise out of or in any way relate to
the Partnership or its properties, business or affairs and (b) such
claims, actions and demands and any losses or damages resulting from such
claims, actions and demands, including amounts paid in settlement or
compromise (if recommended by counsel for the Partnership) of any such
claim, action or demand, provided, that such indemnification shall apply
only in the event the Person against whom a claim, action or demand is
asserted has acted in good faith on behalf of the Partnership and in a
manner reasonably believed by such Person to be within the scope of its
authority under this Agreement and in the best interests of the
Partnership, and only if such action or failure to act does not constitute
gross negligence or willful misconduct. The termination of any action,
suit or proceeding by judgment, order or settlement or upon a plea of
nolo contendere or its equivalent shall not of itself create a presumption
that any Person acted with gross negligence or willful misconduct or
otherwise than in good faith on behalf of the Partnership in a manner
reasonably believed by such Person to be within the scope of its authority
under this Agreement and in the best interests of the Partnership.
7.8.2 The provision of advances from Partnership funds to the General
Partner or any of its officers, directors, employees or agents
(collectively, ''Indemnitees'') for legal expenses and other costs incurred
as a result of any initiated or threatened suit, action or proceeding is
permissible if (i) such suit, action or proceeding relates to or arises out
of, or is alleged to relate to or arise out of, any action or inaction on
the part of the Indemnitee relating to the performance of duties or
services by the Indemnitee on behalf of the Partnership, and (ii) the
Indemnitee undertakes to repay any funds advanced pursuant to this
subparagraph 7.8.2 in cases in which such Indemnitee would not be entitled
to indemnification under subparagraph 7.8.1, together with interest
thereon from the date of payment to the date of repayment at a rate of
interest equal to the average monthly three-month industrial A-1
commercial paper rate in effect during such period. If advances are
permissible under this subparagraph 7.8.2, the Indemnitee shall furnish
the Partnership with an undertaking as set forth in clause (ii) above
and shall thereafter have the right to bill the Partnership for, or
otherwise request the Partnership to pay, at any time and from time to
time after such Indemnitee becomes obligated to make payment therefor,
any and all amounts for which such Indemnitee believes in good faith that
such Indemnitee is entitled to indemnification under subparagraph 7.8.1.
The Partnership shall pay any and all such bills and honor any and all
such requests for payment (for which the Partnership is liable as
determined above) within 60 days after such bill or request is received.
In the event that a final determination is made that the Partnership is
not so obligated in respect of any amount paid by it, such Indemnitee
shall refund such amount, together with interest thereon, within 60 days
of such final determination, and in the event that a final determination
is made that the Partnership is so obligated in respect of any amount not
paid by the Partnership to a particular Indemnitee, the Partnership shall
pay such amount to such Indemnitee within 60 days of such final
determination.
7.8.3. Any judgment against the Partnership or an Indemnitee wherein
the Indemnitee is entitled to indemnification under subparagraph 7.8.1
must first be satisfied from the assets of the Partnership before the
Indemnitee is responsible for satisfaction of such judgment.
7.9 Other Business Ventures
Any Partner (including, without limitation, the General Partner), or
any shareholder, director, employee, Affiliate or other Person holding a
legal or beneficial interest in any entity which is a Partner, may engage
in or possess an interest in other business ventures of every nature and
description, independently or with others, whether such ventures are
competitive with the Partnership or otherwise; and except as expressly
provided in the agreements listed in Schedule B hereto, neither the
Partnership nor the Partners shall have any right by virtue of this
Agreement in or to such independent ventures or to the income or profits
derived therefrom.
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7.10 Timing of Installments Under Investor Notes
If the General Partner deems it necessary or desirable to do so, the
General Partner may, upon notice to all Additional Limited Partners,
(i) extend the due date for the payment of any installments under the
Class A Limited Partners' Investor Notes; provided, however, that all
Class A Limited Partners shall be entitled to the benefit of each such
extension; or (ii) prior to any date upon which installments under the
Investor Notes are due (such prior date, the ''Installment Termination
Date''), relieve the Class A Limited Partners of their respective
obligations to make any installments under each such Class A Limited
Partner's Investor Note falling due after such Installment Termination
Date; provided, however, in no event shall any Class A Limited Partner be
relieved of its obligation to pay any payments under such Class A Limited
Partner's Investor Note falling due prior to the Installment Termination
Date.
7.11 Enforcement of Investor Notes
The General Partner shall have full power to enforce the Investor
Notes held by the Partnership. Each Additional Limited Partner hereby
agrees to such rights on the part of the General Partner and expressly
grants to it all such rights.
7.12 Sale of All Assets
The General Partner shall not sell, license, assign or otherwise
transfer all or substantially all of the assets of the Partnership without
first obtaining the affirmative vote of sixty-six and two-thirds percent
(66-2/3%) in interest (based upon Adjusted Capital Contributions) of the
Limited Partners; provided, however, that, in the event that the option
to purchase the Interests of the Limited Partners expires unexercised or
the Research Program is terminated pursuant to Section 7.01 of the Product
Development Agreement as to all Products, the affirmative vote of a
majority in interest (based upon Adjusted Capital Contributions) of the
Limited Partners will suffice. Entering into, or performing pursuant to
the terms of, any of the following agreements shall not, in and of itself,
be deemed a sale of all or substantially all of the Partnership's assets
for the purposes of this paragraph 7.12: (i) the Purchase Agreement;
(ii) the Product Development Agreement; or (iii) one or more agreements
covering the license or sublicense of the Partnership's proprietary
know-how and technology for therapeutic indications not addressed in
the Memorandum. A purchase of Interests pursuant to paragraph 7.13
shall also not be deemed a sale of all or substantially all of the
Partnership's assets for the purposes of this paragraph 7.12.
7.13 Partnership Purchase
7.13.1 If, pursuant to the Purchase Agreement, ICOS (i) exercises
its option to purchase the Interests of the Limited Partners or
(ii) states in writing that it will not exercise such options, the General
Partner shall provide each Limited Partner with written notice of such
exercise or of such decision not to exercise, and, in the former case, the
General Partner shall transfer all of the Limited Partners' Interests to
ICOS in exchange for the consideration set forth in the Purchase Agreement.
7.13.2 Each Limited Partner hereby agrees to the transfer described in
subparagraph 7.13.1 above, and hereby constitutes and appoints the General
Partner, any Person which becomes a successor General Partner and any
officer of the General Partner, with full power of substitution, such
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Limited Partner's agent and attorney-in-fact for the purpose of executing
and delivering any and all documents necessary to convey such Limited
Partner's Interest to ICOS in the circumstances described above pursuant
to such subparagraph which power of attorney, being coupled with an
interest, is irrevocable and shall survive the death, dissolution or
incapacity of any Limited Partner.
7.13.3 After a transfer of all the Interests of all the Limited
Partners to ICOS pursuant to subparagraph 7.13.1, the General Partner shall
terminate the Partnership pursuant to Article 9.
7.14 Contracts with the General Partner or its Affiliates
The General Partner may, on behalf of the Partnership, enter into
contracts in addition to those listed in Schedule B with itself or any of
its Affiliates, provided that such agreements are upon terms which are no
less favorable to the Partnership than terms that could reasonably be
obtained from parties other than itself or any Affiliate. The validity of
any transaction, agreement or payment involving the Partnership and the
General Partner or any Affiliate of the General Partner, including those
agreements listed in Schedule B hereto, shall not be affected by reason
of (i) the relationship between the Partnership and the General Partner or
such Affiliate of the General Partner or between such Affiliate of the
General Partner and the General Partner or (ii) the approval of said
transaction, agreement or payment by officers or directors of the General
Partner.
7.15 Termination of Partnership; Appointment of a New General Partner.
Without concurrence of sixty-six and two-thirds percent (66-2/3%) in
interest of the Limited Partners, the General Partner may not (a) except
as provided in subparagraph 7.13.3, terminate the Partnership or
(b) appoint a new general partner; provided, however, that the General
Partner may appoint an additional general partner without the consent of
the Limited Partners if the addition of such Person is necessary to
preserve the tax status of the Partnership, such Person has no authority
to manage or control the Partnership under the Partnership Agreement,
there is no change in identity of Persons who have authority to manage or
control the Partnership and the admission of such Person as an additional
general partner does not materially adversely affect the Limited Partners.
ARTICLE 8. Rights and Obligations of the Limited Partners
8.1 No Participation in Management
No Limited Partner (other than the General Partner if it has an
Interest as a Limited Partner as permitted by paragraph 3.4 hereof and
then only in its capacity as General Partner) shall take part in the
management of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise
bind the Partnership.
8.2 Limitation of Liability
Pursuant to the Act, a Limited Partner who is not also a General
Partner of the Partnership shall have no liability for the obligations of
the Partnership in excess of such Limited Partner's Capital Contribution
and such Limited Partner's shares of assets and undistributed profits,
unless such Limited Partner is also a General Partner or such Limited
Partner takes part in the control of the business of the Partnership
(subject to the obligation of a Limited Partner to repay any funds
wrongfully distributed to it). Neither the possession nor the exercise
of the voting rights and other powers of Limited Partners shall constitute
participation in the control of the business of the Partnership.
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8.3 Transfer of Limited Partner's Interest
8.3.1 (a) Subject to any restrictions on transferability required
by law or contained elsewhere in this Agreement, a Limited Partner may
assign in writing such Limited Partner's Interest, provided that:
(i) the assignee of such Interest, at the time of the assignment,
meets all of the requirements applicable to the sale of such Interest to
an Additional Limited Partner, including, without limitation, becoming a
party to the Purchase Agreement and consenting in writing in form
satisfactory to the General Partner to be bound by the terms of this
Agreement as if such assignee were an Additional Limited Partner;
(ii) immediately after the effective date of the assignment
(determined as specified in paragraph 8.4), neither the assignee nor the
assignor, if the assignor has retained any part of such assignor's
Interest, shall hold an Interest that represents a non-integral number of
quarter Units;
(iii) an opinion of counsel for the assignee is delivered to the
General Partner stating that, in the opinion of such counsel (which
counsel and opinion shall be satisfactory to counsel for the General
Partner), such Interest may be legally transferred in compliance with
then-applicable state and Federal laws;
(iv) upon request of the General Partner, an opinion of counsel for
the Partnership is delivered to the General Partner stating that, in the
opinion of such counsel, such assignment would not jeopardize the status
of the Partnership as a partnership for Federal income tax purposes,
would not cause the Partnership to terminate pursuant to Section
708(b)(1)(B) of the Code, would not violate, or cause the Partnership to
violate, any applicable law or governmental rule or regulation, including,
without limitation, any applicable Federal or state securities law, and
would not cause the assets of the Partnership to be ''plan assets'' within
the meaning of ERISA;
(v) an agreement among the assignor, assignee and Partnership, in
form and substance satisfactory to the General Partner, shall be executed
by such parties and delivered to the General Partner, pursuant to which
agreement the assignor and assignee shall represent that each of them knows
of no reason why the proposed assignment would, alone or in conjunction
with other assignments similarly effected, cause the Partnership to be
classified as a publicly traded partnership within the meaning of
Section 7704(b) of the Code and that the transfer was not effected by
means of an interdealer quotation system of a type described in
Section 1.7704-1(b)(5) of the Treasury Regulations or by means of a
secondary market or the substantial equivalent thereof of a type described
in Section 1.7704-1(c) of the Treasury Regulations;
(vi) the General Partner determines in its sole discretion that the
sum of the percentage interests in the Partnership's capital and profits
transferred during the taxable year of the proposed transfer, when added
to the percentage interests in the Partnership's capital and profits
proposed to be transferred by the assignor to the assignee, does not
exceed two percent (2%) of the total interests in the Partnership capital
or profits; and
(vii) the General Partner consents in writing to the assignment,
which consent may be withheld in its sole discretion or granted on such
conditions as the General Partner may specify.
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The General Partner, in its absolute discretion, may waive any of
the requirements set forth in clauses (i) through (iv) of this
subparagraph 8.3.1(a), but shall not in any event consent to any
assignment if such assignment would jeopardize the status of the
Partnership as a partnership for Federal income tax purposes, or would
violate, or cause the Partnership to violate, any applicable law or
governmental rule or regulation, including, without limitation, any
applicable Federal or state securities law or would cause the Partnership's
assets to be ''plan assets'' within the meaning of ERISA. Notwithstanding
the foregoing, the General Partner shall in no event permit the transfer
of less than one quarter Unit. The consent of the General Partner pursuant
to clause (vii) above shall not be required in connection with any transfer
of an Interest required by operation of law. The General Partner shall
not, prior to the Detachment Date (as defined in each Warrant) of each
applicable Warrant, consent to an assignment without certification by ICOS
that the assignor has transferred such assignor's applicable Warrant to
the assignee. By executing this Agreement, each Limited Partner shall be
deemed to have consented to any assignment to which the General Partner
has consented. Anything herein to the contrary notwithstanding, in no event
shall an assignment be made to a minor (except in trust or pursuant to the
Uniform Gifts to Minors Act) or an incompetent.
(b) Each Additional Limited Partner also agrees not to mortgage,
pledge or otherwise encumber or assign any rights in the Interest of such
Additional Limited Partner except as expressly permitted by this Agreement
or the agreements listed in Schedule B hereto.
8.3.2 Each Limited Partner agrees that, after an assignment of an
Interest by such Limited Partner, it will, upon request of the General
Partner, execute such certificates or other documents and perform such
acts as the General Partner deems appropriate in connection with such
transfer. For purposes of this subparagraph, any transfer of an Interest,
whether voluntary or by operation of law, shall be considered an assignment.
8.3.3 Any purported assignment of an Interest that is not made in
compliance with this Agreement or that is attempted to be made in connection
with the delivery of an agreement described in clause (v) above that
contains an incorrect representation is hereby declared to be null and
void and of no force or effect whatsoever and shall not be recognized by
the Partnership or any Partner for purposes of allocations of Profits and
Losses, Partnership distributions or otherwise.
8.3.4 Each Limited Partner agrees that such Limited Partner will, upon
request of the General Partner and prior to the time the General Partner
consents to an assignment of an Interest by such Limited Partner, pay all
reasonable expenses, including attorneys' fees, incurred by the Partnership
in connection with such assignment.
8.3.5 Notwithstanding anything to the contrary herein, each Limited Partner
hereby covenants to each other Partner and to the Partnership that it will
not transfer all or any portion of its Interest, or take any other action,
if such transfer or action could (by itself or in conjunction with other
actions) result in the Partnership's being treated as a ''publicly traded
partnership'' within the meaning of Section 7704(b) of the Code. Each
Limited Partner further agrees that injunctive relief will be an appropriate
remedy for any breach or threatened breach of this covenant because such
breach may cause irreparable harm to the Partnership and that this covenant
shall be binding upon any transferees, successors or assigns of all or
any portion of such Limited Partner's Interest in the Partnership.
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8.4 Assignee's Rights
An assignee of any Interest in compliance with paragraph 8.3 shall be
entitled to receive distributions of cash or other property, including
distributions upon liquidation of the Partnership, from the Partnership
attributable to such Interest after the effective date of the assignment.
The effective date of an assignment of an Interest under the provisions of
this Article 8 for the purposes of Partnership accounting shall be the
date the assignment is accepted by the General Partner, which shall be not
more than five business days following fulfillment of all conditions
precedent to such assignment provided for in this Agreement.
8.5 Satisfactory Written Assignment Required
Anything herein to the contrary notwithstanding, both the Partnership
and the General Partner shall treat the assignor of an Interest as the
absolute owner thereof in all respects until such time as a written
assignment that conforms to the requirements of this Article 8 has been
received by the Partnership and has been consented to and accepted by the
General Partner.
8.6 Substituted Limited Partner
8.6.1 The General Partner, in its sole and absolute discretion, may,
but need not, permit an assignee or transferee (whether such assignee or
transferee has acquired its Interest by virtue of a voluntary assignment
pursuant to paragraph 8.3, an involuntary transfer, including a transfer
pursuant to subparagraph 3.3.5, or a transfer by operation of law) of the
Interest (or a part thereof) of a Limited Partner to be and become a
substituted Limited Partner (''Substituted Limited Partner'') in the
Partnership entitled to all the rights and benefits under this Agreement
of the transferor or assignor of such Interest, but no such assignee or
transferee shall be or become a Substituted Limited Partner unless and
until the General Partner consents in writing to the admission of such
Person as a Substituted Limited Partner, which consent may be withheld by
the General Partner in its sole and absolute discretion. The Partners
hereby consent and agree to such admission of a Substituted Limited
Partner by the General Partner, and agree that the General Partner may,
on behalf of each Partner and on behalf of the Partnership, cause Schedule
A hereto to be appropriately amended, in the event of such admission.
8.6.2 Each Substituted Limited Partner, as a condition to its admission
as a Limited Partner, shall execute and acknowledge such instruments as
the General Partner shall deem necessary or desirable to effectuate such
admission (including any necessary powers of attorney) and to confirm the
agreement of such Substituted Limited Partner to be bound by all the terms
and provisions of this Agreement with respect to the Interest acquired.
All reasonable expenses, including attorneys' fees, incurred by the
Partnership in connection with such admission shall be borne by such
Substituted Limited Partner.
8.6.3 Any Person who acquires an Interest or is admitted to the
Partnership as a Substituted Limited Partner shall be subject to and
bound by all the provisions of this Agreement as if originally a party
to this Agreement, except as otherwise provided herein.
8.7 Indemnification and Terms of Admission
Each Limited Partner shall indemnify and hold harmless the Partnership,
the General Partner and every other Limited Partner who was or is a party
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or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative or otherwise, by reason of or arising from any actual or
alleged misrepresentation (including, without limitation, a misrepresentation
contained in an agreement delivered pursuant to subparagraph 8.3.1(a)(v))
or misstatement of facts or omission to represent or state facts made by
such Limited Partner in connection with any assignment, transfer,
encumbrance or other disposition of all or any part of an Interest or the
admission of a Substituted Limited Partner to the Partnership against
losses, liabilities and expenses for which the Partnership or such other
Person has not otherwise been reimbursed (including, without limitation,
attorneys' fees, judgments, fines and amounts paid in settlement) actually
and reasonably incurred by the Partnership or such other Person in
connection with such action, suit or proceeding.
8.8 Substitution Required for Vote
Unless and until an assignee of an Interest becomes a Substituted
Limited Partner, such assignee shall not be entitled to vote with respect
to such Interest.
8.9 Effective Date
The effective date of admission of a Substituted Limited Partner shall
be the date designated by the General Partner in writing to such Substituted
Limited Partner, which shall not be later than the first day of the fiscal
quarter of the Partnership next following the date upon which the General
Partner has given its written consent to such substitution.
8.10 Death or Incapacity of a Limited Partner
The death or legal incapacity of a Limited Partner shall not cause a
dissolution of the Partnership, but the rights of such Limited Partner to
share in the Profits or Losses of the Partnership, to receive distributions
of Partnership funds and to assign such Limited Partner's Interest pursuant
to paragraph 8.3 shall, on the happening of such an event, devolve on such
Limited Partner's personal representative, or in the event of the death of
a Limited Partner whose Interest is held in joint tenancy, pass to the
surviving joint tenants, subject to the terms and conditions of this
Agreement; and the Partnership shall continue as a limited partnership
under the Act. However, in no event shall such personal representative
become a Substituted Limited Partner solely by reason of such capacity.
The estate of the Limited Partner shall be liable for all the obligations
of the deceased or incapacitated Limited Partner.
8.11 Exercise of Rights of Limited Partners
The Limited Partners may give consent and approval as herein provided
and may exercise the rights and powers granted to them in this Agreement,
it being understood that the exercise of such rights and powers will be
deemed to affect the basic structure of the Partnership and will not be
deemed to be an exercise of control over the Partnership's business;
provided, however, that the exercise of any right and power granted to the
Limited Partners in paragraphs 7.3, 7.12, 9.1, 10.1, 10.5, 11.1, 11.2 and
11.3 will not be authorized or effective unless and until the General
Partner obtains an opinion of counsel or an order or judgment of any court
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of competent jurisdiction to the effect that the exercise of such rights
and powers by the Limited Partners (i) will not constitute evidence that
the Limited Partners are taking part in the control of or management of
the Partnership's business and affairs, (ii) will not result in the loss
of any Limited Partner's limited liability and (iii) will not result in
the Partnership being classified as an association taxable as a corporation
for Federal income tax purposes.
ARTICLE 9. Termination and Distribution
9.1 Termination
The Partnership shall continue in effect until December 31, 2020,
unless earlier terminated upon the occurrence of any one or more of the
following events:
(a) after the death, insanity, retirement, resignation (whether or not
in accordance with the provisions of this Agreement), expulsion,
dissolution or bankruptcy, as relevant, of the General Partner or its
successor General Partner, if any, unless within 90 days after such
event a new General Partner shall have been elected pursuant to paragraph
9.4 or 11.3 to carry on the business of the Partnership. Such vote shall
be deemed for all purposes a vote to remove the General Partner and replace
it with one or more successor General Partners pursuant to Article 11;
(b) the sale of all or substantially all of the Partnership's assets
as permitted by this Agreement (but excluding the licensing of all or
substantially all of the Partnership's assets);
(c) the affirmative vote of sixty-six and two-thirds percent
(66-2/3%) in interest (based upon Adjusted Capital Contributions) of the
Limited Partners to terminate the Partnership, provided that the right to
terminate the Partnership upon such vote shall exist only after all
Capital Contributions to the Partnership by the Limited Partners shall
have been expended or cancelled; and provided further that any such
termination shall be subject to the conditions set forth in paragraph 9.2;
(d) termination required by operation of law; or
(e) upon the transfer of all Interests of the Limited Partners
pursuant to paragraph 7.13.
9.2 Assumption of Agreements
No vote to terminate the Partnership pursuant to paragraph 9.1 shall be
effective unless, prior to or concurrently with such vote, there shall
have been established procedures for the assumption of the Partnership's
obligations under the agreements listed in Schedule B hereto and there
shall have been an irrevocable appointment of an agent who shall be
empowered to give and receive notices, reports and payments under such
agreements and hold and exercise such other powers as are necessary to
permit all other parties to such agreements to deal with such agent as
if the agent were the sole owner of the Partnership's interest, which
procedures are agreed to in writing by each of the other parties to such
agreements.
9.3 Distribution
9.3.1 Upon termination of the Partnership, the affairs of the
Partnership shall be wound up and all of its debts and liabilities
discharged in the order of priority as provided by law. The fair market
value of the respective remaining assets of the Partnership (including
any amount contributed by the General Partner) shall then be determined,
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with the fair market value of any assets other than cash being determined
by an independent appraiser selected by the General Partner. Thereupon,
the capital accounts of the Partners shall be allocated items of net gain
or net loss in accordance with Article 4 as if there had been a taxable
disposition of all of the assets of the Partnership.
9.3.2 After the capital accounts of the Partners have been adjusted
for the allocations required by subparagraph 9.3.1 and for all other
items attributable to the Partnership's taxable year in which the
Partnership terminates, and within the period ending on the earlier to
occur of (i) the end of the Partnership's taxable year in which the
Partnership terminates and (ii) the date which is 90 days after the date
of such termination, the assets of the Partnership shall be distributed to
those Partners with positive Capital Account Balances in proportion to such
positive Capital Account Balances. Each Partner shall receive such
Partner's share of the assets in cash or in kind and the proportion of
such share that is received in cash may vary from Partner to Partner,
all as the General Partner in its sole discretion may decide. If such
distributions are insufficient to return to any Partner the full amount
of such Partner's Capital Contribution, such Partner shall have no
recourse against any other Partner or any Person.
9.3.3 The winding up of the affairs of the Partnership and the
distribution of its assets shall be conducted exclusively by the General
Partner (or if at such time there shall be no General Partner, then by
such Person as may be appointed by the vote of sixty-six and two-thirds
percent (66-2/3%) in interest (based on Adjusted Capital Contributions)
of the Limited Partners), who is hereby authorized to do all acts
authorized by law for purposes of this paragraph 9.3. Without limiting
the generality of the foregoing, the General Partner (or such appointee),
in carrying out such winding up and distribution, shall have full power
and authority to sell all or any of the Partnership's assets or to
distribute the same in kind to the Partners. Any assets distributed in
kind shall be subject to all operating agreements relating thereto
which shall survive the termination of the Partnership. In the event of
the termination of the Partnership by vote as provided by this Agreement,
any distribution of rights of the Partnership under the agreements listed
in Schedule B hereto and all related agreements shall be subject to the
conditions set forth in paragraph 9.2.
9.4 Election to Carry on Business
Upon the occurrence of the events specified in paragraphs 9.1(a) or
11.2, the Limited Partners may, if and to the extent permitted under the
Act and paragraph 7.3, within 90 days of such event, elect to carry on the
business of the Partnership with one or more substitute General Partners
by a vote of sixty-six and two-thirds percent (66-2/3%) in interest
(based on Adjusted Capital Contributions) of the Limited Partners
(excluding the votes of such General Partner or any of its Affiliates if
such General Partner or any of its Affiliates shall be a Limited Partner).
No vote to carry on the business of the Partnership shall entitle the
resigned, withdrawn, removed, dissolved or bankrupt General Partner to
the return of its Capital Contribution, except as provided in paragraphs
11.1 and 11.4.
Article 10. Amendments and Meetings
10.1 Amendment by Limited Partners
Except as otherwise required by law, this Agreement may be amended
in any respect upon the affirmative vote of sixty-six and two-thirds percent
(66-2/3%) in interest (based upon Adjusted Capital Contributions) of the
Limited Partners with the consent of the General Partner, provided that:
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(a) without the consent of each Partner to be adversely affected by
the amendment, this Agreement may not be amended so as to (i) convert a
Limited Partner into a General Partner, (ii) modify the limited liability
of any Limited Partner, (iii) alter the status of the Partnership as a
partnership for Federal income tax purposes or alter the interest of any
Partner in Profits or Losses or in the distributions (including
distributions upon liquidation) of the Partnership (it being understood
that this limitation is not intended to affect the right to amend this
Agreement as necessary or appropriate to permit the issuance of additional
limited partnership interests) or (iv) alter any provision requiring the
consent of a majority in interest (based upon Adjusted Capital
Contributions) of the Limited Partners to permit approval by any lesser
percentage in interest (based upon Adjusted Capital Contributions) of
the Limited Partners; and
(b) in the case of any provision hereof which requires the action,
approval or consent of a specified percentage in interest (based upon
Adjusted Capital Contributions) of the Limited Partners, such provision
may not be amended without the consent of such specified percentage in
interest (based upon Adjusted Capital Contributions) of the Limited
Partners.
If ten percent (10%) or more in interest of the Limited Partners
request in writing that the General Partner submit to a vote of the
Limited Partners a particular proposed amendment to this Agreement, the
General Partner shall do so. Any vote of the Limited Partners may be taken
at a meeting of Limited Partners called for such purpose by the General
Partner upon not less than 20 nor more than 60 days' prior written notice
or, in lieu of a meeting, by the written consent of the required
percentage in interest of the Limited Partners.
10.2 Amendment by General Partner
In addition to any amendments otherwise authorized herein, this
Agreement may be amended from time to time by the General Partner without
the consent of any of the Limited Partners (i) to add to the representations,
duties or obligations of the General Partner or surrender any right or
power granted to the General Partner herein; (ii) to cure any ambiguity,
or correct or supplement any provision herein which may be inconsistent
with any provision herein or to correct any printing, stenographic or
clerical errors or omissions in order that this Agreement shall accurately
reflect the agreement among the Partners hereto; (iii) to amend Schedule A
hereto to provide the necessary information regarding the Additional
Limited Partners, any new General Partner or any Substituted Limited
Partners; and (iv) to qualify the Interests for sale under the Blue Sky or
securities laws of any state or to conform this Agreement in order to list
the Interests on a securities exchange or arrange for the quotation of
Interests on the Nasdaq National Market or otherwise facilitate the
establishment of a market for trading the Interests, provided that no
amendment shall be adopted pursuant to this paragraph 10.2 unless the
General Partner reasonably determines (such determination, in the case of
(3) below, being supported in writing by legal counsel) that the adoption
thereof (1) is consistent with Article 7; (2) with respect to any amendment
other than an amendment pursuant to clause (iii) bove, does not alter
the interest of any Partner in Profits or Losses or in distributions of
the Partnership; (3) does not alter or impair, or result in the alteration
or impairment of, the limited liability of the Limited Partners or the
status of the Partnership as a partnership for Federal income tax purposes;
and (4) with respect to any amendment pursuant to clause (i) above, is
for the benefit of, or not adverse to the interests of the Limited
Partners.
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10.3 Voting Interest
In the event a vote of the Limited Partners shall be taken pursuant
to this Agreement for any reason, a Limited Partner shall, solely for the
purpose of determining such Limited Partner's vote, be deemed the holder
of any Interest, or portion thereof, assigned by such Limited Partner in
respect of which the assignee has not become a Substituted Limited Partner.
10.4 Amendment of Certificate
In the event this Agreement shall be amended pursuant to this Article
10, the General Partner shall amend the Certificate of Limited Partnership
to reflect such change if it deems such amendment to be necessary.
10.5 Meetings of Limited Partners
Upon the written request of ten percent (10%) or more in interest
(based upon Adjusted Capital Contributions) of the Limited Partners, the
General Partner shall call a meeting of the Limited Partners. Notice of
such meeting shall be given, by certified mail, to each Limited Partner
within 10 days after the receipt by the General Partner of such request,
and such meeting shall be held within not less than 20 nor more than 60
days of the date on which such notice shall have been given to the Limited
Partners. The General Partner may, from time to time, also call a special
meeting of the Limited Partners on the General Partner's own initiative
by giving notice of such meeting to each Limited Partner not less than
20 and not more than 60 days prior to the date of the meeting. Any such
notice shall state the place, day and hour of the meeting and shall state
briefly the purpose or purposes of the meeting, which shall be held at a
reasonable time and place. Any Limited Partner may obtain from the General
Partner a list of the names, addresses and Interests of the Limited
Partners, upon written request, and for a proper purpose, provided that
such Limited Partner shall pay any reasonable expense associated with
providing such list.
ARTICLE 11. Resignation or Removal of the General Partner
11.1 Resignation of the General Partner
(a) The General Partner shall not voluntarily resign or withdraw from
the Partnership as General Partner without (i) the consent of sixty-six
and two-thirds percent (66 2/3%) in interest (based upon Adjusted Capital
Contributions) of the Limited Partners (excluding the votes of such
General Partner or any of its Affiliates if such General Partner or any
such Affiliate shall be a Limited Partner), provided that in the event
the Purchase Option contained in the Purchase Agreement shall expire
unexercised or is terminated, the unanimous consent of the board of
directors of the General Partner shall be required in lieu of the consent
of the Limited Partners; (ii) providing one or more successor General
Partners (to whom the resigning General Partner shall assign all or a
portion of its Interest as General Partner in the Partnership) approved
by the unanimous consent of the board of directors of the General Partner;
and (iii) delivering to the Partnership an opinion of the Partnership's
counsel that such resignation or withdrawal will not alter or impair the
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status of the Partnership as a partnership for Federal income tax purposes.
The General Partner may not dispose of its Interest as a General Partner
in the Partnership except to the successor General Partner(s) or as
otherwise expressly provided for in this Article 11. If the General
Partner shall have retained any portion of its Interest, such retained
portion shall be converted into the Interest of a Limited Partner if, and
only if, a majority in interest (based upon Adjusted Capital Contributions)
of the Limited Partners shall consent to such conversion. In the event
the General Partner is not permitted or does not elect to convert its
retained Interest, the Partnership shall pay to the General Partner the
then present fair market value of the General Partner's Interest which
payment will be in the form of a non-interest bearing unsecured promissory
note from the Partnership with principal payable from the distributions
of Distributable Cash that the General Partner would have been entitled
to under this Agreement but for such resignation or withdrawal. The fair
market value of the General Partner's retained Interest shall be
determined by agreement between the General Partner and the Partnership
and in the event they cannot agree, by arbitration in accordance with the
rules of the American Arbitration Association, the cost of which shall
be borne equally by the General Partner and the Partnership.
(b) Any other provisions of this Agreement to the contrary
notwithstanding, if the General Partner resigns or withdraws from the
Partnership in violation of paragraph 11.1(a) above, its then existing
capital account shall automatically be converted into a capital account
of a retired General Partner, the value of which shall be determined by
agreement between the General Partner and the Partnership, and in the
event they cannot agree, by arbitration in accordance with the rules of
the American Arbitration Association, the cost of which shall be borne by
the General Partner. Such retired General Partner's capital account shall
(i) be subordinated to all debts and obligations of the Partnership,
(ii) rank equal in priority to the capital accounts of the Limited
Partners, (iii) not bear interest and (iv) be due and payable to the
General Partner only upon termination of the Partnership as provided
in paragraph 9.1.
(c) Other than pursuant to paragraph 11.1(a) above, the General
Partner shall not at any time be entitled to share in any Partnership
Profits or Losses attributable to the period beginning on the date of
such resignation or withdrawal (and for this purpose the successor General
Partner(s) shall determine whether there shall be an interim closing of
the books pursuant to paragraph 6.5) or in any assets distributed to
Partners at any time after such date except if, and only to the extent
that, the obligation to distribute such assets arose before such date.
11.2 Removal of the General Partner
11.2.1 The Limited Partners, subject to paragraph 11.4 below, may
remove the General Partner upon the written consent or affirmative vote
of sixty-six and two-thirds percent (66-2/3%) in interest (based upon
Adjusted Capital Contributions) of the Limited Partners, provided that
if (i) ICOS does not exercise its option under the Purchase Agreement
to purchase the Interests of the Limited Partners, (ii) the Research
Program is terminated pursuant to Section 7.01 of the Product Development
Agreement or (iii) the Partnership would otherwise be terminated pursuant
to paragraph 9.1(a), the written consent or affirmative vote of a
majority in interest (based upon Adjusted Capital Contributions) of the
Limited Partners will suffice.
11.2.2 The removal of the General Partner shall not affect the
validity or enforceability of any agreements between such General Partner
or its Affiliates and the Partnership.
11.3 Successor
The Limited Partners shall, upon a vote of sixty-six and two-thirds
(66-2/3%) in interest (based on Adjusted Capital Contributions) of the
Limited Partners, if and to the extent permitted under the Act, elect a
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new General Partner, prior to or concurrently with the removal of the
General Partner pursuant to subparagraph 11.2.1, in connection with the
continuation of the business of the Partnership; provided that prior to
or concurrently with such election counsel to the Partnership shall have
delivered to the Partnership a written opinion to the effect that such
election would not alter or impair the status of the Partnership as a
partnership for Federal income tax purposes. Any Person who is admitted
to the Partnership as a General Partner shall be subject and bound by all
the provisions of this Agreement as if originally a party to this
Agreement, except as otherwise provided herein.
11.4 Interest of Removed General Partner
A General Partner removed pursuant to subparagraph 11.2.1 or 11.2.2
above may convert its Interest as General Partner into the Interest of a
Limited Partner with the consent of sixty-six and two-thirds percent
(66-2/3%) in interest (based upon Adjusted Capital Contributions) of the
Limited Partners. In the event the General Partner is not permitted or
does not elect to so convert its Interest, the Partnership shall pay to
the General Partner the then present fair market value of the General
Partner's Interest which payment will be in the form of an interest
bearing promissory note from the Partnership with principal and interest
(at the prime rate from time to time) payable in five equal annual
installments. The General Partner shall not be entitled to share in any
Profits or Losses of the Partnership accruing after the date of its
removal or in any assets distributed to Partners at any time after such
date except if, and only to the extent that, the Profits giving rise to
such distribution accrued prior to such date. The fair market value of
the General Partner's Interest shall be determined by agreement between
the General Partner and the Partnership and in the event they can not
agree, by arbitration in accordance with the rules of the American
Arbitration Association the cost of which shall be borne equally by the
General Partner and the Partnership.
ARTICLE 12. Power of Attorney
12.1 Power of Attorney
12.1.1 Each Limited Partner, by its execution hereof, jointly and
severally makes, constitutes and appoints the General Partner, any Person
which becomes the successor to the General Partner, and any officer of the
General Partner, as its true and lawful agent and attorney-in-fact, with
full power of substitution, in its name, place and stead to make, execute,
sign, acknowledge, swear to, record and file, on its behalf (i) the
original Certificate of Limited Partnership and all amendments thereto
required or permitted by law or the provisions of this Agreement;
(ii) all certificates and other instruments deemed advisable by the
General Partner to permit the Partnership to become or to continue as a
limited partnership or partnership wherein the Limited Partners have
limited liability in any jurisdiction where the Partnership may be doing
business; (iii) all instruments that effect a change or modification of
the Partnership in accordance with this Agreement, including, without
limitation, the substitution of assignees as Substituted Limited Partners
pursuant to paragraph 8.6 and the substitution of Purchasers of Interests
of Defaulting Limited Partners as Substituted Limited Partners pursuant
to subparagraph 3.3.5; (iv) all conveyances and other instruments deemed
advisable by the General Partner to effect the dissolution and termination
of the Partnership; (v) all fictitious or assumed name certificates
required or permitted to be filed on behalf of the Partnership; (vi) all
other instruments which may be required or permitted by law to be filed
an behalf of the Partnership; and (vii) the Purchase Agreement and any
amendment to such agreements.
12.1.2 The foregoing power of attorney:
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(a) is coupled with an interest and shall be irrevocable and survive
the death or incapacity of each Limited Partner;
(b) may be exercised by the General Partner either by signing
separately as attorney-in-fact for each Limited Partner or, prior to or
after listing all of the Limited Partners executing an instrument, by a
single signature of the General Partner acting as attorney-in-fact for
all of them; and
(c) shall survive the delivery of an assignment by a Limited Partner
of the whole or any portion of his Interest; provided that where the
assignee of the whole of such Limited Partner's Interest has been approved
by the General Partner for admission to the Partnership as a Substituted
Limited Partner, the power of attorney of the assignor shall survive the
delivery of such assignment for the sole purpose of enabling the General
Partner to execute, acknowledge and file any instrument necessary to
effect such substitution.
12.1.3 Each Limited Partner shall execute and deliver to the General
Partner within five days after receipt of the General Partner's request
therefor such further designations, powers of attorney and other
instruments as the General Partner deems necessary.
ARTICLE 13. Partner Register
13.1 Register of Partners
The General Partner shall keep a register which, subject to such
reasonable regulations as it may prescribe, shall contain the name,
address and amount of the Interest of each Limited Partner, and until the
effective date of an assignment of an Interest (determined as specified in
paragraph 8.4) or the date an Interest is purchased by a Purchaser
(determined as specified in subparagraph 3.3.5), the Partnership and the
General Partner shall be entitled to deem and treat each Limited Partner
contained in such register as the Limited Partner entitled to receive
payments due hereunder, for the purposes of making payments or giving
notices hereunder and for all other purposes.
ARTICLE 14. Miscellaneous
14.1 Waiver of Partition
Each Partner hereby irrevocably waives during the term of the
Partnership any right that such Partner may have to maintain any action
for partition with respect to any Partnership property.
14.2 Benefits of Agreement
Subject to the restrictions on transferability and assignment set
forth in this Agreement, this Agreement shall bind and inure to the
benefit of the heirs, executors, personal representatives, successors
and permitted assignees of the parties hereto.
14.3 Entire Agreement, Amendment
This Agreement (including annexed Schedules A and B) and the
agreements specifically contemplated hereby sets forth and constitutes
the entire agreement among the parties with respect to the subject matter
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hereof, and supersedes any and all prior agreements, understandings,
promises and representations made by any party to any other party
concerning the subject hereof and the term applicable hereto. This
Agreement (including annexed Schedules A and B) may not be released,
discharged, amended or modified other than in accordance with Article 10.
14.4 Choice of Law
This Agreement (including annexed Schedules A and B but not the
agreements referred to in Schedule B) shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of
the State of Delaware as applied to contracts made and to be performed
entirely within Delaware.
14.5 Submission to Jurisdiction
Each Limited Partner hereby irrevocably submits to the personal
jurisdiction of the state and Federal courts of the State of Delaware
and the state and Federal courts of the State of Washington over any suit,
action or proceeding brought to enforce the Investor Note of such Limited
Partner. Each Limited Partner hereby irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or
proceeding brought in such court has been brought in an inconvenient
forum, and further agrees that a final judgment in any such suit, action
or proceeding brought in such court shall be conclusive and binding
upon such Limited Partner. Nothing in this paragraph 14.5 shall limit
the right of the Partnership or the General Partner to bring proceedings
against such Limited Partner in the courts of any other jurisdiction or
jurisdictions. It is hereby agreed and understood that the submission to
jurisdiction and waiver of venue by each Limited Partner set forth in
this paragraph 14.5 shall be limited solely to the enforcement of the
Investor Note of such Limited Partner and shall not (i) constitute a
submission to jurisdiction or waiver of venue for any other purpose or
(ii) subject such Limited Partner to suit in connection with any manner
other than the enforcement of such Investor Note, any law now or hereafter
in effect to the contrary notwithstanding.
14.6 No Waiver
No failure or delay on the part of any Partner in exercising any
rights under this Agreement, or in insisting on strict performance of any
covenant or condition contained in this Agreement, shall operate as a
waiver of any such Partner's rights hereunder. No waiver of any right under
this Agreement shall be deemed effective unless contained in a writing
signed by the party charged with such waiver, and no waiver of any right
arising from any breach or failure to perform shall be deemed to be a
waiver of any future such right or of any other right arising under
this Agreement.
14.7 Payments and Notices
Payments hereunder shall be sent, and notices required or permitted
hereunder shall be in writing and shall be sent, to the applicable class
or classes of Limited Partners at the address given for such Partner in
the Limited Partner register maintained by the Partnership pursuant to
Article 13, and to the General Partner at:
ICOS Development Corporation
22021 20th Avenue S.E.
Bothell, Washington 98021
Attention: Partnership Administration
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or to such other address as the General Partner may hereafter specify in
writing, and shall be deemed given on the earlier of (i) physical
delivery to a party, and (ii) three (3) days after mailing by prepaid
first class or express mail.
14.8 Legends
If certificates for any Interest or Interests are issued evidencing
a Limited Partner's Interest, each such certificate shall bear such
legends as may be required by applicable Federal or state laws, or as
may be deemed necessary or appropriate by the General Partner to reflect
the restrictions upon transfer contemplated herein.
14.9 Headings, etc.
Article, paragraph and subparagraph headings contained in this
Agreement are included for convenience only and are not to be used in
construing or interpreting this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or the
plural shall include the singular and the plural, and pronouns stated in
either the masculine or the neuter gender shall include the masculine,
the feminine and the neuter.
14.10 Counterparts
This Agreement may be executed in any number of counterparts, each
of which shall be an original and all of which shall constitute together
but one and the same document.
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In Witness Whereof, the parties have executed this Agreement as of
the date first above written.
ICOS Development Corporation,
as General Partner
By: /S/Howard S. Mendelsohn
-----------------------
Title: Secretary/Treasurer
-----------------------
INITIAL LIMITED PARTNER
By: Howard S. Mendelsohn
-----------------------
ADDITIONAL LIMITED PARTNERS
Each Additional Limited Partner whose name, address
and Capital Contribution appear in Schedule A hereto
and whose signature page is attached hereto.
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SCHEDULE A
Capital Contribution
Contribution
GENERAL PARTNER
ICOS Development Corporation...... $900.00
22021 20th Avenue S.E.
Bothell, Washington 98021
INITIAL LIMITED PARTNER
Howard S. Mendelsohn.............. $100.00
c/o ICOS Corporation
22021 20th Avenue S.E.
Bothell, Washington 98021
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SCHEDULE B
Operative Agreements
Product Development Agreement
Purchase Agreement
Sales Agency Agreement
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<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ICOS CORPORATION
Date: August 26, 1997 By:/S/ HOWARD S. MENDELSOHN
---------------- ------------------------
Howard S. Mendelsohn
Chief Accounting Officer
<PAGE>
REDACTED VERSION
EXHIBIT 10.2
TO
ICOS Corporation's
Report on Form 8-K
Dated
August 26, 1997
"[ * ]" = omitted, confidential material, which material
has been separately filed with the Securities and Exchange Commission
pursuant to a request for confidential treatment.
<PAGE>
PURCHASE AGREEMENT
dated as of
June 5, 1997
between
ICOS CORPORATION
and
each of the Limited Partners from time to time
of
ICOS CLINICAL PARTNERS, L.P.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS2
SECTION 1.01 Definitions........................................2
ARTICLE II PURCHASE OPTIONS............................................2
SECTION 2.01 Purchase Options...................................2
SECTION 2.02 Advance Payment Election...........................3
SECTION 2.03 Notice of Exercise.................................4
ARTICLE III PURCHASE AND SALE OF LIMITED PARTNERSHIP INTERESTS.........5
SECTION 3.01 Purchase of Interests..............................5
SECTION 3.02 Purchase Price of Class A Interests................5
SECTION 3.03 Purchase Price of the Class B Interest.............6
SECTION 3.04 Delivery of Common Stock...........................7
SECTION 3.05 Payments...........................................7
SECTION 3.06 Interest...........................................9
SECTION 3.07 Statements.........................................9
SECTION 3.08 Records............................................9
SECTION 3.09 Anti-Dilution......................................9
SECTION 3.10 Purchase of Royalty Payment Obligations...........10
ARTICLE IV REPRESENTATIONS AND WARRANTIES ............................10
SECTION 4.01 Representations and Warranties of the Company.....10
ARTICLE V COVENANTS OF THE COMPANY....................................12
SECTION 5.01 Reservation of Stock..............................12
SECTION 5.02 Registration and Listing of Stock.................13
SECTION 5.03 Delivery of Prospectus............................13
SECTION 5.04 Existence of Partnership..........................14
SECTION 5.05 Payment Recipient Register........................14
SECTION 5.06 Manufacture and Sale of Products..................14
SECTION 5.07 Sale or Disposition of Technology.................15
ARTICLE VI DISCLAIMERS................................................15
SECTION 6.01 No Warranty on Products...........................15
SECTION 6.02 No Warranty on Technology.........................15
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<PAGE>
ARTICLE VII TERM AND TERMINATION......................................16
SECTION 7.01 Purchase Option Termination Events................16
SECTION 7.02 Purchase Option Termination Date..................17
SECTION 7.03 Events of Default.................................17
SECTION 7.04 Term and Termination..............................18
ARTICLE VIII SALE OR ASSIGNMENT.......................................18
SECTION 8.01 Sale or Assignment................................18
ARTICLE IX MISCELLANEOUS PROVISIONS...................................19
SECTION 9.01 Parties Independent...............................19
SECTION 9.02 Entire Agreement; Amendment.......................19
SECTION 9.03 Choice of Law.....................................20
SECTION 9.04 Severability......................................20
SECTION 9.05 No Waiver.........................................20
SECTION 9.06 Payments and Notices..............................20
SECTION 9.07 Headings..........................................21
SECTION 9.08 Counterparts......................................21
Schedule I - Glossary
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<PAGE>
PURCHASE AGREEMENT
Agreement dated as of June 5, 1997 between ICOS Corporation, a
Delaware corporation (the "Company"), and each of the limited partners
(individually, a "Limited Partner" and, collectively, the "Limited
Partners") from time to time of ICOS Clinical Partners, L.P., a Delaware
limited partnership (the "Partnership").
WITNESSETH
WHEREAS, the business of the Partnership is to conduct research
and experimentation in order to develop Products within the Field of
Activity in the Territory; to obtain appropriate regulatory approvals;
after receipt of such approvals, to obtain revenues from the
Exploitation of the Products within the Field of Activity in the
Territory; and to engage in activities incidental to the above activities;
WHEREAS, the Company and the Partnership have entered into the
Product Development Agreement pursuant to which the Company has granted
the Partnership the exclusive right to use certain technology owned or
controlled by the Company, and the Company has agreed to perform, on
behalf of the Partnership, research and experimentation in order to
develop the Products and thereafter to market the Products within the
Field of Activity in the Territory;
WHEREAS, in order to fund such research and experimentation, the
Partnership intends to raise up to $100,000,000 through a private
placement of limited partnership interests in the Partnership as more
fully described in the Memorandum; and
WHEREAS, each Limited Partner wishes to grant the Company an
option to purchase such Limited Partner's Interest exercisable at the
time and in the manner and on the terms described in this Agreement,
and, in consideration for such options, the Company has issued to the
Limited Partners Warrants to purchase shares of its Common Stock;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions
(a) Unless otherwise provided, each capitalized term used herein
shall have the meaning assigned to it in the Glossary attached hereto
as Schedule I.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
Events of Default.................................7.03
Notice of Exercise................................2.01(b)
Prospectus........................................4.01(d)
Purchase Date.....................................2.01(a)
Purchase Option Exercise Date.....................2.03(a)
Purchase Option Shares............................4.01(c)
Purchase Option Termination Date..................7.02(a)
Purchase Option Termination Event.................7.01
Registration Statement............................4.01(d)
SEC...............................................4.01(d)
Securities Act....................................4.01(d)
ARTICLE II
PURCHASE OPTIONS
SECTION 2.01 Purchase Options
(a) Each Limited Partner hereby grants the Company an
irrevocable option to purchase, on a date (the "Purchase Date") designated
by the Company pursuant to Section 2.03(a), all the Interests of such
Limited Partner in accordance with the terms of this Agreement. Such
options to purchase the Interests may only be exercised in the manner set
forth in this Article II.
(b) The Company's right to exercise the options granted hereby
is subject to the following conditions:
(i) Such options may only be exercised if all the options
to purchase the Interests are to be exercised simultaneously;
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(ii) Such options may be exercised only during the period
commencing on the Purchase Option Commencement Date and ending on the
Purchase Option Termination Date by sending a written notice to such
effect containing the information required by Section 2.03 to the
Partnership, the General Partner and all Limited Partners (the "Notice
of Exercise");
(iii) The representations and warranties set forth in
Article IV shall be true and correct in all material respects on the
Purchase Option Exercise Date as if made on such date;
(iv) The Company shall have complied with the
covenants set forth in Sections 5.01 and 5.02(a), (b) and (c) if the Company
elects to make the Stock Advance Payment or the Combination Advance Payment;
and
(v) The Purchase Option Termination Date shall not have
occurred prior to the Purchase Option Exercise Date.
SECTION 2.02 Advance Payment Election
Prior to the Purchase Option Exercise Date, the Company shall determine
whether it will make the Cash Advance Payment, the Stock Advance Payment or
the Combination Advance Payment to the Payment Recipients; provided, that the
Company may make the Stock Advance Payment or the Combination Advance Payment
only if the representations set forth in Section 4.01(d) are true and correct
as of the Purchase Date and the Common Stock (or any other securities included
in the Stock Advance Payment or the Combination Advance Payment pursuant to
Section 3.09) is listed on a national securities exchange or quoted on the
Nasdaq National Market; provided, further, that the Company may not make the
Stock Advance Payment without the prior consent of the General Partner (which
consent shall not be unreasonably withheld) if, prior to the Purchase Date,
the Partnership has not expended an amount equal to or greater than the
aggregate Capital Contributions of all Limited Partners (reduced by $5,000
for each Unit sold without a selling commission under the Sales Agency
Agreement); provided, further, that, in the event that the Partnership has
not expended, prior to the Purchase Date, an amount equal to such Capital
Contributions, the Company may not, without the prior consent of the General
Partner (which consent shall not be unreasonably withheld), make the Common
Stock portion of the Combination Advance Payment larger than an amount that
would cause the cash portion of the Combination Advance Payment to be less
than the cash in the Partnership (less payables) on the Purchase Date. In
the event the Company has not specified in the Notice of Exercise whether it
will make the Cash Advance Payment, the Stock Advance Payment or the
Combination Advance Payment, the Company will be required to make the Cash
Advance Payment.
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SECTION 2.03 Notice of Exercise
(a) The Notice of Exercise shall (A) be dated the date that it is sent
(the "Purchase Option Exercise Date"), (B) be irrevocable, (C) designate the
Purchase Date, which shall be a date not more than 60 days after the Purchase
Option Exercise Date, and (D) contain or be accompanied by:
(i) a description in reasonable detail of each Limited Partner's
right to receive the Class A Payment or the Class B Payment, as the case may
be, for its Interest;
(ii) notification of whether the Company will, pursuant to
Section 2.02, make the Cash Advance Payment, the Stock Advance Payment or the
Combination Advance Payment to the Payment Recipients and (A) if the Company
will make the Stock Advance Payment, (1) the number of shares of Common Stock
that will be delivered on the Purchase Date for each Class A Interest or
Class B Interest, as the case may be, and (2) the computations relating thereto
in reasonable detail and (B) if the Company will make the Combination Advance
Payment, (1) the number of shares of Common Stock and the amount of cash that
will be delivered on the Purchase Date for each Class A Interest or Class B
Interest, as the case may be, and (2) the computations relating thereto in
reasonable detail;
(iii) the information required by Section 2.03(b), if applicable;
and
(iv) a conformed copy of this Agreement.
(b) If, at any time before the Purchase Date, the number of shares of
Common Stock or other securities that would or may be deliverable to any
Limited Partner pursuant to Article III in respect of its Interest shall be
adjusted or any other consideration would be deliverable to any Limited Partner
pursuant to Section 3.09, the Company shall give notice thereof to the
Partnership and, upon request, to any Limited Partner, and shall include in the
Notice of Exercise (or, if such adjustment occurs after the date of such notice,
shall promptly send to each Limited Partner) a statement of the facts requiring
such adjustment or the delivery of such other consideration, the computations
relating thereto in reasonable detail and the number of shares of Common Stock
or other consideration that would or may be deliverable to Limited Partners in
respect of each such Interest pursuant to the Stock Advance Payment or the
Combination Advance Payment. Such statement shall be signed by the Chief
Executive Officer or Chief Financial Officer of the Company.
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ARTICLE III
PURCHASE AND SALE OF LIMITED PARTNERSHIP INTERESTS
SECTION 3.01 Purchase of Interests
(a) On the Purchase Date, each Limited Partner shall sell to the Company,
and the Company shall purchase from such Limited Partner, the Interest of such
Limited Partner at the price and on the terms specified in this Agreement.
(b) At the request and expense of the Company, each Limited Partner shall
execute such further proper assignments and instruments as the Company shall
reasonably request to accomplish and record such purchase and sale and establish
the sole ownership of the Company in and to the Interest of such Limited
Partner.
SECTION 3.02 Purchase Price of Class A Interests
(a) As complete and full consideration for the sale to the Company by
each Class A Limited Partner of its Class A Interest, the Company shall pay
the Class A Payment to each Class A Payment Recipient.
(b) If the Company shall have elected pursuant to Section 2.02 to make the
Cash Advance Payment, or if the Company is not permitted under Section 2.02 to
make the Stock Advance Payment or the Combination Advance Payment, the Company
shall pay to each Class A Payment Recipient the amount of the Class A Down
Payment, in cash, on the Purchase Date in respect of such Class A Payment
Recipient's Class A Interest.
(c) If the Company shall have elected pursuant to Section 2.02 to make the
Stock Advance Payment, the Company shall deliver to each Class A Payment
Recipient the Class A Stock Advance Payment in the manner and at the time
specified in Section 3.04.
(d) If the Company shall have elected pursuant to Section 2.02 to make the
Combination Advance Payment, the Company shall deliver to each Class A Payment
Recipient the Class A Combination Advance Payment in the manner and at the time
specified in Section 3.04.
(e) The Company shall pay in cash to each Class A Payment Recipient that
portion of its Class A Payment constituting the Last Interim License Payment
within 60 days after the Purchase Date.
(f) No fractional shares of Common Stock (or other securities to be
delivered pursuant to Section 3.09) shall be issued to any Class A Payment
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Recipient as part of the Stock Advance Payment, Combination Advance Payment or
Minimum Royalty Stock Payment. Instead of any fractional shares of Common Stock
(or other securities) that would otherwise be issuable to a Class A Payment
Recipient, the Company shall pay to the Class A Payment Recipient a cash
adjustment in respect of such fractional interest in an amount equal to that
fractional interest of the average Closing Price of the Common Stock used to
determine the number of shares of Common Stock comprising the Stock Advance
Payment, Combination Advance Payment or Minimum Royalty Stock Payment.
SECTION 3.03 Purchase Price of the Class B Interest
(a) As complete and full consideration for the sale to the Company by the
Class B Limited Partner of its Class B Interest, the Company shall pay the
Class B Payment to the Class B Payment Recipient.
(b) If the Company shall have elected pursuant to Section 2.02 to make the
Cash Advance Payment, or if the Company is not permitted under Section 2.02 to
make the Stock Advance Payment or the Combination Advance Payment, the Company
shall pay to the Class B Payment Recipient the Class B Down Payment, in cash,
on the Purchase Date.
(c) If the Company shall have elected pursuant to Section 2.02 to make
the Stock Advance Payment, the Company shall deliver to the Class B Payment
Recipientthe Class B Stock Advance Payment in the manner and at the time
specified inSection 3.04.
(d) If the Company shall have elected pursuant to Section 2.02 to make
the Combination Advance Payment, the Company shall deliver to the Class B
Payment Recipient the Class B Combination Advance Payment in the manner
and at the time specified in Section 3.04.
(e) The Company shall pay in cash to the Class B Payment Recipient that
portion of the Class B Payment constituting the Last Interim License Payment
within 60 days of the Purchase Date.
(f) No fractional shares of Common Stock (or other securities to be
delivered pursuant to Section 3.09) shall be issued to the Class B Payment
Recipient as part of the Stock Advance Payment, Combination Advance Payment
or Minimum Royalty Stock Payment. Instead of any fractional shares of Common
Stock (or other securities) that would otherwise be issuable to the Class B
Payment Recipient, the Company shall pay to the Class B Payment Recipient a
cash adjustment in respect of such fractional interest in an amount equal to
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that fractional interest of the average Closing Price of the Common Stock used
to determine the number of shares of Common Stock comprising the Stock Advance
Payment, Combination Advance Payment or Minimum Royalty Stock Payment.
SECTION 3.04 Delivery of Common Stock
The shares of Common Stock (or such other securities as are to be delivered
pursuant to Section 3.09) to be delivered to the Payment Recipient pursuant to
the Stock Advance Payment or the Combination Advance Payment shall be mailed
on the Purchase Date to such Payment Recipient by certified mail, return receipt
requested, at the address of such Payment Recipient set forth in the Limited
Partner register maintained by the Partnership in accordance with Article 13 of
the Partnership Agreement. The Company shall pay all documentary, stamp,
transfer or other transaction taxes attributable to the issuance or delivery of
such shares.
SECTION 3.05 Payments
(a) Each cash payment to a Payment Recipient pursuant to Section 3.02 or
3.03 (other than (i) the Cash Advance Payment or the Combination Advance
Payment, as the case may be, which shall be paid on the Purchase Date,
(ii) the Last Interim License Payment, which shall be paid in accordance with
Sections 3.02(e) and 3.03(e) and (iii) the Minimum Royalty Payment, which shall
be paid in accordance with Section 3.05(b)) shall be made by the Company within
45 days of the last day of each calendar quarter in respect of which the Company
shall be required to make any such payment, at which time there shall also be
delivered to each Payment Recipient a statement setting forth the basis upon
which such payment was calculated for such calendar quarter, signed by the Chief
Executive Officer, Chief Financial Officer or Chief Accounting Officer of the
Company.
(b) The Minimum Royalty Payment to a Payment Recipient shall be made by
the Company within 60 days of the last day of the last calendar quarter of the
Fiscal Year in respect of which the Company shall be required to make any such
payment, at which time there shall be delivered to each Payment Recipient a
statement setting forth the basis upon which such payment was calculated for
such Fiscal Year, signed by the Chief Executive Officer, Chief Financial
Officer or Chief Accounting Officer of the Company. For each Fiscal Year, the
Company may elect whether to make the Minimum Royalty Payment in cash, as a
Minimum Royalty Stock Payment or as a combination of cash and a Minimum Royalty
Stock Payment; provided, that (i) the Company may make the Minimum Royalty
Stock Payment only if the representations set forth in Section 4.01(d) are
true and correct as of the date payment is made and the Common Stock (or any
other securities deliverable pursuant to Section 3.09) is listed on a national
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securities exchange or quoted on the Nasdaq National Market and (ii) the Company
may not make a Minimum Royalty Stock Payment without the prior consent of the
General Partner (which consent shall not be unreasonably withheld) if, prior
to the Purchase Date, the Partnership has not expended an amount equal to or
greater than the aggregate Capital Contributions of all Limited Partners
(reduced by $5,000 for each Unit sold without a selling commission under the
Sales Agency Agreement) until the Company has made payments in cash to Payment
Recipients under this Agreement in an aggregate amount equal to at least the
cash in the Partnership (less payables) on the Purchase Date.
(c) Any cash payment to any Payment Recipient shall be made by mailing to
such Payment Recipient, in accordance with Section 9.06, a check of the Company
in the amount of such payment payable to such Payment Recipient. Any Minimum
Royalty Stock Payment shall be mailed to each Payment Recipient by certified
mail, return receipt requested, to the address of such Payment Recipient set
forth in the Payment Recipient register maintained by the Company pursuant to
Section 5.05. The Company shall pay all documentary, stamp, transfer or other
transaction taxes attributable to the issuance or delivery of the Minimum
Royalty Stock Payment.
(d) A portion of each payment payable pursuant to this Article III
(other than pursuant to Section 3.06) to a Payment Recipient that is made more
than six months after the Purchase Date shall constitute interest on the
remaining portion of the payment. Such interest shall be the minimum rate in
effect on the Purchase Date at which interest must be stated to avoid the
imputation of interest under Section 483 or 1274 of the Code, or any
applicable successor provisions.
(e) Any Net Revenues in a currency other than Dollars shall be deemed
to be equal to the amount of Dollars obtained by converting the outstanding
amount of currency of such Net Revenues into Dollars at the average spot rate
for the purchase of Dollars with such currency as published by Bloomberg on
the last ten business days of the calendar quarter with respect to which such
revenues were accrued.
(f) Any cash payment due pursuant to this Article III shall be payable
in Dollars without deduction for or on account of any present or future taxes,
duties or other charges levied or imposed by any governmental or political
authority (other than any federal, state or local authority in the United
States) through withholding or deduction with respect to any such payments
to the extent permitted by law (except to the extent any such withholding
or deduction provides a credit or other benefit to the Payment Recipients
or is a withholding of tax on or measured by the net income of the Payment
Recipients). If any such taxes, duties or other charges are so levied or
imposed, or any such withholding or deduction (subject to the exception
referred to in the preceding sentence) is required by law, the Company
will make additional payments in such amounts so that every net payment
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under this Agreement, after any required withholding, deduction or payment
for or on account of any such present or future taxes, duties or other
charges, will not be less than the amount provided for herein. The Company
shall furnish promptly to the Payment Recipients official receipts
evidencing such withholding or deduction.
SECTION 3.06 Interest
Any payment pursuant to Section 3.02 or 3.03 that is not made on or before
the date when due shall accrue interest thereon from and after such date and
until the date of payment at the "prime rate" of interest as published by
The Wall Street Journal (Western Edition) (or if not published, another
appropriate publication) for the first business day of each month plus one
percent (1%) (based on a 365-day year) or, if such rate is in excess of the
rate then permitted under applicable law, at the highest rate then permitted
under applicable law.
SECTION 3.07 Statements
After the Purchase Date, the Company shall cause to be delivered to each
Payment Recipient, within 90 days of the end of each fiscal year of the
Company, a statement setting forth the basis upon which payments were
calculated during the preceding fiscal year and the amount of payments payable
during and with respect to such fiscal year.
SECTION 3.08 Records
After the Purchase Date, the Company shall keep accurate records that are
sufficient for the computation of the payments to be made hereunder and shall
make such records available, upon reasonable advance notice, to the Payment
Recipients at the place or places where such records are customarily kept,
for inspection during normal business hours.
SECTION 3.09 Anti-Dilution
(a) If any of the events set forth in paragraph 10(a)(i), 10(a)(ii),
10(a)(iii) or 10(b)(i) of the Warrant shall occur between the Stock Pricing
Date and the Purchase Date, the number of shares of Common Stock or any other
securities to be delivered to each Payment Recipient pursuant to this
Article III shall be adjusted as set forth in paragraphs 10(a)(i), 10(a)(ii),
10(a)(iii), 10(b)(i) and 10(c) of the Warrant, as applicable; provided, that,
for purposes of this Section 3.09, all references in the Warrant to "Holder"
shall be read as "Payment Recipient," all references to "Warrant" shall be
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read as "Purchase Option," all references to "Warrant Shares" shall be read
as "shares of Common Stock (or other securities deliverable hereunder)" and
all provisions adjusting the "Exercise Price" therein shall be disregarded.
(b) If any event shall occur during the period of 30 trading days
immediately preceding the Stock Pricing Date that, had such event occurred
immediately after the Stock Pricing Date, would have required an adjustment
pursuant to Section 3.09(a), an appropriate adjustment shall be made in the
number of shares of Common Stock (or any other securities deliverable hereunder)
to be delivered to each Payment Recipient pursuant to this Section 3.09.
(c) Notwithstanding any other provision of this Section 3.09, no
adjustment shall be made to the number of shares of Common Stock (or other
securities deliverable hereunder) to be delivered to a Payment Recipient if such
adjustment would represent less than one percent (1%) of the number of shares
to be so delivered, but instead, any such Payment Recipient shall receive in
cash the market value of the securities that would otherwise have constituted
such adjustment.
SECTION 3.10 Purchase of Royalty Payment Obligations
The Company shall have the right, at any time after the Purchase Date,
to make an offer to all Class A Payment Recipients and the Class B Payment
Recipient to purchase the Company's payment obligations under this Article III,
as applicable. Any such offer to the Class B Payment Recipient shall be in an
aggregate amount equal to at least five percent (5%) of the aggregate amount
offered to all Class A Payment Recipients and the Class B Payment Recipient
and otherwise on terms no less favorable than the offer to the Class A Payment
Recipients. The Company shall notify each Payment Recipient in accordance
with Section 9.06 of the proposed terms of such offer. If, at any time, at
least sixty-six and two-thirds percent (66-2/3%) in value of all Class A
Payment Recipients shall have accepted the terms of any such offer, the
Company shall have the right, for a period of 60 days after the date on which
such Class A Payment Recipients shall have indicated such acceptance, to
purchase pursuant to the terms of such offer the Company's payment
obligations under this Article III in respect of each Class A Payment
Recipient who has not accepted the terms of such offer and of the Class B
Payment Recipient.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Company
The Company represents and warrants on and as of the Purchase Option
Exercise Date (except for Section 4.01(d)) and the Purchase Date, as if made
on such dates, that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation; this
Agreement constitutes a valid and binding obligation of the Company;
(b) The performance by the Company of its obligations under this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all requisite action, require no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency (except such as has been obtained pursuant to Section 4.01(d)) and
will not contravene the Company's Certificate of Incorporation or Bylaws or
any material agreement or other instrument to which the Company is a party
or by which it is bound or any law, order, judgment or decree to which the
Company is a party or by which it is bound;
(c) If the Company elects to make the Stock Advance Payment or the
Combination Advance Payment, a number of shares of Common Stock (or other
securities deliverable pursuant to Section 3.09, to the extent applicable)
equal to the greater number of such securities (the "Purchase Option Shares")
that would be deliverable to all Payment Recipients pursuant to Article III
if the Company has elected to make the Stock Advance Payment or the
Combination Advance Payment has been duly authorized and reserved solely for
issuance and delivery for such purposes, and, when such shares have been
issued and delivered to the Payment Recipients entitled thereto in
accordance with the terms and conditions of this Agreement, such shares will
have been validly issued and will be fully paid, nonassessable and free of
preemptive or similar rights; and
(d) If the Company elects to make the Stock Advance Payment or the
Combination Advance Payment, as of the Purchase Date:
(i) a registration statement covering the Purchase Option Shares
that would be deliverable to all Payment Recipients pursuant to Article III
under the circumstance set forth under Section 4.01(c) has been declared
effective by the Securities and Exchange Commission (the "SEC") pursuant
to Section 8(a) of the Securities Act of 1933, as amended (the "Securities
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Act"); such registration statement, including all exhibits thereto and
documents incorporated by reference therein, as amended at the time such
registration statement became effective and as amended by any posteffective
amendment thereto, is hereinafter referred to as the "Registration Statement"
and the prospectus included therein, in the form in which such prospectus
was first filed with the SEC pursuant to Rule 424(b) under the Securities
Act, including the documents, if any, incorporated by reference therein,
is hereinafter referred to as the "Prospectus";
(ii) no stop order suspending the use of the Registration
Statement is in effect, and no proceedings for such purpose are pending
before or threatened by the SEC;
(iii) the Purchase Option Shares have been registered or
qualified for sale under the securities or Blue Sky laws of each
jurisdiction in which such registration or qualification is necessary in
connection with the issuance, delivery and resale by the Payment Recipients
of the Purchase Option Shares;
(iv) any document incorporated by reference in the Registration
Statement or the Prospectus, when such document was or will be filed with
the SEC, conformed or will conform in all material respects to the
requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC thereunder;
(v) the Registration Statement and the Prospectus included
therein (including the documents incorporated by reference therein), at
the time that the Registration Statement became effective and on the
Purchase Date, conformed in all material respects to the requirements of
the Securities Act, and the rules and regulations of the SEC thereunder, and
did 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; and
(vi) the Prospectus does not contain, and as amended or
supplemented, if applicable, will not contain, any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
ARTICLE V
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees:
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SECTION 5.01 Reservation of Stock
In the event the Company were to elect to make the Stock Advance Payment
or the Combination Advance Payment, prior to giving the Notice of Exercise,
to reserve out of its duly authorized Common Stock (or other securities
deliverable pursuant to Section 3.09), solely for the purpose of issuance and
delivery upon the exercise by the Company of its option to purchase the
Interests, the number of shares of Common Stock (or such other securities)
that would be deliverable to all Payment Recipients pursuant to Section 3.04.
SECTION 5.02 Registration and Listing of Stock
In the event the Company were to elect to make the Stock Advance Payment,
the Combination Advance Payment or the Minimum Royalty Stock Payment:
(a) Prior to the Purchase Date, to prepare and file with the SEC a
Registration Statement under the Securities Act, with respect to not less
than the aggregate number of shares of Common Stock (or other securities
deliverable pursuant to Section 3.09) that would be deliverable to all Payment
Recipients pursuant to Section 3.04, and to cause such Registration Statement
to be declared effective under the Securities Act;
(b) Prior to the Purchase Date, to register or qualify the shares of
Common Stock (or other securities deliverable pursuant to Section 3.09)
that would be deliverable to each Payment Recipient pursuant to Section 3.04
under the securities or Blue Sky laws of each jurisdiction within the United
States in which such registration or qualification is necessary;
(c) Prior to the Purchase Date, to list on each national securities
exchange on which Common Stock (or other securities deliverable pursuant to
Section 3.09) is then listed, or to keep authorized for quotation on the
Nasdaq National Market, all shares of Common Stock (or such other securities)
to be delivered to each Payment Recipient on the Purchase Date;
(d) To perform the same obligations of registration and listing with
respect to any Minimum Royalty Stock Payment prior to the delivery date of
the Common Stock (or other securities deliverable pursuant to Section 3.09);
and
(e) To pay all expenses it incurs in complying with the provisions
of this Section 5.02, including (i) all registration and filing fees,
(ii) all printing expenses, (iii) all fees and disbursements of its counsel
and independent public accountants, and (iv) all Blue Sky fees and expenses
(including fees and disbursements of counsel).
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SECTION 5.03 Delivery of Prospectus
In the event the Company were to elect to make the Stock Advance Payment,
the Combination Advance Payment or the Minimum Royalty Stock Payment:
(a) As expeditiously as possible (i) after the Company delivers the
Notice of Exercise and on or before the Purchase Date and (ii) on or before
the delivery of any Minimum Royalty Stock Payment, to furnish to each
Limited Partner such number of copies of the Prospectus as such Limited
Partner shall reasonably request, or as shall be necessary in order to
conform with the requirements of the Securities Act, or the applicable
rules and regulations of the SEC thereunder, in order to facilitate the sale
or other disposition by such Limited Partner of the shares delivered to it
pursuant to Section 3.02(c) or (d), 3.03(c) or (d) or 3.05(b).
(b) If, during such period after the delivery of any Prospectus
pursuant to Section 5.03(a), as in the opinion of outside counsel to the
Company, the Prospectus is required by law to be delivered in connection
with sales by any Limited Partner, any event shall occur as a result of
which it is necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances when the Prospectus
is delivered to a purchaser, not misleading, or if it is necessary to amend
or supplement the Prospectus to comply with law, forthwith to prepare and
furnish, at its own expense, to any Limited Partner to which any Prospectus
or Prospectuses may have been delivered pursuant to Section 5.03(a), either
amendments or supplements to the Prospectus, in such numbers as such
Limited Partner shall reasonably request, or as shall be necessary in order
to comply with any law, so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law.
SECTION 5.04 Existence of Partnership
Beginning on the Purchase Date and until the later of (a) one year
following the occurrence of any of the events referred to in
Section 7.01(a), (b) or (c) and (b) 90 days after the Purchase Date, to take
all action necessary to maintain the existence of the Partnership and to
prevent the termination or dissolution thereof, or the winding up of
its affairs.
SECTION 5.05 Payment Recipient Register
Beginning on the Purchase Date and until the termination of this
Agreement, to keep a register that, subject to such reasonable regulations
as it may prescribe, shall contain the names and addresses of each Payment
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Recipient. Until the Company shall have received notice of a sale or an
assignment made in accordance with Article VIII, the Company shall be
entitled to deem and treat each Payment Recipient contained in such
register as the Payment Recipient for the purpose of making payments or
giving notices hereunder and for all other purposes.
SECTION 5.06 Manufacture and Sale of Products
Beginning on the Purchase Date and until the termination of this
Agreement, to use its commercially reasonable best efforts (a) to manufacture
the Products and (b) to sell the Products within the Field of Activity in
the Territory; provided, that if the Company shall determine that such
manufacture or sale of such Products within the Field of Activity in the
Territory is not commercially practicable, it shall use its commercially
reasonable best efforts to license or sell the Technology for use within
the Field of Activity in the Territory to one or more third parties for the
highest consideration that, in the Company's reasonable business judgment,
is obtainable.
SECTION 5.07 Sale or Disposition of Technology
Notwithstanding any other provision of this Agreement, beginning on
the Purchase Date and until the termination of this Agreement, the Company
shall not sell any of the Technology within the Field of Activity in the
Territory to any Person, unless such Person agrees in writing to be bound,
for the benefit of each Payment Recipient, by provisions substantially
similar to the provisions of Article III (excluding any provisions relating
solely to the Cash Advance Payment, the Stock Advance Payment or the
Combination Advance Payment, which shall be payable by the Company).
ARTICLE VI
DISCLAIMERS
SECTION 6.01 No Warranty on Products
Neither the General Partner nor any Limited Partner makes any warranty,
express or implied, and it is expressly agreed that neither the General
Partner nor any Limited Partner shall be liable, or in any way responsible,
for the operation, performance, serviceability, quality of performance, or
material or commercial success of any Product within the Field of Activity
in the Territory or any process related to the Technology, or for the use,
sale, lease, license, assignment, transfer or other disposition of any such
Product within the Field of Activity in the Territory or any process related
to the Technology, in whole or in part.
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SECTION 6.02 No Warranty on Technology
Neither the General Partner nor any Limited Partner makes any
representation, or extends any warranty of any kind, either express or
implied, or assumes any responsibility whatever with respect to the use,
sale, assignment, transfer or other disposition by the Company or its
vendees or transferees of products incorporating or made by use of the
Technology.
ARTICLE VII
TERM AND TERMINATION
This Agreement shall continue in effect until terminated, in whole or
in part, in accordance with the following provisions. Payments accrued as
of the date of termination of this Agreement shall remain due and payable
notwithstanding such termination.
SECTION 7.01 Purchase Option Termination Events
The events set forth below shall constitute "Purchase Option
Termination Events":
(a) the institution of a voluntary case by the Company under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by the Company to the entry of an order for relief
in any involuntary case under any such law, the consent by the Company to
the appointment of or possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official of the Company or of
any substantial part of its property, the general assignment by the
Company for the benefit of creditors or the taking of any corporate action
by the Company in furtherance of any of the foregoing;
(b) the entry of a decree or an order for relief by a court of
competent jurisdiction in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official of the Company or
of any substantial part of its property or ordering the winding up or
liquidation of its affairs, and any such decree or order shall remain
unstayed or undischarged and in effect for a period of 60 days;
(c) the cessation of operations by the Company;
(d) the seizure or attachment of all or a substantial part of the
assets of the Company, which seizure or attachment shall not be terminated,
vacated, set aside or stayed within 60 days; provided, that such seizure or
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attachment shall not constitute a Purchase Option Termination Event if, in
the opinion of the General Partner (as evidenced by a majority vote of its
board of directors), the Company's ability to perform the Research Program
or the Marketing Program is not materially impaired; or
(e) 45 days have elapsed after the termination of the Research Program
with respect to all Products pursuant to Section 7.01(b) of the Product
Development Agreement or any termination of the Product Development Agreement
pursuant to Section 7.02, 7.03 or 7.05 of the Product Development Agreement.
SECTION 7.02 Purchase Option Termination Date
(a) The Purchase Options granted in Section 2.01 shall terminate upon
the earliest date (the "Purchase Option Termination Date") on which any of
the following events shall occur:
(i) the date on which the Company shall give notice to the General
Partner and the Limited Partners to the effect that the Company has
determined not to purchase the Interests pursuant to this Agreement;
(ii) the earlier of (A) 45 days after the last day of the first
month in which the aggregate cumulative amount of payments received by the
Partnership under Section 6.01 of the Product Development Agreement shall equal
or exceed fifteen percent (15%) of the aggregate Capital Contributions of the
Limited Partners (but not earlier than 24 months after the Business Commencement
Date) and (B) 48 months after the Business Commencement Date, prior to which the
Company shall not have exercised its option to purchase the Interests pursuant
to this Agreement by sending a Notice of Exercise; and
(iii) the date on which a Purchase Option Termination Event shall
have occurred.
(b) The Company shall promptly notify the Partnership, the General Partner
and each Limited Partner of the occurrence of (i) a Purchase Option Termination
Event or (ii) the expiration of its option to purchase the Interests.
SECTION 7.03 Events of Default
The events set forth below shall constitute "Events of Default":
(a) any of the events set forth in Section 7.01(a), (b), (c) or (d);
(b) a failure by the Company to make any Advance Payment;
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(c) a failure by the Company to make any payment (other than an Advance
Payment) within five business days of the date when due or any other payment
required by this Agreement when due; or
(d) a default in the performance, or breach, of any covenant or warranty
of the Company contained in this Agreement and continuance of such default or
breach for a period of 90 days after notice of such default or breach has been
given to the Company by a Payment Recipient, the Partnership or the General
Partner, as the case may be, in accordance with Section 9.06.
SECTION 7.04 Term and Termination
(a) The Company shall promptly notify each Payment Recipient in writing
upon the occurrence of any Event of Default of which the Company has knowledge.
If an Event of Default specified in Section 7.03(c) has not been cured within
ten business days after the date of such notice, each Payment Recipient shall
have the right to terminate this Agreement as it applies to such Payment
Recipient upon giving notice to such effect to the Company and shall be free
to pursue against the Company any remedy available at law, in equity or by
statute or otherwise.
(b) If not terminated earlier pursuant to Section 7.04(a), this Agreement
(except for Articles IV and VI) shall terminate when the shares of Common Stock
or capital stock of the Company or other securities, assets or evidences of
indebtedness to be delivered to the Payment Recipients in accordance with
Article III, if any, shall have been delivered and all payments required to be
made by the Company under this Agreement shall have been made to the Payment
Recipients; and the parties hereto shall thereafter have no further rights or
obligations hereunder. The provisions of Articles IV and VI shall survive the
termination of this Agreement.
ARTICLE VIII
SALE OR ASSIGNMENT
SECTION 8.01 Sale or Assignment
(a) The Company shall not assign, delegate or transfer this Agreement or
sell any or all of its rights hereunder without the prior written consent of
(i) the Class A Payment Recipients entitled to receive payments with respect
to two-thirds of the Class A Interests for which the Company shall not have
made all payments required to be made by the Company under this Agreement and
(ii) the Class B Payment Recipient, which consent of the Class B Payment
Recipient shall not be unreasonably withheld, except that the Company may
make such assignment, delegation, transfer or sale without the prior written
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consent of any Payment Recipient (A) to any Person to whom the Company has
assigned, sold, leased, transferred or otherwise disposed of all or
substantially all of the Company's assets, (B) to any successor corporation
resulting from any merger or consolidation of the Company with or into another
corporation, or (C) to any wholly owned subsidiary of the Company; provided,
that the Company will not merge or consolidate with any Person or sell,
lease, transfer or otherwise dispose of substantially all of its assets to
any Person, unless (1) the Person formed by or surviving such merger or
consolidation or to which the Company effects such sale, lease, transfer or
other disposition shall be a solvent corporation organized and existing under
the laws of the United States or a state thereof and (2) such successor
transferee corporation shall expressly assume in writing, by an instrument
or instruments satisfactory in scope, substance, form and legal effect to
the Partnership, the due and punctual payment, performance and observance
of all obligations of the Company under this Agreement, with the same effect
as if such corporation had originally been the Company hereunder (except
that this clause (2) shall not apply to any merger in which the Company is
the surviving corporation); and provided, further, that, in the event of
any assignment under this Section 8.01, this Agreement shall remain binding
upon the assignor.
(b) No Payment Recipient shall assign or transfer this Agreement or
sell any or all of its rights hereunder except the Common Stock or other
securities delivered to it pursuant to this Agreement after such delivery,
if any, without the prior written consent of the Company, which consent
may be withheld in its absolute discretion; provided, that the Class B
Payment Recipient may make any such assignment, transfer or sale to any
present or former officer or officers or director or directors of PaineWebber
Incorporated without the consent of the Company.
(c) The Company and each Payment Recipient shall provide notice to each
other of any such assignment or sale made in accordance with this Section 8.01
no later than ten days prior to such assignment or sale setting forth the
identity and address of the assignee or purchaser and summarizing the terms of
the assignment or sale. Subject to the restrictions on assignment herein set
forth, this Agreement shall inure to the benefit of the successors and assigns
of each of the parties.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.01 Parties Independent
In making and performing this Agreement, the parties act and shall act at
all times as independent contractors, and nothing contained in this Agreement
shall be construed or implied to create an agency, partnership or employer and
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employee relationship among any of the parties hereto. At no time shall any
party make commitments or incur any charges or expenses for or in the name of
any other party.
SECTION 9.02 Entire Agreement; Amendment
This Agreement sets forth and constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof, and shall supersede
any and all prior agreements, understandings, promises and representations made
by any party to any other party concerning the subject matter hereof and the
terms hereto. This Agreement may not be released, discharged, amended or
modified in any manner, except by an instrument in writing signed by each party
hereto.
SECTION 9.03 Choice of Law
This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of New York as applied to
contracts made and to be performed entirely within New York.
SECTION 9.04 Severability
If any provision of this Agreement is or becomes or is deemed invalid,
illegal or unenforceable in any jurisdiction, such provision shall be construed
or deemed amended to conform to applicable laws so as to be valid and
enforceable, or, if it cannot be so construed or deemed amended without
materially altering the intention of the parties, it shall be stricken and the
remainder of this Agreement shall remain in full force and effect.
SECTION 9.05 No Waiver
No waiver of any right under this Agreement shall be deemed effective
unless contained in a writing signed by the party charged with such waiver,
and no waiver of any right arising from any breach or failure to perform shall
be deemed to be a waiver of any future such right or of any other right arising
under this Agreement.
SECTION 9.06 Payments and Notices
Payments hereunder shall be sent, and notices required or permitted
hereunder shall be in writing and shall be sent, if to any Payment Recipient,
to the address given for such Payment Recipient in the Payment Recipient
register maintained by the Company pursuant to Section 5.05 and if to the
Company, the Partnership or the General Partner, as follows:
If to the Company, to:
ICOS Corporation
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22021 20th Avenue S.E.
Bothell, Washington 98021
Telephone: (206) 485-1900
Telefax: (206) 485-1911
Attention: Corporate Secretary
If to the Partnership, to:
ICOS Clinical Partners, L.P.
22021 20th Avenue S.E.
Bothell, Washington 98021
Telephone: (206) 485-1900
Telefax: (206) 485-1911
Attention: General Partner
With a copy to each of the directors of
the General Partner
If to the General Partner, to:
ICOS Development Corporation
22021 20th Avenue S.E.
Bothell, Washington 98021
Telephone: (206) 485-1900
Telefax: (206) 485-1911
Attention: Corporate Secretary
With a copy to each of the directors of
the General Partner
or to such other address as such other party may hereafter specify in writing,
and shall be deemed given on the earliest of (a) physical delivery, (b) if given
by facsimile transmission, when such facsimile is transmitted to the facsimile
number specified in this Agreement and facsimile confirmation of receipt thereof
is received, (c) three days after mailing by prepaid first-class mail, and
(d) two days after mailing by prepaid overnight or express mail.
SECTION 9.07 Headings
Article and section headings contained in this Agreement are included for
convenience only and are not to be used in construing or interpreting this
Agreement.
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SECTION 9.08 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which shall constitute together but one and the
same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their authorized officers as of the day and year first above
written.
ICOS CORPORATION
By: /s/ Gary Wilcox
Title: Executive Vice
President & Secretary
THE CLASS A LIMITED PARTNERS
By: ICOS DEVELOPMENT
CORPORATION, as Attorney-in-
Fact for each of the Class A
Limited Partners
By: /s/ Howard S. Mendelsohn
Title: Secretary/Treasurer
PAINEWEBBER INCORPORATED, as
the Class B Limited Partner
By: /s/ Stephen W. Webster
Title: First Vice President
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Schedule I to the
Purchase Agreement
GLOSSARY
Each of the following terms shall have the meaning assigned to it in this
Glossary, except as otherwise expressly provided in each agreement, as amended
from time to time, to which this Glossary is attached.
"Additional Funds" shall have the meaning set forth in Section 4.04 of the
Product Development Agreement.
"Advance Payment" shall mean the Cash Advance Payment, the Stock
Advance Payment or the Combination Advance Payment, as applicable.
"Affiliate" shall mean, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, such Person; provided, that the
Company's ownership interest in Suncos and its contractual arrangements with
Suncos, as such ownership interest or contractual arrangements may be amended
from time to time, do not constitute control of Suncos by the Company; provided,
further, that the Partnership, General Partner and Company shall not be deemed
to be Affiliates of each other; provided, further, that, with respect to
Background Technology and License Agreements, any Person that controls or is
under common control with any other Person shall only be considered to be an
"Affiliate" of the other Person with respect to its Elements of Technology that
are used in, or are conceived, developed or acquired in the course of
assisting or participating in, the Research Program.
"Annual Minimum Amount" shall mean sixteen percent (16%) of the aggregate
Capital Contributions to the Partnership of all Limited Partners with respect
to the first four Fiscal Years after the Purchase Date and twenty percent (20%)
of the aggregate Capital Contributions to the Partnership of all Limited
Partners with respect to the fifth Fiscal Year after the Purchase Date;
provided, that the Annual Minimum Amount for any Fiscal Year shall not
exceed the amount by which the sum of all distributions paid or payable
to Limited Partners pursuant to the Partnership Agreement and Purchase
Agreement through such Fiscal Year is less than the aggregate Capital
Contributions to the Partnership of all Limited Partners.
"Available Funds" shall mean at any time an amount equal to (a) the sum
of the aggregate amount of capital contributions made or agreed to be made to
<PAGE>
the Partnership by the General Partner and the Limited Partners (including the
amount of any Additional Funds that the Company has agreed to pay or to
cause to be paid), the aggregate Royalty Amounts paid to the Partnership
and any interest earned on such contributions, Additional Funds and Royalty
Amounts by the Partnership, less (i) the aggregate Royalty Amounts paid to
the Partnership that were not needed to fund the Research Program in
accordance with the Product Development Agreement and that have been
distributed to the Limited Partners, (ii) the aggregate amount expended
by the Partnership for selling commissions, financial advisory fees,
investment banking and marketing fees, warrant valuation fees, and
offering and organizational costs,(iii) all interest payable on amounts
borrowed by the Partnership, (iv) reasonable expenses (other than amounts
expended pursuant to the Product Development Agreement) of operating the
Partnership, including administrative and interest expenses and operating
reserves, and (v) the aggregate of all Default Amounts outstanding as of such
time, or (b) such other amount as the Company and the Partnership shall agree
to in writing.
"Background Technology" shall mean all Elements of Technology that (a) the
Company or any Affiliate of the Company Controls, has an ownership interest in
or has the right to acquire an ownership interest in or may conceive, develop or
acquire an ownership interest in (under licenses from others or otherwise) at
any time prior to the Interim License Termination Date and (b) are necessary or
materially useful to Exploit Products.
"Background Technology License" shall have the meaning set forth in
Section 2.01 of the Product Development Agreement.
"Business Commencement Date" shall mean the first date on which the
Company or any Affiliate, licensee or sublicensee of the Company makes a
commercial sale of any Product within the Field of Activity in the Territory
that would generate a payment to the Partnership or the Class A Limited
Partners.
"Capital Contribution" shall mean (a) in respect of each Class A Limited
Partner (whether such Limited Partner's Interest was acquired directly from
the Partnership, by sale or assignment from a predecessor Limited Partner, or
otherwise), $100,000 for each Unit (or $25,000 for each Quarter Unit) owned
by such Class A Limited Partner, less any Default Amount in respect of such
Unit or Quarter Unit; and (b) in respect of the Class B Limited Partner,
$250,000; provided, that, in the event the Company exercises the Purchase
Option prior to the due date for the payment of any installments under the
Class A Limited Partner's Investor Notes or in the event the General Partner
relieves Class A Limited Partners of their obligation to pay any installments
under the Class A Limited Partner's Investor Notes in accordance with
paragraph 7.10 of the Partnership Agreement, the "Capital Contribution"
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of each such Class A Limited Partner shall mean (for all purposes other than
clause (a) of the definitions of Class A Percentage and Class B Percentage)
$100,000 for each Unit (or $25,000 for each Quarter Unit), less any Default
Amount in respect of such Unit or Quarter Unit and less the aggregate amount
of the installments that would otherwise be due and payable under such
Class A Limited Partner's Investor Note after the Purchase Option Exercise
Date or the Installment Termination Date (as defined in paragraph 7.10 of
the Partnership Agreement), as the case may be.
"Cash Advance Payment" shall mean the consideration payable in cash by the
Company to Payment Recipients pursuant to Sections 3.02(b) and 3.03(b) of the
Purchase Agreement in connection with the purchase by the Company of their
Interests.
"Class A Combination Advance Payment" shall mean (a) a cash payment equal
to the product of (i) the difference between one hundred percent (100%) and
the Stock Percentage and (ii) the Class A Down Payment, plus (b) issuance of
the number of shares of Common Stock (and any securities deliverable pursuant
to Section 3.09 of the Purchase Agreement) that is equal to the quotient of
(i) the product of (A) the Stock Percentage and (B) the Class A Down Payment
divided by (ii) the average Closing Price on the 30 trading days immediately
preceding the Stock Pricing Date for each Full Class A Interest of such
Class A Payment Recipient. In the case of any Quarter Class A Interest held
by a Class A Payment Recipient, the number of shares to be delivered to such
Class A Payment Recipient in respect of such Quarter Class A Interest shall be
equal to one-quarter the number of shares of Common Stock (and any securities
deliverable pursuant to Section 3.09 of the Purchase Agreement) to be delivered
in respect of a Full Class A Interest.
"Class A Down Payment" shall mean an amount equal to sixteen percent (16%)
of the Capital Contribution to the Partnership by a Class A Limited Partner.
"Class A Interest" shall mean any limited partnership interest in the
Partnership (other than the Class B Interest) owned by any Class A Limited
Partner.
"Class A Limited Partner" shall have the meaning assigned to such term
in Article I of the Partnership Agreement.
"Class A Payment" shall mean (a) the Last Interim License Payment
payable to a Class A Limited Partner, (b) until the Cut-Off Date, for each
Class A Payment Recipient, (i) prior to the calendar quarter following the
calendar quarter in which the Class B Threshold with respect to Class A
Payment Recipients occurs, its Class A Percentage of the Quarterly Payment
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and Minimum Royalty Payment and (ii) beginning with the calendar quarter
following the calendar quarter in which the Class B Threshold with respect
to Class A Payment Recipients occurs and ending with the Cut-Off Date, for
each calendar quarter an amount equal to ninety-five percent (95%) of its
Class A Percentage of the Quarterly Payment and Minimum Royalty Payment
and (c) either (i) the Class A Down Payment, if the Company elects to make
the Cash Advance Payment or if the Company is required to make the Cash
Advance Payment pursuant to Section 2.02 of the Purchase Agreement,
(ii) the Class A Stock Advance Payment if the Company elects to make the
Stock Advance Payment or (iii) the Class A Combination Advance Payment if
the Company elects to make the Combination Advance Payment.
"Class A Payment Recipient" shall mean each Class A Limited Partner
on or after the Purchase Date on which the Company has purchased the
Class A Interest of such Class A Limited Partner pursuant to the Purchase
Agreement, or any other Person entitled to receive payments in respect of
Class A Interests in accordance with Section 8.01 of the Purchase
Agreement.
"Class A Percentage" shall mean, in the case of each Class A Limited
Partner or Class A Payment Recipient, as the case may be, (a) prior to
the first day of the calendar quarter following the calendar quarter in
which the Class B Threshold with respect to such Class A Limited Partner
or Class A Payment Recipient, as the case may be, occurs, the ratio that
the amount of such Class A Limited Partner's or Class A Payment
Recipient's Capital Contribution to the Partnership bears to the aggregate
Capital Contributions to the Partnership of all Limited Partners and
(b) thereafter, the ratio that the amount of such Class A Limited Partner's
or Class A Payment Recipient's Capital Contribution to the Partnership bears
to the aggregate Capital Contributions to the Partnership of all Class A
Limited Partners.
"Class A Stock Advance Payment" shall mean issuance of the number of shares
of Common Stock (and any securities deliverable pursuant to Section 3.09 of
the Purchase Agreement) that is equal to the quotient of (a) the Class A Down
Payment divided by (b) the average Closing Price on the 30 trading days
immediately preceding the Stock Pricing Date for each Full Class A Interest
of such Class A Payment Recipient. In the case of any Quarter Class A
Interest held by a Class A Payment Recipient, the number of shares to be
delivered to such Class A Payment Recipient in respect of such Quarter Class A
Interest shall be equal to one-quarter the number of shares of Common Stock
(and any securities deliverable pursuant to Section 3.09 of the Purchase
Agreement) to be delivered in respect of a Full Class A Interest.
"Class B Combination Advance Payment" shall mean (a) a cash payment
equal to the product of (i) the difference between one hundred percent (100%)
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and the Stock Percentage and (ii) the Class B Down Payment, plus (b) issuance
of the number of shares of Common Stock (and any securities deliverable
pursuant to Section 3.09 of the Purchase Agreement) that is equal to the
quotient of (i) the product of (A) the Stock Percentage and (B) the Class B
Down Payment divided by (ii) the average Closing Price on the 30 trading
days immediately preceding the Stock Pricing Date.
"Class B Down Payment" shall mean an amount equal to sixteen percent (16%)
of the Capital Contribution of the Class B Limited Partner.
"Class B Interest" shall mean the limited partnership interest in the
Partnership owned by the Class B Limited Partner.
"Class B Limited Partner" shall have the meaning assigned to such term
in Article I of the Partnership Agreement.
"Class B Payment" shall mean (a) the Last Interim License Payment payable
to a Class B Limited Partner; (b) until the Cut-Off Date, the Class B Percentage
of the Quarterly Payment and Minimum Royalty Payment; and (c) either (i) the
Class B Down Payment, if the Company elects to make the Cash Advance Payment or
if the Company is required to make the Cash Advance Payment pursuant to
Section 2.02 of the Purchase Agreement, (ii) the Class B Stock Advance
Payment if the Company elects to make the Stock Advance Payment or (iii) the
Class B Combination Advance Payment if the Company elects to make the
Combination Advance Payment.
"Class B Payment Recipient" shall mean the Class B Limited Partner on or
after the Purchase Date on which the Company has purchased the Class B Interest
of such Class B Limited Partner pursuant to the Purchase Agreement, or any
other Person entitled to receive payments in respect of the Class B Interest
in accordance with Section 8.01 of the Purchase Agreement.
"Class B Percentage" shall mean for all amounts paid (a) prior to the
first day of the calendar quarter following the calendar quarter in which
the Class B Threshold occurs with respect to Class A Limited Partners or
Class A Payment Recipients, as the case may be, the ratio that the amount of
the Class B Limited Partner's Capital Contribution to the Partnership bears to
the aggregate Capital Contributions to the Partnership of all Limited Partners
and (b) on and after the time on which such Class B Threshold occurs,
five percent (5%).
"Class B Stock Advance Payment" shall mean issuance of the number of
shares of Common Stock (and other securities deliverable pursuant to
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Section 3.09 of the Purchase Agreement) that is equal to the quotient of
(a) the Class B Down Payment divided by (b) the average Closing Price on the
30 trading days immediately preceding the Stock Pricing Date.
"Class B Threshold" shall mean (a) with respect to Class A Limited
Partners prior to the Interim License Termination Date, the receipt by each
Class A Limited Partner of distributions pursuant to the Partnership Agreement
in an aggregate amount equal to each such Class A Limited Partner's Capital
Contribution and (b) with respect to Class A Payment Recipients after the
Purchase Date, the receipt by each Class A Payment Recipient of
(i) distributions pursuant to the Partnership Agreement and Quarterly
Payments (increased by any Credits) pursuant to the Purchase Agreement
in an aggregate amount equal to each seventy-five percent (75%) of such
Class A Payment Recipient's Capital Contribution and (ii) distributions
pursuant to the Partnership Agreement and Purchase Agreement (i.e., Class
A Down Payment, Quarterly Payments and Minimum Royalty Payments) in an
aggregate amount equal to each such Class A Payment Recipient's Capital
Contribution.
"Closing Date" shall mean each date on which subscriptions to purchase
Units are accepted by the General Partner.
"Closing Price" at any time shall mean the closing price per share of
the Common Stock (or other securities deliverable pursuant to Section 3.09
of the Purchase Agreement) on the principal national securities exchange on
which the Common Stock (or such other securities) is then listed or admitted
to trading or, if not then listed or traded on any such exchange, on the
Nasdaq National Market or, if not listed or traded on any such exchange or
system, the average of the bid and asked price per share on the Nasdaq
National Market or, if such quotations are not available, the fair market
value as reasonably determined by the board of directors of the Company or
any committee of such board.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute or subsequent codification or recodification of the
federal income tax laws of the United States.
"Combination Advance Payment" shall mean the consideration payable
in cash and Common Stock by the Company to Payment Recipients pursuant to
Sections 3.02(d) and 3.03(d) of the Purchase Agreement in connection with
the purchase by the Company of their Interests.
"Combination Product" shall mean any product that is formulated in part
with any Product (or any part thereof) and in part with any Combination
Substance.
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"Combination Substance" shall mean an active ingredient (other than a
Product) or device used in a Combination Product.
"Common Stock" shall mean fully paid and nonassessable shares of
common stock, par value $.01 per share, of the Company, together with any
other equity securities that may be issued by the Company in addition thereto
or in substitution therefor as provided in Section 10 of the Warrant.
"Company" shall mean ICOS Corporation, a corporation organized and
existing under the laws of the State of Delaware, and its successors.
"Competitive Product" shall mean [ * ].
"Competitive Product Revenues" shall mean, [ * ], the aggregate of
all Net Revenues of the Company and its Affiliates (but not licensees or
sublicensees) in respect of all Competitive Products for such period within
the Field of Activity in the Territory. In the event a product ("Combination
Competitive Product") is formulated in part with any Competitive Product (or
any part thereof) and in part with any active ingredient (other than a
Competitive Product) or device ("Combination Competitive Substance"),
"Competitive Product Revenues" shall mean an amount equal to (a) the aggregate
amount of all Net Revenues of the Company and its Affiliates in such period in
the Territory in respect of any Combination Competitive Product multiplied
by (b) a fraction the numerator of which equals the fair market value of the
Competitive Product (or any part thereof) included in such Combination
Competitive Product and the denominator of which equals the sum of (i) the
fair market value of such Competitive Product (or part thereof) and (ii) the
fair market value of each Combination Competitive Substance included in such
Combination Competitive Product, such "fair market value" being determined
in the same manner that it is determined for Products and Combination
Substances in the definition of Product Revenues.
"Controls" or "Controlled" shall mean at any time, with respect to any
right, title or license, the possession of such right, title or license with
the right to assign or grant licenses or sublicenses without obtaining the
consent of any other Person (other than any consent that has been obtained)
and without violating or causing a default under the terms of any agreement
or other arrangement with or the rights of any other Person.
_______________________________
[ * ] Confidential Treatment Requested
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"Credit" shall mean, with respect to each calendar quarter ending in
the Fiscal Year, [ * ] in the Territory that are in excess of the
Product Revenues that cause the sum of the Royalty Amounts paid or payable
for the calendar quarters ending in the Fiscal Year to equal the Annual
Minimum Amount, if any, for the Fiscal Year; provided, that the Credit
shall not exceed the balance in the Credit Account. In the event the
Credit Account is zero, the Credit shall be zero.
"Credit Account" shall mean the sum of the Class A Down Payments,
Class B Down Payment and each Minimum Royalty Payment made by the Company,
less the aggregate Credits.
"Cut-Off Date" shall mean the later of (a) the last day of the month
in which the thirteenth anniversary of the Business Commencement Date occurs
and (b) the last day of the month in which the eleventh anniversary of the
Purchase Date occurs.
"Default Amount" shall have the meaning assigned to such term in
Section 4.03(a) of the Product Development Agreement.
"Defaulting Limited Partner" shall have the meaning assigned to such
term in Section 3.3.5 of the Partnership Agreement.
"Dollars" and the sign "$" shall mean lawful money of the United States
of America.
"Earned Royalty" shall mean any royalty due under any License
Agreement.
"Elements of Technology" shall mean all technical information, whether
tangible or intangible, including, without limitation, any and all data,
preclinical and clinical results, techniques, discoveries, inventions, ideas,
processes, know-how, patents (including any extension, reissue or renewal
patents), patent applications, inventor's certificates, trade secrets and
other proprietary information, licenses and sublicenses, and samples of any
physical, biological or chemical material.
"Exploitation" shall mean research, experimentation, development,
manufacturing, production, marketing, use, lease, sale, assignment, transfer,
license, sublicense and other disposition, and "Exploit" shall have a
correlative meaning.
_______________________________
[ * ] Confidential Treatment Requested
-8-
<PAGE>
"FDA" shall mean the United States Food and Drug Administration or
any successor agency.
"Field of Activity" shall mean collectively (a) the Hu23F2G Field of
Activity, (b) the ICM3 Field of Activity and (c) the PAF-AH Field of Activity.
"Field Technology" shall mean the Technology within the Field of
Activity.
"Fiscal Year" shall mean the series of 12 full calendar months
following the month in which the Purchase Date occurs and each series
of 12 successive calendar months thereafter.
"Force Majeure" shall mean any occurrence that prevents or
substantially interferes with the performance by a party of any of its
obligations hereunder, if such occurs by reason of any act of God, flood,
fire, explosion, breakdown of plant, strike, lockout, labor dispute, casualty,
accident, war, revolution, civil commotion, acts of public enemies, blockage,
embargo, injunction, law, order, proclamation, regulation, ordinance, demand
or requirement of any government or of any subdivision, authority or
representative of any such government, inability to procure or use materials,
labor, equipment, transportation or energy sufficient to meet manufacturing
needs without the necessity of allocation, or any other cause whatsoever,
whether similar or dissimilar to those above enumerated, beyond the reasonable
control of such party, if and only if the party affected shall have used
reasonable efforts to avoid such occurrence and to remedy it promptly if
it shall have occurred.
"Full Class A Interest" shall mean each Class A Interest that represents
a $100,000 Capital Contribution.
"General Partner" shall mean ICOS Development Corporation, a corporation
organized and existing under the laws of the State of Delaware, as general
partner of the Partnership, and its successors in such capacity.
"Hu23F2G" shall mean the recombinant humanized monoclonal antibody
developed by the Company to block CD11/CD18-mediated cell adhesions in humans.
"Hu23F2G Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of Hu23F2G Products
for human therapeutic purposes.
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<PAGE>
"Hu23F2G Product" shall mean Hu23F2G, any fragment or component
thereof or any substance derived from Hu23F2G (or any fragment or
component thereof).
"ICM3 Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of ICM3 Products
for human therapeutic purposes.
"ICM3 Product" shall mean a recombinant humanized monoclonal antibody
developed by the Company to block the function of human intercellular adhesion
molecule-3, any fragment or component thereof or any substance derived from
such monoclonal antibody (or any fragment or component thereof).
"Initial Calendar Quarter" shall mean the calendar quarter in which the
Purchase Date falls.
"Intellectual Property Right" shall mean rights under patents (including
any extension, reissue or renewal patents) and other similar rights.
"Interest" shall mean any Class A Interest or the Class B Interest; and
"Interests" shall mean all Class A Interests and the Class B Interest.
"Interim License" shall have the meaning assigned to such term in
Section 2.05 of the Product Development Agreement.
"Interim License Termination Date" shall mean the earlier of (a) the
Purchase Date and (b) if the Purchase Option terminates for any reason other
than the purchase by the Company of all the Interests on the Purchase Date,
the earlier of (i) the date on which the Partnership sells, licenses,
sublicenses, assigns or otherwise transfers or disposes of all or a
substantial part of the Technology and (ii) the date that is 18 months after
the Purchase Option Termination Date.
"Investor" shall mean a purchaser of any multiple of one-quarter of
a Unit who meets the suitability standards set forth in the Memorandum
under the caption "Investor Suitability."
"Investor Note" shall have the meaning assigned to such term in
Section 3.3.1 of the Partnership Agreement.
"Invoiced Amount" shall have the meaning assigned to such term in
Section 4.01(c) of the Product Development Agreement.
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<PAGE>
"Last Interim License Payment" shall mean (a) with respect to a Class A
Payment Recipient, such Class A Payment Recipient's Class A Percentage of
ninety-nine percent (99%) (until the Class B Threshold occurs, and thereafter,
95% of 99%) of the Royalty Amount that would otherwise have been payable to
the Partnership (the "Interim License Amount") determined pursuant to Section
6.01 of the Product Development Agreement for the period commencing on the
first day of the calendar quarter following the last calendar quarter in
respect of which payments have been made under such Section 6.01 and
distributed to the partners of the Partnership and ending on the Purchase
Date and (b) with respect to a Class B Payment Recipient, the Class B
Percentage of ninety-nine percent (99%) of the Interim License Amount.
"License Agreement" shall mean any license or sublicense or portion
thereof (other than the Background Technology License, the Program
Technology License or the Interim License) by any Person granting to the
Company or any Affiliate of the Company on the date hereof, or at any time
hereafter, rights that are necessary or materially useful in the
Exploitation of Products, and any amendments thereto, including, without
limitation, any consent from the licensor or sublicensor obtained by the
Company pursuant to the Product Development Agreement.
"License Agreement Right" shall mean any right held by the Partnership,
directly or indirectly (including, without limitation, under the Background
Technology License), in any Technology licensed under any License Agreement.
"Limited Partners" shall mean the Class A Limited Partners and the
Class B Limited Partner.
"Marketing Program" shall mean the Company's implementation of the
Marketing Strategy pursuant to Article V of the Product Development Agreement,
including the execution of marketing agreements with third parties.
"Marketing Strategy" shall mean the strategy to provide for the
distribution, marketing and sale of the Products within the Field of
Activity in the Territory, all as determined by the Company.
"Memorandum" shall mean the Confidential Private Placement
Memorandum dated April 11, 1997 used in connection with the placement of
Units, including the exhibits thereto, in each case together with any
amendments thereof or written supplements thereto prepared by the Company.
"Merger Letter" shall have the meaning assigned to such term in
Section 14.01 of the Product Development Agreement.
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<PAGE>
"Minimum Royalty Payment" shall mean the amount by which the
Annual Minimum Amount for the Fiscal Year exceeds, if at all, the sum of
the Quarterly Payments paid or payable for the four quarters ending in
the Fiscal Year. The Minimum Royalty Payment may be paid in cash or as
a Minimum Royalty Stock Payment or as a combination of cash and a Minimum
Royalty Stock Payment in accordance with Section 3.05 of the Purchase
Agreement.
"Minimum Royalty Stock Payment" shall mean the issuance of the
number of shares of Common Stock (or other securities deliverable
pursuant to Section 3.09 of the Purchase Agreement) that is equal to the
quotient of (a) the portion of the Minimum Royalty Payment for a Fiscal
Year that will be paid in Common Stock divided by (b) the average Closing
Price on the 30 trading days immediately preceding the Minimum Royalty
Stock Pricing Date. The number of such shares issued to each Class A
Payment Recipient and the Class B Payment Recipient is determined in
accordance with the Class A Payment and the Class B Payment, respectively.
"Minimum Royalty Stock Pricing Date" shall mean the last day of the
Fiscal Year to which the Minimum Royalty Stock Payment pertains.
"Nasdaq" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Nasdaq National Market" shall mean the Nasdaq National Market of
the Nasdaq Stock Market.
"Net Revenues," with respect to sales for any period and with respect
to any item, shall mean the proceeds received or to be received, under
generally accepted accounting principles, from sales of Products or Competitive
Products (as applicable) by the Company, any Affiliate of the Company or any
licensee or sublicensee of the Company, but excluding sales to any Affiliate,
licensee or sublicensee of the Company. In determining such net proceeds,
the amounts received from such sales shall be reduced by related prompt
payment and other trade discounts, transportation and related insurance
charges, returns, bad debt and other allowances, taxes (except income and
franchise taxes) and distributors', consignees' and wholesalers' fees and
commissions. The terms "licensee" and "sublicensee" shall mean any Person
licensed or sublicensed by the Company or any Affiliate of the Company,
including pursuant to any marketing, co-marketing or co-detailing agreement (or
similar arrangement that is the functional equivalent of a license), but
excluding customary distribution, wholesaling and consignment arrangements.
For the purposes of this definition, distribution, wholesaling or consignment
-12-
<PAGE>
arrangements shall be limited to arrangements where the distributor,
wholesaler or consignee is not obligated, in addition to selling a Product or
Competitive Product, to undertake any significant promotional or similar
marketing efforts directed at the Product or Competitive Product. In
calculating Net Revenues, any given unit of a Product or Competitive Product
shall be taken into account only once.
"Notice of Exercise" shall mean the written notice that the Company
shall send to each Limited Partner pursuant to Section 2.03 of the Purchase
Agreement in order to inform such Limited Partners that the Company has
elected to exercise its purchase option with respect to the Interests and to
designate the Purchase Date.
"Operative Agreements" shall mean each of the Product Development
Agreement, the Partnership Agreement, the Purchase Agreement, the Sales
Agency Agreement and the Warrants.
"Outstanding Available Funds" shall mean, at any time, the Available
Funds actually received through such time by the Partnership less all amounts
theretofore disbursed to the Company by the Partnership pursuant to Section
4.01 of the Product Development Agreement.
"PAF-AH Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of PAF-AH Products
for human therapeutic purposes.
"PAF-AH Product" shall mean platelet-activating factor acetylhydrolase
and any fragment, component or derivative thereof.
"Partnership" shall mean ICOS Clinical Partners, L.P., a limited
partnership organized under the laws of the State of Delaware.
"Partnership Agreement" shall mean the Agreement of Limited
Partnership dated as of April 11, 1997 among the General Partner and the
limited partners of the Partnership, as amended, modified or restated from
time to time.
"Payment Recipient" shall mean each Class A Payment Recipient and
the Class B Payment Recipient.
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an estate, an unincorporated organization, a government
or any department or agency thereof, or other entity.
-13-
<PAGE>
"Product Development Agreement" shall mean the Product
Development Agreement dated as of June 5, 1997, between the Partnership and
the Company, as amended, modified or restated from time to time.
"Product Revenues" for any period shall mean the sum of (a) the
aggregate amount of Net Revenues in such period within the Field of Activity
in the Territory in respect of any Product and (b) an amount equal to (i) the
aggregate amount of Net Revenues in such period within the Field of Activity
in the Territory in respect of any Combination Product multiplied by (ii) a
fraction the numerator of which equals the fair market value of the Product
(or any part thereof) included in such Combination Product and the
denominator of which equals the sum of (A) the fair market value of such
Product (or part thereof) and (B) the fair market value of each Combination
Substance included in such Combination Product. For purposes of this
definition, "fair market value" of any Product (or part thereof) and
Combination Substance shall be the list retail price of such Product (or part
thereof) and Combination Substance sold separately or, if such Product (or
part thereof) or Combination Substance is not ordinarily sold separately, a
value for both the Product (or part thereof) and Combination Substance
determined in the good-faith business judgment of (x) if the Purchase Date
has not occurred, the General Partner or any successor to the General Partner
as the general partner of the Partnership or (y) if the Purchase Date (if any)
has occurred, the Company.
"Products" shall mean collectively (a) Hu23F2G Products, (b) ICM3
Products and (c) PAF-AH Products.
"Program Technology" shall mean all Elements of Technology that are
developed, acquired or conceived by or on behalf of the Partnership during
the Research Program, but in all cases excluding Background Technology.
"Program Technology License" shall have the meaning set forth in
Section 2.03 of the Product Development Agreement.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
June 3, 1997 between the Company and the Limited Partners, as amended,
modified or restated from time to time.
"Purchase Date" shall mean the date, designated by the Company
pursuant to Section 2.01(a) of the Purchase Agreement in the Notice of
Exercise, on which the Company purchases the Interests pursuant to the
Purchase Agreement, which shall be a date not more than 60 days after the
date of the Notice of Exercise.
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<PAGE>
"Purchase Option" shall mean any of the options granted by the Limited
Partners pursuant to Section 2.01 of the Purchase Agreement.
"Purchase Option Commencement Date" shall mean the first day after
the final Closing Date.
"Purchase Option Exercise Date" shall mean the date, if any, on which
the Notice of Exercise is given.
"Purchase Option Shares" shall have the meaning assigned to such term
in Section 4.01(c) of the Purchase Agreement.
"Purchase Option Termination Date" shall have the meaning set forth in
Section 7.02(a) of the Purchase Agreement.
"Purchase Option Termination Event" shall mean any of the events set forth
in Section 7.01 of the Purchase Agreement.
"Quarter" shall mean any calendar quarter beginning or ending during the
term of the Product Development Agreement; provided, that the first Quarter
shall be the period beginning on May 1, 1997 and ending on the last day of
the calendar quarter in which the first Closing Date occurs, and the last
Quarter shall be the period beginning on the first day of the last calendar
quarter before the Interim License Termination Date and ending on the Interim
License Termination Date.
"Quarter Class A Interest" shall mean each Class A Interest, other than
a Full Class A Interest, that represents a $25,000 Capital Contribution.
"Quarterly Payment" shall mean, for the period beginning with the
Initial Calendar Quarter and for each calendar quarter thereafter, the
sum of seven percent (7%) of Product Revenues in the United States, five
percent (5%) of Product Revenues in the Territory outside the United States
and [ * ] in the Territory for such calendar quarter; provided, that,
in the event that less than 700 Units are issued, such seven percent (7%)
and five percent (5%) shall be adjusted by multiplying each by a fraction,
the numerator of which is the number of Units issued and the denominator
of which is 700; provided, further, that any such sum shall be reduced, if
and as appropriate, to exclude in the Initial Calendar Quarter any Net
Revenues applicable to any period in the Initial Calendar Quarter before
_______________________________
[ * ] Confidential Treatment Requested
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<PAGE>
the Purchase Date; provided, further, that, in the event the Credit Account
is positive at the beginning of the calendar quarter, any such sum shall
be reduced by the Credit for the calendar quarter.
"Quarter Unit" shall mean an interest comprising a Quarter Class A
Interest and Series A Warrants to purchase an aggregate of 2,000 shares
of Common Stock and Series B Warrants to purchase an aggregate of 2,000
shares of Common Stock.
"Research Program" shall mean any research, experimentation or
development relating to the Products within the Field of Activity in the
Territory proposed to be conducted or conducted, directly or indirectly,
by the Company pursuant to the terms of the Product Development Agreement,
including, without limitation, the research, experimentation and development
necessary or useful to receive FDA and such other regulatory approvals to
Exploit Products and otherwise engage within the Field of Activity in the
Territory as the Partnership, in consultation with the Company, directs.
"Research Program Termination Date" shall mean the date on which the
board of directors of the General Partner terminates the Research Program
with respect to all Products pursuant to Section 7.01(b) of the Product
Development Agreement.
"Royalty Amount" shall mean for each calendar quarter the sum of
seven percent (7%) of Product Revenues in the United States, five
percent (5%) of Product Revenues in the Territory outside the United
States and [ * ] in the Territory for such calendar quarter; provided,
that, in the event that less than 700 Units are issued, such seven
percent (7%) and five percent (5%) shall be adjusted by multiplying each by
a fraction, the numerator of which is the number of Units issued and the
denominator of which is 700.
"Sales Agency Agreement" shall mean the Sales Agency Agreement
dated as of June 3, 1997 among the Sales Agent, the Partnership, the General
Partner and the Company relating to the placement of Units, as amended,
modified or restated from time to time.
"Sales Agent" shall mean PaineWebber Incorporated, as sales agent
under the Sales Agency Agreement.
_______________________________
[ * ] Confidential Treatment Requested
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<PAGE>
"Stock Advance Payment" shall mean the consideration payable by the
Company to Payment Recipients in Common Stock or other securities, assets
or evidence of indebtedness pursuant to Article III of the Purchase Agreement
in connection with the purchase by the Company of their Interests.
"Stock Percentage" shall mean, if the Company shall have elected to
make the Combination Advance Payment, the percentage of the purchase price
of the applicable Partnership Interest that the Company elects to pay in
Common Stock.
"Stock Pricing Date" shall mean the fifth trading day before the
Purchase Option Exercise Date.
"Suncos" shall mean Suncos Corporation, a corporation organized and
existing under the laws of Delaware, the stockholders of which are Suntory
and the Company.
"Suntory" shall mean Suntory Limited, a corporation organized and
existing under the laws of Japan.
"Technology" shall mean the Background Technology and the Program
Technology.
"Territory" shall mean (a) the United States with respect to PAF-AH
Products and (b) the entire world, except Japan, with respect to ICM3
Products and Hu23F2G Products.
"Third Party Sublicensee" shall have the meaning assigned to such term
in Section 2.02(a) of the Product Development Agreement.
"Unit" shall mean a "Unit" as contemplated by the Sales Agency
Agreement consisting of one Class A Interest, Series A Warrants to
purchase an aggregate of 8,000 shares of Common Stock and the right to
receive Series B Warrants to purchase an aggregate of 8,000 shares of
Common Stock.
"United States" shall mean the United States of America, including
its territories and possessions.
"Warrant" shall mean any of the warrants to purchase Common Stock
issued to each Limited Partner by the Company in exchange for the Purchase
Options.
_______________________________
[ * ] Confidential Treatment Requested
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<PAGE>
REDACTED VERSION
EXHIBIT 10.3
TO
ICOS Corporation's
Report on Form 8-K
Dated
August 26, 1997
"[ * ]" = omitted, confidential material, which material has been
separately filed with the Securities and Exchange Commission pursuant to a
request for confidential treatment.
<PAGE>
PRODUCT DEVELOPMENT AGREEMENT
dated as of
June 5, 1997
between
ICOS CORPORATION
and
ICOS CLINICAL PARTNERS, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS...............................................1
SECTION 1.01 Definitions.........................................1
ARTICLE II LICENSES GRANTED.........................................2
SECTION 2.01 Background Technology License.......................2
SECTION 2.02 Transfer of Background Technology License...........2
SECTION 2.03 Program Technology License..........................3
SECTION 2.04 Term of Background and Program Technology Licenses..3
SECTION 2.05 Interim License.....................................3
SECTION 2.06 No Implied License..................................4
SECTION 2.07 License Agreements..................................4
ARTICLE III CONDUCT OF THE RESEARCH PROGRAM.........................5
SECTION 3.01 Research Program....................................5
SECTION 3.02 Annual Review of Research Program...................5
ARTICLE IV PAYMENT FOR THE RESEARCH PROGRAM.........................6
SECTION 4.01 License Fee; Quarterly Payments.....................6
SECTION 4.02 Research Program Accounting.........................7
SECTION 4.03 Default by Limited Partner..........................7
SECTION 4.04 Additional Funds....................................8
ARTICLE V PRODUCT MARKETING.........................................9
SECTION 5.01 Marketing...........................................9
SECTION 5.02 Yearly Review of Marketing Program..................9
SECTION 5.03 Marketing Agreements................................9
ARTICLE VI ROYALTIES...............................................10
SECTION 6.01 Interim License Payments...........................10
SECTION 6.02 Payments on Competitive Products After the
Interim License Termination Date...................10
SECTION 6.03 Manner of Payment..................................10
SECTION 6.04 Accounting Records.................................11
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ARTICLE VII TERMINATION OF RESEARCH PROGRAM OR MARKETING PROGRAM...11
SECTION 7.01 Research Program Infeasible or Uneconomic..........11
SECTION 7.02 Termination for Material Breach....................12
SECTION 7.03 Termination for Bankruptcy of the Company..........13
SECTION 7.04 Termination of Research Program for Bankruptcy
of the Partnership.................................13
SECTION 7.05 Termination by Mutual Consent......................14
SECTION 7.06 Effect of Research Program Termination.............14
SECTION 7.07 Effect of Marketing Program Termination............14
ARTICLE VIII FIELD TECHNOLOGY......................................15
SECTION 8.01 Access and Disclosure..............................15
SECTION 8.02 Library............................................15
SECTION 8.03 Partnership Use of Background Technology...........15
SECTION 8.04 Return of Property Rights..........................15
ARTICLE IX CONFIDENTIALITY.........................................16
SECTION 9.01 Confidentiality....................................16
SECTION 9.02 Exceptions.........................................16
SECTION 9.03 Injunctive Remedy..................................17
ARTICLE X INSURANCE AND LIABILITY..................................17
SECTION 10.01 Insurance.........................................17
SECTION 10.02 Third Party Claims................................17
ARTICLE XI INTELLECTUAL PROPERTY RIGHTS............................18
SECTION 11.01 Applications......................................18
SECTION 11.02 Intellectual Property Right Disclaimers...........19
SECTION 11.03 Intellectual Property Right Protection Outside
the Field of Activity or Outside the Territory....19
SECTION 11.04 Intellectual Property Right Expenses..............19
ARTICLE XII INFRINGEMENT SUITS AND ACTIONS.........................20
SECTION 12.01 Company's Right to Bring Infringement Suits
Against Third Parties.............................20
SECTION 12.02 Standby Right of the Partnership..................21
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<PAGE>
SECTION 12.03 Limitations Under License Agreements..............21
ARTICLE XIII REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........22
SECTION 13.01 Representations and Warranties of the Company.....22
ARTICLE XIV MISCELLANEOUS..........................................23
SECTION 14.01 Assignment; Merger Letter.........................23
SECTION 14.02 Entire Agreement..................................23
SECTION 14.03 Severability......................................23
SECTION 14.04 Specific Performance..............................24
SECTION 14.05 Benefits of This Agreement........................24
SECTION 14.06 Choice of Law.....................................24
SECTION 14.07 Amendments and Waivers............................24
SECTION 14.08 Headings..........................................24
SECTION 14.09 Payments, Notices, Reports, Advice and Statements.25
SECTION 14.10 Force Majeure.....................................25
SECTION 14.11 Counterparts......................................25
SECTION 14.12 Decisions by the General Partner..................26
SECTION 14.13 Effective Date....................................26
Schedule I - Glossary
Schedule II - Form of License Agreement Consent
Schedule III - Merger Letter
-iii-
<PAGE>
PRODUCT DEVELOPMENT AGREEMENT
Agreement dated as of June 5, 1997 between ICOS Corporation, a Delaware
corporation (the "Company"), and ICOS Clinical Partners, L.P., a Delaware
limited partnership (the "Partnership").
WITNESSETH:
WHEREAS, the business of the Partnership is to conduct research and
experimentation in order to develop Products within the Field of Activity in
the Territory; to obtain appropriate regulatory approvals; after receipt of
such approvals to Exploit Products within the Field of Activity in the
Territory; and to engage in activities incidental to the above activities;
and
WHEREAS, the Company owns, on the date hereof, and may develop or
otherwise become the owner of certain technology, and the Partnership
desires to acquire from the Company, and the Company is willing to grant to
the Partnership, a license or sublicense, as the case may be, under such
technology for use within the Field of Activity in the Territory; and
WHEREAS, the Company, directly or through its Affiliates, has, or is
expected to develop, acquire or obtain the use of the facilities, equipment
and employees that would permit it to Exploit Products on behalf of the
Partnership, and the Partnership is willing to grant to the Company a
royalty-bearing license in order that the Company may undertake such
Exploitation;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions
(a) Unless otherwise provided, each capitalized term used herein shall
have the meaning assigned to it in the Glossary attached hereto as Schedule I.
(b) Each of the following terms is defined in the section set forth
opposite such term:
<PAGE>
TERM SECTION
Additional Funds 4.04
Background Technology License 2.01
Default Amount 4.03
Default Notice 7.02
Deposit 8.02
Infringement Action 12.01
Interim License 2.05
Invoiced Amount 4.01
Limited Partner Default 4.03
Merger Letter 14.01
Program Review Date 4.04
Quarterly Estimate 4.01
Third Party Claim 10.02
Third Party Sublicensee 2.02
ARTICLE II
LICENSES GRANTED
SECTION 2.01 Background Technology License
The Company hereby irrevocably grants (subject to the terms of any License
Agreement) to the Partnership an exclusive (even as to the Company and its
Affiliates), fully paid-up right and license to make, have made, use, modify
and improve the Background Technology within the Field of Activity in the
Territory (the "Background Technology License").
SECTION 2.02 Transfer of Background Technology License
(a) Subject to the provisions of Section 2.02(b) and subject to the terms
of any License Agreement, the Company also grants to the Partnership after the
Purchase Option Termination Date (i) the right to sell, sublicense, assign,
transfer or otherwise dispose of its rights under the Background Technology
License or any part thereof to any other Person (a "Third Party Sublicensee")
on whatever terms and conditions the Partnership may wish and (ii) the right
to grant any Third Party Sublicensee the right to sell, sublicense, assign,
transfer or otherwise dispose of all or any part of its rights under the
Background Technology License to any other Person (also a "Third Party
Sublicensee").
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<PAGE>
(b) No sale, sublicense, assignment, transfer or other disposition of
rights under the Background Technology License under Section 2.02(a) shall be
effective unless (i) it is in writing and (ii) the Third Party Sublicensee
shall have undertaken and agreed in writing with the Partnership or another
Third Party Sublicensee, as applicable, to be bound by the provisions of this
Section 2.02 and Article IX to the same extent as the Partnership or such
Third Party Sublicensee is bound. The Partnership or such Third Party
Sublicensee shall give the Company prompt written notice each time a sale,
sublicense, assignment, transfer or other disposition is granted or made to
a Third Party Sublicensee.
SECTION 2.03 Program Technology License
The Partnership hereby irrevocably grants to the Company a royalty-free,
exclusive (even as to the Partnership and its Affiliates), fully paid-up right
and license to make, have made, use, modify and improve the Program Technology
(a) outside the Field of Activity or (b) outside the Territory for any purpose
whatsoever (the "Program Technology License"). Such right and license shall
be freely assignable or sublicensable to any Person that agrees in writing to
be bound by the provisions of this Section 2.03 and Article IX to the same
extent as the Company is bound. The Company shall give the Partnership
prompt written notice after each assignment or sublicense by the Company of
the Program Technology or any part thereof.
SECTION 2.04 Term of Background and Program Technology Licenses
The licenses and sublicenses granted under Sections 2.01 and 2.03 as part
of the Background Technology License and the Program Technology License,
respectively, with respect to patents shall continue for the life of each
such patent. All other licenses granted under Sections 2.01 and 2.03 as
part of the Background Technology License and the Program Technology
License, respectively, shall not terminate, subject to the provisions of
any License Agreement.
SECTION 2.05 Interim License
The Partnership hereby grants to the Company the royalty-bearing
(pursuant to the terms of this Agreement), exclusive right and license
(with the right to sublicense in accordance with Section 5.03) to make,
have made, use, modify and improve the Technology within the Field of
Activity in the Territory for the purpose of performing its obligations
under this Agreement (the "Interim License"). The foregoing right and
license shall include the right to make, have made, use and sell Products
but not the right to sell or assign the Interim License. The Interim
License will terminate on the Interim License Termination Date.
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SECTION 2.06 No Implied License
No right or license for the Exploitation of any Technology is granted
by this Agreement, except as expressly specified in this Article II.
SECTION 2.07 License Agreements
(a) The Company and the Partnership agree to use all reasonable efforts
with respect to each License Agreement included in the Background Technology
License to obtain (i) a consent in substantially the form attached hereto as
Schedule II with respect to each License Agreement not existing as of the date
hereof or provisions in such License Agreement that (A) the License Agreement
Rights may be sublicensed and (B) any sublicense, upon termination of the
License Agreement for breach by the licensee, shall be converted into a direct
license from the licensor under the terms and conditions of the License
Agreement (as further limited and restricted by the terms of the sublicense)
if the sublicensee is not then in material breach, and (ii) any other consent
required under any such License Agreement not existing as of the date hereof
for the performance of any of the provisions of this Agreement (including the
right to sublicense the Partnership thereunder as provided in this Agreement
and the right to sublicense such License Agreement to any Third Party
Sublicensee as provided in Sections 2.02 and 2.07(c)).
(b) The Company will not, without the majority vote of the board of
directors of the General Partner, and will not permit any of its Affiliates
to (i) enter into any agreement that contains any provision, or terminate or
amend any existing agreement in a manner, that would operate to restrict,
qualify or otherwise limit any right or license granted or to be granted by
the Company to the Partnership pursuant to the terms of this Agreement, or
(ii) take, suffer or permit any action or fail to act, if such action or
failure to act would cause the Partnership to suffer the loss of all or
any part of any License Agreement Right.
(c) The Company will pay or will cause its Affiliates to pay any Earned
Royalty or other fee payable in respect of any License Agreement included in
the Background Technology License. After the Interim License Termination
Date, any Earned Royalty payable pursuant to any License Agreement included
in the Background Technology License in respect of sales of Products within
the Field of Activity in the Territory by the Partnership (or by any Third
Party Sublicensee) after such date shall be promptly paid to the Company by
the Partnership ten days prior to the date the Earned Royalty is due under
the License Agreement; provided, that the Partnership shall be relieved of
its obligations under this Section 2.07(c) if and to the extent such
obligations have been assumed by a Third Party Sublicensee. The obligations
of the Company pursuant to this Section 2.07 shall terminate with respect
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to any License Agreement included in the Background Technology License to
the extent the Partnership has not sublicensed or assigned its rights
therein, as permitted by this Agreement, within 18 months after the Purchase
Option Termination Date.
ARTICLE III
CONDUCT OF THE RESEARCH PROGRAM
SECTION 3.01 Research Program
(a) The Company shall, subject to the provisions of Article VII, use its
best efforts to carry out the Research Program to the extent of the Available
Funds. The Partnership shall own all right, title and interest in all
Program Technology.
(b) The Company does not guarantee that the Research Program will be
successful in whole or in part or that any Products will actually be developed
or suitable for sale within the Field of Activity in the Territory as a result
thereof or that appropriate regulatory approvals can be obtained. To the
extent that the Company has used its best efforts to carry out the Research
Program to the extent of the Available Funds, the failure of the Company to
develop successfully any Product within the Field of Activity in the
Territory will not be a breach by the Company in the performance of its
obligations under this Agreement. Except as provided in Section 4.04, the
Company shall not be required to pay any of its own funds to conduct the
Research Program.
(c) In carrying out the Research Program, the Company may contract or
otherwise deal with its Affiliates and with subcontractors and other third
parties. Any fees to be paid to such third parties by the Company shall be
reimbursed by the Partnership as part of its payments pursuant to
Section 4.02.
SECTION 3.02 Annual Review of Research Program
Prior to April 30 of each year, beginning in 1998, the management of the
Company shall give a report to the General Partner with respect to the
progress of the Research Program in the 12-month period ending on the
preceding December 31 and the status of the development of the Technology with
respect to each Product being developed or expected to be developed by or on
behalf of the Partnership within the Field of Activity in the Territory. At
least annually prior to an installment being due under the Investor Notes, the
board of directors of the General Partner shall meet to review such report,
the progress of the Research Program and the status of the development of the
Technology.
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ARTICLE IV
PAYMENT FOR THE RESEARCH PROGRAM
SECTION 4.01 License Fee; Quarterly Payments
(a) On the first Closing Date at which at least 500 Units in the
aggregate have been purchased by Investors (not including Units purchased by
officers or directors of the Company), the Partnership shall pay to the
Company a one-time, nonrefundable license fee of $3,333,333.33 for each of
the three Products to be pursued in the Research Program in consideration for
the Company's willingness to enter into this Agreement.
(b) The Partnership shall be obligated to pay to the Company, as
provided in Section 4.01(c), the amount of the Company's expenditures after
May 1, 1997 for conducting the Research Program and a management fee equal to
ten percent (10%) of the total amount of such expenditures, but not exceeding
in the aggregate an amount equal to the Available Funds.
(c) At or prior to the first Closing Date, the Company shall provide the
Partnership with a written statement of its estimate of expenditures for
conducting the Research Program from May 1, 1997 through the end of the
Quarter, which the Partnership shall pay, together with the management fee
referred to in Section 4.01(b) on such estimated expenditures, on the first
Closing Date. At least ten days prior to the end of each Quarter during the
Research Program, the Company shall provide the Partnership with a written
statement of its estimate of expenditures for conducting the Research Program
during the next Quarter (the "Quarterly Estimate"). Within 15 days after the
end of each Quarter, the Company shall provide to the Partnership (i) a report
summarizing the work performed in connection with the Research Program in the
Quarter just ended and (ii) an invoice for an amount (the "Invoiced Amount")
equal to (A) the amount shown in the Quarterly Estimate for the next
succeeding Quarter and the management fee referred to in Section 4.01(b) on
such amount plus (B) the amount of the Company's expenditures with respect
to the Research Program during the Quarter just ended and the management
fee referred to in Section4.01(b), reduced by the Quarterly Estimate and
management fee for the Quarter just ended that were included in the
previously invoice and paid. Such report and invoice shall include any
developments material to the Partnership in the Technology during such
Quarter, shall be in such detail as the Partnership may reasonably
request and shall be signed by an officer of the Company.
(d) Upon receipt of each such invoice, the Partnership shall promptly
pay to the Company the Invoiced Amount no later than the last day of the
month in which the invoice was received (i.e., by April 30, July 31,
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October 31 or January 31, as the case may be); provided, that, to the
extent that the Invoiced Amount exceeds the Outstanding Available Funds,
the Partnership shall be obligated to pay such excess only upon receipt
of additional Available Funds.
SECTION 4.02 Research Program Accounting
(a) The Company's expenditures of conducting the Research Program shall
be determined using the Company's internal financial and accounting systems.
Allocation of all indirect costs, including general and administrative costs,
will be made by the Company on a reasonable basis consistent with generally
accepted accounting principles and with the Company's regular internal cost
accounting system.
(b) The Company shall keep and maintain, in accordance with generally
accepted accounting principles, books of account and other records with
respect to its expenditures, payments and allocations hereunder and shall
permit such books and records to be examined annually by an independent
certified public accountant retained by the Partnership and acceptable
to the Company (which shall be the independent certified public accountant
for the Company, unless the board of directors of the General Partner
determines otherwise) to the extent deemed necessary by the Partnership
to verify such expenditures and payments.
SECTION 4.03 Default by Limited Partner
(a) The failure by any Defaulting Limited Partner to make a payment on
such Limited Partner's Investor Note (as defined in the Partnership Agreement)
when such payment shall be due shall be referred to as a "Limited Partner
Default," and the amount not paid as the result of a Limited Partner Default
shall be referred to as the "Default Amount."
(b) In the event that payment of any Invoiced Amount has been reduced
as a result of a Limited Partner Default, the Partnership shall begin efforts
promptly to collect any Default Amount from such Defaulting Limited Partner
and, if unsuccessful in collecting such Default Amount, shall use its best
efforts to resell the Interest of such Defaulting Limited Partner pursuant
to the Partnership Agreement.
(c) Upon receipt of all or any portion of a Defaulting Limited
Partner's Default Amount after a Quarter for which the Company has not
been paid the full Invoiced Amount, the Partnership shall pay all or such
portion of the amount received as is necessary to make up the portion of
the deficiency caused by such Limited Partner Default.
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SECTION 4.04 Additional Funds
(a) If at any time the Available Funds shall have been expended
(including any Royalty Amounts paid to the Partnership), the General Partner
shall promptly review the progress of the Research Program and the status of
the development of the Technology with respect to each Product being developed
or expected to be developed by or on behalf of the Partnership within the
Field of Activity in the Territory (the date on which such review is commenced
being referred to as the "Program Review Date").
(b) Based on such review, a majority of the board of directors of the
General Partner shall determine in its reasonable business judgment the amount
of funds (the "Additional Funds") reasonably required to allow the Partnership
to pursue its goals under the Research Program for the 12 months immediately
succeeding such Program Review Date in the manner and according to the
schedules contemplated thereby, and shall notify the Company of the amount of
such Additional Funds not later than 20 days after such Program Review Date.
If the Company in its sole discretion agrees to pay such Additional Funds, the
Company shall, not later than 15 days after it shall have received the notice
described in the immediately preceding sentence, so notify the General Partner
and cause the General Partner to provide such Additional Funds as a
contribution to the capital of the Partnership or otherwise cause such
Additional Funds to be paid to the Partnership in such manner as the Company
and the board of directors of the General Partner shall agree. To the extent
that any amount the Company has agreed to pay under this Section 4.04 remains
unpaid, the Company shall deliver to the General Partner a promissory note of
the Company for such unpaid amount and the General Partner shall deliver to
the Partnership a promissory note of the General Partner for such unpaid
amount, such notes to be in a form reasonably satisfactory to the Partnership.
(c) If the Company shall have failed so to notify the General Partner as
required in Section 4.01(b) or shall fail at any time to pay any Additional
Funds it has agreed to pay, then (i) the General Partner shall give notice to
the Company and to each Limited Partner of such failure; and (ii) if the
Company has not paid such Additional Funds within ten business days after
receipt by the Company of such notice, (x) the obligation of the Company
to continue to carry out the Research Program pursuant to Section 3.01 shall
cease, and (y) the Research Program shall terminate with the effect set forth
in Section 7.06.
(d) If any Available Funds (and any Additional Funds theretofore
provided pursuant to this Section 4.04) shall have been expended, the Company
shall have the right to continue to fund the Research Program in any manner
determined by it; provided, that the failure of the Company to fund any
amounts under this Section 4.04(d) shall not result in a breach of this
Agreement.
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ARTICLE V
PRODUCT MARKETING
SECTION 5.01 Marketing
(a) The Company shall, subject to the provisions of Section 7.07, use
its commercially reasonable best efforts, directly or through third parties,
to carry out the Marketing Program and to sell Products within the Field of
Activity in the Territory.
(b) The Company does not guarantee that the Marketing Program will be
successful in whole or in part. To the extent that the Company has used its
commercially reasonable best efforts to carry out the Marketing Program and to
sell Products within the Field of Activity in the Territory, the failure of
the Company to market or sell any Product or Products successfully will not
be a breach by the Company in the performance of its obligations under this
Agreement.
(c) The Company's obligations under this Section 5.01 shall terminate on
the Purchase Option Termination Date.
SECTION 5.02 Yearly Review of Marketing Program
After receipt of regulatory approval in the Territory for the sale of any
Product within the Field of Activity, within 60 days after the end of each
calendar year, and at such additional times as the Partnership shall
reasonably request, the Company shall provide to the Partnership in writing
a report on the Marketing Program for such year. Such report shall be in
such reasonable detail as the Partnership shall request.
SECTION 5.03 Marketing Agreements
In performing the Marketing Program and Exploiting Products, the Company
may enter into co-promotion, co-detailing, marketing or similar agreements or
sublicenses with third parties with respect to Products within the Field of
Activity in the Territory. After entering into any such agreements or
sublicenses, the Company shall provide the Partnership with copies of such
agreements or sublicenses.
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ARTICLE VI
ROYALTIES
SECTION 6.01 Interim License Payments
(a) The Company shall pay to the Partnership within 60 days after the
end of each Quarter the Royalty Amount for such Quarter. Each such payment
shall be accompanied by a summary of the operations that resulted in such
payment, such summary report to be signed by an authorized officer of the
Company.
(b) In the Quarter in which the Interim License Termination Date occurs,
there shall be excluded from the calculations pursuant to this Section 6.01
any Net Revenues attributable to the period subsequent to such date.
SECTION 6.02 Payments on Competitive Products After the Interim License
Termination Date
(a) After the Interim License Termination Date and until the fifth
anniversary of the Purchase Option Termination Date, the Company shall pay to
the Partnership, within 60 days after the end of each Quarter, an amount equal
to the Royalty Amount for such Quarter calculated solely based upon
Competitive Product Revenues.
(b) In the Quarter in which the fifth anniversary of the Purchase Option
Termination Date occurs, there shall be excluded from the calculations
pursuant to this Section 6.02 any Competitive Product Revenues attributable
to the period subsequent to the date of such fifth anniversary.
SECTION 6.03 Manner of Payment
(a) Any payment due pursuant to this Article VI shall be payable in
Dollars without deduction for or on account of any present or future taxes,
duties or other charges levied or imposed by any governmental or political
authority through withholding or deduction with respect to any such payments
to the extent permitted by law (except to the extent any such withholding or
deduction provides a credit or other benefit to the Limited Partners or is a
withholding of tax on or measured by the net income of the Limited Partners).
If any such taxes, duties or other charges are so levied or imposed, or any
such withholding or deduction is required by law (subject to the exception
referred to in the preceding sentence), the Company will make additional
payments in such amounts so that every net payment under this Agreement,
after any required withholding, deduction or payment for or on account of
any such present or future taxes, duties or other charges, will not be less
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than the amount provided for herein. The Company shall furnish promptly to
the Partnership official receipts evidencing such withholding or deduction.
Any Net Revenues in a currency other than Dollars shall be deemed to be equal
to the amount of Dollars obtained converting the outstanding amount of
currency of such Net Revenues into Dollars at the average spot rate for the
purchase of Dollars with such currency as published by Bloomberg on the last
ten business days of the Quarter with respect to which such revenues were
accrued.
(b) Each payment pursuant to this Article VI shall be accompanied by a
summary of the calculations that resulted in such payment. Such report shall
be in such detail as the Partnership reasonably requests and shall be signed
by an officer of the Company.
(c) Any payment that is not made on or before the date when due shall
accrue interest thereon from and including such date and until but excluding
the date of payment at the rate of one percent (1%) plus the "prime rate" of
interest as published by THE WALL STREET JOURNAL (WESTERN EDITION) (or if not
published, another appropriate publication) for the first business day of each
month (based on a 365-day year) or, if such rate is in excess of the rate then
permitted by applicable law, at the highest rate then so permitted.
SECTION 6.04 Accounting Records
The Company shall keep and maintain, in accordance with generally
accepted accounting principles, books of account and other records with
respect to Net Revenues and the payments due under this Article VI and shall
permit such books and records to be examined annually by an independent
certified public accountant retained by the Partnership (which may be the
independent certified public accountant for the Company) to the extent deemed
necessary by the Partnership to verify such payments.
ARTICLE VII
TERMINATION OF RESEARCH PROGRAM OR MARKETING PROGRAM
SECTION 7.01 Research Program Infeasible or Uneconomic
(a) If at any time the board of directors of the General Partner in its
good faith business judgment shall determine (whether or not such
determination is based on a report prepared in accordance with Section 3.02)
that the Research Program is infeasible or uneconomic and should be
discontinued with respect to any Product or Products, then (i) such Product
or Products shall be deemed abandoned and the Research Program with respect
to such Product or Products shall be discontinued, (ii) any funds that the
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General Partner and the Company had determined were to be expended on such
Product or Products, but at the time such Product or Products were deemed
abandoned had not been actually expended or irrevocably committed by the
Company in connection with the research, experimentation and development
of such Product or Products, net of termination costs, shall be
distributed or applied as determined by the board of directors
of the General Partner, (iii) the Company's obligation to perform further
research, experimentation and development with respect to such Product or
Products pursuant to Section 3.01 shall cease, and (iv) the Partnership shall
reimburse the Company for any costs reimbursable to it under this Agreement
with respect to such Product or Products through such reasonable period after
the date of such notice as shall be necessary to effectuate such
discontinuation.
(b) If at any time the board of directors of the General Partner in its
good faith business judgment shall determine that the Research Program is
infeasible or uneconomic, and should be discontinued, with respect to all
Products (whether or not such determination is based on a report prepared in
accordance with Section 3.02), the General Partner shall give notice to the
Company terminating the Research Program with respect to all Products in
accordance with Section 7.06.
SECTION 7.02 Termination for Material Breach
If the Company has materially breached this Agreement, then for so long
as such breach continues unremedied, the Partnership shall have the right to
give written notice to the Company terminating this Agreement if all the
following shall have occurred:
(a) the Partnership shall have sent a written default notice (the
"Default Notice") to the Company that (i) states that a material breach has
occurred, (ii) identifies the section of this Agreement that has been
breached, and (iii) describes in reasonable detail the basis for such Default
Notice; and
(b) (i) the Company shall have failed to cure the breach within 30 days
of receipt of the Default Notice and (ii) the Company has failed to submit in
writing to the Partnership within 30 days of receipt of the Default Notice a
reasonable plan to cure such breach, which plan is accepted by the board of
directors of the General Partner within 30 days of receipt of the Company's
written plan of cure (such acceptance not to be unreasonably withheld). The
board of directors of the General Partner shall review such written plan of
cure promptly upon receipt thereof. As long as the Company is carrying out
the terms of the plan of cure in good faith and in a timely manner, the
breach set forth in the Default Notice will be deemed to be remedied.
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SECTION 7.03 Termination for Bankruptcy of the Company
Notwithstanding Section 7.02, the Partnership shall have the right to
give notice to the Company terminating the Research Program and/or the
Marketing Program after the occurrence, and during the continuation, of
any of the following events:
(a) (i) a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect shall be instituted by the
Company, or the Company shall consent to the entry of an order for relief
in an involuntary case under any such law; (ii) a general assignment for
the benefit of creditors shall be made by the Company; (iii) the Company
shall consent to the appointment of or possession by a receiver, liquidator,
trustee, custodian, sequestrator or similar official of the Company or of
any substantial part of its property; or (iv) the Company shall adopt a
board resolution in furtherance of any of the foregoing actions specified
in this Section 7.03(a); or
(b) a decree or order for relief by a court of competent jurisdiction
shall be entered in respect of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall remain unstayed or undischarged and in effect for a period of
60days.
SECTION 7.04 Termination of Research Program for Bankruptcy of the
Partnership
The Company shall have the right to give notice to the Partnership
terminating the Research Program at any time after the occurrence, and during
the continuation, of any of the following events:
(a) (i) a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect shall be instituted by the
Partnership, or the Partnership shall consent to the entry of an order for
relief in an involuntary case under any such law; (ii) a general assignment
for the benefit of creditors shall be made by the Partnership; (iii) the
Partnership shall consent to the appointment of or possession by a receiver,
liquidator, trustee, custodian, sequestrator or similar official of the
Partnership or of any substantial part of its property; or (iv) the
Partnership shall adopt a board resolution or Partnership resolution, as the
case may be, in furtherance of any of the foregoing actions specified in this
Section 7.04(a); or
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(b) a decree or order for relief by a court of competent jurisdiction
shall be entered in respect of the Partnership in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, trustee, sequestrator or
other similar official of the Partnership or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and any
such decree or order shall remain unstayed or undischarged and in effect for
a period of 60 days.
SECTION 7.05 Termination by Mutual Consent
The Research Program and/or the Marketing Program shall terminate upon
the mutual agreement of the parties; provided, that such agreement on behalf
of the Partnership shall be evidenced by a resolution of the board of
directors of the General Partner and by a resolution of the board of
directors of the Company.
SECTION 7.06 Effect of Research Program Termination
If notice shall be given pursuant to this Article VII (other than
pursuant to Section 7.01(a)) terminating the Research Program with respect
to all Products or if the Research Program is terminated by mutual agreement
pursuant to Section 7.05 (a) the obligation of the Company to perform further
research and development pursuant to Section 3.01 shall cease; (b) the
Partnership shall reimburse the Company for any reimbursable costs under this
Agreement through such reasonable period after the date of such notice as
shall be necessary to effectuate such discontinuation, to the extent of
Available Funds; (c) the obligation of the Partnership to make any further
payments to the Company pursuant to Section 4.01 shall cease; and (d) the
obligation, if any, of the Company to provide any Additional Funds shall
cease and any promissory notes evidencing Additional Funds shall be cancelled.
SECTION 7.07 Effect of Marketing Program Termination
If notice shall be given pursuant to this Article VII terminating the
Marketing Program, (a) the obligation of the Company to market Products
pursuant to Section 5.01 shall cease and (b) not later than 60 days after
the date of such notice, the Company shall pay to the Partnership the
Royalty Amount for the Quarter in which such termination occurs.
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ARTICLE VIII
FIELD TECHNOLOGY
SECTION 8.01 Access and Disclosure
The Company, at its expense, shall on reasonable notice and at all
reasonable times during normal business hours permit the Partnership to have
access to the Field Technology and, upon request, shall disclose in reasonable
detail the Field Technology (including providing copies of all documentation
embodying the Field Technology) to the Partnership or any Third Party
Sublicensee.
SECTION 8.02 Library
The Company shall make and maintain an identified and clearly
identifiable library consisting of any bacterial strain, cell line,
recombinant DNA molecule, cloning vector or other material (each a
"Deposit") forming part of the Field Technology. The Company shall
maintain such library at its address set forth in Section 14.09 or at such
other place as the Company shall have notified the board of directors of
the General Partner by not less than 30 days' advance notice. The Company
will assure the viability and integrity of each Deposit in the library by
monitoring and replacing each Deposit at such times after the
formation of the library as the board of directors of the General Partner
believes to be reasonably necessary to assure the viability and integrity of
such Deposits.
SECTION 8.03 Partnership Use of Background Technology
Except as expressly authorized by this Agreement or by other prior
written consent of the Company, prior to the Purchase Option Termination Date,
the Partnership shall not deliver, transmit or provide to any Person, and
shall not use, any of the Background Technology within the Field of Activity
in the Territory or authorize or cause or aid anyone else to do so.
SECTION 8.04 Return of Property Rights
The Company shall, not later than 60 days after the receipt of a written
request from the Partnership given at any time after the Interim License
Termination Date, deliver to the Partnership all Field Technology in the
Territory and all documentation and other tangible manifestations relating
thereto.
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ARTICLE IX
CONFIDENTIALITY
SECTION 9.01 Confidentiality
The Partnership and the Company, using the same degree of care
customarily used by companies engaged in the development of pharmaceutical
products to protect confidential information of like character, shall keep
confidential all the Technology and all other trade secrets and proprietary
or confidential information furnished by the other party or its agents or
representatives, shall not disclose or deliver any of such Technology, trade
secrets or proprietary or confidential information to third parties (except
as permitted by the Operative Agreements) and shall Exploit the Technology
only as permitted by the Operative Agreements. For such purposes, it shall
be sufficient if the Company or the Partnership, as the case may be, uses the
same degree of care as the Company uses to protect its own confidential
information of like character. The provisions of this Section 9.01 shall
continue in force notwithstanding the termination of the Research Program or
the Marketing Program, or the passing of the Interim License Termination Date.
SECTION 9.02 Exceptions
(a) The obligation of confidentiality and restriction on use imposed by
Section 9.01 shall not apply to any of the Technology that was
(i) in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such party or its
Affiliates;
(ii) disclosed without restriction by, or with the prior written
approval of, the other party; or
(iii) in the case of the Partnership, lawfully obtained by the
Partnership without a binder of confidentiality from a source other than the
Company.
(b) Notwithstanding anything to the contrary contained in Section 9.01,
the Partnership or the Company may disclose or deliver any of the Technology
(i) to the extent such party has been advised by counsel that such disclosure
or delivery is necessary for such party to comply with applicable laws or
regulations, (ii) to the extent that such disclosure or delivery is required
by regulatory authorities in order to obtain marketing approvals of any
Product, (iii) in any customary scientific publication (following the
preparation and filing of appropriate patent applications), and (iv) to the
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extent that such disclosure or delivery is necessary to engage in the Field
of Activity in the Territory or to sublicense others to do so if any third
parties to whom any such disclosure or delivery is to be made shall have
agreed to keep the Technology confidential pursuant to a confidentiality
agreement substantially to the effect of this Article IX. Each party shall
give the other party reasonable advance notice of any such proposed disclosure
or delivery by it, shall use its best efforts to secure confidential treatment
of such Technology and shall advise the other party of the manner of such
disclosure or delivery.
SECTION 9.03 Injunctive Remedy
The parties agree that remedies at law may be inadequate to protect
against breach of this Article IX, and hereby agree to the granting of
injunctive relief in favor of the other party without proof of actual damages.
ARTICLE X
INSURANCE AND LIABILITY
SECTION 10.01 Insurance
Until the Interim License Termination Date, the Company shall use its
best efforts to maintain such insurance relating to the Research Program and
the Marketing Program as is customary to maintain for research or marketing
programs of a similar nature against such risks (including to the extent
available on commercially reasonable terms, against product liability) and
pursuant to such terms (including coverages, deductible limits and self-
insured retentions) as are customary for such businesses. Such insurance
shall be obtained from insurers of good repute and shall be issued in the
names of the Company and the Partnership. The premiums for such insurance
shall be included in the costs referred to in Section 4.01 to the extent
provided therein.
SECTION 10.02 Third Party Claims
(a) The Company will defend any claim, suit, action or proceeding (a
"Third Party Claim") brought or threatened against itself or the Partnership
(i) at any time prior to the Interim License Termination Date or (ii) arising
from the Research Program or the Marketing Program (irrespective of when such
claim, suit, action or proceeding is brought).
(b) Each party will give to the other prompt written notice of any such
actual or threatened Third Party Claim of which it is aware. The Company
shall have the right to exclusive control of the defense of any such Third
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Party Claim, except that any settlement shall require the consent of the
Partnership, which consent shall not be unreasonably withheld. The Company
will pay all expenses (including attorneys' fees) incurred in connection with
defending any such Third Party Claim. Any damages and costs finally settled
or awarded in connection with such Third Party Claim shall be paid by the
Company.
(c) The provisions of this Section 10.02 shall continue in force
notwithstanding the termination of the Research Program or the Marketing
Program, or the passage of the Interim License Termination Date.
ARTICLE XI
INTELLECTUAL PROPERTY RIGHTS
SECTION 11.01 Applications
(a) The Company shall file and pursue all Intellectual Property Right
applications and amendments and continuations thereof that the Company, in its
reasonable business judgment, believes are useful to protect the Partnership's
interest in any Technology and shall use reasonable diligence to maintain in
force any and all resultant Intellectual Property Rights. The Company shall
promptly inform the Partnership of the making of any such filings or the
taking of any such action and shall provide the Partnership with copies
thereof and keep the Partnership informed as to the status thereof.
(b) The Partnership shall have the right, but not the obligation, to
direct that the Company, on the Partnership's behalf, file and pursue such
Intellectual Property Right applications within the Field of Activity in the
Territory and amendments and continuations thereof as the General Partner
believes in its reasonable business judgment are useful to protect the
Partnership's interest in any Technology, and the Company shall use reasonable
diligence to maintain in force any and all resultant Intellectual Property
Rights.
(c) All such Intellectual Property Right applications that claim any
Program Technology within the Field of Activity in the Territory shall be
filed and pursued by the Company in the name of the Partnership. All such
applications that claim any Background Technology (but do not claim any
Program Technology) may be filed and pursued by the Company in its name
(d) The Company's obligations under this Section 11.01 shall terminate
on the Interim License Termination Date and shall be subject to applicable
License Agreements with respect to License Agreement Rights.
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SECTION 11.02 Intellectual Property Right Disclaimers
The Company shall not disclaim any Intellectual Property Right or abandon
any application for any Intellectual Property Right relating to the Technology
within the Field of Activity in the Territory without the prior written
consent of the Partnership. The Company shall, subject to the terms of any
applicable License Agreement, use its best efforts to prevent any licensor
under any such License Agreement included in the Background Technology License
from disclaiming any Intellectual Property Right or abandoning any application
for any Intellectual Property Right relating to the Technology within the
Field of Activity in the Territory without the prior written consent of the
Partnership.
SECTION 11.03 Intellectual Property Right Protection Outside the Field of
Activity or Outside the Territory
The Company, at its own expense and in its name, may file such
Intellectual Property Right applications as the Company believes are necessary
to protect the Company's interests outside the Field of Activity or outside
the Territory in any Technology and may thereafter pursue and maintain in
force the resultant Intellectual Property Rights.
SECTION 11.04 Intellectual Property Right Expenses
To the extent that they are not otherwise reimbursed under any License
Agreement included in the Background Technology License, all the Company's
costs and expenses (including attorneys' fees) incurred in filing, pursuing
and maintaining Intellectual Property Rights pursuant to Section 11.01 shall
be included in the costs referred to in Section 4.01; provided, that such
costs and expenses in connection with filing, pursuing and maintaining
Intellectual Property Rights that are or are reasonably likely to be useful
for products manufactured or expected to be manufactured by or on behalf of
the Company or any Affiliate, in addition to the Products within the Field of
Activity in the Territory, shall be allocated between the Partnership and the
Company in an equitable manner, taking into account the relative benefit of
such Technology to the Company and its Affiliates and to the Partnership.
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ARTICLE XII
INFRINGEMENT SUITS AND ACTIONS
SECTION 12.01 Company's Right to Bring Infringement Suits Against Third
Parties
(a) Each party to this Agreement shall promptly notify the other of any
material infringement in the Territory of which it becomes aware within the
Field of Activity of any Intellectual Property Right included in the
Technology and shall provide the other with any available evidence thereof.
Prior to the Interim License Termination Date, the Company shall have the
right, but not the obligation, to bring, defend and maintain any appropriate
suit, action or proceeding involving any infringement within the Field of
Activity in the Territory (an "Infringement Action"). The Company shall give
the Partnership notice of its intention to commence any such Infringement
Action and the Partnership may at any time elect to participate in such
Infringement Action at its own cost and expense.
(b) If the Company finds it necessary or advisable to join the
Partnership in an Infringement Action, the Partnership shall execute all
papers and perform such other acts as reasonably may be required and, at its
option, may be represented by counsel of its choice. Should the Company lack
standing to bring any Infringement Action, the Partnership shall do so at the
request of the Company upon an undertaking by the Company to indemnify and
hold the Partnership harmless (to the extent permitted by law) from all
related costs and expenses, including attorneys' fees and consequent
liability.
(c) Subject to the right of the Partnership to be represented by counsel
of its choice, the Company shall have the exclusive right to control any
Infringement Action brought, defended or maintained by the Company pursuant to
this Section 12.01; provided, that the Company may not, without the prior
written consent of the Partnership (which consent may not be unreasonably
withheld), enter into any agreement or other arrangement effecting a
settlement of such Infringement Action. The Company shall pay all expenses
(including attorneys' fees) incurred in connection with such Infringement
Action as and when such expenses are incurred subject to reimbursement to the
extent described below.
(d) If, as a result of any such Infringement Action, a judgment is
executed in favor of the Company or settlement is reached with the infringing
party, and such judgment or settlement specifies the amount of damages
attributable to the infringer's past or prospective sales, for purposes of the
definition of Net Revenues, such award will be treated in the same manner as a
sublicense granted by the Company for the respective periods covered by the
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award. In the event that such judgment or settlement does not specify the
amount of damages attributable to the infringing party's past or prospective
sales, the Company shall be entitled to seventy-five percent (75%) of such
settlement or judgment and the Partnership shall be entitled to the remaining
twenty-five percent (25%). Expenses incurred by the Company in bringing such
action shall be reimbursed by the Partnership to the Company, out of the
proceeds received by the Partnership, pro rata based on the relative economic
benefit of any proceeds to the Company as compared to such benefit to the
Partnership.
SECTION 12.02 Standby Right of the Partnership
(a) If the Partnership shall have given the Company not less than 30
days' notice of its intention to bring an Infringement Action and the Company
shall have failed to bring such an Infringement Action, the Partnership, at it
own expense, shall have the right to bring and maintain an Infringement
Action.
(b) If the Partnership finds it necessary or advisable to join the
Company in such Infringement Action, the Company shall execute all papers
and perform such other acts as reasonably may be required and, at its option,
may be represented by counsel of its choice. Should the Partnership lack
standing to bring such Infringement Action, the Company shall do so at the
request of the Partnership upon an undertaking by the Partnership to indemnify
and hold the Company harmless (to the extent permitted by law) from all
related costs and expenses (including attorneys' fees) and consequent
liability.
(c) Subject to the right of the Company, at its expense, to be
represented by counsel of its choice, the Partnership shall have the exclusive
right to control any Infringement Action brought, defended or maintained by
the Partnership pursuant to this Section 12.02. The Partnership shall pay all
expenses (including attorneys' fees) incurred in connection with such
Infringement Action as and when such expenses are incurred.
(d) If, as a result of any such Infringement Action, a judgment is
executed in favor of the Partnership or a settlement is reached with the
infringing party, the Partnership shall be entitled to receive the full
benefit of any such judgment or settlement.
SECTION 12.03 Limitations Under License Agreements
Notwithstanding the provisions of this Article XII, all matters related
to an Infringement Action involving a License Agreement Right shall be
governed by, and subject to, the terms and conditions of any applicable
License Agreements.
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ARTICLE XIII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 13.01 Representations and Warranties of the Company
The Company represents and warrants to the Partnership as of each Closing
Date that:
(a) The execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all requisite action and will not contravene any law or
regulation, any order, award, judgment or decree of any court or governmental
instrumentality, and will not violate, conflict with or constitute a default
under the Company's Certificate of Incorporation or Bylaws, or any material
indenture, mortgage, deed of trust, agreement, license or other instrument or
restriction applicable to the Company or any of its Affiliates, or by which
the Company or any of its Affiliates is bound.
(b) As of the date thereof and as of each Closing Date, the Memorandum
will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
(c) Except as provided in the License Agreements, neither the Background
Technology within the Field of Activity in the Territory nor the Background
Technology License is subject to any mortgage, pledge, lien, security interest,
encumbrance, restriction, royalty, payment or charge of any kind that would
materially adversely affect any use thereof within the Field of Activity in
the Territory.
(d) To the best of its knowledge, no exclusive marketing rights pursuant
to the Orphan Drug Act of 1985, 21 U.S.C. subsection 360aa, are in existence
that are or would be infringed by the activities of the Company or the
Partnership contemplated by this Agreement or the Purchase Agreement.
(e) All royalties or other payments due and payable by the Company or
any Affiliate pursuant to any License Agreement contained in the Background
Technology within the Field of Activity in the Territory have been paid, and
the Company is not in default under any such License Agreement.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 Assignment; Merger Letter
Except as provided in Section 5.07 of the Purchase Agreement and in
Article II of this Agreement, neither this Agreement nor any right or
obligation arising hereunder may be assigned or delegated, in whole or in
part, by either party without the prior written consent of the other, which
consent shall not be unreasonably withheld, except that the Company may,
without the prior written consent of the Partnership, assign its rights and
delegate its obligations hereunder (a) to any Person to which the Company has
assigned, sold, leased, transferred or otherwise disposed of all or
substantially all of its assets or the business related to the Products,
(b) to any successor corporation resulting from any merger or consolidation
of the Company with or into another corporation, or (c) to any wholly owned
subsidiary of the Company; provided, however, that the Company will not merge
or consolidate with any Person or sell, lease, transfer or otherwise dispose
of substantially all of its assets to any Person, unless (i) the Person formed
by or surviving such consolidation or merger or to which the Company effects
such sale, lease, transfer or other disposition shall be a solvent corporation
organized and existing under the laws of the United States of America or a
state thereof and (ii) such successor or transferee corporation shall have
executed and delivered to the Partnership before such event a letter agreement
in substantially the form attached hereto as Schedule III (a "Merger Letter");
and provided, further, that, in the event of any assignment or delegation
under this Section 14.01, this Agreement shall remain binding on the assignor.
Subject to the restrictions on assignment herein set forth, this Agreement
shall inure to the benefit of the successors and assigns of each of the
parties.
SECTION 14.02 Entire Agreement
This Agreement and the other Operative Agreements set forth and
constitute the entire agreement between the parties with respect to the
subject matter hereof, and supersede any and all prior agreements,
understandings, promises and representations made by either party to the
other concerning the subject matter hereof and the terms applicable hereto.
SECTION 14.03 Severability
If any provision of this Agreement is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction, such provision shall be
construed or deemed to be amended to conform to applicable laws so as to be
valid and enforceable, or, if it cannot be so construed or deemed amended
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without materially altering the intention of the parties, it shall be stricken
and the remainder of this Agreement shall remain in full force and effect.
SECTION 14.04 Specific Performance
The parties agree that remedies at law may be inadequate to protect
against breach of Article IX, and the parties hereby agree to the granting of
specific performance in favor of the other party without proof that the
payment of damages would be inadequate compensation.
SECTION 14.05 Benefits of This Agreement
Nothing in this Agreement shall be construed to give to any Person other
than the Company and the Partnership any legal or equitable right, remedy or
claim under this Agreement. This Agreement shall be for the sole and
exclusive benefit of the Company and the Partnership.
SECTION 14.06 Choice of Law
This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of New York as applied to
contracts made and to be performed entirely within New York.
SECTION 14.07 Amendments and Waivers
This Agreement may not be released, discharged, amended or modified in
any manner except by an instrument in writing signed by duly authorized
officers of both parties and, in the case of the Partnership, with the
approval of the board of directors of the General Partner. No waiver of any
right under this Agreement shall be deemed effective unless contained in a
writing signed by the party charged with such waiver and, in the case of a
waiver by the Partnership, only if made with the prior approval of the board
of directors of the General Partner. No waiver of any right arising from any
breach or failure to perform shall be deemed to be a waiver of any future such
right or of any other right arising under this Agreement.
SECTION 14.08 Headings
Section headings contained in this Agreement are included for convenience
only and form no part of the agreement between the parties.
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SECTION 14.09 Payments, Notices, Reports, Advice and Statements
Payments hereunder shall be sent, and notices, reports, advice and
statements required or permitted hereunder shall be in writing and shall be
sentto each party, as follows:
If to the Company, to:
ICOS Corporation
22021 20th Avenue S.E.
Bothell, Washington 98021
Telephone: (206) 485-1900
Fax: (206) 485-1911
Attention: Corporate Secretary
If to the Partnership, to:
ICOS Clinical Partners, L.P.
22021 20th Avenue S.E.
Bothell, Washington 98021
Telephone: (206) 485-1900
Fax: (206) 485-1911
Attention: General Partner
with a copy to each member of the board of directors of the General Partner or
to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earliest of (a) physical delivery, (b) if given
by facsimile transmission, when such facsimile is transmitted to the
facsimile number specified in this Agreement and facsimile confirmation of
receipt thereof is received, (c) three days after mailing by prepaid first-
class mail, and (d) two days after mailing by prepaid overnight or express
mail.
SECTION 14.10 Force Majeure
Each of the parties shall be excused from performing such acts required
hereunder that are prevented by, or whose purpose is frustrated by, Force
Majeure.
SECTION 14.11 Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be an original and all of which shall constitute together but one
and the same document.
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SECTION 14.12 Decisions by the General Partner
For purposes of this Agreement, a decision by the board of directors of
the General Partner (including, without limitation, any decision to be made
by a majority of the board of directors) shall be made as prescribed in the
Certificate of Incorporation and Bylaws of the General Partner.
SECTION 14.13 Effective Date
This Agreement shall become effective concurrently with the first Closing
Date under the Sales Agency Agreement dated the date hereof between the
parties hereto and the Sales Agent.
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IN WITNESS WHEREOF, the Company and the Partnership have executed this
Agreement as of the date first above mentioned.
ICOS CORPORATION
By /s/ Gary Wilcox
Title: Executive Vice President & Secretary
ICOS CLINICAL PARTNERS, L.P.
By ICOS DEVELOPMENT CORPORATION,
as General Partner
By /s/ Howard S. Mendelsohn
Title: Secretary/Treasurer
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Schedule I to the
Product Development
Agreement
GLOSSARY
Each of the following terms shall have the meaning assigned to it in this
Glossary, except as otherwise expressly provided in each agreement, as amended
from time to time, to which this Glossary is attached.
"Additional Funds" shall have the meaning set forth in Section 4.04
of the Product Development Agreement.
"Advance Payment" shall mean the Cash Advance Payment, the Stock
Advance Payment or the Combination Advance Payment, as applicable.
"Affiliate" shall mean, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls, or
is controlled by or is under common control with, such Person; provided, that
the Company's ownership interest in Suncos and its contractual arrangements
with Suncos, as such ownership interest or contractual arrangements may be
amended from time to time, do not constitute control of Suncos by the Company;
provided, further, that the Partnership, General Partner and Company shall not
be deemed to be Affiliates of each other; provided, further, that, with
respect to Background Technology and License Agreements, any Person that
controls or is under common control with any other Person shall only be
considered to be an "Affiliate" of the other Person with respect to its
Elements of Technology that are used in, or are conceived, developed or
acquired in the course of assisting or participating in, the Research Program.
"Annual Minimum Amount" shall mean sixteen percent (16%) of the
aggregate Capital Contributions to the Partnership of all Limited Partners
with respect to the first four Fiscal Years after the Purchase Date and
twenty percent (20%) of the aggregate Capital Contributions to the Partnership
of all Limited Partners with respect to the fifth Fiscal Year after the
Purchase Date; provided, that the Annual Minimum Amount for any Fiscal Year
shall not exceed the amount by which the sum of all distributions paid or
payable to Limited Partners pursuant to the Partnership Agreement and Purchase
Agreement through such Fiscal Year is less than the aggregate Capital
Contributions to the Partnership of all Limited Partners.
<PAGE>
"Available Funds" shall mean at any time an amount equal to (a) the
sum of the aggregate amount of capital contributions made or agreed to be made
to the Partnership by the General Partner and the Limited Partners (including
the amount of any Additional Funds that the Company has agreed to pay or to
cause to be paid), the aggregate Royalty Amounts paid to the Partnership and
any interest earned on such contributions, Additional Funds and Royalty
Amounts by the Partnership, less (i) the aggregate Royalty Amounts paid to the
Partnership that were not needed to fund the Research Program in accordance
with the Product Development Agreement and that have been distributed to the
Limited Partners, (ii) the aggregate amount expended by the Partnership for
selling commissions, financial advisory fees, investment banking and marketing
fees, warrant valuation fees, and offering and organizational costs, (iii) all
interest payable on amounts borrowed by the Partnership, (iv) reasonable
expenses (other than amounts expended pursuant to the Product Development
Agreement) of operating the Partnership, including administrative and interest
expenses and operating reserves, and (v) the aggregate of all Default Amounts
outstanding as of such time, or (b) such other amount as the Company and the
Partnership shall agree to in writing.
"Background Technology" shall mean all Elements of Technology that
(a) the Company or any Affiliate of the Company Controls, has an ownership
interest in or has the right to acquire an ownership interest in or may
conceive, develop or acquire an ownership interest in (under licenses from
others or otherwise) at any time prior to the Interim License Termination Date
and (b) are necessary or materially useful to Exploit Products.
"Background Technology License" shall have the meaning set forth in
Section 2.01 of the Product Development Agreement.
"Business Commencement Date" shall mean the first date on which the
Company or any Affiliate, licensee or sublicensee of the Company makes a
commercial sale of any Product within the Field of Activity in the Territory
that would generate a payment to the Partnership or the Class A Limited
Partners.
"Capital Contribution" shall mean (a) in respect of each Class A
Limited Partner (whether such Limited Partner's Interest was acquired directly
from the Partnership, by sale or assignment from a predecessor Limited
Partner, or otherwise), $100,000 for each Unit (or $25,000 for each Quarter
Unit) owned by such Class A Limited Partner, less any Default Amount in
respect of such Unit or Quarter Unit; and (b) in respect of the Class B
Limited Partner, $250,000; provided, that, in the event the Company exercises
the Purchase Option prior to the due date for the payment of any installments
under the Class A Limited Partner's Investor Notes or in the event the General
Partner relieves Class A Limited Partners of their obligation to pay any
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installments under the Class A Limited Partner's Investor Notes in accordance
with paragraph 7.10 of the Partnership Agreement, the "Capital Contribution"
of each such Class A Limited Partner shall mean (for all purposes other than
clause (a) of the definitions of Class A Percentage and Class B Percentage)
$100,000 for each Unit (or $25,000 for each Quarter Unit), less any Default
Amount in respect of such Unit or Quarter Unit and less the aggregate amount
of the installments that would otherwise be due and payable under such Class A
Limited Partner's Investor Note after the Purchase Option Exercise Date or the
Installment Termination Date (as defined in paragraph 7.10 of the Partnership
Agreement), as the case may be.
"Cash Advance Payment" shall mean the consideration payable in cash
by the Company to Payment Recipients pursuant to Sections 3.02(b) and 3.03
(b) of the Purchase Agreement in connection with the purchase by the Company
of their Interests.
"Class A Combination Advance Payment" shall mean (a) a cash payment
equal to the product of (i) the difference between one hundred percent (100%)
and the Stock Percentage and (ii) the Class A Down Payment, plus (b) issuance
of the number of shares of Common Stock (and any securities deliverable
pursuant to Section 3.09 of the Purchase Agreement) that is equal to the
quotient of (i) the product of (A) the Stock Percentage and (B) the Class A
Down Payment divided by (ii) the average Closing Price on the 30 trading days
immediately preceding the Stock Pricing Date for each Full Class A Interest of
such Class A Payment Recipient. In the case of any Quarter Class A Interest
held by a Class A Payment Recipient, the number of shares to be delivered to
such Class A Payment Recipient in respect of such Quarter Class A Interest
shall be equal to one-quarter the number of shares of Common Stock (and any
securities deliverable pursuant to Section 3.09 of the Purchase Agreement) to
be delivered in respect of a Full Class A Interest.
"Class A Down Payment" shall mean an amount equal to sixteen percent
(16%) of the Capital Contribution to the Partnership by a Class A Limited
Partner.
"Class A Interest" shall mean any limited partnership interest in
the Partnership (other than the Class B Interest) owned by any Class A Limited
Partner.
"Class A Limited Partner" shall have the meaning assigned to such
term in Article I of the Partnership Agreement.
"Class A Payment" shall mean (a) the Last Interim License Payment
payable to a Class A Limited Partner, (b) until the Cut-Off Date, for each
Class A Payment Recipient, (i) prior to the calendar quarter following the
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calendar quarter in which the Class B Threshold with respect to Class A
Payment Recipients occurs, its Class A Percentage of the Quarterly Payment and
Minimum Royalty Payment and (ii) beginning with the calendar quarter following
the calendar quarter in which the Class B Threshold with respect to Class A
Payment Recipients occurs and ending with the Cut-Off Date, for each calendar
quarter an amount equal to ninety-five percent (95%) of its Class A Percentage
of the Quarterly Payment and Minimum Royalty Payment and (c) either (i) the
Class A Down Payment, if the Company elects to make the Cash Advance Payment
or if the Company is required to make the Cash Advance Payment pursuant to
Section 2.02 of the Purchase Agreement, (ii) the Class A Stock Advance Payment
if the Company elects to make the Stock Advance Payment or (iii) the Class A
Combination
Advance Payment if the Company elects to make the Combination Advance Payment
"Class A Payment Recipient" shall mean each Class A Limited Partner
on or after the Purchase Date on which the Company has purchased the Class A
Interest of such Class A Limited Partner pursuant to the Purchase Agreement,
or any other Person entitled to receive payments in respect of Class A
Interests in accordance with Section 8.01 of the Purchase Agreement.
"Class A Percentage" shall mean, in the case of each Class A Limited
Partner or Class A Payment Recipient, as the case may be, (a) prior to the
first day of the calendar quarter following the calendar quarter in which the
Class B Threshold with respect to such Class A Limited Partner or Class A
Payment Recipient, as the case may be, occurs, the ratio that the amount of
such Class A Limited Partner's or Class A Payment Recipient's Capital
Contribution to the Partnership bears to the aggregate Capital Contributions
to the Partnership of all Limited Partners and (b) thereafter, the ratio that
the amount of such Class A Limited Partner's or Class A Payment Recipient's
Capital Contribution to the Partnership bears to the aggregate Capital
Contributions to the Partnership of all Class A Limited Partners.
"Class A Stock Advance Payment" shall mean issuance of the number of
shares of Common Stock (and any securities deliverable pursuant to Section
3.09 of the Purchase Agreement) that is equal to the quotient of (a) the Class
A Down Payment divided by (b) the average Closing Price on the 30 trading days
immediately preceding the Stock Pricing Date for each Full Class A Interest of
such Class A Payment Recipient. In the case of any Quarter Class A Interest
held by a Class A Payment Recipient, the number of shares to be delivered to
such Class A Payment Recipient in respect of such Quarter Class A Interest
shall be equal to one-quarter the number of shares of Common Stock (and any
securities deliverable pursuant to Section 3.09 of the Purchase Agreement) to
be delivered in respect of a Full Class A Interest.
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"Class B Combination Advance Payment" shall mean (a) a cash payment
equal to the product of (i) the difference between one hundred percent (100%)
and the Stock Percentage and (ii) the Class B Down Payment, plus (b) issuance
of the number of shares of Common Stock (and any securities deliverable
pursuant to Section 3.09 of the Purchase Agreement) that is equal to the
quotient of (i) the product of (A) the Stock Percentage and (B) the Class B
Down Payment divided by (ii) the average Closing Price on the 30 trading days
immediately preceding the Stock Pricing Date.
"Class B Down Payment" shall mean an amount equal to sixteen percent
(16%) of the Capital Contribution of the Class B Limited Partner.
"Class B Interest" shall mean the limited partnership interest in
the Partnership owned by the Class B Limited Partner.
"Class B Limited Partner" shall have the meaning assigned to such
term in Article I of the Partnership Agreement.
"Class B Payment" shall mean (a) the Last Interim License Payment
payable to a Class B Limited Partner; (b) until the Cut-Off Date, the Class B
Percentage of the Quarterly Payment and Minimum Royalty Payment; and
(c) either (i) the Class B Down Payment, if the Company elects to make the
Cash Advance Payment or if the Company is required to make the Cash Advance
Payment pursuant to Section 2.02 of the Purchase Agreement, (ii) the Class B
Stock Advance Payment if the Company elects to make the Stock Advance Payment
or (iii) the Class B Combination Advance Payment if the Company elects to make
the Combination Advance Payment.
"Class B Payment Recipient" shall mean the Class B Limited Partner
on or after the Purchase Date on which the Company has purchased the Class B
Interest of such Class B Limited Partner pursuant to the Purchase Agreement,
or any other Person entitled to receive payments in respect of the Class B
Interest in accordance with Section 8.01 of the Purchase Agreement.
"Class B Percentage" shall mean for all amounts paid (a) prior to
the first day of the calendar quarter following the calendar quarter in which
the Class B Threshold occurs with respect to Class A Limited Partners or
Class A Payment Recipients, as the case may be, the ratio that the amount of
the Class B Limited Partner's Capital Contribution to the Partnership bears to
the aggregate Capital Contributions to the Partnership of all Limited Partners
and (b) on and after the time on which such Class B Threshold occurs, five
percent (5%).
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"Class B Stock Advance Payment" shall mean issuance of the number
of shares of Common Stock (and other securities deliverable pursuant to
Section 3.09 of the Purchase Agreement) that is equal to the quotient of
(a) the Class B Down Payment divided by (b) the average Closing Price on
the 30 trading days immediately preceding the Stock Pricing Date.
"Class B Threshold" shall mean (a) with respect to Class A Limited
Partners prior to the Interim License Termination Date, the receipt by each
Class A Limited Partner of distributions pursuant to the Partnership Agreement
in an aggregate amount equal to each such Class A Limited Partner's Capital
Contribution and (b) with respect to Class A Payment Recipients after the
Purchase Date, the receipt by each Class A Payment Recipient of
(i) distributions pursuant to the Partnership Agreement and Quarterly Payments
(increased by any Credits) pursuant to the Purchase Agreement in an aggregate
amount equal to each seventy-five percent (75%) of such Class A Payment
Recipient's Capital Contribution and (ii) distributions pursuant to the
Partnership Agreement and Purchase Agreement (i.e., Class A Down Payment,
Quarterly Payments and Minimum Royalty Payments) in an aggregate amount equal
to each such Class A Payment Recipient's Capital Contribution.
"Closing Date" shall mean each date on which subscriptions to
purchase Units are accepted by the General Partner.
"Closing Price" at any time shall mean the closing price per share
of the Common Stock (or other securities deliverable pursuant to Section 3.09
of the Purchase Agreement) on the principal national securities exchange on
which the Common Stock (or such other securities) is then listed or admitted
to trading or, if not then listed or traded on any such exchange, on the
Nasdaq National Market or, if not listed or traded on any such exchange or
system, the average of the bid and asked price per share on the Nasdaq
National Market or, if such quotations are not available, the fair market
value as reasonably determined by the board of directors of the Company or
any committee of such board.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor statute or subsequent codification or recodification of
the federal income tax laws of the United States.
"Combination Advance Payment" shall mean the consideration payable
in cash and Common Stock by the Company to Payment Recipients pursuant to
Sections 3.02(d) and 3.03(d) of the Purchase Agreement in connection with the
purchase by the Company of their Interests.
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"Combination Product" shall mean any product that is formulated in
part with any Product (or any part thereof) and in part with any Combination
Substance.
"Combination Substance" shall mean an active ingredient (other than
a Product) or device used in a Combination Product.
"Common Stock" shall mean fully paid and nonassessable shares of
common stock, par value $.01 per share, of the Company, together with any
other equity securities that may be issued by the Company in addition thereto
or in substitution therefor as provided in Section 10 of the Warrant.
"Company" shall mean ICOS Corporation, a corporation organized and
existing under the laws of the State of Delaware, and its successors.
"Competitive Product" shall mean [ * ].
"Competitive Product Revenues" shall mean, [ * ], the
aggregate of all Net Revenues of the Company and its Affiliates (but not
licensees or ublicensees) in respect of all Competitive Products for such
period within the Field of Activity in the Territory. In the event a
product ("Combination Competitive Product") is formulated in part with any
Competitive Product (or any part thereof) and in part with any active
ingredient (other than a Competitive Product) or device ("Combination
Competitive Substance"), "Competitive Product
"Revenues" shall mean an amount equal to (a) the aggregate amount
of all Net Revenues of the Company and its Affiliates in such period in the
Territory in respect of any Combination Competitive Product multiplied by
(b) a fraction the numerator of which equals the fair market value of the
Competitive Product (or any part thereof) included in such Combination
Competitive Product and the denominator of which equals the sum of (i) the
fair market value of such Competitive Product (or part thereof) and (ii) the
fair market value of each Combination Competitive Substance included in such
Combination Competitive Product, such "fair market value" being determined
in the same manner that it is determined for Products and Combination
Substances in the definition of Product Revenues.
"Controls" or "Controlled" shall mean at any time, with respect to
any right, title or license, the possession of such right, title or license
with the right to assign or grant licenses or sublicenses without obtaining
the consent of any other Person (other than any consent that has been
_______________________________
[ * ] Confidential Treatment Requested
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<PAGE>
obtained) and without violating or causing a default under the terms of any
agreement or other arrangement with or the rights of any other Person.
"Credit" shall mean, with respect to each calendar quarter ending in
the Fiscal Year, [ * ] in the Territory that are in excess of the
Product Revenues that cause the sum of the Royalty Amounts paid or payable
for the calendar quarters ending in the Fiscal Year to equal the Annual
Minimum Amount, if any, for the Fiscal Year; provided, that the Credit
shall not exceed the balance in the Credit Account. In the event the
Credit Account is zero, the Credit shall be zero.
"Credit Account" shall mean the sum of the Class A Down Payments,
Class B Down Payment and each Minimum Royalty Payment made by the Company,
less the aggregate Credits.
"Cut-Off Date" shall mean the later of (a) the last day of the month
in which the thirteenth anniversary of the Business Commencement Date occurs
and (b) the last day of the month in which the eleventh anniversary of the
Purchase Date occurs.
"Default Amount" shall have the meaning assigned to such term in
Section 4.03(a) of the Product Development Agreement.
"Defaulting Limited Partner" shall have the meaning assigned to such
term in Section 3.3.5 of the Partnership Agreement.
"Dollars" and the sign "$" shall mean lawful money of the United
States of America.
"Earned Royalty" shall mean any royalty due under any License
Agreement.
"Elements of Technology" shall mean all technical information,
whether tangible or intangible, including, without limitation, any and all
data, preclinical and clinical results, techniques, discoveries, inventions,
ideas, processes, know-how, patents (including any extension, reissue or
renewal patents), patent applications, inventor's certificates, trade secrets
and other proprietary information, licenses and sublicenses, and samples of
any physical, biological or chemical material.
_______________________________
[ * ] Confidential Treatment Requested
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<PAGE>
"Exploitation" shall mean research, experimentation, development,
manufacturing, production, marketing, use, lease, sale, assignment, transfer,
license, sublicense and other disposition, and "Exploit" shall have a
correlative meaning.
"FDA" shall mean the United States Food and Drug Administration or
any successor agency.
"Field of Activity" shall mean collectively (a) the Hu23F2G Field of
Activity, (b) the ICM3 Field of Activity and (c) the PAF-AH Field of Activity
"Field Technology" shall mean the Technology within the Field of
Activity.
"Fiscal Year" shall mean the series of 12 full calendar months
following the month in which the Purchase Date occurs and each series of 12
successive calendar months thereafter.
"Force Majeure" shall mean any occurrence that prevents or
substantially interferes with the performance by a party of any of its
obligations hereunder, if such occurs by reason of any act of God, flood,
fire, explosion, breakdown of plant, strike, lockout, labor dispute, casualty,
accident, war, revolution, civil commotion, acts of public enemies, blockage,
embargo, injunction, law, order, proclamation, regulation, ordinance, demand
or requirement of any government or of any subdivision, authority or
representative of any such government, inability to procure or use materials,
labor, equipment, transportation or energy sufficient to meet manufacturing
needs without the necessity of allocation, or any other cause whatsoever,
whether similar or dissimilar to those above enumerated, beyond the reasonable
control of such party, if and only if the party affected shall have used
reasonable efforts to avoid such occurrence and to remedy it promptly if it
shall have occurred.
"Full Class A Interest" shall mean each Class A Interest that
represents a $100,000 Capital Contribution.
"General Partner" shall mean ICOS Development Corporation, a
corporation organized and existing under the laws of the State of Delaware, as
general partner of the Partnership, and its successors in such capacity.
"Hu23F2G" shall mean the recombinant humanized monoclonal antibody
developed by the Company to block CD11/CD18-mediated cell adhesions in humans.
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<PAGE>
"Hu23F2G Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of Hu23F2G Products
for human therapeutic purposes.
"Hu23F2G Product" shall mean Hu23F2G, any fragment or component
thereof or any substance derived from Hu23F2G (or any fragment or component
thereof).
"ICM3 Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of ICM3 Products for
human therapeutic purposes.
"ICM3 Product" shall mean a recombinant humanized monoclonal
antibody developed by the Company to block the function of human intercellular
adhesion molecule-3, any fragment or component thereof or any substance
derived from such monoclonal antibody (or any fragment or component thereof).
"Initial Calendar Quarter" shall mean the calendar quarter in which
the Purchase Date falls.
"Intellectual Property Right" shall mean rights under patents
(including any extension, reissue or renewal patents) and other similar
rights.
"Interest" shall mean any Class A Interest or the Class B Interest;
and "Interests" shall mean all Class A Interests and the Class B Interest.
"Interim License" shall have the meaning assigned to such term in
Section 2.05 of the Product Development Agreement.
"Interim License Termination Date" shall mean the earlier of (a) the
Purchase Date and (b) if the Purchase Option terminates for any reason other
than the purchase by the Company of all the Interests on the Purchase Date,
the earlier of (i) the date on which the Partnership sells, licenses,
sublicenses, assigns or otherwise transfers or disposes of all or a
substantial part of the Technology and (ii) the date that is 18 months after
the Purchase Option Termination Date.
"Investor" shall mean a purchaser of any multiple of one-quarter of
a Unit who meets the suitability standards set forth in the Memorandum under
the caption "Investor Suitability."
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"Investor Note" shall have the meaning assigned to such term in
Section 3.3.1 of the Partnership Agreement.
"Invoiced Amount" shall have the meaning assigned to such term in
Section 4.01(c) of the Product Development Agreement.
"Last Interim License Payment" shall mean (a) with respect to a
Class A Payment Recipient, such Class A Payment Recipient's Class A Percentage
of ninety-nine percent (99%) (until the Class B Threshold occurs, and
thereafter, 95% of 99%) of the Royalty Amount that would otherwise have been
payable to the Partnership (the "Interim License Amount") determined pursuant
to Section 6.01 of the Product Development Agreement for the period commencing
on the first day of the calendar quarter following the last calendar quarter
in respect of which payments have been made under such Section 6.01 and
distributed to the partners of the Partnership and ending on the Purchase Date
and (b) with respect to a Class B Payment Recipient, the Class B Percentage of
ninety-nine percent (99%) of the Interim License Amount.
"License Agreement" shall mean any license or sublicense or portion
thereof (other than the Background Technology License, the Program Technology
License or the Interim License) by any Person granting to the Company or any
Affiliate of the Company on the date hereof, or at any time hereafter, rights
that are necessary or materially useful in the Exploitation of Products, and
any amendments thereto, including, without limitation, any consent from the
licensor or sublicensor obtained by the Company pursuant to the Product
Development Agreement.
"License Agreement Right" shall mean any right held by the
Partnership, directly or indirectly (including, without limitation, under the
Background Technology License), in any Technology licensed under any License
Agreement.
"Limited Partners" shall mean the Class A Limited Partners and the
Class B Limited Partner.
"Marketing Program" shall mean the Company's implementation of the
Marketing Strategy pursuant to Article V of the Product Development Agreement,
including the execution of marketing agreements with third parties.
"Marketing Strategy" shall mean the strategy to provide for the
distribution, marketing and sale of the Products within the Field of Activity
in the Territory, all as determined by the Company.
"Memorandum" shall mean the Confidential Private Placement
Memorandum dated April 11, 1997 used in connection with the placement of
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<PAGE>
Units, including the exhibits thereto, in each case together with any
amendments thereof or written supplements thereto prepared by the Company.
"Merger Letter" shall have the meaning assigned to such term in
Section 14.01 of the Product Development Agreement.
"Minimum Royalty Payment" shall mean the amount by which the Annual
Minimum Amount for the Fiscal Year exceeds, if at all, the sum of the Quarterly
Payments paid or payable for the four quarters ending in the Fiscal Year. The
Minimum Royalty Payment may be paid in cash or as a Minimum Royalty Stock
Payment or as a combination of cash and a Minimum Royalty Stock Payment in
accordance with Section 3.05 of the Purchase Agreement.
"Minimum Royalty Stock Payment" shall mean the issuance of the
number of shares of Common Stock (or other securities deliverable pursuant to
Section 3.09 of the Purchase Agreement) that is equal to the quotient of
(a) the portion of the Minimum Royalty Payment for a Fiscal Year that will be
paid in Common Stock divided by (b) the average Closing Price on the 30
trading days immediately preceding the Minimum Royalty Stock Pricing Date.
The number of such shares issued to each Class A Payment Recipient and the
Class B Payment Recipient is determined in accordance with the Class A Payment
and the Class B Payment, respectively.
"Minimum Royalty Stock Pricing Date" shall mean the last day of the
Fiscal Year to which the Minimum Royalty Stock Payment pertains.
"Nasdaq" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Nasdaq National Market" shall mean the Nasdaq National Market of
the Nasdaq Stock Market.
"Net Revenues," with respect to sales for any period and with
respect to any item, shall mean the proceeds received or to be received, under
generally accepted accounting principles, from sales of Products or
Competitive Products (as applicable) by the Company, any Affiliate of the
Company or any licensee or sublicensee of the Company, but excluding sales to
any Affiliate, licensee or sublicensee of the Company. In determining such
net proceeds, the amounts received from such sales shall be reduced by related
prompt payment and other trade discounts, transportation and related insurance
charges, returns, bad debt and other allowances, taxes (except income and
franchise taxes) and distributors', consignees' and wholesalers' fees and
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<PAGE>
commissions. The terms "licensee" and "sublicensee" shall mean any Person
licensed or sublicensed by the Company or any Affiliate of the Company,
including pursuant to any marketing, co-marketing or co-detailing agreement
(or similar arrangement that is the functional equivalent of a license), but
excluding customary distribution, wholesaling and consignment arrangements.
For the purposes of this definition, distribution, wholesaling or consignment
arrangements shall be limited to arrangements where the distributor,
wholesaler or consignee is not obligated, in addition to selling a Product
or Competitive Product, to undertake any significant promotional or similar
marketing efforts directed at the Product or Competitive Product. In
calculating Net Revenues, any given unit of a Product or Competitive Product
shall be taken into account only once.
"Notice of Exercise" shall mean the written notice that the Company
shall send to each Limited Partner pursuant to Section 2.03 of the Purchase
Agreement in order to inform such Limited Partners that the Company has
elected to exercise its purchase option with respect to the Interests and to
designate the Purchase Date.
"Operative Agreements" shall mean each of the Product Development
Agreement, the Partnership Agreement, the Purchase Agreement, the Sales Agency
Agreement and the Warrants.
"Outstanding Available Funds" shall mean, at any time, the Available
Funds actually received through such time by the Partnership less all amounts
theretofore disbursed to the Company by the Partnership pursuant to Section
4.01 of the Product Development Agreement.
"PAF-AH Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of PAF-AH Products
for human therapeutic purposes.
"PAF-AH Product" shall mean platelet-activating factor
acetylhydrolase and any fragment, component or derivative thereof.
"Partnership" shall mean ICOS Clinical Partners, L.P., a limited
partnership organized under the laws of the State of Delaware.
"Partnership Agreement" shall mean the Agreement of Limited
Partnership dated as of April 11, 1997 among the General Partner and the
limited partners of the Partnership, as amended, modified or restated from
time to time.
"Payment Recipient" shall mean each Class A Payment Recipient and
the Class B Payment Recipient.
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<PAGE>
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an estate, an unincorporated organization, a government
or any department or agency thereof, or other entity.
"Product Development Agreement" shall mean the Product Development
Agreement dated as of June 5, 1997, between the Partnership and the Company,
as amended, modified or restated from time to time.
"Product Revenues" for any period shall mean the sum of (a) the
aggregate amount of Net Revenues in such period within the Field of Activity
in the Territory in respect of any Product and (b) an amount equal to (i) the
aggregate amount of Net Revenues in such period within the Field of Activity
in the Territory in respect of any Combination Product multiplied by (ii) a
fraction the numerator of which equals the fair market value of the Product
(or any part thereof) included in such Combination Product and the denominator
of which equals the sum of (A) the fair market value of such Product (or part
thereof) and (B) the fair market value of each Combination Substance included
in such Combination Product. For purposes of this definition, "fair market
value" of any Product (or part thereof) and Combination Substance shall be the
list retail price of such Product (or part thereof) and Combination Substance
sold separately or, if such Product (or part thereof) or Combination Substance
is not ordinarily sold separately, a value for both the Product (or part
thereof) and Combination Substance determined in the good-faith business
judgment of (x) if the Purchase Date has not occurred, the General Partner or
any successor to the General Partner as the general partner of the Partnership
or (y) if the Purchase Date (if any) has occurred, the Company.
"Products" shall mean collectively (a) Hu23F2G Products, (b) ICM3
Products and (c) PAF-AH Products.
"Program Technology" shall mean all Elements of Technology that are
developed, acquired or conceived by or on behalf of the Partnership during the
Research Program, but in all cases excluding Background Technology.
"Program Technology License" shall have the meaning set forth in
Section 2.03 of the Product Development Agreement.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
June 3, 1997 between the Company and the Limited Partners, as amended,
modified or restated from time to time.
"Purchase Date" shall mean the date, designated by the Company
pursuant to Section 2.01(a) of the Purchase Agreement in the Notice of
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Exercise, on which the Company purchases the Interests pursuant to the
Purchase Agreement, which shall be a date not more than 60 days after the
date of the Notice of Exercise.
"Purchase Option" shall mean any of the options granted by the
Limited Partners pursuant to Section 2.01 of the Purchase Agreement.
"Purchase Option Commencement Date" shall mean the first day after
the final Closing Date.
"Purchase Option Exercise Date" shall mean the date, if any, on
which the Notice of Exercise is given.
"Purchase Option Shares" shall have the meaning assigned to such
term in Section 4.01(c) of the Purchase Agreement.
"Purchase Option Termination Date" shall have the meaning set forth
in Section 7.02(a) of the Purchase Agreement.
"Purchase Option Termination Event" shall mean any of the events set
forth in Section 7.01 of the Purchase Agreement.
"Quarter" shall mean any calendar quarter beginning or ending during
the term of the Product Development Agreement; provided, that the first
Quarter shall be the period beginning on May 1, 1997 and ending on the last
day of the calendar quarter in which the first Closing Date occurs, and the
last Quarter shall be the period beginning on the first day of the last
calendar quarter before the Interim License Termination Date and ending on the
Interim License Termination Date.
"Quarter Class A Interest" shall mean each Class A Interest, other
than a Full Class A Interest, that represents a $25,000 Capital Contribution.
"Quarterly Payment" shall mean, for the period beginning with the
Initial Calendar Quarter and for each calendar quarter thereafter, the sum of
seven percent (7%) of Product Revenues in the United States, five percent (5%)
of Product Revenues in the Territory outside the United States and [ * ]
in the Territory for such calendar quarter; provided, that, in the event that
less than 700 Units are issued, such seven percent (7%) and five percent (5%)
______________________________
[ * ] Confidential Treatment Requested
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<PAGE>
shall be adjusted by multiplying each by a fraction, the numerator of which is
the number of Units issued and the denominator of which is 700; provided,
further, that any such sum shall be reduced, if and as appropriate, to exclude
in the Initial Calendar Quarter any Net Revenues applicable to any period in
the Initial Calendar Quarter before the Purchase Date; provided, further,
that, in the event the Credit Account is positive at the beginning of the
calendar quarter, any such sum shall be reduced by the Credit for the calendar
quarter.
"Quarter Unit" shall mean an interest comprising a Quarter Class A
Interest and Series A Warrants to purchase an aggregate of 2,000 shares of
Common Stock and Series B Warrants to purchase an aggregate of 2,000 shares of
Common Stock.
"Research Program" shall mean any research, experimentation or
development relating to the Products within the Field of Activity in the
Territory proposed to be conducted or conducted, directly or indirectly, by
the Company pursuant to the terms of the Product Development Agreement,
including, without limitation, the research, experimentation and development
necessary or useful to receive FDA and such other regulatory approvals to
Exploit Products and otherwise engage within the Field of Activity in the
Territory as the Partnership, in consultation with the Company, directs.
"Research Program Termination Date" shall mean the date on which the
board of directors of the General Partner terminates the Research Program with
respect to all Products pursuant to Section 7.01(b) of the Product Development
Agreement.
"Royalty Amount" shall mean for each calendar quarter the sum of
seven percent (7%) of Product Revenues in the United States, five percent (5%)
of Product Revenues in the Territory outside the United States and [ * ]
in the Territory for such calendar quarter; provided, that, in the event that
less than 700 Units are issued, such seven percent (7%) and five percent (5%)
shall be adjusted by multiplying each by a fraction, the numerator of which is
the number of Units issued and the denominator of which is 700.
"Sales Agency Agreement" shall mean the Sales Agency Agreement dated
as of June 3, 1997 among the Sales Agent, the Partnership, the General Partner
and the Company relating to the placement of Units, as amended, modified or
restated from time to time.
_______________________________
[ * ] Confidential Treatment Requested
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"Sales Agent" shall mean PaineWebber Incorporated, as sales agent
"Stock Advance Payment" shall mean the consideration payable by the
Company to Payment Recipients in Common Stock or other securities, assets or
evidence of indebtedness pursuant to Article III of the Purchase Agreement in
connection with the purchase by the Company of their Interests.
"Stock Percentage" shall mean, if the Company shall have elected to
make the Combination Advance Payment, the percentage of the purchase price of
the applicable Partnership Interest that the Company elects to pay in Common
Stock.
"Stock Pricing Date" shall mean the fifth trading day before the
Purchase Option Exercise Date.
"Suncos" shall mean Suncos Corporation, a corporation organized and
existing under the laws of Delaware, the stockholders of which are Suntory and
the Company.
"Suntory" shall mean Suntory Limited, a corporation organized and
existing under the laws of Japan.
"Technology" shall mean the Background Technology and the Program
Technology.
"Territory" shall mean (a) the United States with respect to PAF-AH
Products and (b) the entire world, except Japan, with respect to ICM3 Products
and Hu23F2G Products.
"Third Party Sublicensee" shall have the meaning assigned to such
term in Section 2.02(a) of the Product Development Agreement.
"Unit" shall mean a "Unit" as contemplated by the Sales Agency
Agreement consisting of one Class A Interest, Series A Warrants to purchase an
aggregate of 8,000 shares of Common Stock and the right to receive Series B
Warrants to purchase an aggregate of 8,000 shares of Common Stock.
"United States" shall mean the United States of America, including
its territories and possessions.
"Warrant" shall mean any of the warrants to purchase Common Stock
issued to each Limited Partner by the Company in exchange for the Purchase
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Options.
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Schedule II to
Product Development
Agreement
[Date]
ICOS Corporation
22021 20th Avenue S.E.
Bothell, Washington 98021
Re: License Agreement dated as of __________
Gentlemen:
[Licensor] (the "Licensor") has been informed that, for the purposes of
developing and testing [product] for human pharmaceutical use, ICOS
Corporation (the "Company") has caused to be formed ICOS Clinical Partners,
L.P., a Delaware limited partnership (the "Partnership"). The Licensor and
the Company desire to amend the License Agreement dated as of ___________,
19__ between the Licensor and the Company (the "License Agreement") to induce
the Partnership to raise the requisite funds for the development of the
technology licensed under the License Agreement.
Sublicense to the Partnership
The Licensor hereby consents to any sublicense to the Partnership of any
of the rights and licenses granted to the Company under the License Agreement.
Unless otherwise agreed to by the Licensor in writing, no such sublicense shall
relieve the Company from primary liability thereunder.
Transfers to Third Parties
The Partnership, or any other third party to which the Partnership has
assigned or further sublicensed its sublicense rights (a "Third Party"), may
assign or further sublicense any of its sublicense rights, provided, that the
Licensor is promptly notified in writing of such assignment or further
sublicense.
<PAGE>
Curing of Defaults
The Licensor agrees that the Partnership and any Third Party shall have
the right to cure any default by the Company under the License Agreement at
any time during the ___-day period specified in Section ___ of the License
Agreement.
Partnership Option at Termination
The Licensor hereby grants the Partnership an option to acquire all the
license and other rights granted to the Company under the License Agreement
(the "Company License Rights"), which option shall be exercisable at any time
within 60 days after receipt by the Partnership of a copy of any notice of
termination given to the Company terminating the License Agreement for any
reason. The Licensor hereby grants the Partnership a license to use the
Company License Rights in accordance with the provisions of the License
Agreement during the period from such termination of the License Agreement
until such option lapses unexercised.
Notice
The Licensor hereby agrees that any notice give under the License
Agreement by the Licensor to the Company shall also be given to the
Partnership (and, if applicable, to any Third Party) and shall be sent
to the last address designated by written notice to the Licensor pursuant
to the License Agreement. For such purpose, the initial address for
notices to the Partnership shall be:
ICOS Clinical Partners, L.P.
22021 20th Avenue S.E.
Bothell, Washington 98021
Telephone: (206) 485-1900
Fax: (206) 485-1911
Attention: General Partner
Sincerely,
[LICENSOR]
By _________________________________
Title:
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<PAGE>
Accepted and approved as of
the date stated above:
ICOS CORPORATION
By _______________________________
Title:
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<PAGE>
Schedule III to
Product Development
Agreement
[Dated pursuant to the
Product Development Agreement]
ICOS Clinical Partners, L.P.
c/o ICOS Corporation
22021 20th Avenue S.E.
Bothell, Washington 98021
Dear Sirs:
Upon consummation of the proposed [acquisition/merger/consolidation] of
ICOS Corporation, a Delaware corporation (the "Company"), [by/with] ________
[insert name of Company involved in the acquisition of, or merger or
consolidation with, the Company], a wholly owned subsidiary of [insert name of
ultimate parent Company] (the "Parent"), [insert name of surviving company]
(the "Surviving Company") will be the surviving company. The Company is a
party to the Product Development Agreement, the Purchase Agreement, the Sales
Agency Agreement and the Warrants (each as defined in Schedule I to the
Product Development Agreement dated as of _____________, 1997 between the
Company and ICOS Clinical Partners, L.P. (the "Partnership") and,
collectively, the "Agreements").
Each of the undersigned is familiar with the content of the Agreements
and acknowledges and agrees that the Surviving Company will be bound by all
the terms of the Agreements as though it were the Company and an initial
signatory thereto. The Surviving Company agrees that, upon the consummation
of the [acquisition/merger/consolidation], it will fully perform all the
Company's obligations under the Agreements, including, but not limited to, the
obligation of the Company to carry out the Research Program and the Marketing
Program in the manner described in the Product Development Agreement. The
Surviving Company agrees to respect the fiduciary duty of ICOS Development
<PAGE>
Corporation, the general partner of the Partnership (the "General Partner"),
to the limited partners of the Partnership. The Parent agrees not to impede
the Surviving Company's performance of its obligations under the Agreements or
the General Partner's fulfilling such fiduciary duty.
Each of the undersigned understands that your remedies at law may be
inadequate to compensate you for any injury that may result from the Surviving
Company's failure or threatened failure to honor the Company's obligations
under the Agreements, and agrees that, in addition to such remedies at law,
you shall be entitled, without proof of actual injury, to obtain equitable
relief in the form of specific performance, a temporary restraining order, a
temporary or permanent injunction or any other equitable remedy that you may,
in your sole discretion, deem necessary or appropriate to carry out the
purposes, or ensure the benefits to the beneficiaries of, the Agreements.
Each of the undersigned has caused this letter to be executed as of the date
first written above as its duly authorized, valid and binding agreement. This
letter shall be effective as of the date of the consummation of the proposed
[acquisition/merger/consolidation].
Very truly yours,
[SURVIVING COMPANY]
By ________________________________
[Name]
Chief Executive Officer
[PARENT]
By ________________________________
[Name]
Chief Executive Officer
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