<PAGE>
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
December 19, 1997
(Date of Report - earliest event reported)
DURA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-19809 95-3645543
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
7475 LUSK BOULEVARD, SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE IS (619) 457-2553
Page 1
<PAGE>
Item 2. Acquisition or Disposition of Assets
On December 19, 1997, Dura Pharmaceuticals, Inc. (the "Company" or "Dura")
acquired all of the outstanding shares of callable common stock of Spiros
Development Corporation ("Spiros Corp."), a separate, private company.
Spiros Corp. was formed in December 1995 to fund the development of a
proprietary pulmonary drug delivery system, Spiros-TM-, for use with
currently marketed asthma drugs. Dura acquired all of the outstanding shares
of Spiros Corp. by giving notice of exercise the purchase option for the
Spiros Corp. callable common stock on November 6, 1997. The purchase option
was originally acquired in 1995 from Spiros Corp.'s shareholders in exchange
for the issuance to such shareholders of warrants to purchase Dura's common
stock. The purchase price of $45,707,000 for the outstanding securities of
Spiros Corp., consisting of callable common stock and options, was paid by
the issuance of 896,606 shares of Dura common stock valued at $43,755,000 and
a cash payment of $1,952,000 from Dura's existing cash and cash equivalents.
Dura filed a registration statement on Form S-3 with respect to the resale of
the shares of Dura common stock issued in payment of the option exercise,
which was declared effective on December 18, 1997.
The acquistion was consummated based on the terms set forth in (i) Section 9
of the Purchase Agreement dated December 29, 1995 between Dura, Spiros Corp.
and the Spiros Corp. shareholders, (ii) Article IV of the Restated
Certificate of Incorporation of Spiros Corp. and (iii) the Agreement and Plan
of Merger dated December 18, 1997 between Dura, Spiros Corp. and SDC
Acquisition Corp. ("SDC Acquisition"), a Delaware corporation. The acquistion
was effected through the merger of Spiros Corp. with SDC Acquisition, a
wholly-owned subsidiary of Dura, which was effective on December 19, 1997. As
a result of the acquisition, Spiros Corp. is now a wholly-owned subsidiary of
Dura.
The acquisition has been treated as a purchase for accounting purposes and,
accordingly, the Company has allocated the purchase price to the fair value
of the net assets acquired. The net assets acquired consisted of
approximately $1.0 million in cash; accordingly, the excess purchase price
over the fair value of the net assets acquired was $44.7 million. This amount
was allocated to in-process technology and was expensed by Dura as a one-time
non-cash charge in December 1997.
Spiros Corp.'s activities prior to the acquisition consisted of developing
Spiros-TM- for use with three existing asthma drugs licensed from Dura. The
development activities of Spiros Corp. were being performed and managed under a
contract with Dura. Two directors of Spiros Corp. are officers and directors
of Dura.
In December 1997, Dura and Spiros Corp. licensed certain rights to specified
compounds for use with Spiros-TM- to Spiros Development Corporation II, Inc.
("Spiros Corp. II"), a separate, newly-formed corporation (see Item 5 herein).
The foregoing description of the acquisition is qualified in its entirety by
reference to the exhibits attached hereto and incorporated herein by
reference.
Item 5. Other Events
On December 22, 1997, Dura contributed $75.0 million in cash to Spiros Corp.
II, and Dura and Spiros Corp. II completed a Public offering of 6,325,000
Units. Each Unit consisted of one share of callable common stock of Spiros
Corp. II and one warrant to purchase one-fourth of one share of common stock
of Dura. As a result of the offering, warrants to purchase an aggregate of
1,581,250 shares of Dura common stock at $54.84 per share were issued to
Spiros Corp. II shareholders. Dura has the right, through December 31, 2002,
to purchase all of the shares of Spiros Corp. II callable common stock at
predetermined prices, beginning at $24.01 per share, or an aggregate of
$151.9 million,
2
<PAGE>
through December 31, 1999 and increasing on a quarterly basis thereafter to a
maximum of $45.95 per share, or an aggregate of $290.6 million, on December 31,
2002. The purchase option exercise price may be paid in cash or shares of
Dura common stock, or any combination of the foregoing, at Dura's sole
discretion. In addition, Dura has the option, through specified dates, to
acquire Spiros Corp. II's exclusive rights for the use of Spiros with (i) the
asthma drug albuterol and (ii) a second asthma drug being developed by
Spiros Corp. II, to be selected by Dura. A one-time purchase option expense
of $75.0 million, representing the cash contributed to Spiros Corp. II, was
recorded by Dura in December 1997. The Company will also record a warrant
subscription receivable and a corresponding increase to paid-in capital for
the estimated fair value of the warrants issued.
Dura and Spiros Corp. II have entered into certain technology license,
development, manufacturing and marketing, and services agreements, under which
Spiros Corp. II will contract with Dura for the ongoing development of Spiros
with specified asthma drugs. Future payments to be received by Dura from Spiros
Corp. II for the development of Spiros will be prorated between contract revenue
and the warrant subscription receivable.
The description of the events set forth above is qualified in its entirety by
reference to the exhibits which are attached hereto and incorporated herein
by reference.
Item 7. Financial Statements and Exhibits
Listed below are the financial statements and pro forma financial information
filed as part of this report on Form 8-K.
a. Financial Statements of Spiros Development Corporation (a development
stage enterprise):
Independent Auditors' Report
Balance Sheets as of December 31, 1995 and 1996 and September 30,
1997 (unaudited).
Statements of Operations for the period December 5, 1995 (date of
incorporation) to December 31, 1995, the year ended December 31,
1996, the period December 5, 1995 to December 31, 1996, the nine
months ended September 30, 1996 and 1997 (unaudited), and the
period December 5, 1995 to September 30, 1997 (unaudited).
Statements of Cash Flows for the period December 5, 1995 (date of
incorporation) to December 31, 1995, the year ended December 31,
1996, the period December 5, 1995 to December 31, 1996, the nine
months ended September 30, 1996 and 1997 (unaudited), and the
period December 5, 1995 to September 30, 1997 (unaudited).
Statements of Shareholders' Equity for the period December 5,
1995 (date of incorporation) to December 31, 1995, the year
ended December 31, 1996, and the nine months ended September 30,
1997
Notes to Financial Statements.
3
<PAGE>
b. Pro Forma Financial Information:
The following unaudited pro forma condensed consolidated balance
sheet as of September 30, 1997 and the unaudited pro forma condensed
consolidated statements of operations for the year ended December 31,
1996 and for the nine months ended September 30, 1997 give effect to
the acquisition of Spiros Corp. as if it occurred as of September 30,
1997 for the condensed consolidated balance sheet and as of January 1,
1996 for the condensed consolidated statements of operations. These
pro forma condensed consolidated financial statements have been
prepared by management of Dura based on historical financial
statements of Dura and Spiros Corp. and on the assumptions and
adjustments as discussed in the accompanying notes to the pro forma
condensed consolidated financial statements. The acquisition has been
accounted for as a purchase and the pro forma financial information
gives effect to the preliminary allocation of the purchase price to
the acquired assets of Spiros Corp. The final purchase price
allocation will be made at a future date, which may result in
adjustments to the preliminary allocation.
In the opinion of management, all pro forma adjustments necessary to
state fairly such pro forma financial information have been made. The
unaudited pro forma condensed consolidated financial statements are
not necessarily indicative of what actual results of operations would
have been for the periods had the acquisition occurred on the date
indicated. In addition, such pro forma financial statements do not
purport to indicate the results of future operations or financial
position of the Company from the acquisition date forward.
c. Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1.1 (a) U.S. Purchase Agreement dated December 16, 1997 between Dura
Pharmaceuticals, Inc. ("Dura"), Spiros Development Corporation
II, Inc. ("Spiros Corp. II"), and the underwriters listed on
Schedule A thereto.
1.2 (a) International Purchase Agreement dated December 16, 1997 between
Dura, Spiros Corp. II, and the managers listed on Schedule A
thereto.
2.1 (b) Purchase Agreement dated December 29, 1995 between Dura, Spiros
Development Corporation ("Spiros Corp."), and the entities listed
on the schedule of purchasers attached thereto.
2.2 Agreement and Plan of Merger dated December 18, 1995 between
Dura, Spiros Corp. and SDC Acquisition Corp.
4.1(a) Amended and Restated Certificate of Incorporation of Spiros
Corp. II, filed December 19, 1997 with the Deleware Secretary of
State.
4.2(c) By-laws of Spiros Corp. II.
4.3 Purchase Option (included in Exhibit 4.1)
4.4 Warrant Agreement dated December 22, 1997 between Dura and
ChaseMellon Shareholder Services L.L.C., as warrant agent,
including form of Warrant.
4.5 Form of Warrant (included in Exhibit 4.4).
4.6 Specimen Unit Certificate.
4.7 Specimen Certificate of Spiros Corp. II Callable Common Stock.
4.8 Stock Certificate of SDC II Special Shares.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
99.1 Technology License Agreement dated December 22, 1997 between
Dura, Dura Delivery Systems, Inc., Spiros Corp. and Spiros
Corp. II.
99.2 Development Agreement dated December 22, 1997 between Dura and
Spiros Corp. II.
99.3 Albuterol and Product Option Agreement dated December 22, 1997,
between Dura and Spiros Corp. II.
99.4 Manufacturing and Marketing Agreement dated December 22, 1997,
between Dura and Spiros Corp. II.
99.5 Services Agreement dated December 22, 1997, between Dura and
Spiros Corp. II.
99.6 Press Release dated October 10, 1997.
99.7 Press Release dated December 17, 1997.
(a) Incorporated by reference to Schedule 13D filed by Dura on January 2,
1998.
(b) Incorporated by reference to the Company's Current Report on Form 8-K
dated December 29, 1995, as filed on January 9, 1996.
(c) Incorporated by reference to the Company's Registration Statement on
Forms S-1/S-3, filed October 10, 1997, as amended.
</TABLE>
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Spiros Development Corporation:
We have audited the accompanying balance sheets of Spiros Development
Corporation (a development stage enterprise) (the "Company") as of December
31, 1995 and 1996, the related statements of operations, shareholders' equity
and cash flows for the period December 5, 1995 (date of incorporation) to
December 31, 1995, the year ended December 31, 1996 and for the period from
December 5, 1995 (date of incorporation) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1996, and the results of its operations and its cash flows for the period
December 5, 1995 (date of incorporation) to December 31, 1995, the year
ended December 31, 1996, and for the period from December 5, 1995 (date of
incorporation) to December 31, 1996 in conformity with generally accepted
accounting principles.
The Company is in the development stage as of December 31, 1996. As discussed
in Note 1 to the financial statements, the Company has yet to complete
product development, obtain required regulatory approvals, or verify the
market acceptance and demand for its products. As discussed in Note 7 to the
financial statements, on December 19, 1997 Dura Pharmaceuticals, Inc. acquired
all of the callable common stock of the Company.
/s/ DELOITTE & TOUCHE LLP
San Diego, California
March 21, 1997 (December 19, 1997 as to Note 7)
5
<PAGE>
SPIROS DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996 SEPTEMBER 30, 1997
------------- -------------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 26,966,535 $ 10,628,486 $ 718,250
Short-term investments.......................................... 8,040,807 13,188,559 4,132,341
------------- -------------- --------------
Total assets................................................ $ 35,007,342 $ 23,817,045 $ 4,850,591
------------- -------------- --------------
------------- -------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Account payable to Dura Pharmaceuticals, Inc.................... $ 413,078 $ 2,234,293 $ 2,325,013
Accrued liabilities............................................. 400,000 8,153 8,153
------------- -------------- --------------
Total liabilities........................................... 813,078 2,242,446 2,333,166
------------- -------------- --------------
SHAREHOLDERS' EQUITY:
Callable common stock, $.001 par value, authorized--
1,073,334 shares; issued and outstanding--933,334 shares...... 933 933 933
Additonal paid-in capital....................................... 40,423,656 40,641,121 40,641,121
Callable common stock subscription receivable................... (6,000,000)
Unrealized gain (loss) on short-term investments................ (1,866) 14,507 1,461
Deficit accumulated during the development stage................ (228,459) (19,081,962) (38,126,090)
------------- -------------- --------------
Total shareholders' equity.................................. 34,194,264 21,574,599 2,517,425
------------- -------------- --------------
Total liabilities and shareholders' equity ................. $ 35,007,342 $ 23,817,045 $ 4,850,591
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SPIROS DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
DECEMBER 5, DECEMBER 5, DECEMBER 5,
1995 1995 1995
(DATE OF (DATE OF (DATE OF
INCORPORATION) INCORPORATION) NINE MONTHS ENDED INCORPORATION)
TO YEAR ENDED TO SEPTEMBER 30, TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------- SEPTEMBER 30,
1995 1996 1996 1996 1997 1997
------------- ----------- ------------- ----------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Contract....................... $ 200,000 $ 200,000 $ 200,000
Interest....................... $ 9,188 1,788,419 1,797,607 $ 1,444,098 $ 687,954 2,485,561
--------- ----------- ------------ ------------ ------------ ------------
Total revenues............. 9,188 1,988,419 1,997,607 1,444,098 687,954 2,685,561
--------- ----------- ------------ ------------ ------------ ------------
EXPENSES:
Research and
development.................. 237,647 16,173,971 16,411,618 11,535,823 14,862,718 31,274,336
General and
administrative............... 4,666,292 4,666,292 2,510,807 4,869,364 9,535,656
Income taxes................... 1,659 1,659 1,659
--------- ------------ ------------ ------------ ------------ ------------
Total expenses............. 237,647 20,841,922 21,079,569 14,046,630 19,732,082 40,811,651
--------- ------------ ------------ ------------ ------------ ------------
NET LOSS......................... $(228,459) $(18,853,503) $(19,081,962) $(12,602,532) $(19,044,128) $(38,126,090)
--------- ------------ ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SPIROS DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 5, 1995
DECEMBER 5, 1995 DECEMBER 5, 1995 NINE MONTHS ENDED (DATE OF
(DATE OF (DATE OF SEPTEMBER 30, INCORPORATION)
INCORPORATION) TO YEAR ENDED INCORPORATION) TO ------------------------ TO
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1996 1996 1997 SEPTEMBER 30, 1997
----------------- ----------------- ----------------- ----------- ----------- ------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss......................... $ (228,459) $ (18,853,503) $(19,081,962) $(12,602,532) $(19,044,128) $(38,126,090)
Adjustments to reconcile net
loss to net cash provided by
(used for) operating
activities:
Compensation expense--stock
options...................... 242,075 242,075 242,075 242,075
Changes in assets and
liabilities:
Account payable.............. 237,647 1,996,646 2,234,293 1,478,831 90,719 2,325,012
Accrued liabilities.......... 8,153 8,153 10,118 8,153
------------- -------------- ------------ ---------- ------------ ----------
Net cash provided by
(used for) operating
activities............... 9,188 (16,606,629) (16,597,441) (10,871,508) (18,953,409) (35,550,850)
------------- -------------- ------------ ---------- ------------ ----------
INVESTING ACTIVITIES:
Purchases of short-term
investments.................... (8,042,673) (31,068,586) (39,111,259) (25,068,590) (3,177,612) (42,288,871)
Sales and maturities of
short-term investments......... 25,937,207 25,937,207 16,820,942 12,220,785 38,157,992
-------------- -------------- ----------- ---------- ----------- ----------
Net cash provided by (used for)
investing activities..... (8,042,673) (5,131,379) (13,174,052) (8,247,648) 9,043,173 (4,130,879)
-------------- -------------- ----------- ---------- ----------- ----------
FINANCING ACTIVITIES:
Net proceeds from issuance of
callable common stock.......... 21,424,589 5,975,390 27,399,979 5,975,390 27,399,979
Increase (decrease) in accrued
issuance costs................. 575,431 (575,431) (575,431)
Contributions from Dura
Pharmaceuticals, Inc........... 13,000,000 13,000,000 13,000,000
-------------- -------------- ----------- ---------- ----------- ----------
Net cash provided by
financing activities..... 35,000,020 5,399,959 40,399,979 5,399,959 -- 40,399,979
-------------- -------------- ----------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS........ 26,966,535 (16,338,049) 10,628,486 (13,719,197) (9,910,236) 718,250
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD.............. -- 26,966,535 -- 26,966,535 10,628,486 --
-------------- -------------- ----------- ---------- ----------- ----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD........................... $26,966,535 $ 10,628,486 $10,628,486 $13,247,338 $ 718,250 $ 718,250
-------------- -------------- ----------- ---------- ----------- ----------
-------------- -------------- ----------- ---------- ----------- ----------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SPIROS DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CALLABLE DEFICIT
CALLABLE COMMON UNREALIZED ACCUMULATED
COMMON STOCK ADDITIONAL STOCK GAIN (LOSS) DURING THE
---------------------- PAID-IN SUBSCRIPTION ON DEVELOPMENT
SHARES AMOUNT CAPITAL RECEIVABLE INVESTMENTS STAGE TOTAL
--------- ----------- ---------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 5, 1995
(Date of Incorporation)............
Issuance of callable common stock,
net................................ 933,334 $ 933 $27,423,656 $(6,000,000) $21,424,589
Contribution from Dura
Pharmaceuticals, Inc............... 13,000,000 13,000,000
Unrealized loss on
available-for-sale short-term
investments........................ $ (1,866) (1,866)
Net loss............................. $ (228,459) (228,459)
--------- ----- ---------- ------------ ----------- ------------ -----------
BALANCE, DECEMBER 31, 1995........... 933,334 933 40,423,656 (6,000,000) (1,866) (228,459) 34,194,264
Collection of callable common stock
subscription receivable............ 6,000,000 6,000,000
Additional issuance costs incurred
during 1996........................ (24,610) (24,610)
Unrealized gain on available-for-sale
short-term investments............. 16,373 16,373
Compensation expense--stock
options............................ 242,075 242,075
Net loss............................. (18,853,503) (18,853,503)
--------- ----- ---------- ------------ ----------- ------------ -----------
BALANCE, DECEMBER 31, 1996........... 933,334 933 40,641,121 -- 14,507 (19,081,962) 21,574,599
UNAUDITED:
Unrealized loss on available-for-sale
short-term investments............. (13,046) (13,046)
Net loss............................. (19,044,128) (19,044,128)
--------- ----- ---------- ------------ ----------- ------------ -----------
BALANCE, SEPTEMBER 30, 1997.......... 933,334 $ 933 $40,641,121 $ -- $ 1,461 ($38,126,090) $ 2,517,425
--------- ----- ---------- ------------ ----------- ------------ -----------
--------- ----- ---------- ------------ ----------- ------------ -----------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SPIROS DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY--Spiros Development Corporation (the "Company") was incorporated
on December 5, 1995 for the purpose of funding the development of Spiros, a
proprietary drug delivery system licensed to the Company from Dura
Pharmaceuticals, Inc. ("Dura"). Through a series of license, development, and
management agreements with Dura, the Company is developing Spiros and the use of
Spiros with three leading asthma drugs: albuterol, beclomethasone, and
ipratropium (the "Compounds") (see Notes 3 and 4). Two members of the Company's
board of directors are officers of Dura.
BASIS OF ACCOUNTING--The Company is currently engaged in the development of
Spiros products and has yet to complete product development, obtain required
regulatory approvals, or verify the market acceptance and demand for its
products. Accordingly, its activities have been accounted for as those of a
"development stage enterprise" as set forth in Statement of Financial Accounting
Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage
Enterprises." Among the disclosures required by SFAS 7 are that the Company's
financial statements be identified as those of a "development stage enterprise"
and that the Statements of Operations, Shareholders' Equity, and Cash Flows
disclose activities since the date of the Company's inception.
At December 31, 1996, the Company had working capital of $21.6 million. The
Company estimates that these funds will be sufficient to fund product
development through 1997. However, completion of the Company's planned
development of Spiros with the Compounds will require additional funding.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS--The Company considers cash
equivalents to include only highly liquid securities with an original maturity
of three months or less. Short-term investments consist of government
securities, corporate bonds, and commercial paper which management has
classified as available-for-sale in the accompanying financial statements (Note
2). Such investments are carried at fair value, with unrealized gains and losses
reported as a separate component of shareholders' equity.
CONCENTRATION OF CREDIT RISK--The Company invests its excess cash in U.S.
Government securities and debt instruments of financial institutions and
corporations with strong credit ratings. The Company has established guidelines
relative to diversification of its cash investments and their maturities, which
are designed to maintain safety and liquidity. These guidelines are periodically
reviewed and modified to take advantage of trends in yields and interest rates.
The Company has not experienced any significant losses on its cash equivalents
or short-term investments.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
related notes. Changes in those estimates may affect amounts reported in future
periods.
ACCOUNTING FOR STOCK-BASED COMPENSATION--In 1996, the Company elected to
adopt only the disclosure provisions of the Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." Therefore, the
adoption of this standard did not have an effect on the Company's financial
position or results of operations (see Note 5).
INTERIM FINANCIAL INFORMATION--The financial statements as of September
30, 1997, for the nine months ended September 30, 1996 and 1997, and for the
period from December 5, 1995 (date of incorporation) to September 30, 1997
are unaudited. These financial statements reflect all adjustments, consisting
only of normal recurring adjustments which, in the opinion of management, are
necessary to fairly present the Company's financial position as of September
30, 1997, the results of its operations for the nine months ended September
30, 1996 and 1997, and the results of operations from December 5, 1995 (date
of incorporation) to September 30, 1997. The results of operations for the
nine months ended September 30, 1997 are not necessarily indicative of the
results to be expected for the year ending December 31, 1997.
10
<PAGE>
SPIROS DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHORT-TERM INVESTMENTS
The following is a summary of short-term investments:
<TABLE>
<CAPTION>
UNREALIZED ESTIMATED
GAINS FAIR
COST (LOSSES) VALUE
------------- ----------- -------------
<S> <C> <C> <C>
DECEMBER 31, 1995:
Corporate obligations.............................. $ 8,042,673 $ (1,866) $ 8,040,807
DECEMBER 31, 1996:
Corporate obligations.............................. $ 13,174,052 $ 14,507 $ 13,188,559
</TABLE>
At December 31, 1996, all short-term investments mature within one year.
3. SHAREHOLDERS' EQUITY
On December 29, 1995, the Company completed a private placement of
933,334 units. Each unit sold for $30 and consisted of 1 share of the
Company's callable common stock and a Series S warrant to purchase 2.4 shares
of Dura's common stock. Net proceeds to the Company totaled $27.4 million.
The Company also received a $13 million contribution from Dura. In exchange
for this contribution and the Series S warrants, Dura has the right ("Spiros
Purchase Option") through December 31, 1999, to purchase all of the
outstanding shares of the Company's callable common stock at predetermined
prices. The purchase price is $46.88 per share through December 31, 1997 and
increases on a quarterly basis thereafter to a maximum of $76.17 per share on
December 31, 1999. Based on shares outstanding and shares reserved for
options outstanding at December 31, 1996, the aggregate purchase price would
be $49.8 million through December 31, 1997 to a maximum of $80.8 million on
December 31, 1999. The purchase price may be paid, at Dura's discretion, in
cash, shares of Dura common stock, or a combination thereof. Dura has no
legal obligation to exercise the Spiros Purchase Option.
In addition, Dura has the option through specific dates to acquire the
Company's exclusive rights for the use of albuterol with the cassette version
of Spiros ("Albuterol Purchase Option") for a minimum purchase price of $15
million. If Dura exercises the Albuterol Purchase Option and does not
exercise its Spiros Purchase Option, Dura will pay a royalty to the Company
on net sales of such product. (See Note 7.)
4. LICENSE, ROYALTY AND DEVELOPMENT AGREEMENTS
DURA PHARMACEUTICALS, INC.--In connection with the December 29, 1995 private
placement, the Company also entered into certain other agreements with Dura
which are summarized as follows:
TECHNOLOGY LICENSE AGREEMENT--Under this agreement, Dura granted to the
Company, subject to existing agreements with Mitsubishi Chemical
Corporation, a royalty-bearing, perpetual, exclusive license to use Spiros
in connection with the Compounds, certain off-patent proteins and compounds,
and certain non-exclusive rights to other compounds. This agreement expires
upon exercise by Dura of the Spiros Purchase Option and prior to such
expiration, Dura may exercise the Albuterol Purchase Option under terms set
forth in the agreement.
INTERIM MANUFACTURING AND MARKETING AGREEMENT--Under this agreement, the
Company granted to Dura an exclusive license to manufacture and market
Spiros Corp. products in the U.S. in exchange for a royalty of 10.0% on net
product sales, as defined. Such agreement expires upon exercise or
termination of the Spiros Purchase Option.
11
<PAGE>
SPIROS DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LICENSE, ROYALTY AND DEVELOPMENT AGREEMENTS (CONTINUED)
DEVELOPMENT AND MANAGEMENT AGREEMENT--Under this agreement, the Company
has engaged Dura to develop the Company's products and provide general
management services to the Company. The Company reimburses Dura for (1) all
direct development costs plus a fee equal to 25% of all such costs and (2)
indirect development costs plus a fee equal to 15% of such costs. The
Agreement requires the Company to make payments to Dura for costs made on
behalf of the Company within 15 days after the month end in which the costs
were incurred. Fees paid to Dura for development of products and general
management services were $237,647, $20,598,188 and $20,835,835 for the
period December 5, 1995 (date of incorporation) to December 31, 1995,
the year ended December 31, 1996, and the period from December 5, 1995
(date of incorporation) through December 31, 1996, respectively.
MITSUBISHI CHEMICAL CORPORATION ("MCC")--The Company has entered into a
license and supply agreement with MCC whereby MCC was granted a license to
use and sell Spiros with certain compounds in defined territories located in
Asia. Under the agreement, the Company is developing formulations of the
compounds for use with Spiros, as well as a process to manufacture such
products. The Company is entitled to development payments upon achieving
specified milestones. Contract revenue under the agreement is recognized as
performance requirements are met. Contract revenue of $200,000 was recorded
during the year ended December 31, 1996.
5. STOCK OPTION PLAN
Under the 1996 Stock Option Plan (the "Plan"), the Company may grant options
to purchase up to 140,000 shares of the Company's callable common stock to
employees, directors, and consultants who provide services to the Company at
prices not less than 85% of the fair value of a share of callable common stock.
These options generally expire ten years from the date of the grant. Unexercised
options generally terminate upon the execution of a corporate transaction, as
defined in the plan agreement. Shares issued upon the exercise of options are
subject to certain restrictions regarding their disposition.
No options were granted during the period ended December 31, 1995. During
the year ended December 31, 1996, options to purchase 128,000 shares were
granted at a weighted average exercise price of $31.52, all of which remained
outstanding at December 31, 1996. Each of the options was fully exercisable
upon the date of the grant. The options granted have exercise prices ranging
from $30.00 to $33.87 and had a weighted average remaining contractual life
of 9.25 years at December 31, 1996. In accordance with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), the Company applies Accounting Principles Board Opinion No. 25
and related interpretations in accounting for stock options granted to
employees and, accordingly, no compensation cost has been recognized for
stock options granted to employees. In accordance with SFAS 123, options
granted to non-employees are accounted for based on their estimated fair
value at grant date. During the year ended December 31, 1996, 73,000 options
were granted to non-employees for which the Company recorded compensation
expense of $242,075. If the Company had elected to recognize compensation
cost for options granted to employees based on the fair value of the options
granted at the grant date, net loss for the year ended December 31, 1996
would have been increased by $193,935. The estimated weighted average fair
value at grant date for options granted during 1996 was $3.41. The fair value
of options at the date of grant was estimated using the Black-Scholes
option-pricing model with the following assumptions:
12
<PAGE>
SPIROS DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C>
Expected dividend yield............................................ None
Risk-free interest rate............................................ 5.8%
Expected life of options........................................... 2 years
</TABLE>
6. INCOME TAXES
Deferred taxes represent the net tax effects of temporary differences
between the carrying value of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred tax assets at December 31, 1996 are as follows:
<TABLE>
<S> <C>
Net operating loss carryforwards................................ $6,281,973
Research costs capitalized for tax purposes..................... 977,897
Research credit carryforwards................................... 603,720
----------
Total deferred tax assets....................................... 7,863,590
Valuation allowance for deferred tax assets..................... (7,863,590)
----------
Net deferred tax assets..................................... $ 0
----------
</TABLE>
The Company has provided a valuation allowance against deferred tax assets
due to uncertainties as to their ultimate realization. At December 31, 1996, the
Company had federal net operating loss carryforwards totaling approximately
$18.2 million which begin to expire in 2010.
7. EXERCISE OF SPIROS PURCHASE OPTION BY DURA PHARMACEUTICALS, INC.
(UNAUDITED)
On December 19, 1997, Dura acquired all of the Company's callable common
stock. The purchase price of $45.7 million was paid through the issuance of
896,606 shares of Dura common stock valued at $43.8 million and $1.9 million
in cash.
13
<PAGE>
DURA PHARMACEUTICALS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1997
IN THOUSANDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Spiros Purchase Pro Forma
ASSETS Dura Corp. Adjustments Consolidated
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Current Assets:
Cash, cash equivalents, and short-term investments $ 454,710 $ 4,851 $ (1,952) (2b) $ 457,609
Other current asssets 43,707 (2,325) (2a) 41,382
-------------- ------------- ------------ -------------
Total current assets 498,417 4,851 (4,277) 498,991
Property 44,148 44,148
License Agreements and Product Rights 248,743 248,743
Other Non-Current Assets 29,797 29,797
-------------- ------------- ------------ -------------
Total $ 821,105 $ 4,851 $ (4,277) $ 821,679
-------------- ------------- ------------ -------------
-------------- ------------- ------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 38,193 $ 2,333 $ (2,325) (2a) $ 38,201
Current portion of long-term obligations 2,948 2,948
-------------- ------------- ------------ -------------
Total current liabilities 41,141 2,333 (2,325) 41,149
Convertible Subordinated Notes 287,500 287,500
Other Non-Current Liabilities 10,167 10,167
-------------- ------------- ------------ -------------
Total liabilities 338,808 2,333 (2,325) 338,816
-------------- ------------- ------------ -------------
Shareholders' Equity:
Common stock 44 1 - (2b) 45
Additional paid-in capital 533,003 40,641 3,113 (2b) 576,757
Accumulated deficit (49,597) (38,126) (6,411) (2b,c) (94,134)
Unrealized gain on investments 195 2 (2) (2b) 195
Warrant subscriptions receivable (1,348) 1,348 (2c)
-------------- ------------- ------------ -------------
Total shareholders' equity 482,297 2,518 (1,952) 482,863
-------------- ------------- ------------ -------------
Total $ 821,105 $ 4,851 $ (4,277) $ 821,679
-------------- ------------- ------------ -------------
-------------- ------------- ------------ -------------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
14
<PAGE>
DURA PHARMACEUTICALS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Spiros Purchase Pro Forma
Dura Corp. Adjustments Consolidated
--------- --------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 79,563 $ 79,563
Contract 24,556 $ 200 $ (19,138) (3a) 5,618
--------- --------- ---------- ----------
Total revenues 104,119 200 (19,138) 85,181
--------- --------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Cost of sales 21,301 21,301
Clinical, development and regulatory 18,540 16,174 (16,174) (3b) 18,540
Selling, general and administrative 42,631 4,666 (4,666) (3b) 42,631
--------- --------- ---------- ----------
Total operating costs and expenses 82,472 20,840 (20,840) 82,472
--------- --------- ---------- ----------
OPERATING INCOME (LOSS) 21,647 (20,640) 1,702 2,709
--------- --------- ---------- ----------
OTHER:
Interest income 6,897 1,788 8,685
Interest expense (677) (677)
--------- --------- ---------- ----------
Total other 6,220 1,788 8,008
--------- --------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 27,867 (18,852) 1,702 10,717
PROVISION FOR INCOME TAXES 3,539 2 (2,625) (3c) 916
--------- --------- ---------- ----------
NET INCOME (LOSS) $ 24,328 $ (18,854) $ 4,327 $ 9,801
--------- --------- ---------- ----------
--------- --------- ---------- ----------
NET INCOME PER SHARE $ 0.60 $ 0.24
--------- ----------
--------- ----------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES 40,479 41,376
--------- ----------
--------- ----------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial
statements.
15
<PAGE>
DURA PHARMACEUTICALS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Spiros Purchase Pro Forma
Dura Corp. Adjustments As Adjusted
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 105,437 $ 105,437
Contract 22,430 $ (18,331) (3a) 4,099
------------ ------------ ------------ ------------
Total revenues 127,867 - (18,331) 109,536
------------ ------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Cost of sales 23,373 23,373
Clinical, development and regulatory 18,160 $ 14,863 (14,863) (3b) 18,160
Selling, general and administrative 49,485 4,869 (4,869) (3b) 49,485
------------ ------------ ------------ ------------
Total operating costs and expenses 91,018 19,732 (19,732) 91,018
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) 36,849 (19,732) 1,401 18,518
------------ ------------ ------------ ------------
OTHER:
Interest income 11,434 688 12,122
Interest expense (2,531) (2,531)
------------ ------------ ------------ ------------
Total other 8,903 688 - 9,591
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 45,752 (19,044) 1,401 28,109
PROVISION FOR INCOME TAXES 16,357 (7,057) (3c) 9,300
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 29,395 $ (19,044) $ 8,458 $ 18,809
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET INCOME PER SHARE $ 0.62 $ 0.39
------------ ------------
------------ ------------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES 47,392 48,289
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial
statements.
16
<PAGE>
Dura Pharmaceuticals, Inc.
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
1. On December 19, 1997, Dura Pharmaceuticals, Inc. (the "Company" or
"Dura") acquired all of the outstanding shares of callable common stock of
Spiros Development Corporation ("Spiros Corp") for an aggregate purchase
price of $45,707,000. The purchase price was paid through the issuance of
896,606 shares of Dura common stock and a cash payment of $1,952,000. The
acquisition has been accounted for as a purchase business combination.
Dura has initially assigned the estimated aggregate excess of cost over
the fair value of net assets acquired to in-process technology. The
charge to earnings for in-process technology has not been reflected in
the pro forma condensed consolidated statements of operations as it is
non-recurring, but is reflected in the pro forma condensed consolidated
balance sheet.
2. The pro forma condensed consolidated balance sheet includes the adjustments
necessary as if the purchase of Spiros Corp. had occurred on September 30,
1997. The adjustments are summarized as follows (dollars in thousands):
(a) To eliminate intercompany accounts payable and receivable.
Accounts payable and accrued liabilities $ 2,325
Other current assets $ 2,325
(b) To record the issuance of 896,606 shares of the Company's common
stock valued at $43,755 and a cash payment of $1,952 for the acquisition of
Spiros Corp., the elimination of Spiros Corp.'s equity accounts, and a
charge to earnings resulting from the allocation of acquisition
cost to in-process technology.
Accumulated deficit $ 43,189
Additional paid-in capital 40,641
Common stock 1
Unrealized gain on investments 2
17
<PAGE>
Cash $ 1,952
Additional paid-in capital 43,754
Common stock 1
Accumulated deficit 38,126
(c) To eliminate warrant subscriptions receivable.
Accumulated deficit $ 1,348
--------
Warrant subscriptions receivable $ 1,348
3. The pro forma condensed consolidated statements of operations include the
adjustments necessary to reflect the purchase of Spiros Corp. as if it had
occurred on January 1, 1996. The pro forma adjustments are summarized as
follows (dollars in thousands):
For the year ended December 31, 1996:
(a) To eliminate contract revenue recognized by the Company related to
activities conducted on behalf of Spiros Corp. Because a pro rata portion
of the amounts paid by Spiros Corp. to the Company is allocated to warrant
subscriptions receivable, the contract revenue recognized by the Company
does not equal the total research and development and general and
administrative expenses recorded by Spiros Corp. $ 19,138
(b) To eliminate research and development and general and administrative
expenses recognized by Spiros Corp. related to activities conducted by the
Company.
Clinical, development and regulatory $ 16,174
General and administrative 4,666
(c) To record the reduction in the provision for income taxes related to
the decrease in income before income taxes resulting from the combination
of the Company and Spiros Corp. (see further discussion
below). $ 2,625
For the nine months ended September 30, 1997:
(a) To eliminate contract revenue recognized by the Company related to
activities conducted on behalf of Spiros Corp. Because a pro rata portion
of the amounts paid by Spiros Corp. to the Company is allocated to warrant
subscriptions receivable, the contract revenue recognized by the Company
does not equal the total research and development and general and
administrative expenses recorded by Spiros Corp. $ 18,331
(b) To eliminate research and development and general and administrative
expenses recognized by Spiros Corp. related to activities conducted by the
Company.
Clinical, development and regulatory $ 14,863
General and administrative 4,869
(c) To record the reduction in the provision for income taxes related to
the decrease in income before income taxes resulting from the combination
of the Company and Spiros Corp. (see further discussion
below). $ 7,057
No income tax benefit was recognized by Spiros Corp. in its historical
financial statements for the increase in its deferred tax assets due to the
uncertainty regarding its ability to realize those assets. Accordingly,
the pro forma adjustments for the provision for income taxes for the year
ended December 31, 1996 and the nine months ended September 30, 1997 were
determined by combining the results of operations of Spiros Corp. with
those of the Company for the respective periods and calculating the
provision for income taxes as if the Company had acquired Spiros Corp. on
January 1, 1996.
18
<PAGE>
The weighted average number of shares used to calculate pro forma net
income per share for the year ended December 31, 1996 and the nine months
ended September 30, 1997 is based on the historical weighted average shares
outstanding for the Company for the respective periods adjusted to reflect
as of January 1, 1996 the assumed issuance of 896,606 shares of the
Company's common stock as discussed in Note 1.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K to be signed on its behalf
by the undersigned hereunto duly authorized.
DURA PHARMACEUTICALS, INC.
Date: January 5, 1998 /s/ Mitchell R. Woodbury
--------------------------------------
Sr. Vice President and General Counsel
20
<PAGE>
DURA PHARMACEUTICALS, INC.
FORM 8-K
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1 (a) U.S. Purchase Agreement dated December 16, 1997 between Dura
Pharmaceuticals, Inc. ("Dura"), Spiros Development Corporation
II, Inc. ("Spiros Corp. II"), and the underwriters listed on
Schedule A thereto.
1.2 (a) International Purchase Agreement dated December 16, 1997 between
Dura, Spiros Corp. II, and the managers listed on Schedule A
thereto.
2.1 (b) Purchase Agreement dated December 29, 1995 between Dura, Spiros
Development Corporation ("Spiros Corp."), and the entities listed
on the schedule of purchasers attached thereto.
2.2 Agreement and Plan of Merger dated December 18, 1995 between
Dura, Spiros Corp. and SDC Acquisition Corp.
4.1(a) Amended and Restated Certificate of Incorporation of Spiros
Corp. II, filed December 19, 1997 with the Deleware Secretary of
State.
4.2(c) By-laws of Spiros Corp. II.
4.3 Purchase Option (included in Exhibit 4.1)
4.4 Warrant Agreement dated December 22, 1997 between Dura and
ChaseMellon Shareholder Services L.L.C., as warrant agent,
including form of Warrant.
4.5 Form of Warrant (included in Exhibit 4.4).
4.6 Specimen Unit Certificate.
4.7 Specimen Certificate of Spiros Corp. II Callable Common Stock.
4.8 Stock Certificate of SDC II Special Shares.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
99.1 Technology License Agreement dated December 22, 1997 between
Dura, Dura Delivery Systems, Inc., Spiros Corp. and Spiros
Corp. II
99.2 Development Agreement dated December 22, 1997 between Dura and
Spiros Corp. II.
<PAGE>
99.3 Albuterol and Product Option Agreement dated December 22, 1997,
between Dura and Spiros Corp. II.
99.4 Manufacturing and Marketing Agreement dated December 22, 1997,
between Dura and Spiros Corp. II.
99.5 Services Agreement dated December 22, 1997, between Dura and
Spiros Corp. II.
99.6 Press Release dated October 10, 1997.
99.7 Press Release dated December 17, 1997.
(a) Incorporated by reference to Schedule 13D filed by Dura on January 2,
1998.
(b) Incorporated by reference to the Company's Current Report on Form 8-K
dated December 29, 1995, as filed on January 9, 1996.
(c) Incorporated by reference to the Company's Registration Statement on
Forms S-1/S-3, filed October 10, 1997, as amended.
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of the 18th day of December,
1997 (the "Agreement"), by and among Dura Pharmaceuticals, Inc., a Delaware
corporation ("DURA"), SDC Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of DURA ("SUB"), and Spiros Development Corporation, a
Delaware corporation ("SDC").
RECITALS
WHEREAS, subject to and in accordance with the terms and conditions of this
Agreement, the respective Boards of Directors of DURA, SUB and SDC, the
stockholders of SDC and DURA as sole stockholder of SUB have each approved the
merger of SDC with SUB (the "Merger"), whereby all rights of each holder of any
issued and outstanding shares of callable common stock, par value $.001 per
share, of SDC ("SDC Common Stock") arising from such holder's ownership of such
SDC Common Stock will be converted into the right to receive the number of
shares of DURA common stock, par value $.001 per share ("DURA Common Stock") and
cash in lieu of fractional shares, if any set forth opposite such holder's name
on SCHEDULE A attached hereto, and the rights of each outstanding option to
acquire shares of SDC Common Stock shall by virtue of the Merger and, without
any action on the part of the holders thereof, be converted into the right to
receive cash payments pursuant to Section 1.7(b) hereof and be canceled and no
longer be outstanding;
WHEREAS, following the consummation of the transactions contemplated by the
Merger, DURA intends to merge SDC with and into itself, whereupon the separate
existence of SDC shall cease;
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
conditions, representations and warranties contained herein, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to and in accordance with the terms and
conditions of this Agreement and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), at the Effective Time (as defined in
Section 1.3), SDC shall be merged with SUB. As a result of the Merger, the
separate corporate existence of SUB shall cease and SDC shall continue as the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation"), and all the properties, rights, privileges, powers and franchises
of SDC and SUB shall vest in the Surviving Corporation, without any transfer or
assignment
<PAGE>
having occurred, and all debts, liabilities and duties of SDC and SUB shall
attach to the Surviving Corporation, all in accordance with the DGCL.
1.2 CLOSING DATE. The closing of the transactions contemplated by this
Agreement shall take place at the offices of Brobeck, Phleger & Harrison, 550
West "C" Street, Suite 1200, San Diego, California 92101, on December 19, 1997
(the "Closing Date").
1.3 CONSUMMATION OF THE MERGER. As soon as practicable on or after the
Closing Date, the parties hereto will cause the Merger to be consummated by
filing with the Secretary of State of Delaware a certificate of merger in such
form as required by, and executed in accordance with, the relevant provisions of
the DGCL. The "Effective Time" of the Merger as that term is used in this
Agreement shall mean such time as the certificate of merger is duly filed with
the Secretary of State of Delaware.
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the applicable provisions of the DGCL.
1.5 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of SDC, as amended by the Amended and Restated
Certificate of Incorporation of Spiros Development Corporation attached hereto
as SCHEDULE B and the Bylaws, as amended, of Spiros Development Corporation
attached hereto as SCHEDULE C, respectively, shall be the Certificate of
Incorporation and Bylaws, respectively, of the Surviving Corporation and
thereafter shall continue to be its Certificate of Incorporation and Bylaws
until amended as provided therein and under the DGCL.
1.6 DIRECTORS AND OFFICERS. The directors of SDC immediately prior to the
Effective Time shall be the directors of the Surviving Corporation at and after
the Effective Time, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of SDC
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation at and after the Effective Time, in each case until their respective
successors are duly elected or appointed and qualified.
1.7 CONVERSION OF SECURITIES. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of DURA, SDC, SUB or any of their respective stockholders:
(a) All rights of each holder of any shares of SDC Common Stock
issued and outstanding immediately prior to the Effective Time (the
"Shares") arising from such holder's ownership of such Shares shall be
converted into the right to receive the number of shares of DURA Common
Stock set forth opposite such holder's name on SCHEDULE A attached hereto;
PROVIDED, HOWEVER, that no fractional shares of DURA Common Stock shall be
issued, and, in lieu thereof, a cash payment shall be made in accordance
with subsection 1.8(e) hereof.
-2-
<PAGE>
(b) All rights of each option to acquire shares of Callable Common
Stock of SDC outstanding immediately prior to the Effective Time shall in
full satisfaction of any of the rights thereto (i) be converted as of the
Closing Date into the right to receive upon surrender of the respective
Option a cash payment equal to Forty Six Dollars and Eighty Eight Cents
($46.88) (the exercise price for Dura's Purchase Option for all of the
outstanding SDC Common Stock) multiplied by the number of shares of SDC
Common Stock otherwise issuable upon the exercise of the respective
holder's option(s) less the exercise price per share of SDC Common Stock
multiplied by the number of shares of SDC Common Stock for which the
respective option is being exercised and (ii) be automatically canceled and
be no longer outstanding, as of the Closing Date, regardless of whether the
respective Option has been surrendered.
(c) Each issued and outstanding share of capital stock of SUB issued
and outstanding immediately prior to the Effective Time shall continue to
be issued and outstanding and shall be converted into one share of validly
issued, fully paid and non-assessable Common Stock of the Surviving
Corporation. Each stock certificate of SUB evidencing ownership of any
such shares shall continue to evidence ownership of such shares of Common
Stock of the Surviving Corporation.
1.8 EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES.
(a) Prior to the Effective Time, DURA shall appoint a bank, transfer
agent or similar entity to act as the payment agent (the "Payment Agent")
in the Merger and shall make available for exchange, in accordance with
this Section 1.8, the shares of Dura Common Stock issuable pursuant to this
Section 1.8 (and cash to be paid pursuant to subsection 1.8(e)) in exchange
for the Shares.
(b) As soon as practicable after the Effective Time, each holder of a
certificate that prior thereto represented Shares shall be entitled, upon
surrender thereof to the Payment Agent, to receive in exchange therefor, a
certificate or certificates representing the number of whole shares of DURA
Common Stock into which the shares of SDC Common Stock so surrendered shall
have been converted as aforesaid, in such denominations and registered in
such names as such holder may request. Each certificate so surrendered
shall forthwith be canceled. Each holder of shares of SDC Common Stock who
would otherwise be entitled to a fraction of a share of DURA Common Stock
shall, upon surrender of the certificates representing such shares held by
such holder to the Payment Agent, be paid an amount in cash in accordance
with the provisions of subsection 1.8(e) hereof. Until so surrendered and
exchanged, each certificate that prior to the Effective Time represented
Shares shall represent solely the right to receive DURA Common Stock and
cash in lieu of fractional shares, if any. Unless and until any such
certificates shall be so surrendered and exchanged, no dividends or other
distributions payable to the holders of DURA Common Stock, as of any time
on or after the Effective Time, shall be paid to the holders of such
-3-
<PAGE>
certificates that prior to the Effective Time represented Shares; PROVIDED,
HOWEVER, that, upon any such surrender and exchange of such certificates,
there shall be paid to the record holders of the certificates issued and
exchanged therefor the amount, without interest thereon, of dividends and
other distributions, if any, that theretofore were declared and became
payable after the Effective Time and respect to the number of whole shares
of DURA Common Stock issued to such holder.
(c) All shares of DURA Common Stock issued upon the surrender for
exchange of certificates that prior to the Effective Time represented
Shares in accordance with the terms hereof (including any cash paid
pursuant to subsection 1.8(e)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares. At and after the
Effective Time, there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates which prior to the Effective Time represented
Shares are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article I.
(d) If any certificate for shares of DURA Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall have paid to DURA or its transfer agent any transfer or
other taxes required by reason of the issuance of a certificate for shares
of DURA Common Stock in any name other than that of the registered holder
of the certificate surrendered, or established to the satisfaction of DURA
or its transfer agent that such tax has been paid or is not payable.
(e) No fraction of a share of DURA Common Stock shall be issued, but
in lieu thereof each holder of SDC Common Stock who would otherwise be
entitled to a fraction of a share of DURA Common Stock shall, upon
surrender of the certificate formerly representing SDC Common Stock held by
such holder to the Payment Agent, be paid an amount in cash equal to the
amount set forth opposite such holder's name on SCHEDULE A attached hereto
under the heading "Fractional Share Payment." No interest shall be paid on
such amount. All shares of SDC Common Stock held by a record holder shall
be aggregated for purposes of computing the number of shares of DURA Common
Stock to be issued pursuant to this Article I and cash in lieu of
fractional shares payable hereunder.
(f) None of DURA, SUB, SDC, the Surviving Corporation, their transfer
agents or the Payment Agent shall be liable to a holder of the Shares for
any amount properly paid to a public official pursuant to applicable
property, escheat or similar laws.
-4-
<PAGE>
1.9 TAKING OF NECESSARY ACTION; FURTHER ACTION. The parties hereto shall
take all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger as promptly as possible. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of SDC or SUB, such parties shall direct their respective
officers and directors to take all such lawful and necessary action.
ARTICLE II
MISCELLANEOUS
2.1 TERMINATION. This Agreement may be terminated and the Merger and the
other transactions contemplated herein may be abandoned by any party at any time
prior to the Effective Time.
2.2 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), by the
party that is, or whose stockholders are, entitled to the benefits thereof.
This Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto and then only as may
be permitted by applicable provisions of the DGCL. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and each of the parties hereto.
2.3 SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
2.4 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
2.5 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
2.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and no party shall
be liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
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<PAGE>
2.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, as applied to
agreements among Delaware residents to be performed entirely within the State of
Delaware.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
DURA PHARMACEUTICALS, INC.,
a Delaware corporation
By: /s/ Cam L. Garner
------------------------------------------
Cam L. Garner, Chairman, President and
Chief Executive Officer
ATTEST:
/s/ Mitchell R. Woodbury
- -------------------------------
Mitchell R. Woodbury, Secretary
SDC ACQUISITION CORP.,
a Delaware corporation
By: /s/ David S. Kabakoff
------------------------------------------
David S. Kabakoff, President
ATTEST:
/s/ Mitchell R. Woodbury
- -------------------------------
Mitchell R. Woodbury, Secretary
SPIROS DEVELOPMENT
CORPORATION, a Delaware corporation
By: /s/ David S. Kabakoff
------------------------------------------
David S. Kabakoff, President
ATTEST:
/s/ Mitchell R. Woodbury
- -------------------------------
Mitchell R. Woodbury, Secretary
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<PAGE>
SCHEDULE "A"
<TABLE>
<CAPTION>
Number of Shares of
SDC Callable Number of Shares of Dura Common Cash in Lieu of
Record Name of Holder of Common Stock SDC Callable Stock to Be Fractional
SDC Callable Common Stock Certificate Number Common Stock Held Issued in Merger Share Payment
------------------------- --------------------- ------------------- ------------------------ ----------------------
<S> <C> <C> <C> <C>
PIRATE SHIP & CO., AS CC-1 66,667 64,044 $ 1.76
NOMINEE FOR THE GLOBAL
HEALTH SCIENCES FUND
OLD COURT LIMITED, AS CC-2 100,000 96,065 $ 28.00
NOMINEE FOR BIOTECHNOLOGY
INVESTMENTS LTD.
THE CHARLES SCHWAB TRUST CC-3 16,667 16,011 $ 12.16
COMPANY, TRUSTEE FOR THE
DURA PHARMACEUTICALS, INC.
DEFERRED COMPENSATION PLAN
ELAN INTERNATIONAL CC-4 333,333 320,218 $ 12.64
SERVICES LIMITED
H&Q HEALTHCARE INVESTORS CC-6 45,833 44,029 $ 35.84
H&Q LIFE SCIENCES CC-7 37,500 36,024 $ 28.80
INVESTORS
NEW ENTERPRISE ASSOCIATES CC-8 66,667 64,044 $ 1.76
VI, LIMITED PARTNERSHIP
S-E BANKENS CC-9 36,500 35,063 $ 45.60
LAKEMEDELSFONDEN,
STOCKHOLM
WPG LIFE SCIENCES FUND CC-11 10,000 9,606 $ 27.20
L.P.
WPG INSTITUTIONAL LIFE CC-12 6,667 6,404 $ 33.76
SCIENCES FUND L.P.
ABYDOS & CO., AS NOMINEE CC-13 100,000 96,065 $ 28.00
FOR G.T. GLOBAL HEALTH
CARE FUND
DOMAIN PARTNERS III, L.P. CC-14 96,656 92,853 $ 6.88
DP III ASSOCIATES, L.P. CC-15 3,344 3,212 $ 21.12
RUSH & CO., AS NOMINEE FOR CC-16 13,500 12,968 $ 41.60
S-E BANKEN LUXEMBOURG S.A.
TOTAL: 933,334 896,606 $ 325.12
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
SCHEDULE B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF SPIROS DEVELOPMENT CORPORATION
a Delaware corporation
Spiros Development Corporation, a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Spiros Development Corporation. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1995 and was amended
pursuant to a Restated Certificate of Incorporation filed with the Secretary of
State of the State of Delaware on December 29, 1995.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of at least a
majority of the outstanding shares in accordance with Section 228 thereof, and
written notice having been given in accordance with the requirements of such
Section. The Amended and Restated Certificate of Incorporation restates,
integrates and amends the provisions of the Certificate of Incorporation of this
corporation.
3. The text of the Certificate of Incorporation as heretofore amended or
restated is hereby restated and further amended to read in its entirety as
follows:
ARTICLE I
The name of this corporation is Spiros Development Corporation.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 30 Old Rudnick Lane, City of Dover, County of Kent 19901. The name
of its registered agent at such address is CorpAmerica, Inc.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
<PAGE>
ARTICLE IV
Effective at the time of the Corporation's filing with the Secretary of the
State of Delaware of this Amended and Restated Certificate of Incorporation (the
"Effective Time"), the Corporation shall be authorized to issue one class of
stock to be designated "Common Stock", with a par value of $.001 per share which
renames the previously designated "Callable Common Stock" with the same par
value. As a result, as of the Effective Time the total number of shares of all
classes of stock that the Corporation shall have authority to issue is 1,073,334
shares of Common Stock.
ARTICLE V
The corporation is to have a perpetual existence.
ARTICLE VI
The Board of Directors of the corporation is expressly authorized to make,
alter or repeal bylaws of the corporation, but the stockholders may make
additional bylaws and may alter or repeal any bylaw whether adopted by them or
otherwise.
ARTICLE VII
(A) EXCULPATION. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
corporation's stockholders, further reductions in the liability of the
corporation's directors for breach of fiduciary duty, then a director of the
corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
(B) INDEMNIFICATION. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
corporation, its stockholders, and others.
-2-
<PAGE>
(C) EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall be prospective and shall not
adversely affect any right or protection of a director, officer, agent or other
person existing at the time of, or increase the liability of any director of the
corporation with respect to any acts or omissions of such director occurring
prior to, such repeal or modification.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been signed under the seal of the corporation as of this 18 day of
December, 1997.
SPIROS DEVELOPMENT CORPORATION,
a Delaware corporation
By: /s/ David S. Kabakoff
----------------------------------
David S. Kabakoff, President
ATTEST:
/s/ Mitchell R. Woodbury
- -----------------------------------
Mitchell R. Woodbury, Secretary
<PAGE>
SCHEDULE C
BYLAWS
OF
SPIROS DEVELOPMENT CORPORATION
I.
OFFICES
Section 1. The registered office shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
II.
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of San Diego, State of California, at such
place as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1995, shall be held on such date and at such time as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting,
at which they shall elect by a
<PAGE>
plurality vote a board of directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
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<PAGE>
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is
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<PAGE>
required, in which case such express provision shall govern and control the
decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
III.
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be five (5). The directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
-4-
<PAGE>
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of
-5-
<PAGE>
the failure of the stockholders to fix the time or place of such first meeting
of the newly elected Board of Directors, or in the event such meeting is not
held at the time and place so fixed by the stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
President on four (4) days' notice to each director by mail or 48 hours' notice
to each director either personally or by telegram; special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of two directors unless the board consists of only one director,
in which case special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of the sole director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or
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<PAGE>
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation,
-7-
<PAGE>
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
-8-
<PAGE>
IV.
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
V.
OFFICERS
Section 1. The officers of the corporation shall be elected by the
Board of Directors and shall include a President and a Secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also elect a Treasurer and/or
one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
-9-
<PAGE>
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall elect a President and a Secretary and may
also elect Vice Presidents and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
-10-
<PAGE>
THE PRESIDENT AND VICE PRESIDENT
Section 8. The President shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all meetings of the stockholders and the Board of Directors.
He shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the President or in the event of his
inability or refusal to act, the Vice President, if any, (or in the event there
be more than one Vice President, the Vice Presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of
-11-
<PAGE>
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 12. The Assistant Secretary, or, if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors
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<PAGE>
so requires, an account of all his transactions as Treasurer and of the
financial condition of the corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
VI.
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, certifying the number of shares owned by
him in the corporation.
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Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation
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alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
A determination of
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stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
VII.
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of
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the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in
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this Section 6 shall: (i) not be deemed exclusive of any other rights to which
those indemnified may be entitled under the corporation's certificate of
incorporation, any bylaw, agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacities and as to
action in another capacity while holding such office, (ii) continue as to a
person who has ceased to be a director, and (iii) inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Section 6 shall be offset to
the extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
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Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
information in violation of such agent's fiduciary or contractual obligations to
the corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or
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proceeding by reason of the fact that he, his testator or intestate, is or was
an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
Section 7. The corporation shall indemnify its directors to the
fullest extent not prohibited by the California General Corporation Law;
PROVIDED, HOWEVER, that the corporation shall not be required to indemnify any
director in connection with any proceeding (or part thereof) initiated by such
person or any proceeding by such person against the corporation or its
directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the board of directors of the corporation or (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the California General Corporation Law.
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The corporation shall have power to indemnify its officers, employees and
other agents as set forth in the California General Corporation Law.
Promptly after receipt of a request for indemnification hereunder (and in
any event within 90 days thereof) a reasonable, good faith determination as to
whether indemnification of the director is proper under the circumstances
because each director has met the applicable standard of care shall be made by:
(i) a majority vote of a quorum consisting of directors who are not parties to
such proceeding; (ii) if such quorum is not obtainable, by independent legal
counsel in a written opinion; or (iii) approval or ratification by the
affirmative vote of a majority of the shares of this corporation represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) or by
written consent of a majority of the outstanding shares entitled to vote; where
in each case the shares owned by the person to be indemnified shall not be
considered entitled to vote thereon.
For purposes of any determination under this bylaw, a director shall be
deemed to have acted in good faith and in a manner he reasonably believed to be
in the best interests of the corporation and its stockholders, and, with respect
to any criminal action or proceeding, to have had no reasonable cause to believe
that his conduct was unlawful, if his action is based on information, opinions,
reports and statements, including financial statements and other financial data,
in each case prepared or presented by: (i) one or more officers or employees of
the corporation whom the director believed to be reliable and competent in the
matters presented; (ii) counsel, independent accountants or other persons as to
matters which the director believed to be within such person's professional
competence; and (iii) a committee of the Board upon which such director does not
serve, as to matters within such committee's
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designated authority, which committee the director believes to merit confidence;
so long as, in each case, the director acts without knowledge that would cause
such reliance to be unwarranted.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in the best interests of the
corporation and its stockholders or that he had reasonable cause to believe that
his conduct was unlawful.
The provisions of the preceding two paragraphs shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the
California General Corporation Law.
The corporation shall advance, prior to the final disposition of any
proceeding, promptly following request therefor, all expenses incurred by any
director in connection with such proceeding upon receipt of an undertaking by or
on behalf of such person to repay said amounts if it shall be determined
ultimately that such person is not entitled to be indemnified under this bylaw
or otherwise.
Without the necessity of entering into an express contract, all rights to
indemnification and advances to directors under this bylaw shall be deemed to be
contractual rights and be effective to the same extent and as if provided for in
a contract between the corporation and the director. Any right to
indemnification or advances granted by this bylaw to a director shall be
enforceable by or on behalf of the person holding such right in the forum in
which the proceeding is or was pending or, if such forum is not available or a
determination is made that such forum is not convenient, in any court of
competent jurisdiction if (i) the claim for
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indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. The
corporation shall be entitled to raise as a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in connection
with any proceeding in advance of its final disposition when the required
undertaking has been tendered to the corporation) that the claimant has not met
the standards of conduct that make it permissible under the California General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. Neither the failure of the corporation (including its board of
directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the California General Corporation Law, nor an
actual determination by the corporation (including its board of directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
To the fullest extent permitted by the corporation's Certificate of
Incorporation and the California General Corporation Law, the rights conferred
on any person by this bylaw shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers,
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employees or agents respecting indemnification and advances, to the fullest
extent permitted by the California General Corporation Law and the corporation's
Certificate of Incorporation.
The rights conferred on any person by this bylaw shall continue as to a
person who has ceased to be a director and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The corporation, upon approval by the board of directors, may purchase
insurance on behalf of any person required or permitted to be indemnified
pursuant to this bylaw. The corporation's obligation to provide indemnification
under this Section 7 shall be offset to the extent of any other source of
indemnification or any otherwise applicable insurance coverage under a policy
maintained by the corporation or any other person.
Any repeal or modification of this bylaw shall only be prospective and
shall not affect the rights under this bylaw in effect at the time of the
alleged occurrence of any action or omission to act that is the cause of any
proceeding against any agent of the corporation.
The corporation shall indemnify the directors and officers of the
corporation who serve at the request of the corporation as trustees, investment
managers or other fiduciaries of employee benefit plans to the fullest extent
permitted by the California General Corporation Law.
If this bylaw or any portion hereof shall be invalidated on any ground by
any court of competent jurisdiction, then the corporation shall nevertheless
indemnify each director to the fullest extent permitted by any applicable
portion of this bylaw that shall not have been invalidated, or by any other
applicable law.
For the purposes of this bylaw, the following definitions shall apply:
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(i) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative.
(ii) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding, including expenses of
establishing a right to indemnification under this bylaw or any applicable law.
(iii) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(iv) References to a "director," "officer," "employee," or "agent"
of the corporation shall include, without limitation, situations where such
person is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
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Section 8. In the event of any inconsistency between Section 6 and
Section 7 of this Article VII, the controlling Section as to any particular
issue with regard to any particular matter, shall be the one which authorizes
for the benefit of the agent or the other person in question the provision of
the fullest, promptest, most certain or otherwise most favorable indemnification
and/or advancement.
VIII.
AMENDMENT
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
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CERTIFICATE OF SECRETARY
AMENDMENT TO BYLAWS
OF SPIROS DEVELOPMENT CORPORATION
The undersigned hereby certifies that:
I am the duly qualified and acting Secretary of Spiros Development
Corporation, a duly organized and existing Delaware corporation.
The following is a true copy of a resolution duly adopted by the written
consent of the stockholders of the Corporation on December 19, 1997, which
appears in the minute book of the Corporation:
NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 1, of the
Corporation's Bylaws is hereby amended in its entirety to read as follows:
"Section 1. The number of directors which shall constitute the whole
board shall be three (3). The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his or her
successor is elected and qualified. Directors need not be stockholders."
The foregoing resolution is in conformity with the Restated Certificate of
Incorporation and Bylaws of the Corporation, has never been modified or
repealed, and is now in full force and effect.
IN WITNESS WHEREOF, I have executed this Certificate of Secretary and
affixed the seal of the Corporation on December 19, 1997.
/s/ Mitchell R. Woodbury
---------------------------------
Mitchell R. Woodbury, Secretary
<PAGE>
EXHIBIT 4.4
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of December 22, 1997, between DURA
PHARMACEUTICALS, INC., a Delaware corporation ("Dura"), and CHASEMELLON
SHAREHOLDER SERVICES L.L.C., as warrant agent (the "Warrant Agent"), in favor
of each person who acquires from time to time warrants (the "Warrants") to
purchase shares of Dura's Common Stock, $.001 par value per share (the "Warrant
Shares"), issued in the offering of units (the "Units"), each Unit consisting of
one share of common stock, $.001 par value per share ("Spiros II Common Stock"),
of SPIROS DEVELOPMENT CORPORATION II, INC., a Delaware corporation ("Spiros
Corp. II"), and one Warrant, made pursuant to a registration statement on
Forms S-l/S-3 (Nos. 333-37673 and 333-37673-01) (the "Registration
Statement") filed by Dura and Spiros Corp. II with the Securities and Exchange
Commission (the "Commission").
Section 1. APPOINTMENT OF WARRANT AGENT. Dura hereby appoints the Warrant
Agent to act as agent for Dura in accordance with the instructions set forth
herein, and the Warrant Agent hereby accepts such appointment, upon the terms
and conditions hereinafter set forth.
Section 2. CERTAIN DEFINITIONS. As used herein, the following terms shall
have the following meanings:
"ACCELERATION DATE" means the first date upon which an Acceleration Event
occurs; PROVIDED, HOWEVER, that, if approval of the stockholders of Dura is
required in connection with such Acceleration Event, Acceleration Date means the
date of such stockholder approval.
"ACCELERATION EVENT" means the occurrence of, or the execution of a
definitive agreement by Dura with respect to, any of the following events: (i)
any capital reorganization of Dura or reclassification of the Common Stock
(other than a subdivision, combination or reclassification of the outstanding
Common Stock for which adjustment is provided in paragraphs (i), (ii), (iv) and
(v) of Section 13(a) hereof and other than a change in the par value of the
Common Stock or an increase in the authorized capital stock of Dura not
involving the issuance of any shares thereof), (ii) any consolidation of Dura
with, or merger of Dura with or into, any other person (including any
individual, partnership, joint venture, corporation, trust or group thereof)
other than (a) a consolidation or merger pursuant to which the stockholders of
Dura immediately prior to such consolidation or merger own more than 50% of the
outstanding securities having power to vote in the election of directors after
such consolidation or merger or (b) a consolidation or merger by Dura with a
subsidiary of Dura in which Dura is the continuing corporation for which
adjustment is provided in Section 13 hereof, (iii) any sale, lease, transfer or
conveyance of all or substantially all of the assets of Dura (other than a sale,
lease, transfer or conveyance of such assets to an Affiliate (within the meaning
of the Securities Act)) or (iv) the announcement or commencement by any "person
" or " group" (within the meaning of Section 13 (d) and Section 14(d) of the
Exchange Act) other than with respect to a consolidation or merger pursuant to
clause (ii) above, of a BONAFIDE tender offer or exchange offer in accordance
with the rules and
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2
regulations of the Exchange Act to purchase, or the acquisition of securities of
Dura, such that after such acquisition or proposed purchase, the acquiror
"beneficially owns" or would "beneficially own" (as defined in Rule 13d-3 under
the Exchange Act) securities of Dura representing 30% percent or more of the
combined voting power of Dura's then outstanding securities having power to vote
in the election of directors.
"CLOSING PRICE" means the closing price per share of Common Stock on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or traded on any such exchange, on the
Nasdaq National Market or if not listed or traded on any such exchange or the
Nasdaq National Market, the average of the last bid and asked prices per share
on the Nasdaq over-the-counter system or, if such quotations are not available,
the fair market value as reasonably determined by the Board of Directors of Dura
or any committee of such Board.
"COMMON STOCK" means (i) the class of stock designated as the Common Stock,
$.001 par value per share, of Dura on the date hereof or (ii) any other class of
stock resulting from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. Unless the context requires otherwise, all
references to Common Stock and Warrant Shares in this Agreement and in the
Warrant Certificates shall, in the event of an adjustment pursuant to Section 13
hereof, be deemed to refer also to any other securities or property then
issuable upon exercise of the Warrants as a result of such adjustment.
"ELIGIBLE INSTITUTION" shall have the meaning set forth in Section 8(c)
hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXERCISE PRICE" shall have the meaning set forth in Section 5(b) hereof.
"EXERCISE PERIOD" means the period during which the Warrants may be
exercised as set forth in Section 5(a) hereof.
"EXPIRATION DATE" shall have the meaning set forth in Section 5(a) hereof.
"HOLDERS" shall have the meaning set forth in Section 4(b) hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEPARATION DATE" shall have the meaning set forth in Section 5(a) hereof.
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3
"STOCK PURCHASE OPTION" means the option by Dura to purchase all (but not
less than all) of the shares of Spiros Corp. II Common Stock as set forth in
Article V of the Spiros Corp. II Charter.
"WARRANT CERTIFICATE" shall have the meaning set forth in Section 3(a)
hereof.
"WARRANT REGISTER" means the books and records kept by the Warrant Agent
for the registration, and the registration of transfer, of the Warrant
Certificates in which shall be registered the names and addresses of Holders of
Warrants evidenced by Warrant Certificates in registered form and the
certificate numbers and denominations of such Warrant Certificates.
Section 3. FORM OF WARRANT CERTIFICATE: PURCHASE PRICE: SEPARATION FROM
SPIROS CORP. II COMMON STOCK.
(a) The certificates evidencing the Warrants (the "Warrant Certificates"),
and the forms of election to purchase Warrant Shares and of assignment to be
printed on the reverse thereof, shall be substantially in the form set forth in
Exhibit A hereto and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as Dura reasonably deems appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law, any rule or regulation related thereto, or with
any rule or regulation of the NASD, the Nasdaq National Market or any securities
exchange on which the Warrants may from time to time be listed.
(b) Each Warrant shall entitle the Holder thereof to purchase one-fourth
of a Warrant Share upon the exercise thereof at the applicable Exercise Price,
subject to adjustment as provided in Section 13 hereof, during the Exercise
Period; PROVIDED, HOWEVER, that the Warrants are exercisable only for whole
shares; cash will be paid in lieu of fractional shares in accordance with
Section 5(e) hereof. Each Warrant Certificate shall be executed on behalf of
Dura by the manual or facsimile signature of the present or any future President
or any officer of Dura, under its corporate seal, affixed or in facsimile,
attested by the manual or facsimile signature of the present or any future
Secretary or Assistant Secretary of Dura. Warrants shall be dated as of the
date of their initial issue.
(c) As set forth in Section 8 hereof, until the Separation Date, a Warrant
may not be divided or combined with other Warrants or exchanged, assigned or
transferred apart from the share of the Spiros Corp. II Common Stock with which
it was initially sold as a Unit.
Section 4. REGISTRATION AND COUNTERSIGNATURE.
(a) The Warrant Agent shall maintain the Warrant Register. The Warrant
Certificates shall be countersigned by the Warrant Agent and shall not be valid
for any purpose unless so
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4
countersigned. The Warrant Certificates shall be so countersigned, however, by
the Warrant Agent and shall be delivered by the Warrant Agent, notwithstanding
whether the persons whose manual or facsimile signatures appear thereon as
proper officers of Dura shall have ceased to be such officers at the time of
such countersignature or delivery.
(b) Prior to due presentment for registration or transfer of the Warrant
Certificates, Dura and the Warrant Agent may deem and treat the registered
holder (a "Holder") thereof as the absolute owner of the Warrant Certificates
(notwithstanding any notation of ownership or other writing made thereon by
anyone other than Dura or the Warrant Agent), for the purpose of any exercise
thereof and for all other purposes, and neither Dura nor the Warrant Agent shall
be affected by any notice to the contrary.
Section 5. DURATION AND EXERCISE OF WARRANTS.
(a) Warrants may be exercised at any time or from time to time on or after
the earliest of (i) January 1, 2000, (ii) the exercise by Dura of the Stock
Purchase Option, (iii) the termination of the Stock Purchase Option with respect
to Dura and (iv) an Acceleration Date (such earliest date being referred to
herein as the "Separation Date") and will expire at 5:00 p.m., New York City
time, on December 31, 2002 (the "Expiration Date"). Upon the Expiration Date,
all rights evidenced by the Warrants shall cease and the Warrants shall become
void.
(b) Subject to the provisions of this Agreement, the Holder of each
Warrant shall have the right to purchase from Dura (and Dura shall issue and
sell to such Holder) the number of fully paid and nonassessable Warrant Shares
set forth on such Holder's Warrant Certificate (or such number of Warrant Shares
as may result from adjustments made from time to time as provided in this
Agreement) at the price of $_______ per Warrant Share in lawful money of the
United States of America (such exercise price per Warrant Share, as adjusted
from time to time as provided herein, being referred to herein as the "Exercise
Price"), upon (i) surrender of the Warrant Certificates to Dura at the office of
the Warrant Agent designated by the Warrant Agent for such purpose with the
exercise form on the reverse thereof duly completed and signed by the Holder or
Holders thereof or by a duly appointed legal representative thereof or by a duly
authorized attorney, such signature to be guaranteed by an Eligible Institution
(as defined in Section 8(c) hereof) if such guarantee is required by the terms
of the Warrant Certificate, and (ii) payment, in lawful money of the United
States of America, of the Exercise Price for the Warrant Share or Warrant Shares
in respect of which such Warrant is then exercised. The Exercise Price payable
upon exercise of any Warrant may be paid only by certified or, at the option of
the Holder, official bank check payable to the order of Dura. Upon surrender of
the Warrant Certificate, and payment of the Exercise Price, Dura shall issue and
cause to be delivered with all reasonable dispatch to or upon the written order
of the Holder of such Warrant and in such name or names as such Holder may
designate, a certificate or certificates for the number of Warrant Shares so
purchased upon the exercise of such Warrants, together with cash or check,
<PAGE>
5
at Dura's option, in respect of any fraction of a Warrant Share issuable upon
such surrender pursuant to Section 5(e) hereof. The Warrant Agent shall deliver
on a weekly basis all funds received upon exercise of the Warrants to Dura, 7475
Lusk Boulevard, San Diego, California 92121, Attention: Senior Vice President
and Chief Financial Officer.
(c) Each person in whose name any certificate for Warrant Shares is issued
upon the exercise of Warrants shall for all purposes be deemed to have become
the holder of record of the Warrant Shares represented thereby, and such
certificate shall be dated the date upon which the Warrant Certificate
evidencing such Warrants was duly surrendered and payment of the Exercise Price
(and any applicable transfer taxes pursuant to Section 10 hereof) was made;
PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon
which the Common Stock transfer books of Dura are closed, such person shall be
deemed to have become the record holder of such Warrant Shares on, and such
certificate shall be dated, the next succeeding business day on which the Common
Stock transfer books of Dura are open.
(d) In the event that, during the Exercise Period, fewer than all of the
Warrants represented by a Warrant Certificate are exercised, a new Warrant
Certificate, duly executed by Dura, will be issued for the remaining number of
Warrants exercisable pursuant to the Warrant Certificate so surrendered, and the
Warrant Agent shall countersign and deliver such new Warrant Certificate to the
Holder of such unexercised Warrants pursuant to the provisions of this Section 5
and of Section 4 hereof.
(e) No fractional shares of Common Stock or scrip shall be issued to any
Holder in connection with the exercise of a Warrant. Instead of any fractional
shares of Common Stock that would otherwise be issuable to such Holder, Dura
shall pay to such Holder a cash adjustment in respect of such fractional
interest in an amount equal to that fractional interest of the then current
Closing Price on the date of exercise per share of Common Stock.
(f) The number of Warrant Shares to be received upon the exercise of a
Warrant and the price to be paid for a Warrant Share are subject to adjustment
from time to time as hereinafter set forth.
(g) Warrants not exercised on or prior to the Expiration Date shall become
void and all rights in respect thereof shall cease as of such time.
Section 6. RESERVATION OF WARRANT SHARES; STOCK CERTIFICATES. Dura shall
at all times reserve, for issuance and delivery upon exercise of the Warrants,
such number of Warrant Shares or other shares of capital stock of Dura as may be
issuable from time to time upon exercise of the Warrants. All such shares shall
be duly authorized and, when issued upon such exercise and receipt by Dura of
payment in full of the Exercise Price, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or
<PAGE>
6
restrictions on sale and free and clear of all preemptive rights. The Warrant
Agent is hereby irrevocably authorized to requisition, from time to time from
the transfer agent for the Common Stock, stock certificates issuable upon
exercise of outstanding Warrants. Dura will supply such transfer agent with
duly executed stock certificates for such purpose. All Warrant Certificates
surrendered upon exercise shall be cancelled by the Warrant Agent and shall
thereafter be delivered to Dura or otherwise disposed of in a manner
satisfactory to Dura. Unless all Warrants shall have been exercised prior to
5:00 P.M., New York City time, on the Expiration Date, the Warrant Agent shall
certify to Dura, as of the close of business on the Expiration Date, the total
aggregate number of Warrants then outstanding, and thereafter no shares of
Common Stock shall be subject to reservation in respect of such Warrants. Dura
shall keep a copy of this Agreement on file with its transfer agent and with
every transfer agent for any shares of Common Stock.
Section 7. TRANSFER AND REGISTRATION OF THE WARRANTS AND WARRANT SHARES.
(a) The Warrants and the Warrant Shares, and any interest in either, may
be sold, assigned, pledged, encumbered or in any other manner transferred or
disposed of, in whole or in part, only in accordance with Section 8 hereof and
in compliance with applicable United States federal and state securities laws
and the terms and conditions hereof.
(b) The Warrants and the Warrant Shares have been registered under the
Securities Act pursuant to the Registration Statement. Dura covenants and
agrees:
(i) it will prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective
through the termination of the Exercise Period or until such earlier time as no
Warrants remain outstanding;
(ii) as expeditiously as possible, to register or qualify the
Warrants and the Warrant Shares under the securities or "Blue Sky" laws of each
jurisdiction in which such registration or qualification is necessary; and
(iii) to pay all expenses incurred by Dura in complying with this
Section 7(b), including, without limitation (A) all registration and filing
fees, (B) all printing expenses, (C) all fees and disbursements of counsel and
independent public accountants for Dura, (D) all NASD and "Blue Sky" fees and
expenses (including fees and expenses of counsel in connection with any "Blue
Sky" surveys) and (E) the entire expense of any special audits incident to or
required in connection with any such registration.
Section 8. EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANTS.
(a) Through the Separation Date, a Warrant may not be divided or combined
with other
<PAGE>
7
Warrants or exchanged, assigned or transferred apart from the share of Spiros
Corp. II Common Stock with which it was initially sold as a Unit. Until the
occurrence of the Separation Date, the Warrant Agent will not record an
exchange, assignment or transfer of a Warrant Certificate in the Warrant
Register without certification by Spiros Corp. II that the holder has
transferred its Spiros Corp. II Common Stock to the assignee named on the
Warrant Assignment Form printed on the reverse of the Warrant Certificate.
(b) After the Separation Date, Warrants may be exchanged, at the option of
the Holder thereof, upon presentation and surrender to the Warrant Agent of the
Warrant Certificate evidencing such Warrants, for other Warrant Certificates of
different denominations, entitling the Holder or Holders thereof to purchase in
the aggregate the same number of Warrant Shares as did such surrendered Warrant
Certificate. Subject to the preceding sentence, a Warrant Certificate may be
divided or combined with other Warrant Certificates that carry the same rights
upon presentation thereof at the office of the Warrant Agent, together with
written notice signed by the Holder or Holders thereof specifying the names and
denominations in which new Warrant Certificates are to be issued.
(c) After the Separation Date, Warrants may be assigned or transferred, at
the option of the Holder thereof, upon surrender of the Warrant Certificates
evidencing such Warrants to the Warrant Agent, accompanied (if so required by
Dura or the Warrant Agent) by a written instrument or instruments of transfer in
form satisfactory to Dura and the Warrant Agent, duly executed by such Holder or
by a duly authorized representative or attorney, such signature to be guaranteed
by a commercial bank or trust company having an office in the United States, by
a broker or a dealer that is a member of the NASD or by a member of a national
securities exchange (any such entity, an "Eligible Institution"). Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee and the surrendered Warrant Certificate shall be cancelled by the
Warrant Agent. Warrant Certificates so cancelled shall be delivered by the
Warrant Agent to Dura from time to time or otherwise disposed of by the Warrant
Agent in a manner satisfactory to Dura.
(d) Any transfer, exchange or assignment of Warrants (including any new
Warrants issued pursuant to Section 11 hereof) shall be without charge (other
than the cost of any transfer tax) to the Holder and any new Warrant or Warrants
issued pursuant to this Section 8 shall be dated the date hereof.
Section 9. REMOVAL OF LEGEND. Through the Separation Date, each Warrant
Certificate shall bear the following legend:
UNTIL DECEMBER 31, 1999 OR SUCH EARLIER DATE ON WHICH THIS LEGEND IS
REMOVED PURSUANT TO SECTION 9 OF THE WARRANT AGREEMENT, DATED AS
<PAGE>
8
OF ABOUT _______________, 1997, BETWEEN DURA PHARMACEUTICALS, INC. AND
CHASEMELLON SHAREHOLDER SERVICES, AS WARRANT AGENT, THE WARRANTS
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED SEPARATELY,
SPLIT UP, COMBINED OR EXCHANGED, BUT MAY ONLY BE TRANSFERRED, SPLIT
UP, COMBINED OR EXCHANGED TOGETHER WITH THE SHARES OF CALLABLE COMMON
STOCK OF SPIROS DEVELOPMENT CORPORATION II, INC. WITH WHICH SUCH
WARRANTS WERE SOLD AS A UNIT.
After the Separation Date, any Holder of Warrants may surrender the Warrant
Certificate evidencing such Warrants to the Warrant Agent, whereupon the Warrant
Agent shall execute and deliver to such Holder a new Warrant Certificate,
without the legend set forth in this Section 9, entitling such Holder to
purchase the same number of Warrant Shares as provided for by such surrendered
Warrant Certificate. Dura shall supply the Warrant Agent with Warrant
Certificates that do not bear such legend for use after the Separation Date.
Section 10. PAYMENT OF TAXES. Dura shall pay all documentary stamp taxes
attributable to the original issuance of the Warrants and of Warrant Shares;
PROVIDED, HOWEVER, that Dura shall not be required to (a) pay any tax which may
be payable in respect of any transfer involving the transfer and delivery of
Warrant Certificates or the issuance or delivery of certificates for Warrant
Shares in a name other than that of the Holder of the Warrant Certificate
surrendered upon the exercise of a Warrant or (b) issue or deliver any
certificate for Warrant Shares upon the exercise of any Warrants until any such
tax required to be paid under clause (a) shall have been paid, all such tax
being payable by the Holder of such Warrant at the time of surrender.
Section 11. MUTILATED OR MISSING WARRANT CERTIFICATES. In the event that
any Warrant Certificate shall be mutilated, lost, stolen or destroyed, Dura may
in its discretion issue, and the Warrant Agent may countersign and deliver, upon
the request of the Holder of the Warrants evidenced by such Warrant Certificate,
in exchange for and upon cancellation of any such mutilated Warrant Certificate,
or in substitution for any such lost, stolen or destroyed Warrant Certificate, a
new Warrant Certificate of like tenor and evidencing the same number of Warrant
Shares as were evidenced by such mutilated, lost, stolen or destroyed Warrant
Certificate, but only upon receipt of evidence satisfactory to the Warrant Agent
of such loss, theft or destruction of such Warrant Certificate and an indemnity,
if requested, reasonably satisfactory to it. An applicant for such substitute
Warrant Certificate shall also comply with such other reasonable regulations and
pay such other reasonable charges as Dura or the Warrant Agent may prescribe.
Any such new Warrant Certificate shall constitute an original contractual
obligation of Dura, whether or not the allegedly mutilated, lost, stolen or
destroyed Warrant Certificate shall be enforceable by any person at any time
thereafter.
<PAGE>
9
Section 12. NO STOCK RIGHTS: LIMITATION OF LIABILITY. No Holder of any
Warrant shall, by virtue thereof, be entitled to the rights of a stockholder of
Dura, unless and until exercise of such Warrant has occurred. No provisions of
any Warrant or of this Agreement, in the absence of affirmative action by the
Holder of any such Warrant to exercise such Warrant, and no mere enumeration
herein of the rights or privileges of such Holder, shall give rise to any
liability of such Holder for the Exercise Price or as a stockholder of Dura,
whether such liability is asserted by Dura or by its creditors.
Section 13. ANTIDILUTION PROVISIONS.
(a) The Exercise Price and the number of Warrant Shares that may be
purchased upon the exercise of a Warrant shall be subject to change or
adjustment from time to time as follows:
(i) STOCK DIVIDENDS AND STOCK SPLITS. If at any time during the
Exercise Period (A) Dura shall fix a record date for the issuance of any
dividend payable in shares of Common Stock or (B) the number of shares of Common
Stock shall have been increased by a subdivision or split-up of shares of Common
Stock, then, on the record date fixed for the determination of holders of Common
Stock entitled to receive such dividend or immediately after the effective date
of such subdivision or split-up, as the case may be, the number of shares to be
delivered upon exercise of any Warrant will be appropriately increased so that
each Holder thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately following such action
had such Warrant been exercised immediately prior thereto, and the Exercise
Price will be appropriately adjusted. The time of occurrence of an event giving
rise to an adjustment made pursuant to this Section 13(a)(i) shall, in the case
of a stock dividend, be deemed to be the record date thereof and shall, in the
case of a subdivision or split-up, be deemed to be the effective date thereof.
(ii) COMBINATION OF STOCK. If the number of shares of Common Stock
outstanding at any time during the Exercise Period is decreased by a combination
of the outstanding shares of Common Stock, then, immediately after the effective
date of such combination, the number of shares of Common Stock to be delivered
upon exercise of any Warrant shall be appropriately decreased so that the Holder
of such Warrant thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately following such action
had such Warrant been exercised immediately prior thereto, and the Exercise
Price shall be appropriately adjusted.
(iii) REORGANIZATION. If, at any time during the Exercise Period,
any capital reorganization of Dura, or any reclassification of the Common Stock,
or any consolidation of Dura with, or merger of Dura with or into, any other
person or any sale, lease or other transfer of all or substantially all of the
assets of Dura to any other person (including any individual, partnership, joint
venture, corporation, trust or group thereof) shall be effected in such a way
that
<PAGE>
10
upon consummation of such transaction the holders of the Common Stock shall be
entitled to receive stock, securities or assets with respect to or in exchange
for Common Stock, then, upon exercise of any Warrant in accordance with the
terms of this Agreement and the Warrant Certificate, the Holder of such Warrant
shall have the right to receive the kind and amount of stock, securities or
assets receivable upon such reorganization, reclassification, consolidation,
merger or sale, lease or other transfer by a holder of the number of shares of
Common Stock that such Holder would have been entitled to receive upon exercise
of such Warrant pursuant to Section 3 hereof had such Warrant been exercised
immediately prior to such reorganization, reclassification, consolidation,
merger or sale, lease or other transfer, subject to additional adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 13(a).
(iv) SPECIAL DIVIDENDS. If, at any time during the Exercise Period
(other than in a dissolution or liquidation), Dura shall distribute to holders
of Common Stock evidences of indebtedness of Dura, securities or other assets
(other than cash dividends payable out of retained earnings) by way of a
dividend on outstanding shares of Common Stock, then the Exercise Price shall be
adjusted so that immediately after the date fixed by Dura as the record date in
respect of such distribution, such Exercise Price shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to the
close of business on the record date for the determination of the stockholders
entitled to receive such distribution by a fraction, (A) the numerator of which
shall be the Closing Price on such record date less the then fair market value
as determined reasonably and in good faith by the Board of Directors of Dura of
the portion of the securities or other assets distributed applicable to one
share of Common Stock and (B) the denominator of which shall be such Closing
Price. Such adjustment shall become effective on such record date. In such
case, no adjustment shall be made to the number of Warrant Shares to be received
upon the exercise of a Warrant.
(v) RIGHTS OFFERING. If, at any time during the Exercise Period,
Dura shall issue or sell or fix a record date for the issuance of rights,
options, warrants or convertible or exchangeable securities to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase Common
Stock (or securities convertible into or exchangeable for Common Stock), in any
such case, at a price per share (or having a conversion price per share) that,
together with the value (if for consideration other than cash, as reasonably
determined in good faith by the Board of Directors of Dura) of any consideration
paid for any such rights, options, warrants or convertible or exchangeable
securities, is greater than the Exercise Price and less than the Closing Price
on the date of such issuance or sale or on such record date, as the case may be,
then, immediately after the date of such issuance or sale or on such record
date, the number of shares to be delivered upon exercise of the Warrants shall
be appropriately increased so that the Holder, thereafter during the Exercise
Period, shall be entitled to receive the number of shares of Common Stock
determined by multiplying the number of shares such Holder would have been
entitled to receive immediately before the date of such issuance or sale or such
record date by
<PAGE>
11
a fraction, (A) the numerator of which shall be the number of shares of Common
Stock outstanding on such date plus the number of additional shares of Common
Stock offered for subscription or purchase (or into which the convertible or
exchangeable securities so offered are initially convertible or exchangeable)
and (B) the denominator of which shall be the number of shares of Common Stock
outstanding on such date plus the number of shares of Common Stock that the
aggregate offering price of the total number of shares so offered for
subscription or purchase (or the aggregate initial conversion price of the
convertible securities so offered) would purchase at such Closing Price, and the
Exercise Price shall be appropriately adjusted. The time of occurrence of an
event giving rise to an adjustment pursuant to this Section 13(v) shall, in the
case of a dividend, be the record date and shall, in the case of an issuance or
sale, be the date of such issuance or sale.
(vi) NO ADJUSTMENTS TO EXERCISE PRICE. No adjustment of the Exercise
Price in accordance with the provisions of paragraph (i), (ii), (iii), (iv) or
(v) above shall be made in an amount of less than $.01; PROVIDED, HOWEVER, that
the amount by which any adjustment is not made by reason of the provisions of
this Section shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
(vii) READJUSTMENTS, ETC. If an adjustment is made under paragraph
(i), (ii), (iii), (iv) or (v) above, and the event to which the adjustment
relates does not occur, then any adjustments in the Exercise Price or Warrant
Shares that were made in accordance with such paragraphs shall be adjusted back
to the Exercise Price and the number of Warrant Shares that were in effect
immediately prior to the record date for such event.
(b) NO IMPAIRMENT, CERTAIN EVENTS.
(i) Dura shall not, by amendment of its Certificate of Incorporation
or through any reorganization, reclassification, consolidation, merger, sale,
lease or transfer of assets, issuance or sale of securities or any other action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Section 13 by Dura, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 13
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holders against impairment.
(ii) If any event occurs as to which the provisions of paragraph (a)
of this Section 13 are not strictly applicable but with respect to which, in the
reasonable, good faith opinion of Dura, an adjustment of the Exercise Price, and
the number of Warrant Shares issuable upon the exercise of a Warrant, would
fairly protect the exercise rights of the Holders in accordance with the basic
intent and principles of such provisions or as to which an adjustment pursuant
to such provisions, if strictly applied, would not fairly protect the purchase
rights of the Holders in accordance with the basic intent and principles of such
provisions, then Dura shall make any
<PAGE>
12
computation required under this Section 13(b)(ii) with respect to any such
adjustment on a basis consistent with the basic intent and principles
established by the provisions of this Section 13, necessary to preserve, without
dilution, the exercise rights of the Holders. Dura shall appoint a firm of
independent certified public accountants (which may be the regular auditors of
Dura) of recognized national standing, which firm shall review the computation
of Dura prepared pursuant to this Section 13(b)(ii) and prepare a report signed
by such firm, which shall be provided to Dura and which shall acknowledge that
the adjustment calculation prepared by Dura is arithmetically correct. Such
report shall be conclusive evidence of the correctness of the computation made
under this Section 13(b)(ii). Upon receipt of such report, Dura shall forthwith
cause to be made, or shall act to prevent, the adjustments described in such
calculation.
Section 14. OFFICER'S CERTIFICATE. Whenever the number of Warrant Shares
that may be purchased upon exercise of the Warrant is adjusted as required by
the provisions of this Agreement, Dura shall file forthwith with the Warrant
Agent and with its Secretary or Assistant Secretary at its principal office an
officer's certificate indicating the adjusted number of Warrant Shares that may
be purchased upon exercise of a Warrant and the adjusted Exercise Price,
determined as herein provided, and setting forth in reasonable detail the facts
requiring such adjustment and the manner of computing such adjustment. Each
such officer's certificate shall be made available at all reasonable times for
inspection by the Holders. Dura shall, forthwith after each such adjustment,
cause a copy of such officer's certificate to be mailed to the Holders. The
Warrant Agent may rely on such certificate without further inquiry and shall not
be deemed to have knowledge of any adjustment unless and until it shall have
received such certificate.
Section 15. NOTICE OF CERTAIN EVENTS. In the event that, at any time
during the period commencing on the Separation Date and ending on the last day
of the Exercise Period:
(a) Dura shall pay any dividend on Common Stock that is payable in stock,
or make any distribution (other than regular cash dividends) to the holders of
Common Stock;
(b) Dura authorizes the issuance to all holders of Common Stock of rights
or warrants to subscribe for or purchase shares of Common Stock or any other
subscription rights or warrants;
(c) Dura authorizes the distribution to all holders of Common Stock of any
of Dura's assets, including evidences of its indebtedness or assets (other than
cash dividends payable out of retained earnings);
(d) there shall be any capital reorganization or reclassification of the
capital stock of Dura or consolidation or merger of Dura with another person
(other than a consolidation or merger of Dura with a subsidiary of Dura in which
Dura is the surviving or continuing corporation and there is no change with
respect to the Common Stock), or sale, conveyance or transfer of all or
substantially all of Dura's property and assets (other than a sale, conveyance
or transfer of such
<PAGE>
13
assets to an Affiliate (within the meaning of the Securities Act));
(e) there shall be a voluntary or involuntary dissolution, liquidation,
bankruptcy, assignment for the benefit of creditors or winding up of Dura; or
(f) Dura shall propose to take any other action, or any other event
occurs, that would require an adjustment pursuant to Section 13 hereof of the
Exercise Price or the number of Warrant Shares that may be purchased upon the
exercise of a Warrant;
then Dura will cause to be mailed to the Holder by first-class mail addressed to
such Holder at the address appearing in the Warrant Register, at least twenty
(20) days (or ten (10) days in any case specified in clauses (a), (b) or (c)
above) before the applicable record or effective date hereinafter specified, a
notice stating (A) the date as of which the holders of Common Stock of record
entitled to receive any such dividends, rights, warrants or distributions are to
be determined or (B) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record will be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding-up.
Section 16. ACCELERATION EVENT. In case of any Acceleration Event, Dura
shall, as a condition precedent to the consummation of the transaction
constituting, or announced as, such Acceleration Event, cause effective
provisions to be made so that the Holder of a Warrant shall have the right
immediately thereafter, by exercising such Warrant, to purchase during the
Exercise Period the aggregate amount and kind of shares of stock and other
securities and property that were receivable upon such Acceleration Event by a
holder of the number of shares of Common Stock that would have been received
immediately prior to such Acceleration Event upon exercise of such Warrant. Any
such provisions shall require adjustments in respect of such shares of stock and
other securities and assets and other property that shall be as nearly
equivalent as may be practicable to the adjustments provided for in such
Warrant. The foregoing provisions of this Section 16 shall similarly apply to
successive Acceleration Events. Dura shall, at least twenty (20) days prior to
the Acceleration Date relating to any Acceleration Event (or if such
Acceleration Event was beyond the control of Dura, and Dura did not have
knowledge thereof twenty (20) days prior to such Acceleration Date, as soon as
practicable thereafter), cause to be mailed to the Holders a notice describing
in reasonable detail such Acceleration Event and informing the Holders of the
date the Exercise Period will commence and that the Holders may exercise
Warrants at any time during the Exercise Period.
Section 17. LISTING ON SECURITIES EXCHANGES. Dura will list on each
national securities exchange or, if not so listed, will list for quotation on
the Nasdaq National Market, or such other
<PAGE>
14
over-the-counter quotation system on which any Common Stock may at any time be
listed, all shares of the Common Stock from time to time issuable upon the
exercise of the Warrants, and will maintain such listing so long as any other
shares of Common Stock are so listed; and Dura shall so list on each national
securities exchange or the Nasdaq National Market, or such other over-the-
counter quotation system, and shall maintain such listing of, any other shares
of capital stock of Dura issuable upon the exercise of the Warrants if and so
long as any shares of capital stock of the same class are listed on such
national securities exchange or are traded on the Nasdaq National Market or such
over-the-counter quotation system. Any such listing or quotation will be at
Dura's expense.
Section 18. AVAILABILITY OF INFORMATION. Dura will comply with all
applicable periodic public information reporting requirements of the Commission
to which it may from time to time be subject.
Section 19. WARRANT AGENT.
(a) MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
(i) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto; PROVIDED,
HOWEVER, that such successor corporation must be otherwise eligible for
appointment as a Warrant Agent hereunder. In the event that at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of such predecessor Warrant Agent and deliver such Warrant
Certificates so countersigned; and in the event that at the time of such
succession any of the Warrant Certificates shall not have been countersigned,
any such successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of such predecessor Warrant Agent or in the name
of such successor Warrant Agent; and in any event, all such Warrant Certificates
shall have the full force and effect provided in such Warrant Certificates and
in this Agreement.
(ii) In the case that at any time the name of the Warrant Agent shall
be changed and at such time one or more of the Warrant Certificates shall have
been countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrant Certificates so
countersigned; in the event that at that time one or more of the Warrant
Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name; and in all such cases such Warrant Certificates shall have the full force
and effect provided in such Warrant Certificates and in this
<PAGE>
15
Agreement.
(b) DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by which the Holders, by their acceptance of Warrants, and Dura, shall be bound:
(i) The Warrant Agent shall not be responsible for any failure of
Dura to comply with any of the covenants to be complied with by Dura that are
contained in this Agreement or in the Warrant Certificates.
(ii) The Warrant Agent may consult at any time with counsel
satisfactory thereto, and the Warrant Agent shall incur no liability or
responsibility to Dura or to any Holder in respect of any action taken, suffered
or omitted by the Warrant Agent hereunder in good faith and in accordance with
the opinion or the advice of such counsel, provided that the Warrant Agent shall
have exercised reasonable care in the selection and continued employment of such
counsel.
(iii) The Warrant Agent shall incur no liability or responsibility to
Dura or to any Holder for any action taken in reliance on any notice,
resolution, waiver, consent, order, certificate or other paper, document or
instrument believed by the Warrant Agent to be genuine and to have been signed,
sent or presented by the party or parties thereto.
(iv) Dura shall (A) pay to the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the execution of this
Agreement, (B) reimburse the Warrant Agent for all expenses, taxes (other than
taxes based on such Warrant Agent's net income), governmental charges, and other
charges of any kind and nature, incurred by the Warrant Agent in the performance
of this Agreement, (C) advance to the Warrant Agent, upon request, funds to pay
cash in lieu of fractional shares of Common Stock issuable upon exercise of
Warrants and (D) indemnify the Warrant Agent and save it harmless against any
and all losses, expenses or liabilities, including judgments, costs and counsel
fees, arising out of or in connection with its agency under this Agreement,
except as a result of its negligence or bad faith. In no case shall the
Warrant Agent be liable for special, indirect, incidental or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), unless such loss or damages arise as a result of the
Warrant Agent's gross negligence or intentional misconduct.
(v) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
the incurrence by the Warrant Agent of expenses unless Dura or one or more
Holders shall have furnished the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent, and any recovery of judgment shall be for the ratable benefit
of the Holders, as their respective rights or interests may appear.
<PAGE>
16
(vi) The Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of Dura, or become pecuniarily interested in any transaction in
which Dura may be interested or contract with or lend money or otherwise act as
fully and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for Dura or for any other legal entity.
(vii) The Warrant Agent shall act hereunder solely as agent, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not be liable for any actions which it may take or refrain from taking, in
connection with this Agreement, except as result from its own gross negligence
or bad faith.
(viii) The Warrant Agent shall make copies of this Agreement available
for inspection at its principal offices at _________________________ during
normal business hours and shall provide copies to Holders upon their written
request.
(c) CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement by providing both (i) written
notice to Dura and (ii) written notice, sent at the Company's expense by
first-class mail, postage prepaid, to each Holder at such Holder's address
appearing in the Warrant Register, which notice shall specify a date when such
resignation shall take effect and shall be sent at least two weeks prior to the
date so specified. If the Warrant Agent shall resign or otherwise become
incapable of acting, Dura shall appoint a successor thereto. If Dura shall
fail to make such appointment within a period of thirty (30) days after
receiving written notification of such resignation or incapacity by the Warrant
Agent or by any Holder (which Holder shall, with such notice, submit Warrant
Certificates held thereby for inspection by Dura), then any Holder may apply to
any court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Pending appointment of a successor to the Warrant Agent, either
by Dura or by a court, the duties of the Warrant Agent shall be carried out by
Dura. After such appointment, the successor Warrant Agent shall be vested with
such powers, rights, duties and responsibilities as such Warrant Agent would
have been vested had such Warrant Agent been named originally as Warrant Agent
hereunder, without further act or deed. The former Warrant Agent shall deliver
and transfer to the successor Warrant Agent any property at the time held by
such former Warrant Agent hereunder and shall execute and deliver any further
assurance, conveyance, act or deed necessary therefor. Failure to provide any
notice called for in this Section 19, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of a successor Warrant Agent.
Section 20. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment
after the date hereof of any transfer agent for the Common Stock, or of any
subsequent transfer agent for shares of the Common Stock, Dura will file with
the Warrant Agent a statement setting forth the name
<PAGE>
17
and address of such transfer agent.
Section 21. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of Dura, the Warrant Agent or any of the Holders
shall bind and inure to the benefit of their respective successors, assigns,
heirs and personal representatives.
Section 22. TERMINATION. This Agreement shall terminate at 5:00 p.m., New
York City time, on the Expiration Date or upon such earlier date on which all
Warrants have been exercised or redeemed, except that the Warrant Agent shall
account to Dura for all cash held by it at 5:00 p.m., New York City time, on
such Expiration Date or such other date.
Section 23. HEADINGS. The headings of sections of this Agreement have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 24. AMENDMENTS. This Agreement may be amended only by both (i)
the written consent of Dura and (ii) the affirmative vote or the written consent
of Holders holding not less than two-thirds in interest of the then outstanding
Warrants; PROVIDED, HOWEVER, that, except as expressly provided herein, this
Agreement may not be amended to change (a) the Exercise Price, (b) the Exercise
Period, (c) the number or type of securities to be issued upon the exercise of
the Warrants or (d) the provisions of this Section 24, without the consent of
each Holder.
Section 25. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which when so executed shall be deemed to be an original,
but all of which taken together shall constitute one and the same agreement.
Section 26. NOTICES.
(a) Any notice required by the provisions of this Agreement to be provided
to Dura by the Warrant Agent or by any Holder shall be deemed given if deposited
in the United States mail, first class postage prepaid, addressed (until another
address is filed in writing by Dura with the Warrant Agent) as follows:
Dura Pharmaceuticals Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: Corporate Secretary
(b) Any notice required by the provisions of this Agreement to be provided
to the Warrant Agent by Dura or by any Holder shall be deemed given if deposited
in the United States mail, first class postage prepaid, addressed (until another
address is filed in writing by the
<PAGE>
18
Warrant Agent with Dura or notice of the address of a successor Warrant Agent is
provided pursuant to this Agreement) as follows:
ChaseMellon Shareholder Services
400 South Hope Street, 4th Floor
Los Angeles, CA 90071
Attn:___________________________
(c) Any notice required by the provisions of this Agreement to be provided
to any Holder by Dura or by the Warrant Agent shall be deemed given if deposited
in the United States mail, first class postage prepaid, addressed to such Holder
at its address set forth in the Warrant Register. Any notice given in
conformity with this Section 26 shall be deemed effective three (3) days after
mailing.
Section 27. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation, other than Dura, the Warrant
Agent and the Holders, any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
Dura, the Warrant Agent and the Holders.
Section 28. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be signed by its duly authorized officers.
DURA PHARMACEUTICALS, INC.
By: /s/ Mitchell R. Woodbury
------------------------------------------
Title: Sr. VP
---------------------------------------
CHASEMELLON SHAREHOLDER SERVICES, as
Warrant Agent
By: /s/ Sharon Knepper
------------------------------------------
Title: Asst. Vice President
---------------------------------------
<PAGE>
EXHIBIT A
FORM OF WARRANT CERTIFICATE
UNTIL THIS LEGEND IS REMOVED PURSUANT TO SECTION 9 OF THE WARRANT AGREEMENT,
DATED ON OR ABOUT _______________, 1997, BETWEEN DURA PHARMACEUTICALS,INC. AND
CHASEMELLON SHAREHOLDER SERVICES, AS WARRANT AGENT, THE WARRANTS REPRESENTED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED SEPARATELY, SPLIT UP, COMBINED OR
EXCHANGED, BUT MAY ONLY BE TRANSFERRED, SPLIT UP, COMBINED OR EXCHANGED TOGETHER
WITH THE SHARES OF CALLABLE COMMON STOCK OF SPIROS DEVELOPMENT CORPORATION II,
INC. WITH WHICH SUCH WARRANTS WERE SOLD AS A UNIT.
VOID AFTER 5:00 P.M., Warrant No.______________
NEW YORK CITY TIME, ON Warrants_________________
DECEMBER 31, 2002
CUSIP _____________
DURA PHARMACEUTICALS, INC.
Warrants to Purchase Shares of Common Stock
THIS CERTIFIES THAT, FOR VALUE RECEIVED,
_______________, or registered assigns, is the registered holder of the number
of Warrants (the "Warrants") set forth above. Each Warrant entitles the holder
thereof to purchase from Dura Pharmaceuticals, Inc., a Delaware corporation
("Dura"), subject to the terms and conditions hereinafter set forth and in the
Warrant Agreement hereinafter referred to, one fully paid and nonassessable
share of Common Stock, par value $.001 per share, of Dura (the "Common Stock").
The Warrants may be exercised at any time or from time to time on or after the
first to occur of (i) January 1, 2000, (ii) the exercise by Dura of the Stock
Purchase Option, (iii) the termination of the Stock Purchase Option with respect
to Dura and (iv) an Acceleration Date (as defined in the Warrant Agreement)
(such earliest date being referred to herein as the "Separation Date") and will
expire at 5:00 p.m., New York City time, on December 31, 2002] (the "Expiration
Date"). Upon the Expiration Date, all rights evidenced by the Warrants shall
cease and the Warrants shall become void. Subject to the provisions of the
Warrant Agreement, the holder of each Warrant shall have the right to purchase
from Dura until the Expiration Date (and Dura shall issue and sell to such
holder of a Warrant) one-third of one fully paid and nonassessable share of
Common Stock (a "Warrant Share") at an exercise price (the "Exercise Price") of
$_______ per share upon surrender of this Warrant Certificate to Dura at the
office of the Warrant Agent (as defined in the Warrant Agreement) designated by
the Warrant Agent for such purpose with the form of election to purchase
appearing on this Warrant Certificate duly completed and signed, together with
payment of the Exercise Price by certified or official bank
<PAGE>
A-2
check payable to the order of Dura.
The Exercise Price and the number of Warrant Shares that may be purchased
upon the exercise of the Warrants and the number of Warrants outstanding are
subject to change or adjustment upon the occurrence of certain events set forth
in the Warrant Agreement.
REFERENCE IS MADE TO THE PROVISIONS OF THIS WARRANT CERTIFICATE SET FORTH
ON THE REVERSE SIDE HEREOF, AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FRONT OF THIS CERTIFICATE.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, Dura has caused this Warrant Certificate to be executed
by its duly authorized officers.
Dated: ____________, 1997 DURA PHARMACEUTICALS, INC.
By:
---------------------------
Title:
------------------------
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES,
as Warrant Agent
By:
--------------------------------
Authorized Signature
<PAGE>
A-3
[REVERSE SIDE]
DURA PHARMACEUTICALS, INC.
This Warrant Certificate is subject to all of the terms and conditions of
the Warrant Agreement, dated on or about ___________, 1997 (the "Warrant
Agreement"), between Dura and the Warrant Agent, to all of which terms and
conditions the registered holder of the Warrant consents by acceptance hereof.
The Warrant Agreement is incorporated herein by reference and made a part hereof
and reference is made to the Warrant Agreement for a full description of the
rights, limitations of rights, obligations, duties and immunities of the Warrant
Agent, Dura and the registered holders of Warrant Certificates. Copies of the
Warrant Agreement are available for inspection at the principal office of the
Warrant Agent or may be obtained upon written request addressed to the Warrant
Agent at its principal office in _________________.
Dura shall not be required upon the exercise of the Warrants evidenced by
this Warrant Certificate to issue fractional shares, but shall make adjustment
therefore in cash on the basis of the current market value of any fractional
interest as provided in the Warrant Agreement.
Dura has agreed to cause a registration statement under the Securities Act
of 1933, as amended, covering the Warrants and Warrant Shares to be effective
through the termination of the Exercise Period (as defined in the Warrant
Agreement) or until such earlier time as no Warrants remain outstanding, and to
register or qualify the Warrants and the Warrant Shares to be delivered upon
exercise of the Warrants under the laws of each jurisdiction in which such
registration or qualification is necessary.
The Warrants evidenced by this Warrant Certificate may not be divided or
combined with other Warrants or exchanged, assigned or transferred apart from
the shares of Spiros Development Corp. II, Inc. Callable Common Stock with which
they were sold as a Unit to the public until the Separation Date. After the
Separation Date, this Warrant Certificate may be exchanged, at the option of the
holder upon presentation and surrender hereof to the Warrant Agent, for other
Warrant Certificates of different denominations, entitling the holder hereof to
purchase in the aggregate the same number of Warrant Shares, but without the
legend that appears hereon. After the Separation Date, Warrants may be assigned
or transferred upon surrender of this Warrant Certificate to the Warrant Agent,
accompanied (if so required by Dura or the Warrant Agent) by the form of
assignment appearing on this Warrant Certificate duly completed and signed,
whereupon the Warrant Agent shall execute and deliver to the transferee a new
Warrant Certificate entitling the transferee to purchase the same number of
Warrant Shares, but without the legend that appears hereon. If the Warrants
evidenced by this Warrant Certificate shall be exercised in part, the holder
hereof shall be
<PAGE>
A-4
entitled to receive upon surrender hereof another Warrant Certificate or
Certificates evidencing the number of Warrants not so exercised.
The holder of this Warrant Certificate shall not, by virtue hereof, be
entitled to any of the rights of a stockholder in Dura, either at law or in
equity, and the rights of the holder are limited to those expressed in the
Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Common Stock are closed for
any purpose, Dura shall not be required to make delivery of certificates for
shares purchasable upon such transfer until the date of the reopening of said
transfer books.
Each holder of this Warrant Certificate, by accepting the same, consents
and agrees with Dura, the Warrant Agent and with every other holder of a Warrant
Certificate that:
(a) this Warrant Certificate is transferable on the registry books of
the Warrant Agent only upon the terms and conditions set forth in the Warrant
Agreement; and
(b) Dura and the Warrant Agent may deem and treat the person in whose
name this Warrant Certificate is registered as the absolute owner hereof
(notwithstanding any notation of ownership or other writing hereon made by
anyone other than Dura or the Warrant Agent) for all purposes whatever and
neither Dura nor the Warrant Agent shall be affected by any notice to the
contrary.
This Warrant Certificate shall not be valid or enforceable for any purpose
until it shall have been countersigned by the Warrant Agent.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________ Custodian __________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not Act
as tenants in common --------------------------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
<PAGE>
A-5
ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
Dated___________, _____
The undersigned hereby irrevocably exercises this Warrant to purchase _____
shares of Common Stock and herewith makes payment of $___________ in payment of
the Exercise Price thereof on the terms and conditions specified in this Warrant
Certificate, surrenders this Warrant Certificate and all right, title, and
interest therein to Dura and directs that the Warrant Shares deliverable upon
the exercise of such Warrants be registered in the name and at the address
specified below and delivered thereto.
Name:
---------------------------------------------------------------------------
(Please Print)
Name:
---------------------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
If such number of Warrant Shares is less than the aggregate number of
Warrant Shares purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the balance of such Warrant Shares to be
registered in the name and at the address specified below and delivered thereto.
Name:
---------------------------------------------------------------------------
(Please Print)
Address:
------------------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
Taxpayer's Identification or Social Security Number:
----------------------------
Signature(s)
-----------------------
-----------------------
NOTE: The above signature(s) must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever. If the certificate representing the
Warrant Shares or any Warrant Certificate representing Warrants not exercised is
to be registered in a name other than that in which this Warrant Certificate is
registered, the signature of the holder hereof must be guaranteed.
Signature(s) Guaranteed:
- -----------------------------
<PAGE>
A-6
ASSIGNMENT
FOR VALUE RECEIVED, ____________ hereby sells, assigns and transfers to:
Name:
---------------------------------------------------------------------------
(Please Print)
Address:
------------------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
Taxpayer's Identification or Social Security Number:
----------------------------
the right to purchase up to _____ Warrant Shares represented by this Warrant and
does hereby irrevocably constitute and appoint _______________ to transfer said
Warrant on behalf of Dura, with full power of substitution in the premises.
Dated:__________, __ __________________________________
__________________________________
Signature(s) of registered Holder
NOTE: The above signature(s) must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever.
Signature(s) Guaranteed:
- ------------------------------
<PAGE>
SPECIMEN UNIT CERTIFICATE
THE SECURITIES OF SPIROS DEVELOPMENT CORPORATION II, INC. ARE SUBJECT TO AN
OPTION BY THE HOLDER OF THE SPECIAL COMMON STOCK OF SPIROS DEVELOPMENT
CORPORATION II, INC. AS DESCRIBED IN ARTICLE V OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF SPIROS DEVELOPMENT CORPORATION II, INC. TO
PURCHASE SUCH SECURITIES AT AN AGREED UPON PRICE EXERCISABLE BY NOTICE AT ANY
TIME COMMENCING ON THE CLOSING DATE OF THE UNIT OFFERING AND ENDING ON THE
EARLIER OF (i) DECEMBER 31, 2002, (ii) THE 90TH DAY AFTER THE DATE SPIROS
DEVELOPMENT CORPORATION II, INC. DELIVERS QUARTERLY FINANCIAL STATEMENTS OF
SPIROS DEVELOPMENT CORPORATION II, INC. TO THE HOLDER OF THE SPECIAL COMMON
STOCK SHOWING CASH OR CASH EQUIVALENTS OF LESS THAN $5 MILLION AND (iii) THE
DATE OF TERMINATION BY SPIROS DEVELOPMENT CORPORATION II, INC. OF THAT CERTAIN
TECHNOLOGY LICENSE AGREEMENT, DEVELOPMENT AGREEMENT OR MANUFACTURING AND
MARKETING AGREEMENT DATED ON OR ABOUT DECEMBER 22, 1997. COPIES OF THE AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION OF SPIROS DEVELOPMENT CORPORATION II,
INC. ARE AVAILABLE AT THE OFFICES OF SPIROS DEVELOPMENT CORPORATION II, INC.,
7475 LUSK BOULEVARD, SAN DIEGO, CALIFORNIA 92121, AND WILL BE FURNISHED TO ANY
STOCKHOLDER OF SPIROS DEVELOPMENT CORPORATION II, INC. ON REQUEST AND WITHOUT
COST.
Spiros Development Corporation II, Inc.
Dura Pharmaceuticals, Inc.
U-_____ _____ UNITS
UNIT CERTIFICATE
Each Unit Consisting of
One Share of Callable Common Stock, par value $0.001 per share,
of Spiros Development Corporation II, Inc. and
One Warrant to Purchase One-Fourth of One Share of Common Stock,
par value $0.001 per share, of Dura Pharmaceuticals, Inc.
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
CUSIP 848935 20 1
THIS IS TO CERTIFY that
or registered assigns, is the registered
holder of the number of Units, offered pursuant to a Registration Statement
on Forms S-1/S-3 (the "Registration Statement"), set forth above ("Units"),
each of which entitles the holder to one share of callable common stock (the
"Callable Common Stock" or the "Shares"), par value $0.001 per share, of
Spiros Development Corporation II, Inc. ("SDC II") and one warrant (the
"Warrants") to purchase one-fourth of one share of common stock ("Dura Common
Stock"), par value $0.001 per share, of Dura Pharmaceuticals, Inc. ("Dura").
Each Warrant entitles the holder to purchase one-fourth of one share of Dura
Common Stock at an exercise price of $54.84 per share of Dura Common Stock
subject to adjustment, at any time after the securities included in the Units
become separately transferable through December 31, 2002. Capitalized terms
not otherwise defined herein shall have the meanings given to them in the
Registration Statement.
The Callable Common Stock and the Warrants may not be traded separately
until December 31, 1999 or such earlier date as the Purchase Option is
exercised or expires unexercised. At any time after the securities are
separately transferable, this Unit Certificate is exchangeable upon the
surrender hereof by the registered holder to the Transfer Agent in exchange
for one or more new Stock Certificates, representing in the
<PAGE>
aggregate the number of Shares comprising the Units represented hereby, and
one or more new Warrant Certificates, representing in the aggregate the
number of Warrants comprising the Units represented hereby.
SDC II and Dura, respectively, agree at all times to reserve or hold
available a sufficient number of shares of its Callable Common Stock and
Warrants to cover the number of securities issuable upon the exchange of this
Certificate and the exercise of rights of the underlying securities.
This Unit Certificate entitles the holder hereof, either at law or in
equity, to any rights as a shareholder of SDC II or warrant holder of Dura as
shall pertain to the underlying securities.
This Unit Certificate is exchangeable at any time upon the surrender
hereof by the registered holder to the Transfer Agent for one or more new
Unit Certificates of like tenor and date representing in the aggregate the
right to the number of Units represented hereby.
SDC II and Dura (the "Companies") may deem and treat the registered
holder of this Unit Certificate at any time as the absolute owner hereof and
of the securities covered hereby for all purposes and shall not be affected
by any notice to the contrary.
The Warrants covered by this Certificate are subject to the terms of the
Warrant Agreement. The Warrant Agreement is available at the executive
offices of Dura.
The Warrant Agreement is incorporated herein by reference and made a
part hereof and reference is hereby made thereto for a full description of
the rights, limitations of rights, obligations, duties and immunities
hereunder.
The terms of this Unit Certificate shall be governed by the laws of the
State of California without giving effect to conflicts of law principles
thereof.
This Unit Certificate shall not be valid or obligatory for any purpose
unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Companies have caused this Unit Certificate to
be executed by its duly authorized officers.
Dated:
Spiros Development Corporation II, Inc.
PRESIDENT SECRETARY
Dura Pharmaceuticals, Inc.
PRESIDENT SECRETARY
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
[REVERSE SIDE]
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED THE
CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
<PAGE>
UNIF GIFT MIN ACT........................Custodian........................
(Cust) (Minor)
under Uniform Gifts to Minors Act
..........................................................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,__________________ hereby sell, assign and transfer
unto _____________________________________________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING ZIP CODE, OF ASSIGNEE)
___________________________________ Units represented by the within
Certificate and do hereby irrevocably constitute and appoint
_____________________________________________________________________
Attorney to transfer the said units on the books of the within named Corporation
with full power of substitution in the premises.
Dated __________________
___________________
Signature
___________________
Signature
NOTICE: The signature(s) to this
assignment must correspond with the
name(s) as written upon the face of
the Certificate in every particular,
without alteration or enlargement or
any change whatever.
Signature(s) Guaranteed
By__________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
<PAGE>
SPECIMEN CERTIFICATE
CALLABLE COMMON STOCK
The securities of Spiros Development Corporation II, Inc., a Delaware company
(the "Company") evidenced hereby are subject to an option of the holder of a
majority of the Special Common Stock of the Company, as described in the Amended
and Restated Certificate of Incorporation of the Company, to purchase such
securities at an agreed upon price, exercisable by notice given at any time
beginning on the closing date of the offering of the Callable Common Stock, par
value $0.001 per share (the "Callable Common Stock"), of Spiros Development
Corporation II, Inc. and the warrants (the "Warrants") to purchase common shares
of Dura Pharmaceuticals, Inc. ("Dura") which comprise the Units, (the "Unit
Offering") and ending on the earlier of (i) December 31, 2002, (ii) the 90th day
after the date the Company provides such holder with quarterly financial
statements of the Company showing cash or cash equivalents of less than
$5,000,000 or (iii) the date of termination by the Company of that certain
Technology License Agreement, Development Agreement or Manufacturing and
Marketing Agreement dated on or about December 22, 1997. Copies of the
Amended and Restated Certificate of Incorporation of the Company are available
at the offices of the Company, 7475 Lusk Boulevard, San Diego, California
92121, Attention: Mitchell R. Woodbury and will be furnished to any shareholder
of the Company on request and without cost.
Until December 31, 1999 or such earlier date as the Purchase Option is
exercised or expires unexercised (the "Separation Date"), the shares of Callable
Common Stock represented by this Certificate may be traded, exchanged, or
otherwise transferred only together with the Warrant issued herewith. The
holder hereof may, but need not, submit this Certificate for the removal of this
legend after the Separation Date.
SPIROS DEVELOPMENT CORPORATION II, INC.
Incorporated Under The Laws of the State of Delaware
CALLABLE COMMON STOCK
FULLY PAID AND NON-ASSESSABLE CALLABLE COMMON STOCK,
PAR VALUE OF $.001 PER SHARE
OF SPIROS DEVELOPMENT CORPORATION II, INC.
CUSIP 848936100
See Reverse For Certain Definitions
<PAGE>
THIS CERTIFIES that
is the owner of Callable Common Stock of
SPIROS DEVELOPMENT CORPORATION II, INC. (the "Company"), transferable on the
books of the Company by the holder hereof, in person or by duly authorized
attorney, upon surrender of this Certificate properly endorsed. This
certificate and the shares represented hereby are subject to the laws of
Delaware, and to the Amended and Restated Certificate of Incorporation of the
Company as now or hereafter amended (copies of which are on file at the offices
of the Company and the Transfer Agent), which are made a part hereof with the
same force and effect as if they were set forth herein, to all of which the
holder, by acceptance hereof, assents. This certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Company has caused the facsimile signatures of
its duly authorized officers and the facsimile of its corporate seal to be
hereunto affixed.
Dated:
Countersigned and Registered:
Transfer Agent and Registrar
By: ____________________
Name:
Title:
Authorized Officer Authorized Officer
<PAGE>
[FORM OF REVERSE OF SPIROS DEVELOPMENT CORPORATION II, INC.'S
CALLABLE COMMON STOCK]
SPIROS DEVELOPMENT CORPORATION II, INC.
The Company will furnish without charge to each shareholder who so
requests a copy of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of shares of the
Company or series thereof, and the qualifications, limitations or restrictions
of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT...............Custodian..............................
(cust) (Minor)
under Uniform Gifts to Minors Act
....................................................
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, __________________ hereby sells, assigns and
transfers unto
Please insert Social Security
or other identifying number
of assignee
<PAGE>
Please print or typewrite name and address
including postal zip code of assignee
Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
attorney, to transfer the said same on the books of the within named Company,
with full power of substitution in the premises.
Dated:
Signature
Signature
Notice: The signature to this assignment must
correspond with the name as written upon the face
of the Certificate, in every particular, without
alteration or enlargement, or any change whatever.
In presence of:
<PAGE>
Important: All signatures must be guaranteed by a firm which is a
financial institution and a member of the Securities
Transfer Agent's medallion Program ("STAMP"), the Stock
Exchange Medallion Program ("SEMP") or the New York
Stock Exchange, Inc. Medallion Signature Program
("MSP").
Signature Guarantee:
Name of Firm
Authorized Signature
Name of Authorized Signatory
(Please print)
Address of Firm
Area Code and Telephone Number of Firm
<PAGE>
SPECIMEN CERTIFICATE
SPECIAL COMMON STOCK
The Special Common Stock, par value $1.00 of Spiros Development Corporation
II, Inc., a Delaware company (the "Company"), evidenced hereby entitles the
holders of a majority of the shares of such Special Common Stock to purchase
all, but not less than all, of the outstanding shares of the Company's
Callable Common Stock, par value $0.001 per share (the "Callable Common
Stock") exercisable by notice given at any time beginning on the closing
date of the offering of the Units, each Unit comprised of one share of
Callable Common Stock and one warrant to purchase one-fourth of one share of
the common stock of Dura Pharmaceuticals, Inc. and ending on the earlier of
(i) December 31, 2002, (ii) the 90th day after the date the Company provides
such holder with quarterly financial statements of the Company showing cash
or cash equivalents of less than $5,000,000 or (iii) the date of termination
by the Company of that certain Technology License Agreement, Development
Agreement or Manufacturing and Marketing Agreement dated on or about
December 22, 1997, all as described in the Amended and Restated
Certificate of Incorporation of the Company. Copies of the Amended and
Restated Certificate of Incorporation of the Company are available at the
offices of the Company, 7475 Lusk Boulevard, San Diego, California 92121,
Attention: Mitchell R. Woodbury and will be furnished to any stockholder of
the Company on request and without cost.
SPIROS DEVELOPMENT CORPORATION II, INC.
Incorporated Under The Laws of the State of Delaware
SPECIAL COMMON STOCK
FULLY PAID AND NON-ASSESSABLE CALLABLE COMMON STOCK,
PAR VALUE OF $1.00 PER SHARE
OF SPIROS DEVELOPMENT CORPORATION II, INC.
Certificate No. S-1
See Reverse For Certain Definitions
<PAGE>
THIS CERTIFIES that Dura Pharmaceuticals, Inc.
is the owner of 1,000 Shares of Special Common Stock of
SPIROS DEVELOPMENT CORPORATION II, INC. (the "Company"), transferable on the
books of the Company by the holder hereof, in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are subject to the laws of
Delaware, and to the Amended and Restated Certificate of Incorporation of the
Company as now or hereafter amended (copies of which are on file at the offices
of the Company and the Transfer Agent), which are made a part hereof with the
same force and effect as if they were set forth herein, to all of which the
holder, by acceptance hereof, assents. This certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Company has caused the facsimile signatures of
its duly authorized officers and the facsimile of its corporate seal to be
hereunto affixed.
Dated: December 22, 1997
Countersigned and Registered:
/s/ Cam L. Garner, President /s/ Mitchell R. Woodbury, Secretary
---------------------------- -----------------------------------
Authorized Officer Authorized Officer
<PAGE>
[REVERSE OF SPIROS DEVELOPMENT CORPORATION II, INC.'S
SPECIAL COMMON STOCK]
SPIROS DEVELOPMENT CORPORATION II, INC.
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be offered, sold
or otherwise transferred, pledged or hypothecated in the absence of a
registration statement in effect with respect to such securities, or delivery
of an opinion of counsel in form and substance satisfactory to the issuer of
these securities that such offer, sale or transfer, pledge or hypothecation
is in compliance with the Act.
The Company will furnish without charge to each stockholder who so
requests a copy of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of shares of the
Company or series thereof, and the qualifications, limitations or restrictions
of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT...............Custodian..............................
(cust) (Minor)
under Uniform Gifts to Minors Act
....................................................
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, __________________ hereby sells, assigns and transfers
unto ______________________________________________________________________
(Please insert Social Security
or other identifying number of assignee)
______________________________________________________________________
Please print or typewrite name and address
including postal zip code of assignee
<PAGE>
____________________________________________ Shares of Special Common Stock
represented by the within certificate, and do hereby irrevocably constitute and
appoint
__________________________________________________________________
attorney, to transfer the said same on the books of the within named Company,
with full power of substitution in the premises.
Dated: __________________________
_______________________
Signature
_______________________
Signature
Notice: The signature to this
assignment must correspond with the name
as written upon the face of the
Certificate, in every particular,
without alteration or enlargement, or
any change whatever.
In presence of: __________________________
<PAGE>
Important: All signatures must be guaranteed by a firm which is a
financial institution and a member of the Securities
Transfer Agent's medallion Program ("STAMP"), the Stock
Exchange Medallion Program ("SEMP") or the New York
Stock Exchange, Inc. Medallion Signature Program
("MSP").
Signature Guarantee: ___________________________________
Name of Firm
___________________________________
Authorized Signature
___________________________________
Name of Authorized Signatory
(Please print)
___________________________________
Address of Firm
___________________________________
Area Code and Telephone Number of Firm
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-99722, 33-93914, and 33-71798 on Form S-3 and Registration Statement No.
333-34551 on Form S-8 of Dura Pharmaceuticals, Inc. of our report dated March
21, 1997 (December 19, 1997 as to Note 7), relating to the financial
statements of Spiros Development Corporation (a development stage enterprise)
as of December 31, 1995 and 1996 and for the periods then ended, included in
this Current Report on Form 8-K of Dura Pharmaceuticals, Inc.
/s/ DELOITTE & TOUCHE LLP
San Diego, California
January 5, 1998
<PAGE>
Exibit 99.1
TECHNOLOGY LICENSE AGREEMENT
This TECHNOLOGY LICENSE AGREEMENT (the "Agreement") is made as of
December 22, 1997, by and among DURA PHARMACEUTICALS, INC., a Delaware
corporation ("DURA"), DURA DELIVERY SYSTEMS, INC., a Delaware corporation
("DDSI"), SPIROS DEVELOPMENT CORPORATION, a Delaware corporation ("Spiros
Corp."), and SPIROS DEVELOPMENT CORPORATION II, INC., a Delaware corporation
("Spiros Corp. II").
RECITALS
WHEREAS, DURA and Spiros Corp. II are parties to the Development Agreement,
the Manufacturing and Marketing Agreement, and the Albuterol and Product Option
Agreement (all capitalized terms shall have the respective meanings set forth in
Section 1 hereof).
WHEREAS, DURA has the Purchase Option to acquire all of the Spiros Corp. II
Common Stock.
WHEREAS, DURA, DDSI and/or Spiros Corp. are the owners or licensees of the
Core Technology and of certain rights relating to the Spiros Products and
certain intellectual property rights relating thereto.
WHEREAS, DURA, DDSI and Spiros Corp. are willing to grant to Spiros Corp.
II and Spiros Corp. II desires to acquire from DURA, DDSI and Spiros Corp., a
license to the Core Technology and the Spiros Products for the purpose of
allowing Spiros Corp. II to perform research, develop and commercialize the
Spiros Products.
WHEREAS, pursuant to the Development Agreement, Spiros Corp. II has engaged
DURA to employ the intellectual property rights and technology licensed
hereunder in conducting the Development and commercialization of Spiros
Products.
WHEREAS, in the course of researching and developing the Program
Technology, DURA or Spiros Corp. II may develop certain inventions, processes or
know-how, or DURA may obtain on behalf of Spiros Corp. II rights to certain
additional technology or patents or other proprietary rights useful to other
than just the Spiros Products.
WHEREAS, DURA desires to acquire, and Spiros Corp. II is willing to grant
to DURA, an exclusive worldwide license or sublicense to make, use, market and
sell such developments, technology or rights other than with respect to Spiros
Products.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the
<PAGE>
receipt and sufficiency of which are hereby acknowledged, and in order to induce
DURA to enter into the Agreements, DURA, DDSI, Spiros Corp. and Spiros Corp. II
hereby agree as follows:
1. DEFINITIONS.
1.1 DEFINITIONS. All capitalized terms used herein and not otherwise
defined shall have the respective meanings, to the extent such terms are used
herein, set forth in SCHEDULE 1.1 attached hereto, which is incorporated by this
reference as though fully set forth herein.
1.2 SINGULAR AND PLURAL. Singular and plural forms, as the case may be,
of terms defined herein shall have correlative meanings.
2. GRANT OF LICENSES.
2.1 GRANT OF EXCLUSIVE LICENSES TO SPIROS CORP. II; RIGHT TO SUBLICENSE.
2.1.1 DURA GRANT. Subject to the terms and conditions of this
Agreement, DURA hereby grants to Spiros Corp. II an exclusive (against DURA and
all other Persons) perpetual, worldwide right and license, terminable only as
set forth herein, to employ the DURA Core Technology to research, develop, make,
have made, use, sell, have sold and import the Spiros Products (except with
respect to beclomethasone in Japan, Hong Kong, Singapore, the Republic of China,
Taiwan, the Republic of Korea and the People's Republic of China).
2.1.2 DDSI GRANT. Subject to the terms and conditions of this
Agreement, DDSI hereby grants to Spiros Corp. II an exclusive (against DDSI and
all other Persons) perpetual, worldwide right and license, terminable only as
set forth herein, to employ the DDSI Core Technology to research, develop, make,
have made, use, sell, have sold and import the Spiros Products (except with
respect to beclomethasone in Japan, Hong Kong, Singapore, the Republic of China,
Taiwan, the Republic of Korea and the People's Republic of China).
2.1.3 SPIROS CORP. GRANT. Subject to the terms and conditions of
this Agreement, Spiros Corp. hereby grants to Spiros Corp. II an exclusive
(against Spiros Corp. and all other Persons) perpetual, worldwide right and
license, terminable only as set forth herein, to employ the Spiros Core
Technology to research, develop, make, have made, use, sell, have sold and
import the Spiros Products (except with respect to beclomethasone in Japan, Hong
Kong, Singapore, the Republic of China, Taiwan, the Republic of Korea and the
People's Republic of China).
2.2 THIRD PARTY LICENSES TO DURA OR ANY OF ITS AFFILIATES. With respect
to the rights of third parties that may be obtained by DURA after the date
hereof, and which are necessary or useful to the Development under the
Development Agreement or the
- 2 -
<PAGE>
commercialization of the Spiros Products under the Manufacturing and
Marketing Agreement, DURA shall use commercially reasonable efforts to secure
such rights and the right to sublicense such rights to Spiros Corp. II and
shall sublicense such rights to Spiros Corp. II whenever possible; PROVIDED
that Spiros Corp. II shall not be obligated to accept any grant of rights or
assume any obligations hereunder without its prior written consent. If
Spiros Corp. II desires to obtain any such rights licensed to DURA or any of
its Affiliates pursuant to an agreement with any Person other than Spiros
Corp. II (a "Third Party Agreement"), the existence of which DURA shall
promptly inform Spiros Corp. II, Spiros Corp. II and DURA agree to negotiate
in good faith regarding the allocation between DURA or any of its Affiliates
and Spiros Corp. II of the royalty, license fee, milestone fee or other
payments payable to the third party and the assumption of any obligations
applicable to such license, if any. Spiros Corp. II shall bear the cost of
obtaining any such rights and shall assume such obligations only in
proportion to its and its sublicensees' (other than DURA's and/or any of its
Affiliates) use of such rights. Any sublicense granted to Spiros Corp. II
hereunder shall be limited to the rights that DURA and/or any of its
Affiliates has a right to grant under any such Third Party Agreement and to
any obligations under any such Third Party Agreement, and to any obligations
assumed by DURA and/or any of its Affiliates in consideration of the grant or
assignment of such rights to DURA which are to be sublicensed to Spiros Corp.
II. No party shall take any action, or fail to take any action within its
control, that would constitute or give rise to a breach or other violation by
DURA or any of its Affiliates of any such Third Party Agreement. The parties
agree that no future licensing fees are required to be paid by Spiros Corp.
II during the term of this Agreement as consideration for the licenses and
sublicenses granted to Spiros Corp. II hereunder, except as set forth in this
Section 2.2.
2.3 SPIROS CORP. II SUBLICENSES AND LICENSES TO DURA.
2.3.1 DEVELOPMENT LICENSE. Spiros Corp. II hereby grants DURA an
exclusive, even as to Spiros Corp. II and all other Persons, royalty-free
license to employ and engage in any and all uses of the Program Technology to
conduct Development, subject to the terms and conditions of and to the extent
necessary to perform its obligations under the Development Agreement. The
rights granted under this Section 2.3.1 may be further sublicensed by DURA only
to its Affiliates or as permitted under of the Development Agreement (and, in
such a case, solely to the extent necessary to perform any subcontracting
services thereunder) or as otherwise agreed to in writing by Spiros Corp. II.
2.3.2 COMMERCIALIZATION LICENSE. Spiros Corp. II hereby grants
DURA an exclusive, even as to Spiros Corp. II and all other Persons, worldwide
license to use the Program Technology to make, have made, use, sell, supply and
import Spiros Products subject to the terms and conditions of and to the extent
necessary to perform its obligations under the
- 3 -
<PAGE>
Manufacturing and Marketing Agreement. The rights granted under this
Section 2.3.2 may be further sublicensed by DURA only to its Affiliates or as
permitted under the Manufacturing and Marketing Agreement (and, in such a case,
solely to the extent necessary to perform any subcontracting services
thereunder) or as otherwise agreed to in writing by Spiros Corp. II.
2.3.3 ALBUTEROL PRODUCT LICENSE. Spiros Corp. II hereby grants
DURA effective upon the exercise of the Albuterol Option, an exclusive, royalty-
free, irrevocable, perpetual, worldwide license to use the Program Technology to
develop, make, have made, use, sell, have sold, supply and import the Albuterol
Product. The license granted hereunder shall include the right to grant
sublicenses with respect to the Program Technology licensed under this Section
2.3.3 for use with the Albuterol Product.
2.3.4 PRODUCT OPTION LICENSE. Spiros Corp. II hereby grants DURA
effective upon the exercise of the Product Option, an exclusive, royalty-free,
irrevocable, perpetual, worldwide license to use the Program Technology to
develop, have developed, make, have made, use, sell, have sold, supply and
import the Option Product. The license granted hereunder shall include the
right to grant sublicenses with respect to the Program Technology licensed under
this Section 2.3.4 for use with the Option Product.
2.3.5 ADDITIONAL LICENSE. Spiros Corp. II hereby grants DURA an
exclusive, royalty-free, irrevocable, perpetual, worldwide license to use the
Program Technology, including technology relating to enhancements to Spiros
technology or any next generation inhaler system in which Spiros Corp. II has
rights, to develop, have developed, make, have made, use, sell, have sold,
supply and import any products other than the Spiros Products.
2.3.6 OTHER LICENSES. The foregoing licenses are granted in
addition to, and not in substitution for, any other license granted to DURA,
whether pursuant to this Agreement or otherwise.
2.4 RESTRICTIONS UPON USE OF PROGRAM TECHNOLOGY. Except as provided in
the Agreements or by the prior written consent of DURA, Spiros Corp. II shall
not, directly or indirectly, prior to the expiration or termination (other than
by exercise) of the Purchase Option, (a) license, sublicense, encumber, pledge,
sell, assign or otherwise transfer to any Person any rights under the Program
Technology, (b) make, have made, use or sell any of the Program Technology for
any purpose whatsoever, or (c) authorize, cause or assist in any way any other
Person to do any of the foregoing. Following the expiration or termination
(other than by exercise) of the Purchase Option, the foregoing limitations shall
cease to be applicable and Spiros Corp. II shall have, without limitation, the
right to sublicense the Program Technology for use with the Spiros Products.
- 4 -
<PAGE>
2.5 ADJUSTMENT OF LICENSES. The licenses granted in Sections 2.1 and 2.3
hereunder shall be subject to adjustment (a) upon the Albuterol Option Closing
Date, so as to exclude any rights to the Albuterol Program Assets from the
licenses granted therein, and (b) upon the Product Option Closing Date, so as to
exclude any rights to Spiros Product Program Assets from the license granted
therein.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
3.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF DURA. DURA represents,
warrants and covenants to Spiros Corp. II as follows:
3.1.1 ORGANIZATION OF DURA. DURA is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority adequate for executing and delivering
and performing its obligations under this Agreement;
3.1.2 ORGANIZATION OF DDSI. DDSI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority adequate for executing and delivering
and performing its obligations under this Agreement;
3.1.3 ORGANIZATION OF SPIROS CORP.. Spiros Corp. is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with full corporate power and authority adequate for executing
and delivering and performing its obligations under this Agreement.
3.1.4 AUTHORIZATION. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action on
the part of DURA, DDSI and Spiros Corp. and this Agreement shall constitute a
legal, valid and binding obligation of each of DURA, DDSI and Spiros Corp.,
enforceable against DURA, DDSI and Spiros Corp. in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors;
3.1.5 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement do not and will not conflict with or
contravene any provision of the charter documents or by-laws of each of DURA,
DDSI and Spiros Corp. or any material agreement, document, instrument, indenture
or other obligation of DURA, DDSI or Spiros Corp.;
3.1.6 OTHER AGREEMENTS. None of DURA, DDSI or Spiros Corp. shall
enter into any agreement, make any commitment, take any action or fail to take
any action that would contravene any material provision of, or materially
derogate or restrict any of the rights and licenses granted or assigned to
Spiros Corp. II under, this Agreement and each of DURA, DDSI and Spiros Corp.
- 5 -
<PAGE>
agree to abide and be bound by the terms of any license agreement to which they
are a party, any of the rights to which have been or will be sublicensed or
assigned to Spiros Corp. II;
3.1.7 INTELLECTUAL PROPERTY RIGHTS. To the best of its
knowledge, each of DURA, DDSI and Spiros Corp. has sufficient legal and/or
beneficial title and ownership to grant the licenses to the DURA Core
Technology, the DDSI Core Technology and the Spiros Corp. Core Technology,
respectively, and the other intellectual property rights provided in Section
2 above. None of DURA, DDSI or Spiros Corp. is aware of and has not received
any communications alleging that it has violated, or that Spiros Corp. II by
practicing the Core Technology as contemplated in the Agreements would
violate, any intellectual property rights of any third party. Except for the
1933 Royalty Agreement, there are no outstanding options, licenses or
agreements of any kind between DURA, DDSI or Spiros Corp. and any third party
relating to the research, development, manufacture, use or sale of the Spiros
Products. To the best of its knowledge, there is no material unauthorized
use, infringement or misappropriation of any of the Core Technology. DURA,
DDSI and Spiros Corp. are not aware of, nor have they received any
communications challenging the ownership, validity or effectiveness of the
Core Technology.
3.1.8 VALIDITY. None of DURA, DDSI or Spiros Corp. is aware of any
action, suit or inquiry or investigation instituted by any federal, state, local
or foreign governmental agency or instrumentality which questions or threatens
the validity of the Agreements.
3.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SPIROS CORP. II. Spiros
Corp. II represents, warrants and covenants to DURA, DDSI and Spiros Corp. as
follows:
3.2.1 ORGANIZATION. Spiros Corp. II is a corporation duly
organized, validly existing and in good standing under the laws of State of
Delaware with full corporate power and authority adequate for executing and
delivering and performing its obligations under this Agreement;
3.2.2 AUTHORIZATION. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action on
the part of Spiros Corp. II, and this Agreement shall constitute a legal, valid
and binding obligation of Spiros Corp. II, enforceable against Spiros Corp. II
in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors;
3.2.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement do not and will not conflict with or
contravene any provision of the charter documents or by-laws of Spiros Corp. II
or any material agreement, document, instrument, indenture or other obligation
of Spiros Corp. II;
- 6 -
<PAGE>
3.2.4 OTHER AGREEMENTS. Spiros Corp. II shall not enter into any
agreement, make any commitment, take any action or fail to take any action that
would contravene any material provisions of, or materially derogate or restrict
any of the rights or licenses granted to DURA under, this Agreement;
3.2.5 SUBLICENSES. Spiros Corp. II agrees to abide and be bound by
the terms of the sublicenses granted to it in accordance with the terms of this
Agreement by DURA, DDSI and/or Spiros Corp. under any Third Party Agreement or
under any agreement with a third party;
3.2.6 NON-COMPETITION. Spiros Corp. II shall not, during the
term of this Agreement, without the prior written consent of DURA, solicit
the employment of any person, in any capacity, who, at any time during the
term of this Agreement, shall have been an officer, director, employee or
agent of DURA or any of its Affiliates, except for the officers of Spiros
Corp. II on the date hereof; and
3.2.7 VALIDITY. Spiros Corp. II is aware of no action, suit or
inquiry or investigation instituted by any federal, state, local or foreign
governmental agency or instrumentality which questions or threatens the validity
of the Agreements.
4. DISCLOSURE AND USE OF TECHNOLOGY AND RIGHTS.
4.1 TECHNOLOGY TRANSFER.
4.1.1 PRIOR TO EXPIRATION OR TERMINATION OF PURCHASE OPTION. At any
time prior to the expiration or termination (other than by exercise) of the
Purchase Option and upon request by Spiros Corp. II, each of DURA, DDSI and
Spiros Corp. shall, within a reasonable time thereafter, provide access to
Spiros Corp. II to all physical manifestations of the Program Technology which
they control.
4.1.2 AFTER EXPIRATION OR TERMINATION OF OPTION. After expiration
or termination (other than by exercise) of the Purchase Option, DURA shall,
except as provided otherwise in any of the Agreements, within thirty (30) days
of a written request by Spiros Corp. II, provide to Spiros Corp. II or a
sublicensee designated by Spiros Corp. II, reasonably sufficient quantities of
previously manufactured quantities of Spiros Products and all physical
manifestations of the Program Technology, including, without limitation, copies
of all laboratory notebooks, designs, specifications, formulas, procedures,
clinical and pre-clinical data and other information, all to the extent that
such Spiros Products, or Program Technology were developed prior to the time of
such required delivery. Spiros Corp. II shall pay all costs of shipping,
packaging, copying and similar or related costs in connection therewith,
provided such costs have not been previously paid by Spiros Corp. II hereunder
or under the
- 7 -
<PAGE>
Development Agreement.
4.1.3 TECHNICAL ASSISTANCE AFTER EXPIRATION OR TERMINATION OF
PURCHASE OPTION. For a period of one (1) year after expiration or termination
(other than by exercise) of the Purchase Option, each of DURA, DDSI and Spiros
Corp. shall provide to Spiros Corp. II, or a sublicensee designated by Spiros
Corp. II, at Spiros Corp. II's or such permitted sublicensee's sole option and
expense, reasonable technical assistance and instruction in understanding,
interpreting and applying the Program Technology solely for the purposes of
further developing the Program Technology and developing and commercializing
Spiros Products. Each of DURA, DDSI and Spiros Corp. shall make their
respective employees directly involved in the Development of the Program
Technology prior to the expiration or termination (other than by exercise) of
the Purchase Option, reasonably available for consultation by telephone, or in
person at their respective offices at reasonable cost, in connection with such
assistance and instruction, all at the sole expense of Spiros Corp. II or such
sublicensee. The obligations set forth in this Section 4.1.3 shall not include
any obligation to disclose matters unrelated to the application of the Program
Technology to the Spiros Products, matters with respect to the Albuterol Product
(following the exercise of the Albuterol Option) or matters with respect to the
Option Product (following the exercise of the Product Option).
4.2 PATENTS.
4.2.1 RIGHTS PRIOR TO EXPIRATION OR TERMINATION OF PURCHASE
OPTION. Except as set forth below, until the expiration or termination (other
than by exercise) of the Purchase Option, DURA shall, at Spiros Corp. II's
sole expense, direct and cause appropriate patent applications to be
prepared, filed and prosecuted in all relevant territories, in a timely
fashion, with respect to any inventions included in the Program Technology
whether arising out of inventions made solely by DURA employees or
consultants, inventions made solely by DDSI employees or consultants,
inventions made solely by Spiros Corp. employees or consultants, inventions
made solely by Spiros Corp. II employees or consultants or inventions made
jointly by any of the parties' employees or consultants. DURA and Spiros
Corp. II shall discuss and evaluate with each other such discoveries and
inventions and shall confer regarding the advisability of filing patent
applications to cover those discoveries and inventions, including the
countries in which such patent applications should be filed. DURA shall
cause any patents issuing thereon to be maintained and enforced that DURA and
Spiros Corp. II believe, in their commercially reasonable judgment, are
patentable and commercially and technically significant to Spiros Corp. II.
With respect to the Developed Technology that has substantial application to
Spiros Products, as well as to products other than the Spiros Products, the
expenses of preparing, prosecuting and maintaining such patents shall be
reasonably allocated between DURA and Spiros Corp. II by their mutual
agreement.
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4.2.2 RIGHTS AFTER EXPIRATION OR TERMINATION OF PURCHASE OPTION.
After the expiration or termination of the Purchase Option (other than by
exercise), Spiros Corp. II shall have the exclusive right, at its sole expense,
to prepare and prosecute, in its name, patent applications, and to maintain
patents issued with respect to the Program Technology. In the event that Spiros
Corp. II declines to prepare, prosecute or maintain any such patent application
or patent, Spiros Corp. II shall give DURA no less than sixty (60) days' prior
written notice of such decision but in all events at least as much time so as to
allow DURA to take action to forestall a loss of novelty or a statutory bar to
patentability. Following such written notice, and in order to protect its
rights, DURA shall have the right in its sole discretion and at its sole
expense, to undertake the preparation, prosecution or maintenance of any such
patent application or patent issued thereon with respect to the DURA Core
Technology, the DDSI Core Technology and the Spiros Core Technology.
Enforcement rights upon the expiration or termination (other than by exercise)
of the Purchase Option are governed by Section 5.2.2 hereunder.
4.2.3 COOPERATION. Each party agrees to cause each of its employees
and agents to take all actions and to execute, acknowledge and deliver all
instruments or agreements reasonably requested by the other party, and necessary
for the perfection, maintenance, enforcement or defense of that party's rights
as set forth above.
4.3 CONFIDENTIAL INFORMATION. Any party receiving Confidential
Information shall maintain the confidential and proprietary status of such
Confidential Information, keep such Confidential Information and each part
thereof within its possession or under its control sufficient to prevent any
activity with respect to the Confidential Information that is not specifically
authorized by this Agreement, use all commercially reasonable efforts to prevent
the disclosure of any Confidential Information to any other Person, and use
commercially reasonable efforts to ensure that such Confidential Information is
used only for those purposes specifically authorized herein; PROVIDED, HOWEVER,
that such restriction shall not apply to any Confidential Information that is
(a) independently developed by the receiving party outside the scope of this
Agreement or the Development Agreement (PROVIDED, HOWEVER, that such restriction
shall apply to any technology licensed by DURA, DDSI or Spiros Corp. to Spiros
Corp. II under this Agreement), (b) in the public domain at the time of its
receipt or thereafter becomes part of the public domain through no fault of the
receiving party, (c) received without an obligation of confidentiality from a
third party having the right to disclose such information, (d) released from the
restrictions of this Section 4.3 by the express written consent of the
disclosing party, (e) disclosed to any permitted assignee, permitted sublicensee
or permitted subcontractor of DURA, DDSI, Spiros Corp. or Spiros Corp. II under
the Agreements (if such assignee, sublicensee or
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subcontractor is subject to the provisions of this Section 4.3 or
substantially similar provisions) or (f) required by law, statute, rule or
court order to be disclosed (the disclosing party shall, however, use
commercially reasonable efforts to obtain confidential treatment of any such
disclosure). The obligations set forth in this Section 4.3 shall survive for
a period of ten (10) years from the expiration or termination (other than by
exercise) of the Purchase Option. Without limiting the generality of the
foregoing, DURA, DDSI, Spiros Corp. and Spiros Corp. II each shall use
commercially reasonable efforts to obtain, if not already in place,
confidentiality agreements from their respective employees and agents,
similar in scope to this Section 4.3, to protect the Confidential Information.
4.4 PERMITTED DISCLOSURES. Notwithstanding the provisions of Section 4.3
hereof, DURA, DDSI, Spiros Corp. and Spiros Corp. II (and their permitted
sublicensees) may, to the extent necessary, disclose and use Confidential
Information, consistent with the rights of DURA, DDSI, Spiros Corp. and Spiros
Corp. II otherwise granted hereunder (a) for the purpose of securing
institutional or government approval to clinically test or market any Spiros
Product, (b) for the purpose of securing patent protection for an invention
within the scope of the Program Technology, (c) in the case of Spiros Corp. II,
following expiration or termination (other than by exercise) of the Purchase
Option, to the extent necessary or useful in the development or
commercialization of any Spiros Products or (d) in the case of DURA, following
exercise of the Albuterol Option or the Product Option, to the extent necessary
or useful in the development or commercialization of the Albuterol Product or
the Option Product, respectively; PROVIDED, that the disclosing party obtains an
agreement from any Person to whom such Confidential Information is disclosed to
preserve the confidentiality thereof upon terms reasonably equivalent to those
set forth herein and to use such Confidential Information only for those
purposes consistent with the respective rights granted to Spiros Corp., DURA,
DDSI and Spiros Corp. II hereunder or under any of the Agreements.
5. PATENT INFRINGEMENT.
5.1 NOTIFICATION OF INFRINGEMENT. Each party shall notify all other
parties of any infringement known to such party by any Person of any Patent
Rights and shall provide all other parties with the available evidence, if any,
of such infringement.
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5.2 ENFORCEMENT OF PATENT RIGHTS. If any party has actual notice of
infringement by any Person of Patent Rights, the respective officers of DURA and
Spiros Corp. II shall confer to determine in good faith an appropriate course of
action to enforce such Patent Rights or otherwise abate the infringement
thereof, subject to the provisions of this Section 5.2. DURA and Spiros Corp.
II shall consult with each other in the planning and execution of any action to
enforce Patent Rights.
5.2.1 RIGHTS PRIOR TO EXPIRATION OR TERMINATION OF OPTION. Until
the expiration or termination (other than by exercise) of the Purchase Option,
if DURA determines that enforcement of Patent Rights is appropriate, DURA shall
have the right, but not the obligation, to take appropriate action to enforce
such Patent Rights. Any enforcement with respect to the Patent Rights shall be
at DURA's expense; PROVIDED, HOWEVER, that if DURA elects to so act with respect
to the Patent Rights, Spiros Corp. II shall have the right to participate in the
enforcement of such Patent Rights by agreeing to bear a percentage of the costs
of such enforcement in such amount as the parties shall determine. If, within
six (6) months after notice of infringement, DURA has not commenced an action to
enforce such Patent Rights or thereafter ceases to diligently pursue such
action, Spiros Corp. II shall have the right, at its expense, to take
appropriate action to enforce such Patent Rights as its sole remedy hereunder.
All amounts recovered in any action to enforce Patent Rights undertaken by DURA
and Spiros Corp. II, whether by judgment or settlement, shall be retained by
DURA and Spiros Corp. II pro rata according to the respective percentages of
expenses borne by them in enforcing such Patent Rights. Neither DURA nor Spiros
Corp. II shall enter into any settlement that includes the grant of a license
under, agreement not to enforce, or any statement prejudicial to the validity or
enforceability of any Patent Rights without the consent of the other, which
consent shall not be unreasonably withheld. Any amounts retained by Spiros
Corp. II shall not be considered Available Funds.
5.2.2 RIGHTS AFTER EXPIRATION OR TERMINATION OF OPTION. After the
expiration or termination (other than by exercise) of the Purchase Option, if
Spiros Corp. II determines that enforcement of Patent Rights is appropriate,
Spiros Corp. II shall have the right, but not the obligation, to take
appropriate action to enforce such Patent Rights. Any enforcement with respect
to the Patent Rights shall be at Spiros Corp. II's expense; PROVIDED, HOWEVER,
that if Spiros Corp. II elects to so act with respect to the Patent Rights, DURA
shall have the right to participate in the enforcement of such Patent Rights by
agreeing to bear a percentage of the costs of such enforcement in such amount as
the parties shall determine. If, within six (6) months after notice of
infringement, Spiros Corp. II has not commenced an action to enforce such Patent
Rights or thereafter ceases to diligently pursue such action, DURA shall have
the right, at its expense, to take appropriate action to enforce such Patent
Rights as its sole remedy hereunder. All amounts recovered in any action to
enforce Patent Rights undertaken by
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Spiros Corp. II and DURA, whether by judgment or settlement, shall be
retained by Spiros Corp. II or DURA pro rata according to the respective
percentages of expenses borne by them in enforcing such Patent Rights.
Neither DURA nor Spiros Corp. II shall enter into any settlement that
includes the grant of a license under, agreement not to enforce, or any
statement prejudicial to the validity or enforceability of any Patent Rights
without the consent of the other, which consent shall not be unreasonably
withheld.
5.2.3 COOPERATION. Each party agrees to cause each of its employees
and agents to take all actions and to execute, acknowledge and deliver all
instruments or agreements reasonably requested by the other party, and necessary
for the perfection, maintenance, enforcement or defense of the party's rights as
set forth above.
5.3 DISCLAIMER OF WARRANTY; CONSEQUENTIAL DAMAGES.
5.3.1 DISCLAIMER OF WARRANTY. Nothing in this Agreement shall be
construed as a representation made or warranty given by any party hereto that
any patents will issue based on pending applications within the Patent Rights,
or that any such Patent Rights which do issue will be valid, or that the
practice by a party hereto of any license granted hereunder, or that the use of
any Program Technology licensed hereunder, will not infringe the patent or
proprietary rights of any other Person. Spiros Corp. II understands that the
Development shall involve technologies that have not been approved by any
regulatory authority and that none of DURA, DDSI or Spiros Corp. guarantees the
safety or usefulness of any Spiros Product. In addition, except as expressly
set forth in Section 3 of this Agreement, DURA, DDSI, Spiros Corp. and Spiros
Corp. II acknowledge that THE PROGRAM TECHNOLOGY IS LICENSED TO Spiros Corp. II
AND SUBLICENSED TO DURA HEREUNDER AS IS, AND DURA, DDSI, SPIROS CORP. AND SPIROS
CORP. II EXPRESSLY DISCLAIM AND HEREBY WAIVE, RELEASE AND RENOUNCE ANY WARRANTY,
EXPRESS OR IMPLIED, WITH RESPECT TO SUCH PROGRAM TECHNOLOGY, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT. Except as expressly set forth in this agreement, DURA, DDSI,
Spiros Corp. and Spiros Corp. II disclaim all warranties of any nature, express
or implied.
5.3.2 CONSEQUENTIAL DAMAGES. NONE OF THE PARTIES TO THIS AGREEMENT
SHALL BE ENTITLED TO RECOVER FROM ANOTHER PARTY HERETO ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
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6. INDEMNIFICATION.
6.1 INDEMNIFICATION BY DURA. DURA shall indemnify the Spiros Corp. II
Indemnitees, pay on demand and protect, defend, save and hold harmless each
Spiros Corp. II Indemnitee from and against any and all Claims incurred by or
asserted against any Spiros Corp. II Indemnitee of whatever kind or nature,
including, without limitation, any claim or liability based upon negligence,
warranty, strict liability, violation of government regulation or
infringement of patent or other propriety rights, arising from or occurring
as a result of (a) any use of the Program Technology by DURA or any
Affiliate, agent or sublicensee of DURA (other than Spiros Corp. II in
contravention of the terms of this Agreement), (b) any of the Development or
any other services to be performed by DURA during the term of the Agreements
pursuant to the Agreements, including, without limitation, any workers'
compensation claim by any DURA employee or consultant or other Person or (c)
subject to Section 5.3.2, any breach of the Agreements by DURA, except, with
respect to Spiros Corp. II Indemnitees, in cases in which Claims of Spiros
Corp. II Indemnitees are based upon the gross negligence or willful
misconduct of a Spiros Corp. II Indemnitee. A Spiros Corp. II Indemnitee
shall promptly notify DURA of any Claim with respect to which an Spiros Corp.
II Indemnitee is seeking indemnification hereunder, upon becoming aware
thereof, and permit DURA at DURA's cost to defend against such Claim and
shall cooperate in the defense thereof.
6.2 INDEMNIFICATION BY SPIROS CORP. II. Spiros Corp. II shall indemnify
the DURA Indemnitees, the DDSI Indemnitees and the Spiros Corp. Indemnitees, pay
on demand and protect, defend, save and hold harmless each DURA Indemnitee, DDSI
Indemnitee or Spiros Corp. Indemnitee from and against any and all Claims
incurred by or asserted against any DURA Indemnitee, DDSI Indemnitee or Spiros
Corp. Indemnitee of whatever kind or nature, including, without limitation, any
claim or liability based upon negligence, warranty, strict liability, violation
of government regulation or infringement of patent or other propriety rights,
arising from or occurring as a result of (a) any use of the Program Technology
by Spiros Corp. II or any sublicensee of Spiros Corp. II (other than the use of
such by DURA, DDSI or Spiros Corp. whether pursuant to the Agreements or
otherwise) or (b) subject to Section 5.3.2, any breach of the Agreements by
Spiros Corp. II, except, with respect to DURA Indemnitees, in cases in which
Claims are based upon the gross negligence or willful misconduct of a DURA
Indemnitee or, except with respect to DDSI Indemnitees, in cases in which Claims
are based upon the gross negligence or willful misconduct of a DDSI Indemnitee
or, except with respect to Spiros Corp. Indemnitees, in cases in which Claims
are based upon the gross negligence or willful misconduct of a Spiros Corp.
Indemnitee. An Indemnitee hereunder shall promptly notify Spiros Corp. II of
any Claim with respect to which such Indemnitee is seeking indemnification
hereunder, upon becoming aware thereof, and permit Spiros Corp. II at Spiros
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Corp. II's cost to defend against such Claim and shall cooperate in the
defense thereof.
6.3 DEFENSE OF CLAIMS. None of DURA, DDSI, Spiros Corp. or Spiros Corp.
II shall enter into, or permit, any settlement of any Claim for which
indemnification is being sought by such party hereunder without the express
written consent of each other party (or a DURA, DDSI, Spiros Corp. or Spiros
Corp. II Indemnitee, as the case may be), which consent shall not be
unreasonably withheld or delayed. Each party may, at its option and expense,
have its own counsel participate in any proceeding which is under the direction
of another party (the "Indemnifying Party") and will cooperate with the
Indemnifying Party and its insurer in the disposition of any such matter;
PROVIDED, HOWEVER, that if the Indemnifying Party shall not defend such Claim,
the other party shall have the right to defend such Claim itself and recover
from the Indemnifying Party all reasonable attorneys' fees and expenses incurred
by it during the course of such defense.
7. TECHNOLOGY ACCESS FEE.
7.1 FEE. In consideration of the license rights granted to Spiros
Corp. II herein and in recognition of DURA's, DDSI's and Spiros Corp.'s
expertise which they have developed over a period of years and individually,
Spiros Corp. II shall pay DURA, DDSI and Spiros Corp. an aggregate technology
access fee equal to the greater of (a) five percent (5%) of the Net Sales in
a calendar year for each Spiros Product, to be paid by Spiros Corp. II fifty
percent (50%) to DURA, twenty percent (20%) to DDSI and thirty percent
(30%) to Spiros Corp. or (b) Two Million Dollars for all Spiros Products in
any calendar year beginning in calendar 1998, to be paid by Spiros Corp. II
fifty percent (50%) to DURA, twenty percent (20%) to DDSI and thirty
percent (30%) to Spiros Corp.
7.2 TERM. Such technology access fee obligation shall terminate on a
country-to-country basis, on the following basis: (a) in those countries where
no patents covering such Spiros Product issue, ten (10) years following the
first commercial sale of such Spiros Product in such country; and (b) in those
countries where a patent(s) covering such Spiros Product issue, upon the
expiration of the last-to-expire patent covering the manufacture, use, import or
sale of a Spiros Product in such country.
7.3 PAYMENT OF TECHNOLOGY ACCESS FEES. Spiros Corp. II shall pay Five
Hundred Thousand Dollars ($500,000) on or before the forty-fifth (45th)
day following the end of each calendar quarter, fifty percent (50%) to
DURA, twenty percent (20%) to DDSI and thirty percent (30%) to Spiros
Corp. Within sixty (60) days following the end of each calendar year,
Spiros Corp. II shall provide to DURA, DDSI and Spiros Corp. a formal
accounting of the Net Sales of each Spiros Product in such calendar year
(the "Accounting"), and shall calculate the aggregate sum with respect to
sales of all Spiros Products which would be due if Spiros Corp. II were
to pay DURA five percent (5%) of the Net Sales in a calendar year for
each Spiros Product (the "Net Sales Amount"). In the event that the Net
Sales Amount is less than Two Million Dollars ($2,000,000), no additional
payments shall be due and payable from Spiros Corp. II with respect to
access to the Core Technology. In the event that the Net Sales Amount is
greater than Two Million Dollars ($2,000,000), Spiros Corp. II shall
promptly pay, but in no event later than five (5) business days following
delivery of the Accounting to DURA, DDSI and Spiros Corp., the difference
between the Net Sales Amount and Two Million Dollars ($2,000,000) with
respect to access to the Core Technology, fifty percent (50%) to DURA,
twenty percent (20%) to DDSI and thirty percent (30%) to Spiros Corp.
7.4 PRODUCT SALES. The Spiros Products for which such technology access
fees are payable shall be deemed to have been sold when shipped and billed to a
third party.
7.5 PAYEE. Such technology access fees shall be paid by Spiros Corp. II
directly to the party entitled thereto or to such party's designee as duly named
in a written notice to Spiros Corp. II.
7.6 PAYMENT IN DOLLARS. Such technology access fees shall
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be paid in United States currency. All technology access fees accrued in
currencies other than U.S. dollars shall be converted into U.S. dollars on
the basis of the rate of exchange applied by Citibank, N.A., New York, as of
the last banking day of each quarter for which such technology access fees
become due.
7.7 PROHIBITED PAYMENTS. Notwithstanding any other provision of the
Agreements, if Spiros Corp. II is prevented from paying any such technology
access fee by virtue of the statutes, laws, codes or governmental regulations of
the country from which the payment is to be made, then such technology access
fee shall be made by depositing funds in the currency in which accrued to the
other party's account in a bank acceptable to the other party in the country
whose currency is involved.
7.8 TAXES. If a law or governmental regulation requires withholding of
taxes on any payment due hereunder, such taxes shall be deducted from any amount
to be remitted hereunder and shall be paid to the proper taxing authority, and
proof of payment shall be provided to the party on whose behalf such taxes were
paid as evidence of such payment in such form as required by the tax authorities
having jurisdiction thereover.
7.9 REPORTS. Each payment of any such technology access fee shall be
accompanied by a written report, prepared and signed by a financial officer of
Spiros Corp. II, showing for the quarter for which payment is being made, the
gross sales and Net Sales of each Spiros Product sold and the technolgy access
fees which shall have accrued with respect thereto and currency conversion
calculations, if any. In the event that, for any quarter following the first
quarter in which a Spiros Product is sold for which such a technology access fee
would be payable, no such technology access fee is due, the party having
responsibility for sales of such Spiros Product shall report the same to the
other parties.
7.10 MAINTENANCE AND EXAMINATION OF RECORDS. At the request and expense
of DURA, Spiros Corp. II, or their respective Affiliates, the other parties
hereto and their Affiliates shall permit an independent certified public
accountant appointed by such party and reasonably acceptable to the other
party, at reasonable times and upon reasonable notice (but not exceeding once
in any twelve (12) month period), to examine those records as may be
necessary to: (a) determine, with respect to any calendar year ending not
more than three (3) years prior to such party's request, the correctness of
any report or payment under this Agreement; or (b) obtain information as to
the Spiros Product sales for any calendar year. Said independent certified
public accountant shall verify to the requesting party only the amount of
payment due or costs incurred hereunder and disclose no other information
revealed in its audit. Results of any such examination shall be made
available to the parties. Any amount of deficiency, or overcharge, shall be
paid or refunded promptly to Spiros Corp. II, plus interest at the commercial
prime lending rate of Citibank, N.A., New York (or equivalent banking
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institution) until the date paid. The party requesting the audit shall bear
the full cost of the performance of any such audit unless such audit
discloses a variance of more than five percent (5%) from the amount of the
original report, technology access fee or payment calculation, in which case
the party being audited shall bear the full cost of the performance of such
audit. DURA and Spiros Corp. II shall maintain and keep complete and
accurate records in sufficient detail to enable any examination concerning
technology access fees to be conducted pursuant to this Section 7.10.
8. TERM AND TERMINATION.
8.1 TERM. This Agreement shall be effective as of the date hereof and
shall continue in full force and effect indefinitely, unless terminated earlier
as provided in Sections 8.2, 8.3 and 8.4 hereof.
8.2 TERMINATION BY MUTUAL AGREEMENT. By mutual agreement, the parties
hereto may at any time terminate this Agreement and the Development on mutually
acceptable terms.
8.3 EFFECT OF PURCHASE OPTION EXERCISES.
8.3.1 PURCHASE OPTION. In the event the Purchase Option is
exercised by DURA, this Agreement shall terminate, effective upon the Purchase
Option Closing Date, without any obligation to make payments pursuant to Section
7 of this Agreement.
8.3.2 PARTIAL TERMINATION UPON EXERCISE OF ALBUTEROL OPTION. In the
event that the Albuterol Option is exercised, this Agreement shall terminate,
effective on the Albuterol Option Closing Date, with respect to the Albuterol
Program Assets and any obligation to make technology access fee payments with
respect to the Albuterol Product, but shall otherwise continue in full force and
effect until terminated pursuant to this Section 8.
8.3.3 PARTIAL TERMINATION UPON EXERCISE OF PRODUCT OPTION. In the
event that the Product Option is exercised, this Agreement shall terminate,
effective on the Product Option Closing Date, with respect to the Spiros Product
Program Assets and any obligation to make technology access fee payments with
respect to the Option Product, but shall otherwise continue in full force and
effect until terminated pursuant to this Section 8.
8.4 TERMINATION BY DURA, DDSI AND SPIROS. Either DURA, DDSI and Spiros
Corp., acting by unanimous action, or Spiros Corp. II shall have the right to
terminate this Agreement, effective as set forth in a written notice of the
occurrence of an Event of Default with respect to the other party.
8.5 RIGHTS IN BANKRUPTCY. All rights and licenses granted
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under or pursuant to this Agreement by DURA, DDSI, Spiros Corp. and Spiros
Corp. II are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to "intellectual property"
as defined under Section 101 of the Bankruptcy Code. The parties agree that
DURA and Spiros Corp. II as licensees of such rights under this Agreement,
shall retain and may fully exercise all of their rights and elections under
the Bankruptcy Code. The parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against DURA, DDSI, Spiros
Corp. or Spiros Corp. II under the Bankruptcy Code, the parties hereto which
are not parties to such proceeding shall be entitled to a complete duplicate
of (or complete access to, as appropriate) any such intellectual property and
all embodiments of such intellectual property, and same, if not already in
their possession, shall be promptly delivered to them upon any such
commencement of a bankruptcy proceeding upon their written request therefor.
8.6 EFFECT OF TERMINATION.
8.6.1 TERMINATION BY DURA, DDSI AND SPIROS CORP.. If DURA, DDSI and
Spiros Corp. terminate this Agreement pursuant to Section 8.4 hereof, (a) the
licenses and sublicenses granted to Spiros Corp. II under Section 2.1 of this
Agreement shall terminate, (b) all rights to the DURA Core Technology shall
revert to DURA, all rights to the DDSI Core Technology shall revert to DDSI and
all rights to the Spiros Core Technology shall revert to Spiros Corp., (c) all
rights to the Program Technology except as set forth in (b) above shall revert
to DURA, (d) all rights to develop, make, have made, use, sell and import all
Spiros Products shall revert to DURA, DDSI and/or Spiros Corp. and (e) the
provisions of Sections 1, 3.2.6, 4.3, 4.4, 5.3, 6, 9.4 and 9.5 of this Agreement
shall survive. DURA will use reasonable efforts for a period of 120 days after
a termination by DURA, DDSI and Spiros Corp., pursuant to Section 8.4 hereof, to
negotiate royalties or any other compensation to be paid by DURA to Spiros Corp.
II with respect to the Developed Technology that will revert to DURA. In the
event the parties are unable to agree on the royalties or other compensation to
be paid by DURA with respect to the Developed Technology with the 120 day
period, such matter shall be submitted by DURA and Spiros Corp. II to binding
arbitration in accordance with the rules of the American Arbitration
Association.
8.6.2 TERMINATION BY SPIROS CORP. II. If Spiros Corp. II terminates
this Agreement pursuant to Section 8.4 hereof, the provisions of Sections 1,
2.1, 2.3.3 (if the Albuterol Option has been exercised), 2.3.4 (if the Product
Option has been exercised), 2.3.5, 3.2.6, 4.2.2, 4.3, 4.4, 5.3, 6, 7, 9.4 and
9.5 of this Agreement shall survive; PROVIDED, HOWEVER, if Spiros Corp. II fails
to perform or observe or otherwise breaches its Material Obligations under
Section 7 of this Agreement, which failure or breach is unremedied for a period
of sixty (60) days after receipt by Spiros Corp. II of written notice thereof
from DURA, or in the event such failure or breach
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is not capable of cure within sixty (60) days, for such longer period of time
as Spiros Corp. II is vigorously pursuing such cure in good faith, DURA, DDSI
and Spiros Corp. shall have the right to terminate this Agreement with the
same effect as if DURA, DDSI and Spiros Corp. were to terminate this
Agreement pursuant to Section 8.4 hereof.
8.6.3 TERMINATION OF PURCHASE OPTION UNEXERCISED. If the Purchase
Option terminates unexercised, the licenses and sublicenses granted under
Sections 2.3.1 and 2.3.2 of this Agreement shall terminate.
8.6.4 CONTINUING OBLIGATION TO MAKE PAYMENTS. Notwithstanding
anything contained herein to the contrary, upon termination of this Agreement,
the obligation to pay any amounts payable by any party to another party which
accrued prior to such termination shall survive.
9. MISCELLANEOUS.
9.1 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the part of
DURA, DDSI, Spiros Corp. or Spiros Corp. II to exercise and no delay in
exercising any right, power, remedy or privilege under this Agreement or
provided by statute or at law or in equity or otherwise, including, without
limitation, the right or power to terminate this Agreement, shall impair,
prejudice or constitute a waiver of any such right, power, remedy or privilege
or be construed as a waiver of any breach of this Agreement or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
or the exercise of any other right, power, remedy or privilege.
9.2 FORCE MAJEURE. DURA, DDSI, Spiros Corp. and Spiros Corp. II shall
each be excused for any failure or delay in performing any of their respective
obligations under this Agreement, if such failure or delay is caused by Force
Majeure.
9.3 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended or is to be construed to constitute DURA, DDSI, Spiros Corp. and Spiros
Corp. II as partners or joint venturers or one party as an employee of any other
party. Except as expressly provided herein, no party hereto shall have any
express or implied right or authority to assume or create any obligations on
behalf of or in the name of any other party or to bind any other party to any
contract, agreement or undertaking with any third party.
9.4 NOTICES. All notices, requests and other communications to DURA,
DDSI, Spiros Corp. or Spiros Corp. II hereunder shall be in writing (including
telecopy or similar electronic transmissions), shall refer specifically to this
Agreement and shall be personally delivered or sent by telecopy or other
electronic facsimile transmission or by registered mail or certified mail,
return receipt requested and postage prepaid, or
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<PAGE>
by reliable overnight courier service, in each case to the respective address
specified below (or to such address as may be specified in writing to the
other party hereto):
If to DURA, addressed to:
Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
with a copy to the attention of General Counsel
If to DDSI, addressed to:
Dura Delivery Systems, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
If to SPIROS, addressed to:
Spiros Development Corporation
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
If to Spiros Corp. II, addressed to:
Spiros Development Corporation II, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
Each party shall provide each other party with copies of any notices sent
hereunder, with such copies sent at the same time as the original notice. Any
notice or communication given in conformity with this Section 9.4 shall be
deemed to be effective when received by the addressee, if delivered by hand,
telecopy or electronic transmission, three (3) days after mailing, if mailed,
and one (1) business day after delivery to a reliable overnight courier service.
9.5 FURTHER ASSURANCES. Each of DURA, DDSI, Spiros Corp. and Spiros Corp.
II hereby agrees to duly execute and deliver, or cause to be duly executed and
delivered, such further instruments and do and cause to be done such further
acts and things, including, without limitation, the filing of such additional
assignments, agreements, documents and instruments, that may be necessary or as
the other party hereto may at any time and from time to time reasonably request
in connection with this Agreement or to carry out more effectively the
provisions and purposes of, or to better assure and confirm unto such other
party its rights and remedies under, this Agreement.
9.6 SUCCESSORS AND ASSIGNS. The terms and provisions of
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<PAGE>
this Agreement shall inure to the benefit of, and be binding upon, DURA,
DDSI, Spiros Corp., Spiros Corp. II and their respective successors and
assigns; PROVIDED, HOWEVER, that DURA, DDSI, Spiros Corp. and Spiros Corp. II
may not assign or otherwise transfer any of their respective rights and
interests, nor delegate any of their respective obligations, hereunder,
including, without limitation, pursuant to a merger or consolidation, without
the prior written consent of the other party hereto; PROVIDED FURTHER,
HOWEVER, that DURA, DDSI or Spiros Corp. may fully assign their respective
rights and interests, and delegate their respective obligations, hereunder,
effective upon written notice thereof (a) to an Affiliate if such Affiliate
assumes all of the obligations of DURA, DDSI or Spiros Corp., as the case may
be, hereunder and this Agreement remains binding upon Dura, DDSI or Spiros
Corp., as the case may be; or (b) to any Person that acquires all or
substantially all of the assets of Dura, DDSI or Spiros Corp. as the case may
be, or which is the surviving Person in a merger or consolidation with Dura,
DDSI or Spiros Corp. if such Person assumes all the obligations of DURA, DDSI
or Spiros Corp., as the case may be, hereunder. Notwithstanding the
foregoing, Spiros Corp. II shall have the right to assign its rights and
delegate its obligations hereunder following expiration or termination (other
than by exercise) of the Purchase Option. Any attempt to assign or delegate
any portion of this Agreement in violation of this Section 9.6 shall be null
and void. Subject to the foregoing any reference to DURA, DDSI, Spiros Corp.
or Spiros Corp. II hereunder shall be deemed to include the successors
thereto and assigns thereof.
9.7 AMENDMENTS. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent by DURA, DDSI, Spiros
Corp. or Spiros Corp. II to any departure therefrom, shall in any event be
effective unless the same shall be in writing specifically identifying this
Agreement and the provision intended to be amended, modified, waived, terminated
or discharged and signed by DURA, DDSI, Spiros Corp. and Spiros Corp. II, and
each amendment, modification, waiver, termination or discharge shall be
effective only in the specific instance and for the specific purpose for which
given. No provision of this Agreement shall be varied, contradicted or
explained by any other agreement, course of dealing or performance or any other
matter not set forth in an agreement in writing and signed by DURA, DDSI, Spiros
Corp. and Spiros Corp. II.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, as applied to contracts
made and performed entirely within the State of California. Except as otherwise
provided herein, any claim or controversy arising out of or related to this
contract or any breach hereof shall be submitted to a court of competent
jurisdiction in the State of California, and the parties hereby consent to the
jurisdiction and venue of such court.
9.9 SEVERABILITY. If any provision hereof should be held
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<PAGE>
invalid, illegal or unenforceable in any respect in any jurisdiction, then,
to the fullest extent permitted by law, (a) all other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in order to carry out the intentions of the parties hereto as
nearly as may be possible and (b) such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such provision in any other jurisdiction. To the extent permitted by
applicable law, DURA, DDSI, Spiros Corp. and Spiros Corp. II hereby waive any
provision of law that would render any provision hereof prohibited or
unenforceable in any respect.
9.10 HEADINGS. Headings used herein are for convenience only and shall not
in any way affect the construction of, or be taken into consideration in
interpreting, this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.
9.12 ENTIRE AGREEMENT. This Agreement, together with any agreements
referenced herein, constitute, on and as of the date hereof, the entire
agreement of DURA, DDSI, Spiros Corp. and Spiros Corp. II with respect to the
subject matter hereof, and all prior or contemporaneous understandings or
agreements, whether written or oral, between DURA, DDSI, Spiros Corp. and Spiros
Corp. II with respect to such subject matter are hereby superseded in their
entirety.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.
SPIROS DEVELOPMENT CORPORATION II, INC.
By: /s/ David S. Kabakoff
-------------------------------------------
David S. Kabakoff
President and Chief Executive Officer
DURA PHARMACEUTICALS, INC.
By: /s/ Cam L. Garner
-------------------------------------------
Cam L. Garner
President and Chief Executive Officer
DURA DELIVERY SYSTEMS, INC.
By: /s/ Mitchell R. Woodbury
-------------------------------------------
Mitchell R. Woodbury
Secretary
SPIROS DEVELOPMENT CORPORATION
By: /s/ Mitchell R. Woodbury
-------------------------------------------
Mitchell R. Woodbury
Secretary
[SIGNATURE PAGE TO TECHNOLOGY LICENSE AGREEMENT]
<PAGE>
SCHEDULE 1.1
GLOSSARY
SCHEDULE 1.1
<PAGE>
SCHEDULE 1.1
GLOSSARY
"AFFILIATE" of a person shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. "Control" (and, with correlative meanings, the
terms "controlled by" and "under common control with") shall mean the possession
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting stock, by contract or
otherwise. In the case of a corporations, "control" shall mean, among other
things, the direct or indirect ownership of more than fifty percent (50%) of its
outstanding voting stock.
"AGREEMENTS" shall mean the Manufacturing and Marketing Agreement, the
Technology Agreement and the Development Agreement.
"ALBUTEROL OPTION" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"ALBUTEROL AND PRODUCT OPTION AGREEMENT" shall mean the Albuterol and
Product Option Agreement dated as of December 22, 1997, between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"ALBUTEROL OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 1.5 of the Albuterol and Product Option Agreement.
"ALBUTEROL PROGRAM ASSETS" shall have the meaning assigned to it in Section
1.1 of the Albuterol and Product Option Agreement.
"ALBUTEROL PRODUCT" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"AVAILABLE FUNDS" shall mean the sum of (a) the net proceeds to Spiros
Corp. II from the sale of the Units in the Offering and the Contribution, (b)
all royalties remitted to Spiros Corp. II by DURA (or its Affiliates) from the
Sale of Spiros Products pursuant to the Agreements, (c) the Option Proceeds, if
any, (d) any other amounts provided by DURA to Spiros Corp. II, if any and (e)
interest or other income earned through temporary investment of the amounts
described in clauses (a), (b), (c) or (d).
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as amended
from time to time.
"CLAIM" shall mean any and all liabilities, damages, losses, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees).
SCHEDULE 1.1
<PAGE>
"CONFIDENTIAL INFORMATION" shall mean all Program Technology disclosed by
DURA (and its Affiliates) to Spiros Corp. II or by Spiros Corp. II to DURA
pursuant to the Agreements or the Services Agreement.
"CONTRIBUTION" shall have the meaning assigned in Section 5.2 of the
Development Agreement.
"CORE TECHNOLOGY" shall mean the DURA Core Technology, the DDSI Core
Technology and the Spiros Core Technology.
"DDSI CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DDSI as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DDSI Patent Rights; PROVIDED,
HOWEVER, that DDSI Core Technology shall also include Technology acquired by
DDSI from a third party after the date of the closing of the Offering necessary
or useful to the development of the Spiros Products, except to the extent that
there are any limitations or restrictions on DDSI's ability to license or
sublicense such Technology. "Owned or controlled" shall include Technology that
DDSI owns, or under which DDSI is licensed and has the right to grant
sublicenses and/or grant immunity from suit.
"DDSI INDEMNITEE" shall mean DDSI, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DDSI PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DDSI (or the rights to
which have been assigned to DDSI) as of the date of the Technology Agreement
relating to dry powder inhalers, powder storage systems and/or formulation
methods for dry powder inhalation, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
patent applications and (c) any patent issued or issuing upon any of the
foregoing.
"DESIGNATED COMPOUND(S)" shall mean any compounds for delivery using the
System selected by Spiros Corp. II, and agreed to be developed by DURA.
"DEVELOPED TECHNOLOGY" shall mean any Technology including, without
limitation, any enhancements, substitutions or improvements to the Core
Technology that is (a) discovered, developed or otherwise acquired by DURA
pursuant to the terms of the Development Agreement or (b) otherwise acquired by
or on behalf of Spiros Corp. II during the term of the Development Agreement.
"DEVELOPMENT" shall mean the further development of the Program Technology
for the purpose of identifying, developing, manufacturing, marketing and
commercializing Spiros Products and
SCHEDULE 1.1
<PAGE>
the making of the Other Expenditures.
"DEVELOPMENT AGREEMENT" shall mean the Development Agreement dated as of
December 22, 1997, between DURA and Spiros Corp., as amended, modified or
supplemented from time to time.
"DEVELOPMENT COSTS" shall mean the Direct Development Costs, the Indirect
Development Costs and the Other Expenditures.
"DEVELOPMENT TERM" shall mean the period commencing on the Closing Date and
ending on the earlier of (a) the Option Closing Date or (b) the date the Option
terminates or expires other than by exercise.
"DIRECT DEVELOPMENT COSTS" shall mean all costs incurred by DURA or its
Affiliates in respect of the Development, other than Indirect Development
Costs, determined in accordance with generally accepted accounting principles
consistent with DURA's internal accounting system, allocated on a reasonable
and consistent basis. Direct Development Costs shall consist primarily of
fully-burdened payroll costs (burdened to include benefits, payroll taxes and
an allocation of facilities and overhead costs) and any other such costs
generated internally by DURA in respect of the Development.
"DPI" shall mean the motor-driven dry powder inhaler (other than an inahler
designed to deliver a single dose of a drug) developed by DURA, DDSI and/or
Spiros Corp. and to be developed by DURA and/or Spiros Corp. II.
"DURA COMMON STOCK" shall mean the Common Stock of DURA, par value $.001
per share.
"DURA CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DURA as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DURA Patent Rights and DURA
Trademarks; PROVIDED, HOWEVER, that DURA Core Technology shall also include
Technology acquired by DURA from a third party after the date of the closing of
the Offering necessary or useful to the development of the Spiros Products,
except to the extent that there are any limitations or restrictions on DURA's
ability to license or sublicense such Technology. "Owned or controlled" shall
include Technology that DURA owns, or under which DURA is licensed and has the
right to grant sublicenses and/or grant immunity from suit.
"DURA INDEMNITEE" shall mean DURA, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DURA PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DURA (or the rights to
which have been assigned to DURA) as of the date of the Technology Agreement
relating to DPIs, PSSs and/or formulation methods for dry powder inhalation, (b)
any
SCHEDULE 1.1
<PAGE>
patent application constituting an equivalent, counterpart, reissue,
extension or continuation (including, without limitation, a continuation in part
or a subdivision) of any of the foregoing patent applications and (c) any patent
issued or issuing upon any of the foregoing.
"DURA TRADEMARKS" shall mean Spiros-TM-.
"EVENT OF DEFAULT" shall mean any of the following events: (a) at any
time, if DURA or Spiros Corp. II fails to perform or observe or otherwise
breaches any of its Material Obligations, and such failure or breach continues
unremedied for a period of sixty (60) days after receipt by of written notice
thereof from the other party; (b) at any time, effective as set forth in a
written notice from the other party if DURA or Spiros Corp. II shall (i) seek
the liquidation, reorganization, dissolution or winding-up of itself or the
composition or readjustment of its debts (other than pursuant to a merger with
an Affiliate), (ii) apply for or consent to the appointment of, or the taking
possession by, a receiver, custodian, trustee or liquidator for itself or of all
or a substantial part of its assets, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the Bankruptcy
Code, (v) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts (other than pursuant to a merger with an Affiliate) or
(vi) adopt any resolution of its Board of Directors or shareholders for the
purpose of effecting any of the foregoing (other than pursuant to a merger with
an Affiliate); or (c) at any time, effective as set forth in a written notice
from the other party, if a proceeding or case shall be commenced without the
application or consent of DURA or Spiros Corp. II as applicable, and such
proceeding or case shall continue undismissed, or an order, judgment or decrees
approving or ordering any of the following shall be entered and continued
unstayed and in effect, for a period of sixty (60) days from and after the date
service of process is effected, seeking (i) DURA's or Spiros Corp. II's, as
applicable, liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of DURA or Spiros Corp. II or for
all or any substantial part of its assets or (iii) similar relief in respect of
DURA or Spiros Corp. II under any law relating to bankruptcy, insolvency,
reorganization, winding-up or the composition or readjustment of debts.
"FDA" shall mean the United States Food and Drug Administration or any
successor agency or authority, the approval of which is required to market
health care products in the United States.
"FDA APPROVAL" shall mean the final regulatory approval of the FDA required
to commence commercial marketing of a health product.
SCHEDULE 1.1
<PAGE>
"FORCE MAJEURE" shall mean any act of God, any accident explosion, fire,
storm, earthquake, flood, drought, peril of the sea, riot, embargo, war or
foreign, federal, state or municipal order of general application, seizure,
requisition or allocation, any failure or delay of transportation, shortage of
or inability to obtain supplies, equipment, fuel or labor or any other
circumstance or event beyond the reasonable control of the party relying upon
such circumstance or event.
"INDIRECT DEVELOPMENT COSTS" shall mean all costs, fees and out-of-pocket
or other expenses, including the purchase of any capital equipment related to
the Development, incurred or paid by DURA to a third party, other than an
Affiliate of DURA, in respect of the Development, determined in accordance with
generally accepted accounting principles consistent with DURA's internal
accounting system, allocated on a reasonable and consistent basis.
"MANUFACTURING AND MARKETING AGREEMENT" shall mean the Manufacturing and
Marketing Agreement dated as of December 22, 1997 between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"MANUFACTURE" shall mean the manufacture and assembly of the Spiros
Products.
"MATERIAL OBLIGATION" shall mean the material obligations of a party under
the Technology Agreement, the Development Agreement or the Manufacturing and
Marketing Agreement.
"NET SALES" shall mean the gross amount invoiced for sales of Spiros
Products by DURA or its sublicensees, if any, to third parties less (i)
discounts actually allowed, (ii) credits for claims, allowances, retroactive
price reductions or returned Spiros Products, (iii) prepaid freight charges
incurred in transporting Spiros Products to customers, (iv) sales taxes and
other governmental charges actually paid in connection with the sales (but
excluding what is commonly known as income taxes) and (v) any royalty
obligations under the 1993 Royalty Agreement. Net Sales shall not include sales
between or among DURA, its Affiliates and its sublicensees unless such sales are
for end use rather than for purposes of resale.
"OFFERING" shall mean the underwritten public offering of the Units
pursuant to the Registration Statement.
"OPTION PROCEEDS" shall have the meaning assigned to it in Section 3 of the
Albuterol and Product Option Agreement.
"OPTION PRODUCT" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"OTHER EXPENDITURES" shall mean funds spent by Spiros Corp. II to acquire
capital equipment, develop a next generation inhaler system or to enhance the
System.
SCHEDULE 1.1
<PAGE>
"PATENT RIGHTS" shall mean any patents or patent applications within the
Spiros Corp. II Patent Rights, the DURA Patent Rights, the DDSI Patent Rights
and the Spiros Corp. Patent Rights.
"PERSON" shall mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust or other entity.
"PRODUCT OPTION" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"PRODUCT OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 2.5 of the Albuterol and Product Option Agreement.
"PROGRAM TECHNOLOGY" shall mean the Core Technology and the Developed
Technology.
"PSS" shall mean the powder storage system developed and to be developed by
DURA for use with the DPI.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
December 16, 1997, among DURA, Spiros Corp. II, Merrill Lynch & Co., and
Donaldson, Lufkin & Jenrette.
"PURCHASE OPTION" shall mean the option granted to the holder of Spiros
Corp. II's Special Common Stock to purchase all of the Spiros Corp. II Common
Stock as set forth in Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION CLOSING DATE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION EXERCISE PRICE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-1/S-3 filed by Spiros Corp. II and DURA dated October 10, 1997 (No.
333-37673/333-37673-01), including all exhibits and any amendments thereof
and supplements thereto.
"RESEARCH FUNDS" shall mean the Available Funds, less (i) all general and
administrative expenses including, without limitation, those paid or payable
pursuant to the Development Agreement or the Services Agreement, and the
reasonable out-of-pocket expenses of Spiros Corp. II directors and reasonable
compensation for Spiros Corp. II's independent directors, less (ii) any amounts
paid to DURA under the Development Agreement or the Services Agreement, less
(iii) any costs and expenses incurred in the defense or settlement of any action
or claim or in respect of a judgment thereon, and less (iv) One Million Dollars
($1,000,000) to be retained by Spiros Corp. II as working capital in the event
DURA does not exercise the Purchase Option.
SCHEDULE 1.1
<PAGE>
"SALE(S)" or "SELL" shall mean the activity undertaken by a sales
representative during a sales call on physicians, physician assistants, nurses,
hospitals, clinics, health maintenance organizations, preferred provider
organizations and managed care companies (including all forms of communication
not involving face to face contact by such sales representatives), describing
the FDA-approved indicated uses, safety, effectiveness, contraindications, side
effects, warnings and other relevant characteristics of the Spiros Product, in a
fair and balanced manner consistent with the requirements of the Federal Food,
Drug, and Cosmetic Act, as amended (and the regulations thereunder).
"SPIROS CASSETTE SYSTEM" shall mean a DPI in which the PSS is in the form
of a cassette.
"SPIROS CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
Spiros Corp. as of the date of the closing of the Offering necessary or useful
to the development of the Spiros Products, and (b) the Spiros Corp. Patent
Rights; PROVIDED, HOWEVER, that Spiros Core Technology shall also include
Technology acquired by Spiros Corp. from a third party after the date of the
closing of the Offering necessary or useful to the development of the Spiros
Products, except to the extent that there are any limitations or restrictions on
Spiros Corp.'s ability to license or sublicense such Technology. "Owned or
controlled" shall include Technology that Spiros Corp. owns, or under which
Spiros Corp. is licensed and has the right to grant sublicenses and/or grant
immunity from suit.
"SPIROS CORP. INDEMNITEE" shall mean Spiros Corp., its successors and
assigns, and the directors, officers, employees, agents and counsel thereof.
"SPIROS CORP. PATENT RIGHTS" shall mean those certain inventions described
in claims of (a) the patent applications pending, filed by Spiros Corp. (or the
rights to which have been assigned to Spiros Corp.) as of the date of the
Technology Agreement relating to dry powder inhalers, powder storage systems
and/or formulation methods for dry powder inhalation, (b) any patent application
constituting an equivalent, counterpart, reissue, extension or continuation
(including, without limitation, a continuation in part or a subdivision) of any
of the foregoing patent applications and (c) any patent issued or issuing upon
any of the foregoing.
"SPIROS CORP. II CHARTER" shall mean Amended and Restated Certificate of
Spiros Development Corporation II, Inc. in effect as of the closing of the
Offering, as amended from time to time.
"SPIROS CORP. II COMMON STOCK" shall mean the Callable Common Stock of
Spiros Corp. II, $.001 par value.
"SPIROS CORP. II INDEMNITEE" shall mean Spiros Corp. II, its
SCHEDULE 1.1
<PAGE>
successors and assigns, and the directors, officers, employees, agents and
counsel thereof.
"SPIROS CORP. II PATENT RIGHTS" shall mean those certain inventions
described in claims of (a) any patent application having one or more claims
covering Developed Technology, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
applications or (c) any patent issued or issuing upon any of the foregoing
applications.
"SPIROS PRODUCT(S)" shall mean (a) any System used with a formulation of
albuterol, beclomethasone, ipratropium, an albuterol-ipratropium combination,
budesonide or a Designated Compound developed, produced, manufactured or
marketed by DURA on behalf of Spiros Corp. II using the Program Technology.
"SPIROS PRODUCT PROGRAM ASSETS" shall have the meaning assigned to it in
Section 2.1 of the Albuterol and Product Option Agreement.
"SYSTEM" shall mean the DPI and the PSS when used together.
"TECHNOLOGY" shall mean, solely with respect to motor-driven dry powder
inhalers and powder storage systems for drugs for delivery through such
inhalers, the manufacture thereof, and formulations of drugs to be delivered
through such inhalers, public and nonpublic technical or other information,
trade secrets, know-how, processes, formulations, concepts, ideas, preclinical,
clinical, pharmacological or other data and testing results, experimental
methods, or results, assays, descriptions, business or scientific plans,
depictions, customer lists and any other written, printed or electronically
stored materials, pharmaceutical compounds or any other natural or man-made
pharmaceutical materials and any and all other intellectual property, including
patents and patent applications, of any nature whatsoever. The term
"Technology" shall include, without limitation, any of the foregoing as it
relates to enhancements of, substitutions for or improvements to the Core
Technology.
"TECHNOLOGY AGREEMENT" shall mean the Technology License Agreement dated
as of December 22, 1997, among DURA, DDSI, Spiros Corp. and Spiros Corp. II,
as amended, modified or supplemented from time to time.
"TERRITORY" shall mean the entire world.
"UNDERWRITERS" shall have the meaning assigned to it in the Registration
Statement.
"UNITS" shall mean units, each consisting of one share of Spiros Corp. II
Common Stock and one warrant to purchase one-fourth of one share of DURA Common
Stock, all as described in the Registration Statement.
SCHEDULE 1.1
<PAGE>
"1993 ROYALTY AGREEMENT" shall have the meaning assigned to it in the
Registration Statement.
SCHEDULE 1.1
<PAGE>
EXHIBIT 99.2
DEVELOPMENT AGREEMENT
This DEVELOPMENT AGREEMENT (the "Agreement") is made as of December 22,
1997, by and between DURA PHARMACEUTICALS, INC., a Delaware corporation
("DURA"), and SPIROS DEVELOPMENT CORPORATION II, INC., a Delaware corporation
("Spiros Corp. II").
RECITALS
WHEREAS, DURA and Spiros Corp. II are parties to the Technology Agreement,
the Manufacturing and Marketing Agreement, and the Albuterol and Product Option
Agreement (all capitalized terms shall have the respective meaning set forth in
Section 1 hereto).
WHEREAS DURA, Dura Delivery Systems, Inc., a Delaware corporation ("DDSI"),
and Spiros Development Corporation, a Delaware corporation ("Spiros Corp."),
have granted to Spiros Corp. II, and Spiros Corp. II has acquired from DURA,
DDSI and Spiros Corp., a license to certain technology for the purpose of
allowing Spiros Corp. II to further develop the Core Technology and to develop
and commercialize the Spiros Products.
WHEREAS, DURA has experience in the development of pharmaceutical products
and has the facilities, equipment, employees and other resources to accomplish
development activities, on behalf of Spiros Corp. II, with respect to such
rights and technology.
WHEREAS, Spiros Corp. II desires to engage DURA to perform such services in
connection with the Development, and DURA is willing to provide such services.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in order to induce DURA to enter into the
Agreements, DURA and Spiros Corp. II hereby agree as follows:
1. DEFINITIONS.
1.1 DEFINITIONS. All capitalized terms used herein and not otherwise
defined shall have the respective meanings, to the extent such terms are used
herein, set forth in SCHEDULE 1.1 attached hereto, which is incorporated by this
reference as though fully set forth herein.
1.2 SINGULAR AND PLURAL. Singular and plural forms, as the case may be,
of terms defined herein shall have correlative meanings.
2. DEVELOPMENT SERVICES.
2.1 DEVELOPMENT. Spiros Corp. II hereby engages DURA, and DURA hereby
accepts such engagement, to use commercially reasonable efforts to undertake the
Development. Such services shall be provided as follows:
<PAGE>
2.1.1 WORKPLAN AND BUDGET. As of the date of the closing of the
Offering, DURA shall have provided Spiros Corp. II with a workplan and budget
acceptable to the Board of Directors of Spiros Corp. II covering the period from
the closing through December 31, 1998, a copy of which is attached hereto as
SCHEDULE 2.1. Thereafter, DURA and Spiros Corp. II shall prepare an annual
workplan and budget in accordance with Section 3 hereof. DURA and Spiros Corp.
II may make changes in the annual workplan and budget from time to time as
approved in writing by an authorized representative of each party. Expenditures
made on behalf of Spiros Corp. II by DURA for which DURA is to be reimbursed
pursuant to Section 5.1 hereof, shall not exceed in any calendar year one
hundred twenty percent (120%) of the amount allocated in the annual workplan and
budget applicable to such year unless otherwise approved by the Board of
Directors of Spiros Corp. II. DURA shall report significant deviations from the
annual workplan and budget to Spiros Corp. II in a timely manner.
2.1.2 CONDUCT OF DEVELOPMENT. During the term of this Agreement,
DURA shall use commercially reasonable efforts to (a) conduct the Development on
behalf of Spiros Corp. II in a prudent and skillful manner in accordance, in all
material respects, with the annual workplan and budget then in effect and
applicable laws, ordinances, rules, regulations, orders, licenses and other
requirements now or hereafter in effect and (b) diligently execute such annual
workplan and budget and report to Spiros Corp. II any significant deviations
therefrom in a timely manner. Spiros Corp. II hereby appoints DURA its
exclusive agent, for the term of this Agreement, with the sole power and
authority to file and prosecute all necessary regulatory applications and
permits in DURA's name required to obtain FDA Approval and other regulatory
approvals for the Spiros Products. DURA shall, at Spiros Corp. II's expense as
described below, furnish all labor, supervision, services, supplies and
materials necessary to perform the Development in accordance with the annual
workplan and budget then in effect. In addition to its undertakings pursuant to
the Technology Agreement, DURA agrees to use commercially reasonable efforts, on
behalf of itself, DDSI and Spiros Corp., to attempt to obtain and to sublicense
to Spiros Corp. II subject to the terms and conditions of the Technology
Agreement, on behalf of and at the expense of Spiros Corp. II but in accordance
with Section 2.4 of the Technology Agreement, any patent or technology license
or sublicense from any Person, including DURA, DDSI or Spiros Corp., that DURA
reasonably determines to be necessary or useful to enable DURA to conduct the
Development under this Agreement.
2.1.3 SUBCONTRACTS. Spiros Corp. II acknowledges that DURA may elect
to subcontract to third parties a portion of the Development. Spiros Corp. II
acknowledges and agrees that in performing the Development, DURA may, and is
hereby authorized to, without the prior written consent of Spiros Corp. II,
engage or agree or otherwise collaborate with other Persons, including, without
limitation, Affiliates of DURA or institutions performing other development
activities for DURA, to provide assistance in carrying out the Development.
2.1.4 CHANGES TO THE WORKPLANS. If at any time Spiros Corp. II
determines, based on the reports furnished pursuant to Section 3 hereof, in its
reasonable business judgment and in consultation with DURA, or DURA determines
with Spiros Corp. II's consent (which consent shall not be withheld
unreasonably), that the Development should be discontinued with respect to the
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further development of a particular Spiros Product because the continuance
thereof is unfeasible or uneconomic, or that the Development should be expanded
to include one or more Designated Compounds, then Spiros Corp. II and DURA shall
use all reasonable efforts to agree on the nature of further development and the
identity of such Designated Compounds.
2.1.5 SALE OF SPIROS PRODUCTS PRIOR TO REGULATORY APPROVAL.
Spiros Corp. II hereby appoints DURA as its exclusive agent for the
Manufacture and Sale of Spiros Products during the term of this Agreement for
the sole purpose of conducting the clinical testing required to obtain FDA
Approval or other regulatory approval to market such Spiros Products. DURA
shall charge Spiros Corp. II for all the costs (determined in accordance with
Section 6.5 hereof) relating to the Manufacture and Sale of such Spiros
Products prior to FDA Approval of such Spiros Products as Development Costs,
and shall remit to Spiros Corp. II any revenues received by it from the sale
of such Spiros Products. Spiros Corp. II agrees that all such revenues
received hereunder with respect to Spiros Products shall be considered
Available Funds.
2.1.6 MANUFACTURE AND SALE OF SPIROS PRODUCTS FOLLOWING
REGULATORY APPROVAL. Spiros Corp. II and DURA hereby agree that the
Manufacture and Sale of each Spiros Product during the term of this Agreement
following FDA Approval or other required regulatory approval to market such
Spiros Product shall be governed solely by the terms and conditions of the
Manufacturing and Marketing Agreement.
2.2 DISCLAIMER OF WARRANTIES. DURA cannot and does not guarantee that the
Development will be successful in whole or in part, that any Spiros Products
will be developed or that any developed Spiros Products will be successful in
the marketplace. To the extent that DURA has complied with Section 2.1.2
hereof, the failure of DURA to further develop successfully the Program
Technology or to discover, develop or commercialize any Spiros Product will not
in and of itself constitute a breach by DURA of any representation, warranty,
covenant or other obligation under the Agreements. In addition, neither DURA
nor Spiros Corp. II makes any representation or warranty or guaranty that the
Available Funds will be sufficient for the completion of the Development of any
or all of the Spiros Products or to begin commercialization with respect to any
Spiros Product.
2.3 RIGHTS TO PROPERTY. All right, title and interest to the Program
Technology acquired or developed pursuant to this Agreement including any
submissions or applications to the FDA or any foreign equivalent made by DURA in
its name on behalf of Spiros Corp. II shall be the exclusive property of Spiros
Corp. II; PROVIDED, HOWEVER, that such right, title and interest shall be
subject in all events to (a) the rights to Albuterol Program Assets obtained
from Spiros Corp. II pursuant to the exercise of the Albuterol Option or (b) the
rights to the Spiros Product Program Assets obtained from Spiros Corp. II
pursuant to the exercise of the Product Option. All matters relating to patents
and patent applications with respect to the Program Technology acquired or
developed pursuant to this Agreement shall be governed by Section 5.2 of the
License Agreement.
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2.4 TERMINATION OF DEVELOPMENT UPON EXERCISE OF THE ALBUTEROL OPTION. If
the Albuterol Option is exercised, Development hereunder shall cease with
respect to the Albuterol Product. DURA and the Board of Directors of Spiros
Corp. II shall agree upon an allocation to one or more remaining Spiros Products
or to the Other Expenditures of the funds available as a result of the exercise
of the Albuterol Option.
2.5 TERMINATION OF DEVELOPMENT UPON EXERCISE OF THE PRODUCT OPTION. If
the Product Option is exercised, Development hereunder shall cease with respect
to the Option Product. DURA and the Board of Directors of Spiros Corp. II shall
agree upon an allocation to one or more remaining Spiros Products or to the
Other Expenditures of the funds available as a result of the exercise of the
Product Option.
3. REPORTS AND RECORDS. Within thirty (30) days after the end of each
calendar quarter during the term of this Agreement, DURA shall provide to the
Board of Directors of Spiros Corp. II a reasonably detailed report setting forth
in respect of such quarter (a) the total Development Costs incurred, (b) a
summary of the work performed hereunder by DURA and its employees and agents and
(c) a description of any material developments with respect to the Program
Technology. Prior to December 1 of each year (commencing with December 1, 1998)
during the term of this Agreement, DURA shall report to the Board of Directors
of Spiros Corp. II with respect to the progress of the Development, which report
shall include the proposed annual workplan and budget for the next calendar
year. Prior to January 1 of each year (commencing January 1, 1999), the Board
of Directors of Spiros Corp. II shall approve such annual workplan and budget
with such changes as it may, in the exercise of its reasonable business
judgment, deem necessary and as DURA may approve (which approval shall not be
unreasonably withheld); PROVIDED, that no annual workplan and budget shall be
deemed effective until approved by DURA and the Board of Directors of Spiros
Corp. II. DURA shall prepare a final report, within ninety (90) days after the
expiration or termination of this Agreement, setting forth in reasonable detail
a summary of the work performed since the last report provided to the Board of
Directors hereunder and the material developments with respect thereto and
containing a final statement of all costs billed to Spiros Corp. II hereunder.
DURA shall keep and maintain proper and complete records and books of account
documenting all of its expenses related to the Development, including those
allocated to and reimbursed by Spiros Corp. II hereunder. At Spiros Corp. II's
request and expense, DURA shall permit a certified independent public accountant
selected by Spiros Corp. II to have access, no more than once in each calendar
year during the term of this Agreement and each year for three (3) calendar
years following the termination hereof, during regular business hours and upon
reasonable notice to DURA, to such records and books for the sole purpose of
determining the appropriateness of Development Costs invoiced hereunder;
PROVIDED, HOWEVER, that if such certified independent public accountant
reasonably determines that such Development Costs have been, for any calendar
year, after adjustments herein provided for, overstated by DURA by an amount
equal to or greater than five percent (5%), DURA shall promptly refund any such
overpayment to Spiros Corp. II and pay all reasonable fees and disbursements of
such certified independent public accountant incurred in the course of making
such determination.
4. OTHER ACTIVITIES. During the term of this Agreement, DURA shall devote
such time and
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effort to the performance of services pursuant to this Agreement as may be
necessary or appropriate to fulfill its duties under this Agreement;
PROVIDED, HOWEVER, it is specifically understood and agreed by Spiros Corp.
II that DURA shall not be required to devote itself, on a full-time basis, to
the provision of such services and that DURA shall have the right to engage
in its own development activities and in other business activities with other
Persons, and Spiros Corp. II shall not, by virtue of this Agreement, have any
right, title or interest in or to such independent activities or to the
income or profits derived therefrom and, without limiting DURA's obligation
to use commercially reasonable efforts to provide certain services hereunder,
nothing set forth in this Agreement shall limit or reduce the ability of DURA
to carry on such other activities.
5. PAYMENT FOR SERVICES; TIMING OF PAYMENTS.
5.1 PAYMENTS FOR DEVELOPMENT. In consideration of the Development
to be carried out by DURA during the term of this Agreement, Spiros Corp. II
shall reimburse DURA out of Available Funds for all of (a) the Direct
Development Costs plus a fee equal to twenty-five percent (25%) of all of
such costs (the "Management Fee"), PROVIDED that the cost to DURA of services
provided by Affiliates of DURA shall not exceed the cost to each Affiliate of
providing such services, and (b) the Indirect Development Costs plus a fee
equal to twenty percent (20%) of all such costs (the "Indirect Management
Fee"), invoiced to Spiros Corp. II by DURA. The amount to be paid to DURA
pursuant to this Agreement shall not exceed the amount of the Available
Funds. The Available Funds must be retained by Spiros Corp. II in an account
separate from all accounts containing any other funds. Spiros Corp. II agrees
to expend all Available Funds on Development and Other Expenditures pursuant
to this Agreement, except as otherwise set forth in the Agreements. In the
event that the cash and cash equivalents of Spiros Corp. II are reduced to
less than $5 million, DURA may, within thirty (30) days following notice from
Spiros Corp. II that such funds have been reduced to less than $5 million, at
its option (the "Funding Option"), provide additional funds sufficient in the
reasonable judgment of DURA and Spiros Corp. II to fund the continued
Development of Spiros Products for an additional twelve (12) months at a
level comparable to the level of funding provided during the prior twelve
(12) months, which funding shall be considered Available Funds. The Funding
Option may only be exercised one time and shall be irrevocable following
exercise. Payment to Spiros Corp. II of all amounts in respect of the Funding
Option must be made within thirty (30) days of its exercise.
5.2 CONTRIBUTIONS. Concurrently with the execution of this Agreement,
DURA will contribute Seventy-Five Million Dollars ($75,000,000) in cash to
Spiros Corp. II (the "Contribution").
5.3 DEVELOPMENT EXPENSES. Within five (5) business days of the closing of
the Offering and upon the receipt by Spiros Corp. II of an invoice therefor,
Spiros Corp. II shall reimburse DURA for all development services as set forth
on SCHEDULE 5.3 incurred by DURA through the date of the closing of the
Offering, estimated to be five million Dollars ($5,000,000)
but which shall in no event exceed seven million Dollars
($7,000,000).
5.4 TIMING OF PAYMENTS. Spiros Corp. II shall pay to DURA monthly the
Development
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Costs, plus the applicable Management Fee and Indirect Management Fee,
actually incurred in the prior month as shown on a statement delivered by
DURA to Spiros Corp. II. Spiros Corp. II shall make such payment within
fifteen (15) days after the delivery of such statement from DURA.
5.5 CALCULATION OF COSTS. Direct Development Costs shall be allocated on
a reasonable and consistent basis, and charged to Spiros Corp. II for services
performed by DURA on behalf of Spiros Corp. II hereunder. DURA's expenditures
and estimated expenditures for performing the Development hereunder shall be
determined using generally accepted accounting principles, consistent with
DURA's internal financial and accounting systems, allocated on a reasonable and
consistent basis. Allocation of all Indirect Development Costs shall be made by
DURA on a reasonable basis consistent with DURA's regular internal cost
accounting system.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. The provisions of Section 3 of
the Technology Agreement with respect to DURA and Spiros Corp. II shall apply
with equal force and effect to this Agreement and are incorporated hereunder.
7. CONFIDENTIALITY. The provisions of Sections 4.3 and 4.4 of the Technology
Agreement shall apply with equal force and effect to this Agreement and are
incorporated hereunder.
8. DISCLAIMER OF WARRANTY; CONSEQUENTIAL DAMAGES. The provisions of Section
5.3 of the Technology Agreement shall apply with equal force and effect to this
Agreement and are incorporated hereunder.
9. INDEMNIFICATION AND INSURANCE.
9.1 INDEMNIFICATION. The provisions of Section 6 of the Technology
Agreement shall apply with equal force and effect to this Agreement and are
incorporated hereunder.
9.2 INSURANCE.
9.2.1 INSURANCE BY SPIROS CORP. II. To the extent Spiros Corp. II
develops or uses, or causes the development or use (except by DURA or its
Affiliates or subcontractors under this Agreement) of, the Spiros Products,
Spiros Corp. II shall, to the extent available at commercially reasonable rates,
maintain with insurers or underwriters of good repute such insurance relating to
the Development, and the sale and use of the Spiros Products, against such
risks, pursuant to such terms (including deductible limits or self-insured
retentions) and for such periods, as is customary for comparable businesses
undertaking the development, sale and use of products of a similar nature, and
shall, to the extent reasonably possible and not unreasonably expensive, cause
DURA, DDSI and Spiros Corp. to be named as additional insured parties on its
insurance policies. To the extent Spiros Corp. II is required to obtain
insurance under this Section 9.2.1 during the term of this Agreement, Spiros
Corp. II may use Available Funds to pay the premiums therefor.
9.2.2 INSURANCE BY DURA. DURA shall, to the extent available at
commercially
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reasonable rates, maintain, with insurers or underwriters of good repute such
insurance relating to the Development, against such risks and pursuant to
such terms (including deductible limits or self-insured retentions) as is
customary for comparable businesses undertaking research and development
programs of a similar nature, and shall, to the extent reasonably possible
and not unreasonably expensive, cause Spiros Corp. II to be named as an
additional insured party on its insurance policies.
10. TERM AND TERMINATION.
10.1 TERM. This Agreement shall be effective as of the date hereof and,
unless terminated earlier as provided in Sections 10.2, 10.3 and 10.4 hereof,
shall continue in full force and effect for the duration of the Development
Term.
10.2 TERMINATION BY MUTUAL AGREEMENT. By mutual agreement, the parties
hereto may at any time terminate this Agreement and the Development on mutually
acceptable terms.
10.3 EFFECT OF PURCHASE OPTION EXERCISES.
10.3.1 PURCHASE OPTION. In the event the Purchase Option is
exercised by DURA, this Agreement shall terminate, effective upon the Purchase
Option Closing Date, without any obligation to make payments pursuant to Section
7 of the Technology Agreement.
10.3.2 PARTIAL TERMINATION UPON EXERCISE OF ALBUTEROL OPTION. In
the event that the Albuterol Option is exercised as provided in the Albuterol
and Product Option Agreement, this Agreement shall terminate, effective on the
Albuterol Option Closing Date, with respect to the Albuterol Product, but shall
otherwise continue in full force and effect until terminated pursuant to this
Section 10.
10.3.3 PARTIAL TERMINATION UPON EXERCISE OF PRODUCT OPTION. In the
event that the Product Option is exercised as provided in the Albuterol and
Product Option Agreement, this Agreement shall terminate, effective on the
Product Option Closing Date, with respect to the Option Product but shall
otherwise continue in full force and effect until terminated pursuant to this
Section 10.
10.4 TERMINATION FOR EVENT OF DEFAULT. Either DURA or Spiros Corp. II
shall have the right to terminate this Agreement, effective as set forth in a
written notice to the othe party of the occurrence of an Event of Default with
respect to such other party.
10.5 EFFECT OF TERMINATION.
10.5.1 RETURN OF SPIROS PRODUCTS. In the event of the termination
of DURA's right to continue Development of one or more Spiros Products pursuant
to Section 10.4 as a result of an Event of Default by DURA, DURA shall within
thirty (30) days of the effective date of such termination, transfer to Spiros
Corp. II all Program Technology and all other data, records and materials in
DURA's possession or control which relate to such Spiros Products. DURA shall
also cooperate in the transfer of regulatory filings related to such Spiros
Products, and take such other
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actions and execute such other instruments, assignments and documents as may
be necessary to effect the transfer of such Development rights to Spiros
Corp. II.
10.5.2 CONTINUING OBLIGATION TO MAKE PAYMENTS. Termination of this
Agreement shall not relieve the parties hereto of any liability, including any
obligation to pay any amounts payable by any party to another party which
accrued prior to such termination, nor preclude any party from pursuing all
rights and remedies it may have hereunder or at law or equity with respect to
any breach of this Agreement nor prejudice any party's right to obtain
performance of any obligation.
11. MISCELLANEOUS.
11.1 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the part of DURA
or Spiros Corp. II to exercise and no delay in exercising any right, power,
remedy or privilege under this Agreement or provided by statute or at law or in
equity or otherwise, including, without limitation, the right or power to
terminate this Agreement, shall impair, prejudice or constitute a waiver of any
such right, power, remedy or privilege or be construed as a waiver of any breach
of this Agreement or as an acquiescence therein, nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or
further exercise thereof or the exercise of any other right, power, remedy or
privilege.
11.2 FORCE MAJEURE. DURA and Spiros Corp. II shall each be excused for any
failure or delay in performing any of their respective obligations under this
Agreement, if such failure or delay is caused by Force Majeure.
11.3 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended or is to be construed to constitute DURA and Spiros Corp. II as
partners or joint venturers or one party as an employee of any other party.
Except as expressly provided herein, no party hereto shall have any express or
implied right or authority to assume or create any obligations on behalf of or
in the name of any other party or to bind any other party to any contract,
agreement or undertaking with any third party.
11.4 NOTICES. All notices, requests and other communications to DURA or
Spiros Corp. II hereunder shall be in writing (including telecopy or similar
electronic transmissions), shall refer specifically to this Agreement and
shall be personally delivered or sent by telecopy or other electronic
facsimile transmission or by registered mail or certified mail, return
receipt requested and postage prepaid, or by reliable overnight courier
service, in each case to the respective address specified below (or to such
address as may be specified in writing to the other party hereto):
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If to DURA, addressed to:
Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
with a copy to the attention of General Counsel
If to Spiros Corp. II, addressed to:
Spiros Development Corporation II, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
Any notice or communication given in conformity with this Section 12.4 shall be
deemed to be effective when received by the addressee, if delivered by hand,
telecopy or electronic transmission, three (3) days after mailing, if mailed and
one (1) business day after delivery to a reliable overnight courier service.
11.5 FURTHER ASSURANCES. Each of DURA and Spiros Corp. II hereby agrees to
duly execute and deliver, or cause to be duly executed and delivered, such
further instruments and do and cause to be done such further acts and things,
including, without limitation, the filing of such additional assignments,
agreements, documents and instruments, that may be necessary or as the other
party hereto may at any time and from time to time reasonably request in
connection with this Agreement or to carry out more effectively the provisions
and purposes of, or to better assure and confirm unto such other party its
rights and remedies under, this Agreement.
11.6 SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, DURA, Spiros Corp. II, and
their respective successors and assigns; PROVIDED, HOWEVER, that DURA and Spiros
Corp. II may not assign or otherwise transfer any of their respective rights and
interests, nor delegate any of their respective obligations, hereunder,
including, without limitation, pursuant to a merger or consolidation, without
the prior written consent of the other party hereto; PROVIDED FURTHER, HOWEVER,
that DURA may fully assign its rights and interests, and delegate its
obligations, hereunder, effective upon written notice thereof (a) to an
Affiliate if such Affiliate assumes all of the obligations of DURA hereunder and
this Agreement remains binding upon DURA; or (b) to any Person that acquires all
or substantially all of the assets of DURA, or which is the surviving Person in
a merger or consolidation with DURA, if such Person assumes all the obligations
of DURA hereunder. Notwithstanding the foregoing, Spiros Corp. II shall have
the right to assign its rights and delegate its obligations hereunder following
expiration or termination (other than by exercise) of the Purchase Option.
Notwithstanding the foregoing, Spiros Corp. II shall have the right to assign
its rights and delegate its obligations hereunder following expiration or
termination (other than by exercise) of the Purchase Option. Any attempt to
assign or delegate any portion of this Agreement in violation of this Section
11.6 shall be null and void. Subject to the foregoing any reference to DURA or
Spiros Corp. II hereunder shall be deemed to include the successors thereto and
assigns thereof.
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11.7 AMENDMENTS. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent by DURA or Spiros
Corp. II to any departure therefrom, shall in any event be effective unless the
same shall be in writing specifically identifying this Agreement and the
provision intended to be amended, modified, waived, terminated or discharged and
signed by DURA and Spiros Corp. II, and each amendment, modification, waiver,
termination or discharge shall be effective only in the specific instance and
for the specific purpose for which given. No provision of this Agreement shall
be varied, contradicted or explained by any other agreement, course of dealing
or performance or any other matter not set forth in an agreement in writing and
signed by DURA and Spiros Corp. II.
11.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, as applied to contracts
made and performed entirely within the State of California. Except as otherwise
provided herein, any claim or controversy arising out of or related to this
contract or any breach hereof shall be submitted to a court of competent
jurisdiction in the State of California, and the parties hereby consent to the
jurisdiction and venue of such court.
11.9 SEVERABILITY. If any provision hereof should be held invalid, illegal
or unenforceable in any respect in any jurisdiction, then, to the fullest extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intentions of the parties hereto as nearly as may be possible and (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction. To the
extent permitted by applicable law, DURA and Spiros Corp. II hereby waive any
provision of law that would render any provision hereof prohibited or
unenforceable in any respect.
11.10 HEADINGS. Headings used herein are for convenience only and shall
not in any way affect the construction of, or be taken into consideration in
interpreting, this Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.
11.12 ENTIRE AGREEMENT. This Agreement, together with any agreements
referenced herein, constitute, on and as of the date hereof, the entire
agreement of DURA and Spiros Corp. II with respect to the subject matter hereof,
and all prior or contemporaneous understandings or agreements, whether written
or oral, between DURA and Spiros Corp. II with respect to such subject matter
are hereby superseded in their entirety.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
DURA PHARMACEUTICALS, INC.
By /s/ Cam L. Garner
----------------------------------------------
Cam L. Garner
President and Chief Executive Officer
SPIROS DEVELOPMENT CORPORATION II, INC.
By /s/ David S. Kabakoff
----------------------------------------------
David S. Kabakoff
President and Chief Executive Officer
[SIGNATURE PAGE TO DEVELOPMENT AGREEMENT]
<PAGE>
SCHEDULE 1.1
GLOSSARY
SCHEDULE 1.1
<PAGE>
SCHEDULE 1.1
GLOSSARY
"AFFILIATE" of a person shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. "Control" (and, with correlative meanings, the
terms "controlled by" and "under common control with") shall mean the possession
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting stock, by contract or
otherwise. In the case of a corporations, "control" shall mean, among other
things, the direct or indirect ownership of more than fifty percent (50%) of its
outstanding voting stock.
"AGREEMENTS" shall mean the Manufacturing and Marketing Agreement, the
Technology Agreement and the Development Agreement.
"ALBUTEROL OPTION" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"ALBUTEROL AND PRODUCT OPTION AGREEMENT" shall mean the Albuterol and
Product Option Agreement dated as of December 22, 1997, between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"ALBUTEROL OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 1.5 of the Albuterol and Product Option Agreement.
"ALBUTEROL PROGRAM ASSETS" shall have the meaning assigned to it in Section
1.1 of the Albuterol and Product Option Agreement.
"ALBUTEROL PRODUCT" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"AVAILABLE FUNDS" shall mean the sum of (a) the net proceeds to Spiros
Corp. II from the sale of the Units in the Offering and the Contribution, (b)
all royalties or fees remitted to Spiros Corp. II by DURA (or its Affiliates)
from the Sale of Spiros Products or in consideration of license rights
granted pursuant to the Agreements, (c) the Option Proceeds, if any, (d) any
other amounts provided by DURA to Spiros Corp. II, if any and (e) interest or
other income earned through temporary investment of the amounts described in
clauses (a), (b), (c) or (d).
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as amended
from time to time.
"CLAIM" shall mean any and all liabilities, damages, losses, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees).
SCHEDULE 1.1
<PAGE>
"CONFIDENTIAL INFORMATION" shall mean all Program Technology disclosed by
DURA (and its Affiliates) to Spiros Corp. II or by Spiros Corp. II to DURA
pursuant to the Agreements or the Services Agreement.
"CONTRIBUTION" shall have the meaning assigned in Section 5.2 of the
Development Agreement.
"CORE TECHNOLOGY" shall mean the DURA Core Technology, the DDSI Core
Technology and the Spiros Core Technology.
"DDSI CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DDSI as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DDSI Patent Rights; PROVIDED,
HOWEVER, that DDSI Core Technology shall also include Technology acquired by
DDSI from a third party after the date of the closing of the Offering necessary
or useful to the development of the Spiros Products, except to the extent that
there are any limitations or restrictions on DDSI's ability to license or
sublicense such Technology. "Owned or controlled" shall include Technology that
DDSI owns, or under which DDSI is licensed and has the right to grant
sublicenses and/or grant immunity from suit.
"DDSI INDEMNITEE" shall mean DDSI, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DDSI PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DDSI (or the rights to
which have been assigned to DDSI) as of the date of the Technology Agreement
relating to dry powder inhalers, powder storage systems and/or formulation
methods for dry powder inhalation, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
patent applications and (c) any patent issued or issuing upon any of the
foregoing.
"DESIGNATED COMPOUND(S)" shall mean any compounds for delivery using the
System selected by Spiros Corp. II, and agreed to be developed by DURA.
"DEVELOPED TECHNOLOGY" shall mean any Technology including, without
limitation, any enhancements, substitutions or improvements to the Core
Technology that is (a) discovered, developed or otherwise acquired by DURA
pursuant to the terms of the Development Agreement or (b) otherwise acquired by
or on behalf of Spiros Corp. II during the term of the Development Agreement.
"DEVELOPMENT" shall mean the further development of the Program Technology
for the purpose of identifying, developing, manufacturing, marketing and
commercializing Spiros Products and
SCHEDULE 1.1
<PAGE>
the making of the Other Expenditures.
"DEVELOPMENT AGREEMENT" shall mean the Development Agreement dated as of
December 22, 1997, between DURA and Spiros Corp., as amended, modified or
supplemented from time to time.
"DEVELOPMENT COSTS" shall mean the Direct Development Costs, the Indirect
Development Costs and the Other Expenditures.
"DEVELOPMENT TERM" shall mean the period commencing on the Closing Date and
ending on the earlier of (a) the Option Closing Date or (b) the date the Option
terminates or expires other than by exercise.
"DIRECT DEVELOPMENT COSTS" shall mean all costs incurred by DURA or its
Affiliates in respect of the Development, other than Indirect Development
Costs, determined in accordance with generally accepted accounting principles
consistent with DURA's internal accounting system, allocated on a reasonable
and consistent basis. Direct Development Costs shall consist primarily of
fully-burdened payroll costs (burdened to include benefits, payroll taxes and
an allocation of facilities and overhead costs) and any other such costs
generated internally by DURA in respect of the Development.
"DPI" shall mean the motor-driven dry powder inhaler (other than an inahler
designed to deliver a single dose of a drug) developed by DURA, DDSI and/or
Spiros Corp. and to be developed by DURA and/or Spiros Corp. II.
"DURA COMMON STOCK" shall mean the Common Stock of DURA, par value $.001
per share.
"DURA CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DURA as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DURA Patent Rights and DURA
Trademarks; PROVIDED, HOWEVER, that DURA Core Technology shall also include
Technology acquired by DURA from a third party after the date of the closing of
the Offering necessary or useful to the development of the Spiros Products,
except to the extent that there are any limitations or restrictions on DURA's
ability to license or sublicense such Technology. "Owned or controlled" shall
include Technology that DURA owns, or under which DURA is licensed and has the
right to grant sublicenses and/or grant immunity from suit.
"DURA INDEMNITEE" shall mean DURA, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DURA PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DURA (or the rights to
which have been assigned to DURA) as of the date of the Technology Agreement
relating to DPIs, PSSs and/or formulation methods for dry powder inhalation, (b)
any
SCHEDULE 1.1
<PAGE>
patent application constituting an equivalent, counterpart, reissue,
extension or continuation (including, without limitation, a continuation in
part or a subdivision) of any of the foregoing patent applications and (c)
any patent issued or issuing upon any of the foregoing.
"DURA TRADEMARKS" shall mean SpirosTM.
"EVENT OF DEFAULT" shall mean any of the following events: (a) at any
time, if DURA or Spiros Corp. II fails to perform or observe or otherwise
breaches any of its Material Obligations, and such failure or breach continues
unremedied for a period of sixty (60) days after receipt by of written notice
thereof from the other party; (b) at any time, effective as set forth in a
written notice from the other party if DURA or Spiros Corp. II shall (i) seek
the liquidation, reorganization, dissolution or winding-up of itself or the
composition or readjustment of its debts (other than pursuant to a merger with
an Affiliate), (ii) apply for or consent to the appointment of, or the taking
possession by, a receiver, custodian, trustee or liquidator for itself or of all
or a substantial part of its assets, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the Bankruptcy
Code, (v) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts (other than pursuant to a merger with an Affiliate) or
(vi) adopt any resolution of its Board of Directors or shareholders for the
purpose of effecting any of the foregoing (other than pursuant to a merger with
an Affiliate); or (c) at any time, effective as set forth in a written notice
from the other party, if a proceeding or case shall be commenced without the
application or consent of DURA or Spiros Corp. II as applicable, and such
proceeding or case shall continue undismissed, or an order, judgment or decrees
approving or ordering any of the following shall be entered and continued
unstayed and in effect, for a period of sixty (60) days from and after the date
service of process is effected, seeking (i) DURA's or Spiros Corp. II's, as
applicable, liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of DURA or Spiros Corp. II or for
all or any substantial part of its assets or (iii) similar relief in respect of
DURA or Spiros Corp. II under any law relating to bankruptcy, insolvency,
reorganization, winding-up or the composition or readjustment of debts.
"FDA" shall mean the United States Food and Drug Administration or any
successor agency or authority, the approval of which is required to market
health care products in the United States.
"FDA APPROVAL" shall mean the final regulatory approval of the FDA required
to commence commercial marketing of a health product.
SCHEDULE 1.1
<PAGE>
"FORCE MAJEURE" shall mean any act of God, any accident explosion, fire,
storm, earthquake, flood, drought, peril of the sea, riot, embargo, war or
foreign, federal, state or municipal order of general application, seizure,
requisition or allocation, any failure or delay of transportation, shortage of
or inability to obtain supplies, equipment, fuel or labor or any other
circumstance or event beyond the reasonable control of the party relying upon
such circumstance or event.
"INDIRECT DEVELOPMENT COSTS" shall mean all costs, fees and out-of-pocket
or other expenses, including the purchase of any capital equipment related to
the Development, incurred or paid by DURA to a third party, other than an
Affiliate of DURA, in respect of the Development, determined in accordance with
generally accepted accounting principles consistent with DURA's internal
accounting system, allocated on a reasonable and consistent basis.
"MANUFACTURING AND MARKETING AGREEMENT" shall mean the Manufacturing and
Marketing Agreement dated as of December 22, 1997 between DURA and Spiros Corp.
II, as amended, modified or supplemented from time to time.
"MANUFACTURE" shall mean the manufacture and assembly of the Spiros
Products.
"MATERIAL OBLIGATION" shall mean the material obligations of a party under
the Technology Agreement, the Development Agreement or the Manufacturing and
Marketing Agreement.
"NET SALES" shall mean the gross amount invoiced for sales of Spiros
Products by DURA or its sublicensees, if any, to third parties less (i)
discounts actually allowed, (ii) credits for claims, allowances, retroactive
price reductions or returned Spiros Products, (iii) prepaid freight charges
incurred in transporting Spiros Products to customers, (iv) sales taxes and
other governmental charges actually paid in connection with the sales (but
excluding what is commonly known as income taxes) and (v) any royalty
obligations under the 1993 Royalty Agreement. Net Sales shall not include sales
between or among DURA, its Affiliates and its sublicensees unless such sales are
for end use rather than for purposes of resale.
"OFFERING" shall mean the underwritten public offering of the Units
pursuant to the Registration Statement.
"OPTION PROCEEDS" shall have the meaning assigned to it in Section 3 of the
Albuterol and Product Option Agreement.
"OPTION PRODUCT" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"OTHER EXPENDITURES" shall mean funds spent by Spiros Corp. II to acquire
capital equipment, develop a next generation inhaler system or to enhance the
System.
SCHEDULE 1.1
<PAGE>
"PATENT RIGHTS" shall mean any patents or patent applications within the
Spiros Corp. II Patent Rights, the DURA Patent Rights, the DDSI Patent Rights
and the Spiros Corp. Patent Rights.
"PERSON" shall mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust or other entity.
"PRODUCT OPTION" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"PRODUCT OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 2.5 of the Albuterol and Product Option Agreement.
"PROGRAM TECHNOLOGY" shall mean the Core Technology and the Developed
Technology.
"PSS" shall mean the powder storage system developed and to be developed by
DURA for use with the DPI.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
December 16, 1997, among DURA, Spiros Corp. II, Merrill Lynch & Co., and
Donaldson, Lufkin & Jenrette.
"PURCHASE OPTION" shall mean the option granted to the holder of Spiros
Corp. II's Special Common Stock to purchase all of the Spiros Corp. II Common
Stock as set forth in Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION CLOSING DATE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION EXERCISE PRICE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-
1/S-3 filed by Spiros Corp. II and DURA dated October 10, 1997 (No. 333-37673/
333-37673-01), including all exhibits and any amendments thereof
and supplements thereto.
"RESEARCH FUNDS" shall mean the Available Funds, less (i) all general and
administrative expenses including, without limitation, those paid or payable
pursuant to the Development Agreement or the Services Agreement, and the
reasonable out-of-pocket expenses of Spiros Corp. II directors and reasonable
compensation for Spiros Corp. II's independent directors, less (ii) any amounts
paid to DURA under the Development Agreement or the Services Agreement, less
(iii) any costs and expenses incurred in the defense or settlement of any action
or claim or in respect of a judgment thereon, and less (iv) One Million Dollars
($1,000,000) to be retained by Spiros Corp. II as working capital in the event
DURA does not exercise the Purchase Option.
SCHEDULE 1.1
<PAGE>
"SALE(S)" or "SELL" shall mean the activity undertaken by a sales
representative during a sales call on physicians, physician assistants, nurses,
hospitals, clinics, health maintenance organizations, preferred provider
organizations and managed care companies (including all forms of communication
not involving face to face contact by such sales representatives), describing
the FDA-approved indicated uses, safety, effectiveness, contraindications, side
effects, warnings and other relevant characteristics of the Spiros Product, in a
fair and balanced manner consistent with the requirements of the Federal Food,
Drug, and Cosmetic Act, as amended (and the regulations thereunder).
"SPIROS CASSETTE SYSTEM" shall mean a DPI in which the PSS is in the form
of a cassette.
"SPIROS CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
Spiros Corp. as of the date of the closing of the Offering necessary or useful
to the development of the Spiros Products, and (b) the Spiros Corp. Patent
Rights; PROVIDED, HOWEVER, that Spiros Core Technology shall also include
Technology acquired by Spiros Corp. from a third party after the date of the
closing of the Offering necessary or useful to the development of the Spiros
Products, except to the extent that there are any limitations or restrictions on
Spiros Corp.'s ability to license or sublicense such Technology. "Owned or
controlled" shall include Technology that Spiros Corp. owns, or under which
Spiros Corp. is licensed and has the right to grant sublicenses and/or grant
immunity from suit.
"SPIROS CORP. INDEMNITEE" shall mean Spiros Corp., its successors and
assigns, and the directors, officers, employees, agents and counsel thereof.
"SPIROS CORP. PATENT RIGHTS" shall mean those certain inventions described
in claims of (a) the patent applications pending, filed by Spiros Corp. (or the
rights to which have been assigned to Spiros Corp.) as of the date of the
Technology Agreement relating to dry powder inhalers, powder storage systems
and/or formulation methods for dry powder inhalation, (b) any patent application
constituting an equivalent, counterpart, reissue, extension or continuation
(including, without limitation, a continuation in part or a subdivision) of any
of the foregoing patent applications and (c) any patent issued or issuing upon
any of the foregoing.
"SPIROS CORP. II CHARTER" shall mean Amended and Restated Certificate of
Spiros Development Corporation II, Inc. in effect as of the closing of the
Offering, as amended from time to time.
"SPIROS CORP. II COMMON STOCK" shall mean the Callable Common Stock of
Spiros Corp. II, $.001 par value.
"SPIROS CORP. II INDEMNITEE" shall mean Spiros Corp. II, its
SCHEDULE 1.1
<PAGE>
successors and assigns, and the directors, officers, employees, agents and
counsel thereof.
"SPIROS CORP. II PATENT RIGHTS" shall mean those certain inventions
described in claims of (a) any patent application having one or more claims
covering Developed Technology, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
applications or (c) any patent issued or issuing upon any of the foregoing
applications.
"SPIROS PRODUCT(S)" shall mean (a) any System used with a formulation of
albuterol, beclomethasone, ipratropium, an albuterol-ipratropium combination,
budesonide or a Designated Compound developed, produced, manufactured or
marketed by DURA on behalf of Spiros Corp. II using the Program Technology.
"SPIROS PRODUCT PROGRAM ASSETS" shall have the meaning assigned to it in
Section 2.1 of the Albuterol and Product Option Agreement.
"SYSTEM" shall mean the DPI and the PSS when used together.
"TECHNOLOGY" shall mean, solely with respect to motor-driven dry powder
inhalers and powder storage systems for drugs for delivery through such
inhalers, the manufacture thereof, and formulations of drugs to be delivered
through such inhalers, public and nonpublic technical or other information,
trade secrets, know-how, processes, formulations, concepts, ideas, preclinical,
clinical, pharmacological or other data and testing results, experimental
methods, or results, assays, descriptions, business or scientific plans,
depictions, customer lists and any other written, printed or electronically
stored materials, pharmaceutical compounds or any other natural or man-made
pharmaceutical materials and any and all other intellectual property, including
patents and patent applications, of any nature whatsoever. The term
"Technology" shall include, without limitation, any of the foregoing as it
relates to enhancements of, substitutions for or improvements to the Core
Technology.
"TECHNOLOGY AGREEMENT" shall mean the Technology License Agreement dated as
of December 22, 1997, among DURA, DDSI, Spiros Corp. and Spiros Corp. II, as
amended, modified or supplemented from time to time.
"TERRITORY" shall mean the entire world.
"UNDERWRITERS" shall have the meaning assigned to it in the Registration
Statement.
"UNITS" shall mean units, each consisting of one share of Spiros Corp. II
Common Stock and one warrant to purchase one-fourth of one share of DURA Common
Stock, all as described in the Registration Statement.
SCHEDULE 1.1
<PAGE>
"1993 ROYALTY AGREEMENT" shall have the meaning assigned to it in the
Registration Statement.
<PAGE>
SCHEDULE 2.1
Proposed Budget and Workplan
<TABLE>
<CAPTION>
Year ended December 31,
(in millions)
-----------------------------------------------------------
(3 months) (4 months)
1997(2) 1998 1999 2000 2001 Total
---------- ------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Beginning cash balance . . . . . . . . . . . . . . $ -- $151.7 $95.8 $45.9 $12.4 $ --
Dura Contribution. . . . . . . . . . . . . . . . . 75.0 -- -- -- -- 75.0
Net proceeds of the Offerings. . . . . . . . . . . 81.7 -- -- -- -- 81.7
Interest income(1) . . . . . . . . . . . . . . . . -- 6.0 3.5 1.4 0.3 11.2
------ ------ ----- ----- ----- ------
Total . . . . . . . . . . . . . . . . . . . . $156.7 $157.7 $99.3 $47.3 $12.7 $167.9
------ ------ ----- ----- ----- ------
------ ------ ----- ----- ----- ------
Payments
Albuterol . . . . . . . . . . . . . . . . . . . 3.4 30.3 -- -- -- 33.7
Beclomethasone. . . . . . . . . . . . . . . . . 1.6 9.1 6.0 0.3 -- 17.0
Budesonide. . . . . . . . . . . . . . . . . . . -- 4.6 15.2 11.1 6.3 37.2
Ipratropium . . . . . . . . . . . . . . . . . . -- 9.5 16.1 9.0 -- 34.6
Albuterol-Ipratropium . . . . . . . . . . . . . -- 6.5 11.2 10.1 3.0 30.8
Other Expenditures . . . . . . . . . . . . . . . . -- 1.5 4.5 4.0 2.0 12.0
General and administrative expenses. . . . . . . . -- 0.4 0.4 0.4 0.4 1.6
------ ------ ----- ----- ----- ------
Total . . . . . . . . . . . . . . . . . . . . $ 5.0 $ 61.9 $53.4 $34.9 $11.7 $166.9
------ ------ ----- ----- ----- ------
------ ------ ----- ----- ----- ------
Ending cash balance . . . . . . . . . . . . . . . $151.7 $ 95.8 $45.9 $12.4 $ 1.0 $ 1.0
------ ------ ----- ----- ----- ------
------ ------ ----- ----- ----- ------
</TABLE>
- ------------------------
(1) Assumes an interest rate of 5%.
(2) Expenditures in the year ended December 31, 1997 include approximately $4
million to repay Dura for estimated costs and expenses to be incurred by
Dura on behalf of Spiros Corp. II between October 10, 1997 and the closing
of the Offerings.
<PAGE>
SCHEDULE 5.3
Contracting for Development services through closing.
Dry powder inhaler and drug development costs through closing of the
Offering.
SCHEDULE 5.3
<PAGE>
EXHIBIT 99.3
ALBUTEROL AND PRODUCT OPTION AGREEMENT
This ALBUTEROL AND PRODUCT OPTION AGREEMENT, is dated as of December 22,
1997, by and between DURA PHARMACEUTICALS, INC., a Delaware corporation
("DURA"), and SPIROS DEVELOPMENT CORPORATION II, INC., a Delaware corporation
("Spiros Corp II").
RECITALS
A. DURA and Spiros Development Corporation, a Delaware corporation
("Spiros Corp.") are parties to the Agreements as hereinafter defined. Except
where the context requires otherwise, capitalized terms used but not defined
herein shall have the respective meanings assigned to them in the Glossary
attached as SCHEDULE 1.1 to this Agreement.
B. Pursuant to the Technology Agreement, each of DURA and Spiros Corp.
have granted to Spiros Corp. II, and Spiros Corp. II has acquired from each of
DURA and Spiros Corp., an exclusive license to certain patent rights and
technology for the purpose of allowing Spiros Corp. II to develop and
commercialize Spiros Products.
C. As a condition to entering into the Agreements, and in partial
consideration of the Contribution, DURA desires to receive from Spiros Corp. II,
and Spiros Corp. II is willing to grant to DURA, an option to acquire the
Albuterol Program Assets (defined in Section 1.1 below), pursuant to the terms
of this Agreement.
D. As a further condition to entering into the Agreements, and in partial
consideration of the Contribution, DURA desires to receive from Spiros Corp. II,
and Spiros Corp. II is willing to grant to DURA, an option to acquire the Spiros
Product Program Assets (defined in Section 2.1 below), pursuant to the terms of
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, DURA and Spiros Corp. II hereby agree as follows:
1. ALBUTEROL OPTION
1.1 GRANT OF ALBUTEROL OPTION. Subject to the terms and conditions of
this Agreement, Spiros Corp. II hereby grants to DURA an option (the "Albuterol
Option") to acquire, for all purposes, medical uses and indications without any
limitation imposed by Spiros Corp. II, all of Spiros Corp. II's right, title and
interest in and to the following (the "Albuterol Program Assets"): (a) the
product developed by DURA pursuant to the Development Agreement with albuterol
in the Spiros Cassette System (the "Albuterol Product"), (b) albuterol as
formulated for use in the Albuterol Product, (c) a perpetual, sublicensable,
non-exclusive, royalty-free license to the technology owned by Dura or developed
or acquired by Dura during the term of the Development
<PAGE>
Agreement applicable to the Albuterol Product for use solely with the Albuterol
Product, and (d) all applications and documents filed with the FDA or any other
regulatory body to obtain regulatory approval to commence commercial sale or use
of the Albuterol Product. The tangible manifestations of the Albuterol Program
Assets shall be delivered to DURA promptly following the Albuterol Option
Closing Date (defined in Section 1.5 below).
1.2 ALBUTEROL OPTION PERIOD. Subject to earlier termination pursuant
to Section 8 hereof, the Albuterol Option is exercisable commencing on the
date of this Agreement and ending (the "Albuterol Option Termination Date")
at 11:59 p.m., San Diego time, on the earlier of (a) three hundred and sixty
(360) days after receipt of FDA Approval of the Albuterol Product or (b) the
date following the commencement of Manufacture of the Albuterol Product
pursuant to the Manufacturing and Marketing Agreement upon which Dura ceases
to manufacture or market the Albuterol Product in accordance with the terms
of the Manufacturing and Marketing Agreement. If the Albuterol Option
Termination Date is not a business day, then the Albuterol Option Termination
Date shall be 11:59 p.m., San Diego time, on the next succeeding business day.
1.3 EXERCISE PRICE. Upon exercise of the Albuterol Option, DURA shall
make a single payment (the "Albuterol Option Exercise Price") to Spiros Corp.
II equal to (a) the aggregate Purchase Option Exercise Price, assuming
acquisition of all shares of Spiros Corp. II Common Stock issued pursuant to
the Offering four years following the date of closing of the Offering,
multiplied by (b) a fraction, the numerator of which will equal the
development and commercialization costs and expenses incurred by Spiros Corp.
II in connection with the development and commercialization of the Albuterol
Product and the denominator of which will equal $ 167,900,000 plus the net
proceeds to DURA, if any, from the exercise by of the over-allotment option
described in the Registration Statement by the Underwriters in connection
with the Offering.
1.4 FORM OF PAYMENT. The Albuterol Option Exercise Price shall be paid in
cash, by certified or bank cashier's check (or wire transfer) made payable to
Spiros Corp. II.
1.5 MANNER OF EXERCISE. The Albuterol Option may be exercised at any time
during the Albuterol Option Period by written notice (the "Albuterol Purchase
Exercise Notice") to Spiros Corp. II, signed by an executive officer of DURA,
stating that the Albuterol Option is being exercised and setting forth: (a) the
estimated Albuterol Option Exercise Price as determined in accordance with
Section 1.3 hereof; and (b) a closing date, not less than twenty (20) nor more
than sixty (60) days after the date of such notice (the "Albuterol Option
Closing Date"), on which the Albuterol Program Assets shall be purchased.
1.6 ALBUTEROL OPTION CLOSING DATE.
(a) At the closing of the Albuterol Option on the Albuterol Option
Closing Date, (i) Spiros Corp. II shall deliver to DURA such documents, bills of
sale, licenses, sublicenses, further instruments of transfer and assignment and
other papers and take such further actions as may be reasonably required or
desirable to effect the transfer of the Albuterol Program Assets contemplated
hereby, and (ii) DURA shall deliver to Spiros Corp. II a certified or bank
cashier's check (or wire transfer) in the amount of the Albuterol Option
Exercise Price.
-2-
<PAGE>
(b) Transfer of all Albuterol Program Assets to DURA shall be deemed
to occur automatically on the Albuterol Option Closing Date, subject to the
provisions of Section 5 hereof. Notwithstanding any other provision of this
Agreement, with respect to any rights held by Spiros Corp. II pursuant to an
agreement with any person other than DURA, which rights relate to the Albuterol
Program Assets, the rights granted to DURA hereunder shall be limited to the
rights which Spiros Corp. II has a right to assign or grant under such agreement
and shall be subject to any obligations assumed by Spiros Corp. II in
consideration of the grant or assignment of such rights to Spiros Corp. II,
including all obligations to pay any license fees and royalties with respect to
the Albuterol Program Assets (such assumed obligations being referred to herein
as the "Assumed Albuterol Obligations"); PROVIDED, HOWEVER, that Spiros Corp. II
shall use commercially reasonable efforts to obtain the right to grant
sublicenses or assign such rights on terms reasonably acceptable to DURA.
2. PRODUCT OPTION
2.1 GRANT OF PRODUCT OPTION. Subject to the terms and conditions of this
Agreement, Spiros Corp. II hereby grants to DURA an option (the "Product
Option") to acquire, for all purposes, medical uses and indications without any
limitation imposed by Spiros Corp. II, all of Spiros Corp. II's right, title and
interest in and to the following (the "Spiros Product Program Assets"): (a) a
single Spiros Product (other than the Albuterol Product) developed by DURA
pursuant to the Development Agreement for which DURA determines to exercise the
Product Option (the "Option Product"), (b) the compound to be delivered by the
Option Product, as formulated for use specifically in the Option Product, (c) a
perpetual, sublicensable, non-exclusive, royalty-free license to the technology
owned by Dura or developed or acquired by Dura during the term of the
Development Agreement applicable to the Option Product for use solely with the
Option Product, and (d) all applications and documents filed with the FDA or any
other regulatory body to obtain regulatory approval to commence commercial sale
or use of the Option Product. The tangible manifestations of the Spiros Product
Program Assets shall be delivered to DURA promptly following the Product Option
Closing Date (as defined in Section 2.5 below).
2.2 PRODUCT OPTION PERIOD. Subject to earlier termination pursuant to
Section 8 hereof, the Product Option is exercisable with respect to each
Spiros Product commencing on the date of this Agreement and ending (the
"Product Option Termination Date") at 11:59 p.m., San Diego time, ninety (90)
days after receipt of FDA Approval of such Spiros Product. If the Product
Option Termination Date is not a business day, then the Product Option
Termination Date shall be 11:59 p.m., San Diego time, on the next succeeding
business day.
2.3 EXERCISE PRICE. Upon exercise of the Product Option, DURA shall make
a single payment (the "Product Option Exercise Price") to Spiros Corp. II, of
one hundred and ten percent (110%) of (a) the aggregate Purchase Option Exercise
Price, assuming acquisition of all shares of Spiros Corp. II Common Stock issued
pursuant to the Offering four years following the date of closing of the
Offering, multiplied by (b) a fraction, the numerator of which will equal the
development and commercialization costs and expenses incurred by Spiros Corp. II
in connection
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with the development and commercialization of the Option Product and the
denominator of which will equal $167,900,000 plus the net proceeds to DURA,
if any, from the exercise by of the over-allotment option described in the
Registration Statement by the Underwriters in connection with the Offering.
2.4 FORM OF PAYMENT. The Product Option Exercise Price shall be paid in
cash, by certified or bank cashier's check (or wire transfer) made payable to
Spiros Corp. II.
2.5 MANNER OF EXERCISE. The Product Option may be exercised at any time
during the Product Option Period by written notice (the "Product Purchase
Exercise Notice") to Spiros Corp. II, signed by an executive officer of DURA,
stating that the Product Option is being exercised and setting forth: (a) the
Spiros Product to be designated as the Option Product; (b) the estimated Product
Option Exercise Price as determined in accordance with Section 2.3 hereof; and
(c) a closing date, not less than twenty (20) nor more than sixty (60) days
after the date of such notice (the "Product Option Closing Date"), on which the
Spiros Product Program Assets shall be purchased.
2.6 PRODUCT OPTION CLOSING DATE.
(a) At the closing of the Product Option on the Product Option
Closing Date, (i) Spiros Corp. II shall deliver to DURA such documents, bills of
sale, licenses, sublicenses, further instruments of transfer and assignment and
other papers and take such further actions as may be reasonably required or
desirable to effect the transfer of the Spiros Product Program Assets
contemplated hereby, and (ii) DURA shall deliver to Spiros Corp. II a certified
or bank cashier's check (or wire transfer) in the amount of the Product Option
Exercise Price.
(b) Transfer of all Spiros Product Program Assets to DURA shall be
deemed to occur automatically on the Product Option Closing Date, subject to the
provisions of Section 5 hereof. Notwithstanding any other provision of this
Agreement, with respect to any rights held by Spiros Corp. II pursuant to an
agreement with any person other than DURA, which rights relate to the Spiros
Product Program Assets, the rights granted to DURA hereunder shall be limited to
the rights which Spiros Corp. II has a right to assign or grant under such
agreement and shall be subject to any obligations assumed by Spiros Corp. II in
consideration of the grant or assignment of such rights to Spiros Corp. II,
including all obligations to pay any license fees and royalties with respect to
the Spiros Product Program Assets (such assumed obligations being referred to
herein as the "Assumed Option Product Obligations"); PROVIDED, HOWEVER, that
Spiros Corp. II shall use commercially reasonable efforts to obtain the right to
grant sublicenses or assign such rights on terms reasonably acceptable to DURA.
3. DISPOSITION OF ALBUTEROL OPTION EXERCISE PRICE AND PRODUCT OPTION EXERCISE
PRICE. Until the expiration or termination of the Technology Agreement, the
Development Agreement or the Manufacturing and Marketing Agreement, at which
time all proceeds of the Albuterol Option Exercise Price and Product Option
Exercise Price (together with any interest, dividends and other earnings
thereon, the "Option Proceeds") received by Spiros Corp. II will become
unrestricted as to disposition or use by Spiros Corp. II, the Option Proceeds
shall be deemed Available Funds and shall not be otherwise expended, used,
encumbered or distributed.
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4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The provisions of Section 3 of
the Technology Agreement shall apply with equal force and effect to this
Agreement and are incorporated hereunder.
5. CONDITIONS TO ALBUTEROL OR PRODUCT OPTION CLOSING.
5.1 CONDITIONS TO OBLIGATIONS OF DURA. The obligations of DURA to
consummate the transactions contemplated by this Agreement following exercise of
the Albuterol Option or the Product Option shall be subject, at DURA's option,
to the fulfillment at or prior to the Albuterol Closing Date or Product Option
Closing Date, as the case may be, of each of the following conditions:
(a) Spiros Corp. II shall have duly executed and delivered to DURA
each of the documents, certificates and other items provided in Section
1.6(a)(i), in the case of the exercise of the Albuterol Option, and Section
2.6(a)(i), in the case of the exercise of the Product Option, of this Agreement
to the reasonable satisfaction of DURA and its counsel.
(b) The representations and warranties made by Spiros Corp. II
in Section 3.1 of the Technology Agreement shall be true and correct in all
material respects on and as of the Albuterol Option Closing Date or the
Product Option Closing Date, as the case may be, with the same effect as
though such representations and warranties had been made or given on and as
of such date, and Spiros Corp. II shall have performed and complied in all
material respects with all of Spiros Corp. II's obligations under this
Agreement which are to be performed or complied with by it on or prior to the
Albuterol Option Closing Date or the Product Option Closing Date, as the case
may be.
(c) No action, suit or other proceeding before a court, tribunal or
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain substantial damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of any
law, decree or regulation of governmental authority having appropriate
jurisdiction, and no preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by a government,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect which would (i) make the acquisition or holding by
DURA of the Albuterol Program Assets, or the Spiros Product Program Assets, as
the case may be, illegal or impose material limitations on its ability to
exercise full rights of ownership with respect to such Albuterol Program Assets
or Spiros Product Program Assets, as the case may be, or (ii) otherwise prevent
the consummation of the transactions contemplated hereby.
5.2 CONDITIONS TO OBLIGATIONS OF SPIROS CORP. II. The obligations of
Spiros Corp. II to consummate the transactions contemplated by this Agreement
following exercise of the Albuterol Option or Product Option, shall be subject,
at Spiros Corp. II's option, to the
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fulfillment at or prior to the Albuterol Option Closing Date or Product Option
Closing Date, as the case may be, of each of the following conditions:
(a) DURA shall have delivered to Spiros Corp. II the Albuterol
Option Exercise Price or the Product Option Exercise Price, as the case may be.
(b) Each of the representations and warranties made by DURA in
Section 3.1 of the Technology Agreement shall be true and correct in all
material respects on and as of the Albuterol Option Closing Date or the Product
Option Closing Date, as the case may be, with the same effect as though such
representations and warranties had been made or given on and as of such date,
and DURA shall have performed and complied in all material respects with all of
DURA's obligations under this Agreement which are to be performed or complied
with on or prior to the Albuterol Option Closing Date or the Product Option
Closing Date, as the case may be.
(c) No action, suit or other proceeding before a court, tribunal or
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain substantial damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of any
law, decree or regulation of governmental authority having appropriate
jurisdiction, and no preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by a government,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect which would (i) make the transfer by Spiros Corp.
II of the Albuterol Program Assets or the Spiros Product Program Assets, as the
case may be, pursuant to this Agreement illegal or (ii) otherwise prevent the
consummation of the transactions contemplated hereby.
6. DISCLAIMER OF WARRANTY. SPIROS CORP. II DISCLAIMS ALL WARRANTIES, WHETHER
EXPRESS OR IMPLIED, (a) THAT THE ALBUTEROL PROGRAM ASSETS OR THE SPIROS PRODUCT
PROGRAM ASSETS, OR ANY USE THEREOF, WILL BE FREE FROM CLAIMS OF PATENT
INFRINGEMENT, INTERFERENCE OR UNLAWFUL USE OF PROPRIETARY INFORMATION OF ANY
THIRD PARTY AND (b) OF THE ACCURACY, RELIABILITY, TECHNICAL OR COMMERCIAL VALUE,
COMPREHENSIVENESS OR MERCHANTABILITY OF THE ALBUTEROL PROGRAM ASSETS OR THE
SPIROS PRODUCT PROGRAM ASSETS OR THEIR SUITABILITY OR FITNESS FOR ANY PURPOSE
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN, DEVELOPMENT, MANUFACTURE,
USE OR SALE OF PRODUCTS. EXCEPT AS EXPRESSLY SET FORTH HEREIN, THERE ARE NO
OTHER WARRANTIES OF WHATEVER NATURE, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
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<PAGE>
7. ADDITIONAL AGREEMENTS. Following the receipt of the Albuterol Option
Exercise Notice and until the Albuterol Option Closing Date and following the
receipt of the Product Option Exercise Notice and until the Product Option
Closing Date, the following shall apply:
(a) DURA and Spiros Corp. II will take all reasonable actions necessary
to comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement.
DURA and Spiros Corp. II will take all reasonable actions necessary to obtain
(and will cooperate with the other party in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
governmental entity, domestic or foreign, or other person, required to be
obtained or made by such party in connection with the taking of any action
contemplated by this Agreement.
(b) Spiros Corp. II shall each use its best efforts to ensure a quick
and effective transfer to DURA of the Albuterol Program Assets or the Spiros
Product Program Assets, as the case may be.
(c) Spiros Corp. II will use its best efforts to preserve the business
organization of Spiros Corp. II intact and, with respect to the Albuterol
Program Assets or the Spiros Product Program Assets, as the case may be, carry
on its business diligently and in substantially the same manner as it did prior
to such exercise and will take such action as may be necessary to maintain,
preserve, renew and keep in force and effect the existence, rights and
franchises of Spiros Corp. II, and Spiros Corp. II shall not, with respect
thereto, make or institute any change in its methods of sale, management,
accounting or operation.
(d) Spiros Corp. II shall ensure that, with respect to all Albuterol
Program Assets or all Spiros Product Program Assets, as the case may be, no
contract or commitment will be entered into, and no purchase or sale of assets
(tangible or intangible) will be made, by or on behalf of Spiros Corp. II,
except contracts, commitments, purchases or sales which are in the ordinary
course of business and consistent with past practice and are not material to
Spiros Corp. II (individually or in the aggregate).
8. TERM; SURVIVAL.
8.1 TERM. This Agreement shall continue in full force and effect until
the earliest of (a) the termination of the Technology Agreement, the Development
Agreement or the Manufacturing and Marketing Agreement by Spiros Corp. II as a
result of a breach of such agreement by DURA, (b) at such time as both the
Albuterol Option and Product Option have terminated as to DURA, whether by
exercise or otherwise, or (c) at such time as the Purchase Option terminates,
whether by exercise or otherwise, at which time this Agreement shall terminate.
8.2 SURVIVAL. If this Agreement is terminated hereunder, Section 3 shall
survive any such termination.
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9. MISCELLANEOUS.
9.1 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the part of DURA
or Spiros Corp. II to exercise and no delay in exercising any right, power,
remedy or privilege under this Agreement or provided by statute or at law or in
equity or otherwise, including, without limitation, the right or power to
terminate this Agreement, shall impair, prejudice or constitute a waiver of any
such right, power, remedy or privilege or be construed as a waiver of any breach
of this Agreement or as an acquiescence therein, nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or
further exercise thereof or the exercise of any other right, power, remedy or
privilege.
9.2 FORCE MAJEURE. DURA and Spiros Corp. II shall each be excused for any
failure or delay in performing any of their respective obligations under this
Agreement, if such failure or delay is caused by Force Majeure.
9.3 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended or is to be construed to constitute DURA and Spiros Corp. II as
partners or joint venturers or one party as an employee of any other party.
Except as expressly provided herein, no party hereto shall have any express or
implied right or authority to assume or create any obligations on behalf of or
in the name of any other party or to bind any other party to any contract,
agreement or undertaking with any third party.
9.4 NOTICES. All notices, requests and other communications to DURA or
Spiros Corp. II hereunder shall be in writing (including telecopy or similar
electronic transmissions), shall refer specifically to this Agreement and shall
be personally delivered or sent by telecopy or other electronic facsimile
transmission or by registered mail or certified mail, return receipt requested,
postage prepaid, in each case to the respective address specified below (or to
such address as may be specified in writing to the other party hereto):
If to DURA, addressed to:
Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
with a copy to the attention
of General Counsel
If to Spiros Corp. II, addressed to:
Spiros Development Corporation II, Inc.
c/o Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
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<PAGE>
Any notice or communication given in conformity with this Section 9.4 shall be
deemed to be effective when received by the addressee, if delivered by hand,
telecopy or electronic transmission, and three (3) days after mailing, if
mailed.
9.5 FURTHER ASSURANCES. Each of DURA and Spiros Corp. II hereby agrees to
duly execute and deliver, or cause to be duly executed and delivered, such
further instruments and do and cause to be done such further acts and things,
including, without limitation, the filing of such additional assignments,
agreements, documents and instruments, that may be necessary or as the other
party hereto may at any time and from time to time reasonably request in
connection with this Agreement or to carry out more effectively the provisions
and purposes of, or to better assure and confirm unto such other party its
rights and remedies under, this Agreement. Each party shall provide each other
party with copies of any notices sent hereunder with copies sent at the same
time as the original notice.
9.6 SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, DURA, Spiros Corp. II, and
their respective successors and assigns; PROVIDED, HOWEVER, that DURA and Spiros
Corp. II may not assign or otherwise transfer any of their respective rights and
interests, nor delegate any of their respective obligations, hereunder,
including, without limitation, pursuant to a merger or consolidation, without
the prior written consent of the other party hereto; PROVIDED FURTHER, HOWEVER,
that DURA may fully assign its rights and interests, and delegate its
obligations, hereunder, effective upon written notice thereof (a) to an
Affiliate if such Affiliate assumes all of the obligations of DURA hereunder and
this Agreement remains binding upon DURA; or (b) to any Person that acquires all
or substantially all of the assets of DURA, or which is the surviving Person in
a merger or consolidation with DURA. Any attempt to assign or delegate any
portion of this Agreement in violation of this Section 9.6 shall be null and
void. Subject to the foregoing any reference to DURA or Spiros Corp. II
hereunder shall be deemed to include the successors thereto and assigns thereof.
9.7 AMENDMENTS. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent by DURA or Spiros
Corp. II to any departure therefrom, shall in any event be effective unless the
same shall be in writing specifically identifying this Agreement and the
provision intended to be amended, modified, waived, terminated or discharged and
signed by DURA and Spiros Corp. II, and each amendment, modification, waiver,
termination or discharge shall be effective only in the specific instance and
for the specific purpose for which given. No provision of this Agreement shall
be varied, contradicted or explained by any other agreement, course of dealing
or performance or any other matter not set forth in an agreement in writing and
signed by DURA and Spiros Corp. II.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, as applied to contracts
made and performed entirely within the State of California. Except as otherwise
provided herein, any claim or controversy arising out of or related to this
contract or any breach hereof shall be submitted to a court of competent
jurisdiction in the State of California, and the parties hereby consent to the
jurisdiction and venue of such court.
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9.9 SEVERABILITY. If any provision hereof should be held invalid, illegal
or unenforceable in any respect in any jurisdiction, then, to the fullest extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intentions of the parties hereto as nearly as may be possible and (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction. To the
extent permitted by applicable law, DURA and Spiros Corp. II hereby waive any
provision of law that would render any provision hereof prohibited or
unenforceable in any respect.
9.10 HEADINGS. Headings used herein are for convenience only and shall not
in any way affect the construction of, or be taken into consideration in
interpreting, this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.
9.12 ENTIRE AGREEMENT. This Agreement, together with any agreements
referenced herein and the Prior Agreements, constitutes, on and as of the date
hereof, the entire agreement of DURA and Spiros Corp. II with respect to the
subject matter hereof, and all prior or contemporaneous understandings or
agreements, whether written or oral, between DURA and Spiros Corp. II with
respect to such subject matter are hereby superseded in their entirety.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal and delivered as of the date first above written.
SPIROS DEVELOPMENT CORPORATION II, INC.
By: /s/ David S. Kabakoff
-----------------------------------------
David S. Kabakoff
President and Chief Executive Officer
DURA PHARMACEUTICALS, INC.
By: /s/ Cam L. Garner
-----------------------------------------
Cam L. Garner
President and Chief Executive Officer
[SIGNATURE PAGE TO ALBUTEROL AND PRODUCT
PURCHASE OPTION AGREEMENT]
<PAGE>
SCHEDULE 1.1
GLOSSARY
SCHEDULE 1.1
<PAGE>
SCHEDULE 1.1
GLOSSARY
"AFFILIATE" of a person shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. "Control" (and, with correlative meanings, the
terms "controlled by" and "under common control with") shall mean the possession
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting stock, by contract or
otherwise. In the case of a corporations, "control" shall mean, among other
things, the direct or indirect ownership of more than fifty percent (50%) of its
outstanding voting stock.
"AGREEMENTS" shall mean the Manufacturing and Marketing Agreement, the
Technology Agreement and the Development Agreement.
"ALBUTEROL OPTION" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"ALBUTEROL AND PRODUCT OPTION AGREEMENT" shall mean the Albuterol and
Product Option Agreement dated as of December 22, 1997, between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"ALBUTEROL OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 1.5 of the Albuterol and Product Option Agreement.
"ALBUTEROL PROGRAM ASSETS" shall have the meaning assigned to it in Section
1.1 of the Albuterol and Product Option Agreement.
"ALBUTEROL PRODUCT" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"AVAILABLE FUNDS" shall mean the sum of (a) the net proceeds to Spiros
Corp. II from the sale of the Units in the Offering and the Contribution, (b)
all royalties remitted to Spiros Corp. II by DURA (or its Affiliates) from the
Sale of Spiros Products pursuant to the Agreements, (c) the Option Proceeds, if
any, (d) any other amounts provided by DURA to Spiros Corp. II, if any and (e)
interest or other income earned through temporary investment of the amounts
described in clauses (a), (b), (c) or (d).
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as amended
from time to time.
"CLAIM" shall mean any and all liabilities, damages, losses, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees).
SCHEDULE 1.1
<PAGE>
"CONFIDENTIAL INFORMATION" shall mean all Program Technology disclosed by
DURA (and its Affiliates) to Spiros Corp. II or by Spiros Corp. II to DURA
pursuant to the Agreements or the Services Agreement.
"CONTRIBUTION" shall have the meaning assigned in Section 5.2 of the
Development Agreement.
"CORE TECHNOLOGY" shall mean the DURA Core Technology, the DDSI Core
Technology and the Spiros Core Technology.
"DDSI CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DDSI as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DDSI Patent Rights; PROVIDED,
HOWEVER, that DDSI Core Technology shall also include Technology acquired by
DDSI from a third party after the date of the closing of the Offering necessary
or useful to the development of the Spiros Products, except to the extent that
there are any limitations or restrictions on DDSI's ability to license or
sublicense such Technology. "Owned or controlled" shall include Technology that
DDSI owns, or under which DDSI is licensed and has the right to grant
sublicenses and/or grant immunity from suit.
"DDSI INDEMNITEE" shall mean DDSI, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DDSI PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DDSI (or the rights to
which have been assigned to DDSI) as of the date of the Technology Agreement
relating to dry powder inhalers, powder storage systems and/or formulation
methods for dry powder inhalation, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
patent applications and (c) any patent issued or issuing upon any of the
foregoing.
"DESIGNATED COMPOUND(S)" shall mean any compounds for delivery using the
System selected by Spiros Corp. II, and agreed to be developed by DURA.
"DEVELOPED TECHNOLOGY" shall mean any Technology including, without
limitation, any enhancements, substitutions or improvements to the Core
Technology that is (a) discovered, developed or otherwise acquired by DURA
pursuant to the terms of the Development Agreement or (b) otherwise acquired by
or on behalf of Spiros Corp. II during the term of the Development Agreement.
"DEVELOPMENT" shall mean the further development of the Program Technology
for the purpose of identifying, developing, manufacturing, marketing and
commercializing Spiros Products and
SCHEDULE 1.1
<PAGE>
the making of the Other Expenditures.
"DEVELOPMENT AGREEMENT" shall mean the Development Agreement dated as of
December 22, 1997, between DURA and Spiros Corp., as amended, modified or
supplemented from time to time.
"DEVELOPMENT COSTS" shall mean the Direct Development Costs, the Indirect
Development Costs and the Other Expenditures.
"DEVELOPMENT TERM" shall mean the period commencing on the Closing Date and
ending on the earlier of (a) the Option Closing Date or (b) the date the Option
terminates or expires other than by exercise.
"DIRECT DEVELOPMENT COSTS" shall mean all costs incurred by DURA or its
Affiliates in respect of the Development, other than Indirect Development
Costs, determined in accordance with generally accepted accounting principles
consistent with DURA's internal accounting system, allocated on a reasonable
and consistent basis. Direct Development Costs shall consist primarily of
fully-burdened payroll costs (burdened to include benefits, payroll taxes and
an allocation of facilities and overhead costs) and any other such costs
generated internally by DURA in respect of the Development.
"DPI" shall mean the motor-driven dry powder inhaler (other than an inahler
designed to deliver a single dose of a drug) developed by DURA, DDSI and/or
Spiros Corp. and to be developed by DURA and/or Spiros Corp. II.
"DURA COMMON STOCK" shall mean the Common Stock of DURA, par value $.001
per share.
"DURA CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DURA as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DURA Patent Rights and DURA
Trademarks; PROVIDED, HOWEVER, that DURA Core Technology shall also include
Technology acquired by DURA from a third party after the date of the closing of
the Offering necessary or useful to the development of the Spiros Products,
except to the extent that there are any limitations or restrictions on DURA's
ability to license or sublicense such Technology. "Owned or controlled" shall
include Technology that DURA owns, or under which DURA is licensed and has the
right to grant sublicenses and/or grant immunity from suit.
"DURA INDEMNITEE" shall mean DURA, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DURA PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DURA (or the rights to
which have been assigned to DURA) as of the date of the Technology Agreement
relating to DPIs, PSSs and/or formulation methods for dry powder inhalation, (b)
any
SCHEDULE 1.1
<PAGE>
patent application constituting an equivalent, counterpart, reissue,
extension or continuation (including, without limitation, a continuation in part
or a subdivision) of any of the foregoing patent applications and (c) any patent
issued or issuing upon any of the foregoing.
"DURA TRADEMARKS" shall mean Spiros-TM-.
"EVENT OF DEFAULT" shall mean any of the following events: (a) at any
time, if DURA or Spiros Corp. II fails to perform or observe or otherwise
breaches any of its Material Obligations, and such failure or breach continues
unremedied for a period of sixty (60) days after receipt by of written notice
thereof from the other party; (b) at any time, effective as set forth in a
written notice from the other party if DURA or Spiros Corp. II shall (i) seek
the liquidation, reorganization, dissolution or winding-up of itself or the
composition or readjustment of its debts (other than pursuant to a merger with
an Affiliate), (ii) apply for or consent to the appointment of, or the taking
possession by, a receiver, custodian, trustee or liquidator for itself or of all
or a substantial part of its assets, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the Bankruptcy
Code, (v) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts (other than pursuant to a merger with an Affiliate) or
(vi) adopt any resolution of its Board of Directors or shareholders for the
purpose of effecting any of the foregoing (other than pursuant to a merger with
an Affiliate); or (c) at any time, effective as set forth in a written notice
from the other party, if a proceeding or case shall be commenced without the
application or consent of DURA or Spiros Corp. II as applicable, and such
proceeding or case shall continue undismissed, or an order, judgment or decrees
approving or ordering any of the following shall be entered and continued
unstayed and in effect, for a period of sixty (60) days from and after the date
service of process is effected, seeking (i) DURA's or Spiros Corp. II's, as
applicable, liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of DURA or Spiros Corp. II or for
all or any substantial part of its assets or (iii) similar relief in respect of
DURA or Spiros Corp. II under any law relating to bankruptcy, insolvency,
reorganization, winding-up or the composition or readjustment of debts.
"FDA" shall mean the United States Food and Drug Administration or any
successor agency or authority, the approval of which is required to market
health care products in the United States.
"FDA APPROVAL" shall mean the final regulatory approval of the FDA required
to commence commercial marketing of a health product.
SCHEDULE 1.1
<PAGE>
"FORCE MAJEURE" shall mean any act of God, any accident explosion, fire,
storm, earthquake, flood, drought, peril of the sea, riot, embargo, war or
foreign, federal, state or municipal order of general application, seizure,
requisition or allocation, any failure or delay of transportation, shortage of
or inability to obtain supplies, equipment, fuel or labor or any other
circumstance or event beyond the reasonable control of the party relying upon
such circumstance or event.
"INDIRECT DEVELOPMENT COSTS" shall mean all costs, fees and out-of-pocket
or other expenses, including the purchase of any capital equipment related to
the Development, incurred or paid by DURA to a third party, other than an
Affiliate of DURA, in respect of the Development, determined in accordance with
generally accepted accounting principles consistent with DURA's internal
accounting system, allocated on a reasonable and consistent basis.
"MANUFACTURING AND MARKETING AGREEMENT" shall mean the Manufacturing and
Marketing Agreement dated as of December 22, 1997 between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"MANUFACTURE" shall mean the manufacture and assembly of the Spiros
Products.
"MATERIAL OBLIGATION" shall mean the material obligations of a party under
the Technology Agreement, the Development Agreement or the Manufacturing and
Marketing Agreement.
"NET SALES" shall mean the gross amount invoiced for sales of Spiros
Products by DURA or its sublicensees, if any, to third parties less (i)
discounts actually allowed, (ii) credits for claims, allowances, retroactive
price reductions or returned Spiros Products, (iii) prepaid freight charges
incurred in transporting Spiros Products to customers, (iv) sales taxes and
other governmental charges actually paid in connection with the sales (but
excluding what is commonly known as income taxes) and (v) any royalty
obligations under the 1993 Royalty Agreement. Net Sales shall not include sales
between or among DURA, its Affiliates and its sublicensees unless such sales are
for end use rather than for purposes of resale.
"OFFERING" shall mean the underwritten public offering of the Units
pursuant to the Registration Statement.
"OPTION PROCEEDS" shall have the meaning assigned to it in Section 3 of the
Albuterol and Product Option Agreement.
"OPTION PRODUCT" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"OTHER EXPENDITURES" shall mean funds spent by Spiros Corp. II to acquire
capital equipment, develop a next generation inhaler system or to enhance the
System.
SCHEDULE 1.1
<PAGE>
"PATENT RIGHTS" shall mean any patents or patent applications within the
Spiros Corp. II Patent Rights, the DURA Patent Rights, the DDSI Patent Rights
and the Spiros Corp. Patent Rights.
"PERSON" shall mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust or other entity.
"PRODUCT OPTION" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"PRODUCT OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 2.5 of the Albuterol and Product Option Agreement.
"PROGRAM TECHNOLOGY" shall mean the Core Technology and the Developed
Technology.
"PSS" shall mean the powder storage system developed and to be developed by
DURA for use with the DPI.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
December 16, 1997, among DURA, Spiros Corp. II, Merrill Lynch & Co., and
Donaldson, Lufkin & Jenrette.
"PURCHASE OPTION" shall mean the option granted to the holder of Spiros
Corp. II's Special Common Stock to purchase all of the Spiros Corp. II Common
Stock as set forth in Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION CLOSING DATE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION EXERCISE PRICE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-1/S-3 filed by Spiros Corp. II and DURA dated October 10, 1997 (No.
333-37673/333-37673-01), including all exhibits and any amendments thereof
and supplements thereto.
"RESEARCH FUNDS" shall mean the Available Funds, less (i) all general and
administrative expenses including, without limitation, those paid or payable
pursuant to the Development Agreement or the Services Agreement, and the
reasonable out-of-pocket expenses of Spiros Corp. II directors and reasonable
compensation for Spiros Corp. II's independent directors, less (ii) any amounts
paid to DURA under the Development Agreement or the Services Agreement, less
(iii) any costs and expenses incurred in the defense or settlement of any action
or claim or in respect of a judgment thereon, and less (iv) One Million Dollars
($1,000,000) to be retained by Spiros Corp. II as working capital in the event
DURA does not exercise the Purchase Option.
SCHEDULE 1.1
<PAGE>
"SALE(S)" or "SELL" shall mean the activity undertaken by a sales
representative during a sales call on physicians, physician assistants, nurses,
hospitals, clinics, health maintenance organizations, preferred provider
organizations and managed care companies (including all forms of communication
not involving face to face contact by such sales representatives), describing
the FDA-approved indicated uses, safety, effectiveness, contraindications, side
effects, warnings and other relevant characteristics of the Spiros Product, in a
fair and balanced manner consistent with the requirements of the Federal Food,
Drug, and Cosmetic Act, as amended (and the regulations thereunder).
"SPIROS CASSETTE SYSTEM" shall mean a DPI in which the PSS is in the form
of a cassette.
"SPIROS CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
Spiros Corp. as of the date of the closing of the Offering necessary or useful
to the development of the Spiros Products, and (b) the Spiros Corp. Patent
Rights; PROVIDED, HOWEVER, that Spiros Core Technology shall also include
Technology acquired by Spiros Corp. from a third party after the date of the
closing of the Offering necessary or useful to the development of the Spiros
Products, except to the extent that there are any limitations or restrictions on
Spiros Corp.'s ability to license or sublicense such Technology. "Owned or
controlled" shall include Technology that Spiros Corp. owns, or under which
Spiros Corp. is licensed and has the right to grant sublicenses and/or grant
immunity from suit.
"SPIROS CORP. INDEMNITEE" shall mean Spiros Corp., its successors and
assigns, and the directors, officers, employees, agents and counsel thereof.
"SPIROS CORP. PATENT RIGHTS" shall mean those certain inventions described
in claims of (a) the patent applications pending, filed by Spiros Corp. (or the
rights to which have been assigned to Spiros Corp.) as of the date of the
Technology Agreement relating to dry powder inhalers, powder storage systems
and/or formulation methods for dry powder inhalation, (b) any patent application
constituting an equivalent, counterpart, reissue, extension or continuation
(including, without limitation, a continuation in part or a subdivision) of any
of the foregoing patent applications and (c) any patent issued or issuing upon
any of the foregoing.
"SPIROS CORP. II CHARTER" shall mean Amended and Restated Certificate of
Spiros Development Corporation II, Inc. in effect as of the closing of the
Offering, as amended from time to time.
"SPIROS CORP. II COMMON STOCK" shall mean the Callable Common Stock of
Spiros Corp. II, $.001 par value.
"SPIROS CORP. II INDEMNITEE" shall mean Spiros Corp. II, its
SCHEDULE 1.1
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successors and assigns, and the directors, officers, employees, agents and
counsel thereof.
"SPIROS CORP. II PATENT RIGHTS" shall mean those certain inventions
described in claims of (a) any patent application having one or more claims
covering Developed Technology, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
applications or (c) any patent issued or issuing upon any of the foregoing
applications.
"SPIROS PRODUCT(S)" shall mean (a) any System used with a formulation of
albuterol, beclomethasone, ipratropium, an albuterol-ipratropium combination,
budesonide or a Designated Compound developed, produced, manufactured or
marketed by DURA on behalf of Spiros Corp. II using the Program Technology.
"SPIROS PRODUCT PROGRAM ASSETS" shall have the meaning assigned to it in
Section 2.1 of the Albuterol and Product Option Agreement.
"SYSTEM" shall mean the DPI and the PSS when used together.
"TECHNOLOGY" shall mean, solely with respect to motor-driven dry powder
inhalers and powder storage systems for drugs for delivery through such
inhalers, the manufacture thereof, and formulations of drugs to be delivered
through such inhalers, public and nonpublic technical or other information,
trade secrets, know-how, processes, formulations, concepts, ideas, preclinical,
clinical, pharmacological or other data and testing results, experimental
methods, or results, assays, descriptions, business or scientific plans,
depictions, customer lists and any other written, printed or electronically
stored materials, pharmaceutical compounds or any other natural or man-made
pharmaceutical materials and any and all other intellectual property, including
patents and patent applications, of any nature whatsoever. The term
"Technology" shall include, without limitation, any of the foregoing as it
relates to enhancements of, substitutions for or improvements to the Core
Technology.
"TECHNOLOGY AGREEMENT" shall mean the Technology License Agreement dated
as of December 22, 1997, among DURA, DDSI, Spiros Corp. and Spiros Corp. II,
as amended, modified or supplemented from time to time.
"TERRITORY" shall mean the entire world.
"UNDERWRITERS" shall have the meaning assigned to it in the Registration
Statement.
"UNITS" shall mean units, each consisting of one share of Spiros Corp. II
Common Stock and one warrant to purchase one-fourth of one share of DURA Common
Stock, all as described in the Registration Statement.
SCHEDULE 1.1
<PAGE>
"1993 ROYALTY AGREEMENT" shall have the meaning assigned to it in the
Registration Statement.
SCHEDULE 1.1
<PAGE>
EXHIBIT 99.4
MANUFACTURING AND MARKETING AGREEMENT
This MANUFACTURING AND MARKETING AGREEMENT (the "Agreement") is made as
of December 22, 1997 by and between DURA PHARMACEUTICALS, INC., a Delaware
corporation ("DURA"), and SPIROS DEVELOPMENT CORPORATION II, INC., a Delaware
corporation ("Spiros Corp. II").
RECITALS
WHEREAS, DURA and Spiros Corp. II are parties to the Development
Agreement, the Technology Agreement and the Albuterol and Product Option
Agreement (all capitalized terms shall have the respective meaning set forth
in Section 1 hereof).
WHEREAS, DURA has the Purchase Option to acquire all of the Spiros Corp.
II Common Stock.
WHEREAS, DURA has the expertise necessary to manufacture, itself or
through subcontractors, the Spiros Products.
WHEREAS, DURA has marketing and sales personnel currently performing
marketing for respiratory pharmaceutical products.
WHEREAS, Spiros Corp. II desires to license DURA to manufacture, promote
and sell the Spiros Products, and DURA is willing to accept such engagement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce DURA to
enter into the Agreements, DURA and Spiros Corp. II hereby agree as follows:
1. DEFINITIONS.
1.1 DEFINITIONS. All capitalized terms used herein and not otherwise
defined shall have the respective meanings, to the extent such terms are used
herein, set forth in SCHEDULE 1.1 attached hereto, which is incorporated by
this reference as though fully set forth herein.
1.2 SINGULAR AND PLURAL. Singular and plural forms, as the case may
be, of terms defined herein shall have correlative meanings.
2. DURA'S RESPONSIBILITIES.
2.1 DURA'S GENERAL RESPONSIBILITIES. During the term of this
Agreement, DURA shall, at its sole expense (except as otherwise expressly
provided herein), in addition to its other obligations hereunder, have
responsibility for performing the activities set forth below:
<PAGE>
(a) supervise, train and maintain such competent and qualified
sales personnel as may be required to promote the Spiros Products as provided
herein;
(b) use diligent and commercially reasonable efforts to launch,
market, promote and commence Sales of a Spiros Product promptly upon receipt
of FDA Approval of such Spiros Product;
(c) on or before the thirtieth (30th) day of each calendar quarter
following receipt of FDA Approval, furnish to Spiros Corp. II a report
containing DURA's Manufacture and Sales activities during the prior calendar
quarter;
(d) make no statement, representation or warranty, oral or
written, concerning the Spiros Products inconsistent with or contrary to the
labeling approved by regulatory authorities in respect of the Spiros Products;
(e) promptly submit to Spiros Corp. II all adverse drug experience
information concerning the Spiros Products; and
(f) conform its practices and procedures relating to Spiros
Product sampling to product sampling practices and procedures DURA follows
with respect to other similar products, which practices and procedures shall
be in compliance with applicable rules and regulations.
DURA shall take such other actions as DURA and Spiros Corp. II may jointly
agree upon and deem necessary, desirable or appropriate to promote and Sell
the Spiros Products effectively and as contemplated by this Agreement.
2.2 ADVERTISING AND PROMOTIONAL RESPONSIBILITIES. From time to time,
but at least once each year, DURA shall develop and formulate a marketing
plan setting forth DURA's strategies and plans for pricing, marketing and
detailing Spiros Products. Marketing plans shall be prepared in a manner
appropriate for product launch and consistent with sales and marketing plans
for similarly placed pharmaceutical products. The marketing plans shall be
submitted to the Board of Directors of Spiros Corp. II as part of the annual
workplan and budget for approval.
2.3 TERMS OF SALE. DURA will be responsible for determining all terms
of sale, including but not limited to, policies concerning pricing, credit
terms, cash discounts and returns and allowances.
3. ROYALTIES.
3.1 ROYALTIES ON SALES OF SPIROS PRODUCTS. Dura shall receive and
retain on its own behalf all payments by purchasers
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of the Spiros Products Sold by DURA hereunder. DURA hereby agrees to pay to
Spiros Corp. II royalties equal to seven percent (7%) of Net Sales of each
Spiros Products Sold beginning on the date of FDA Approval of such product;
provided, however, that prior to the expiration of the Albuterol Option no
royalty payment shall apply with respect to Net Sales of the Albuterol
Product.
3.2 ROYALTY PAYMENT. Royalties due on Net Sales of Spiros Products
shall be paid quarterly in arrears, on or before the forty-fifth (45th) day
following the end of each calendar quarter. Acceptance by Spiros Corp. II of
any payment remitted hereunder, whether or not the amount shall be in
dispute, shall not constitute acceptance by Spiros Corp. II of the account or
schedules on which such payment is based.
3.3 SINGLE ROYALTY. All sales of Spiros Products among DURA, its
Affiliates and any of their sublicensees shall be disregarded for purposes of
computing royalties under this Section 3, but in such instances royalties
shall be payable only upon sales to unlicensed third parties unless such
other sales were for purposes of end use, rather than for resale. Nothing
contained herein shall obligate DURA to pay Spiros Corp. II more than one
royalty on any unit of Spiros Products sold.
3.4 LATE PAYMENTS. DURA shall pay interest to Spiros Corp. II on the
aggregate amount of any amounts payable by DURA that are not paid on or
before the date such payments are due under this Agreement at a rate per
annum equal to the lesser of the prime rate of interest as reported by
Citibank, N.A., New York, from time to time, plus two percent (2%), or the
highest rate permitted by applicable law, calculated on the number of days
such payment is delinquent.
4. ACCOUNTING AND STATEMENTS.
4.1 ROYALTY STATEMENTS. DURA shall keep, and cause its Affiliates, if
any, to keep true and accurate accounts of all royalties payable to Spiros
Corp. II under the Agreement and DURA shall deliver or cause to be delivered
to Spiros Corp. II written statements of royalties due on or before the
forty-fifth (45th) day following the end of each calendar quarter and at the
same time shall pay Spiros Corp. II the amount of such royalties shown to be
due pursuant to Section 3. Such reports shall show in reasonably specific
detail: (a) the gross sales of each Spiros Product sold by DURA, its
Affiliates and sublicensees during the reporting period and the calculation
of Net Sales from such gross sales; (b) the royalties payable in United
States dollars, if any, which shall have accrued hereunder based upon Net
Sales of Spiros Products; (c) the withholding taxes, if any, required by law
to be deducted in respect of such sales; and (d) the date of the first
commercial sale of each Spiros Product.
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4.2 RECORDS. DURA shall keep, and cause its Affiliates and sublicensees,
if any, to keep accurate records in sufficient detail to be able to determine
the amount of royalties payable. Spiros Corp. II shall have the right at its
own expense to have an independent certified public accounting firm examine the
relevant books and records of account of DURA, any of its Affiliates or
sublicensees during reasonable business hours not more often than once during
each calendar year, to determine whether appropriate accounting and payment of
royalties have been made during the preceding two (2) calendar years. This
independent certified public accounting firm shall treat as confidential and
shall not disclose to Spiros Corp. II any information other than information
which is needed or proper to support the information required to be given to
Spiros Corp. II pursuant to this Agreement. If such accounting firm concludes
that additional royalties were owed during such period, DURA shall pay the
additional royalties within thirty (30) days of the date Spiros Corp. II
delivers to DURA such accounting firm's written report so concluding. The fees
charged by such accounting firm shall be paid by Spiros Corp. II; PROVIDED,
HOWEVER, if the audit discloses that the royalties payable by DURA for the
audited period are more than one hundred five percent (105%) of the royalties
actually paid for such period, then DURA shall pay the reasonable fees and
expenses charged by such accounting firm.
4.3 SUBLICENSEE RECORDS. DURA shall include in each permitted sublicense
granted by it pursuant to this Agreement or the License Agreement a provision
requiring the sublicensee to make reports to DURA, to keep and maintain records
of sales made pursuant to such sublicense and to grant access to such records by
Spiros Corp. II's independent accountant to the same extent required of DURA
under this Agreement.
5. MANUFACTURING AND SALE RECORDS. DURA shall keep, maintain, update and
preserve for the benefit of Spiros Corp. II true, accurate and complete
records of all efforts made by DURA pursuant to this Agreement, including,
without limitation, records of current and prospective customer contacts,
status of sales programs, advertising efforts, promotion efforts, market
feedback, marketing strategy, distribution, business leads and sales leads
("Records"). Upon written request of Spiros Corp. II or upon the termination
of this Agreement, copies of the Records shall be sent by DURA to Spiros
Corp. II within sixty (60) days of such request or termination.
6. MANUFACTURING PRACTICES.
6.1 MANUFACTURING SPECIFICATIONS. The Manufacture of all Spiros
Products during the term of this Agreement shall be the responsibility of
DURA. DURA shall manufacture, or cause its
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subcontractor to manufacture, the Spiros Products under this Agreement in
compliance in all material respects with all requirements of applicable laws
and regulations and all applicable good manufacturing practices, as
prescribed from time to time by the FDA and other applicable worldwide
regulatory authorities, using the specifications, manufacturing methods and
formulae as agreed upon by DURA and Spiros Corp. II in writing.
6.2 INSPECTION OF MANUFACTURING FACILITIES. DURA or its subcontractor
shall permit Spiros Corp. II and its duly authorized agents, at Spiros Corp.
II's sole expense, to enter DURA's or its subcontractor's premises, upon
reasonable notice during normal working hours, for the purpose of inspecting
the manufacturing processes and components used in the manufacture of the
Spiros Products and the quality thereof.
7. CONFIDENTIALITY. The provisions of Sections 4.3 and 4.4 of the
Technology Agreement shall apply with equal force and effect to this
Agreement and are incorporated hereunder.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS. The provisions of Section 3
of the Technology Agreement with respect to DURA and Spiros Corp. II shall
apply with equal force and effect to this Agreement and are incorporated
hereunder. In addition, DURA represents, warrants and covenants to Spiros
Corp. II as follows:
8.1 DURA'S EFFORTS. DURA shall use its commercially reasonable efforts
to locate and contact specialist respiratory physicians and other physicians,
hospitals, clinics, health maintenance organizations, preferred provider
organizations and managed care companies for the purpose of determining
whether such persons, groups or entities may be interested in buying or
prescribing the Spiros Products. DURA hereby agrees that failure to use its
commercially reasonable efforts as described in this Agreement shall
constitute a material breach of this Agreement;
8.2 COMPLIANCE WITH APPLICABLE LAWS. DURA shall comply (and shall
require all its sublicensees, agents and representatives to comply) with all
applicable laws, statutes, regulations and treaties relating to the
Manufacture and Sale of the Spiros Corp. II's Products and the performance of
DURA's obligations hereunder. DURA shall demonstrate, at Spiros Corp. II's
reasonable request, compliance with all applicable laws, statutes,
regulations and treaties;
8.3 USE OF NAMES. DURA shall use the then-current names used by Spiros
Corp. II for the Spiros Products (but will not represent or imply that it is
Spiros Corp. II or an Affiliate of Spiros Corp. II, or a part of or partner
or joint venturer with Spiros Corp. II);
8.4 NOTIFICATION OF PROBLEMS WITH SPIROS PRODUCTS. DURA
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shall keep Spiros Corp. II informed as to any problems encountered with the
Spiros Products and any suggested resolutions for those problems and shall
communicate promptly to Spiros Corp. II any and all modifications, design
changes or improvements suggested by any employee or agent; and
8.5 RECORDS. DURA shall keep and maintain a file of all persons and
entities to which Spiros Products have been sold by DURA or its sublicensees,
including: name; address; serial number, if any, of the Spiros Products;
date of delivery; and any applicable contract or purchase order executed by
such person or entity. Such file may be inspected by Spiros Corp. II at any
time and a complete copy of such file shall be delivered to Spiros Corp. II
upon the termination or earlier expiration of this Agreement pursuant to
Section 9.
9. TERM AND TERMINATION.
9.1 TERM. This Agreement shall be effective as of the date hereof and,
unless terminated earlier as provided in Sections 9.2, 9.3 and 9.4 hereof,
and shall continue in full force and effect until such time as the Purchase
Option terminates or expires (other than by exercise), subject to Section 9.6.
9.2 TERMINATION BY MUTUAL AGREEMENT. By mutual agreement, the parties
hereto may at any time terminate this Agreement on mutually acceptable terms.
9.3 EFFECT OF OPTION EXERCISES.
9.3.1 PURCHASE OPTION. Subject to Section 9.6, in the event
the Purchase Option is exercised by DURA, this Agreement shall terminate,
effective upon the Purchase Option Closing Date, without any obligation to
make payments pursuant to Section 7 of the Technology Agreement.
9.3.2 PARTIAL TERMINATION UPON EXERCISE OF ALBUTEROL OPTION.
In the event that the Albuterol Option is exercised, this Agreement shall
terminate, effective on the Albuterol Option Closing Date, with respect to
the Albuterol Program Assets and any obligation to make royalty payments with
respect to the Albuterol Product, but shall otherwise continue in full force
and effect until terminated pursuant to this Section 9.
9.3.3 PARTIAL TERMINATION UPON EXERCISE OF PRODUCT OPTION. In
the event that the Product Option is exercised, this Agreement shall
terminate, effective on the Product Option Closing Date, with respect to the
Option Product and any obligation to make royalty payments with respect to
the Product Option, but shall otherwise continue in full force and effect
until terminated pursuant to this Section 9.
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<PAGE>
9.4 TERMINATION BY DURA. Either DURA or Spiros Corp. II shall have the
right to terminate this Agreement, effective as set forth in a written notice
to the other of an Event of Default with respect to such other party.
9.5 EFFECT OF TERMINATION.
9.5.1 RETURN OF SPIROS PRODUCTS. In the event of the
termination of DURA's right to continue to Manufacture and Sell one or more
(other than as a result of the exercise of the Albuterol Option or the
Product Option) Spiros Products pursuant to Section 9.4 as a result of an
Event of Default by DURA, DURA shall within thirty (30) days of the effective
date of such termination, transfer to Spiros Corp. II all Program Technology
and all other data, records and materials in DURA's possession or control
which relate to such Spiros Products. In addition, DURA shall within fifteen
(15) days of the effective date of the termination notify Spiros Corp. II in
writing of the quantity of such Spiros Products which it has in inventory,
and DURA shall thereupon be permitted during the six (6) months following
such termination to Sell such inventory of Spiros Products; provided that
Spiros Corp. II shall first have the right to purchase such Spiros Products
for a transfer price equal to the cost of manufacture of such products
together with DURA's overhead thereon. DURA shall also cooperate in the
transfer of regulatory filings related to such Spiros Products, and take such
other actions and execute such other instruments, assignments and documents
as may be necessary to effect the transfer of the Manufacture and Sale rights
to Spiros Corp. II.
9.5.2 SURVIVAL. Sections 1, 2.1(c), (d), (e) and (f), 3 (but
only to the extent rights to payments have accrued prior to termination), 4,
5, 7, 8, 9, 10 and 11 of this Agreement, and all obligations to pay any
amounts due hereunder, shall survive, and shall not be affected by, any
termination of this Agreement pursuant to this Section 9.
10. INDEMNIFICATION AND INSURANCE.
10.1 INDEMNIFICATION. The provisions of Sections 6.1 and 6.2 of the
Technology Agreement shall apply with equal force and effect to this
Agreement and are incorporated hereunder.
10.2 INSURANCE.
10.2.1 INSURANCE BY SPIROS CORP. II. To the extent Spiros Corp.
II develops or uses, or causes the development or use (except by DURA or its
Affiliates or sublicensees under this Agreement) of, the Spiros Products,
Spiros Corp. II shall, to the extent available at commercially reasonable
rates, maintain with insurers or underwriters of good repute such insurance
relating
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to the development, sale and use of the Spiros Products, against such risks,
pursuant to such terms (including deductible limits or self-insured
retentions) and for such periods, as is customary for comparable businesses
undertaking the development, sale and use of products of a similar nature,
and shall, to the extent reasonably possible and not unreasonably expensive,
cause DURA and its Affiliates to be named as additional insured parties on
its insurance policies. To the extent Spiros Corp. II is required to obtain
insurance under this Section 10.2.1 during the term of this Agreement, Spiros
Corp. II may use Available Funds to pay the premiums therefore.
10.2.2 INSURANCE BY DURA. DURA shall, to the extent available
at commercially reasonable rates, maintain, with insurers or underwriters of
good repute such insurance relating to the Development, Manufacture and Sale,
against such risks and pursuant to such terms (including deductible limits or
self-insured retentions) as is customary for comparable businesses
undertaking research, development and commercialization programs of a similar
nature, and shall, to the extent reasonably possible and not unreasonably
expensive, cause Spiros Corp. II to be named as an additional insured party
on its insurance policies.
11. MISCELLANEOUS.
11.1 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the part of
DURA or Spiros Corp. II to exercise and no delay in exercising any right,
power, remedy or privilege under this Agreement or provided by statute or at
law or in equity or otherwise, including, without limitation, the right or
power to terminate this Agreement, shall impair, prejudice or constitute a
waiver of any such right, power, remedy or privilege or be construed as a
waiver of any breach of this Agreement or as an acquiescence therein, nor
shall any single or partial exercise of any such right, power, remedy or
privilege preclude any other or further exercise thereof or the exercise of
any other right, power, remedy or privilege.
11.2 FORCE MAJEURE. DURA and Spiros Corp. II shall each be excused for
any failure or delay in performing any of their respective obligations under
this Agreement, if such failure or delay is caused by Force Majeure.
11.3 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement
is intended or is to be construed to constitute DURA and Spiros Corp. II as
partners or joint venturers or one party as an employee of any other party.
Except as expressly provided herein, no party hereto shall have any express
or implied right or authority to assume or create any obligations on behalf
of or in the name of any other party or to bind any other party to any
contract, agreement or undertaking with any third party.
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<PAGE>
11.4 NOTICES. All notices, requests and other communications to DURA or
Spiros Corp. II hereunder shall be in writing (including telecopy or similar
electronic transmissions), shall refer specifically to this Agreement and
shall be personally delivered or sent by telecopy or other electronic
facsimile transmission or by registered mail or certified mail, return
receipt requested, postage prepaid, or reliable overnight courier service, in
each case to the respective address specified below (or to such address as
may be specified in writing to the other party hereto):
If to DURA, addressed to:
Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
with a copy to the attention of General Counsel
If to Spiros Corp. II, addressed to:
Spiros Development Corporation II, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
Any notice or communication given in conformity with this Section 11.4 shall
be deemed to be effective when received by the addressee, if delivered by
hand, telecopy or electronic transmission, three (3) days after mailing, if
mailed, and one (1) business day after delivery to a reliable overnight
courier service.
11.5 FURTHER ASSURANCES. Each of DURA and Spiros Corp. II hereby agrees
to duly execute and deliver, or cause to be duly executed and delivered, such
further instruments and do and cause to be done such further acts and things,
including, without limitation, the filing of such additional assignments,
agreements, documents and instruments, that may be necessary or as the other
party hereto may at any time and from time to time reasonably request in
connection with this Agreement or to carry out more effectively the
provisions and purposes of, or to better assure and confirm unto such other
party its rights and remedies under, this Agreement.
11.6 SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, DURA, Spiros Corp. II,
and their respective successors and assigns; PROVIDED, HOWEVER, that DURA and
Spiros Corp. II may not assign or otherwise transfer any of their respective
rights and interests, nor delegate any of their respective obligations,
hereunder, including, without limitation, pursuant to a merger or
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<PAGE>
consolidation, without the prior written consent of the other party hereto;
PROVIDED FURTHER, HOWEVER, that DURA may fully assign its rights and
interests, and delegate its obligations, hereunder, effective upon written
notice thereof (a) to an Affiliate if such Affiliate assumes all of the
obligations of DURA hereunder and this Agreement remains binding upon DURA;
or (b) to any Person that acquires all or substantially all of the assets of
DURA, or which is the surviving Person in a merger or consolidation with
DURA, if such Person assumes all the obligations of DURA hereunder.
Notwithstanding the foregoing, Spiros Corp. II shall have the right to assign
its rights and delegate its obligations hereunder following expiration or
termination (other than by exercise) of the Purchase Option. Any attempt to
assign or delegate any portion of this Agreement in violation of this Section
11.6 shall be null and void. Subject to the foregoing any reference to DURA
or Spiros Corp. II hereunder shall be deemed to include the successors
thereto and assigns thereof.
11.7 AMENDMENTS. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent by DURA or Spiros
Corp. II to any departure therefrom, shall in any event be effective unless
the same shall be in writing specifically identifying this Agreement and the
provision intended to be amended, modified, waived, terminated or discharged
and signed by DURA and Spiros Corp. II, and each amendment, modification,
waiver, termination or discharge shall be effective only in the specific
instance and for the specific purpose for which given. No provision of this
Agreement shall be varied, contradicted or explained by any other agreement,
course of dealing or performance or any other matter not set forth in an
agreement in writing and signed by DURA and Spiros Corp. II.
11.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, as applied to
contracts made and performed entirely within the State of California. Except
as otherwise provided herein, any claim or controversy arising out of or
related to this contract or any breach hereof shall be submitted to a court
of competent jurisdiction in the State of California, and the parties hereby
consent to the jurisdiction and venue of such court.
11.9 SEVERABILITY. If any provision hereof should be held invalid,
illegal or unenforceable in any respect in any jurisdiction, then, to the
fullest extent permitted by law, (a) all other provisions hereof shall remain
in full force and effect in such jurisdiction and shall be liberally
construed in order to carry out the intentions of the parties hereto as
nearly as may be possible and (b) such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such provision in any other jurisdiction. To the extent permitted by
applicable law, DURA and Spiros Corp. II
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<PAGE>
hereby waive any provision of law that would render any provision hereof
prohibited or unenforceable in any respect.
11.10 HEADINGS. Headings used herein are for convenience only and shall
not in any way affect the construction of, or be taken into consideration in
interpreting, this Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
11.12 ENTIRE AGREEMENT. This Agreement, together with any agreements
referenced herein, constitute, on and as of the date hereof, the entire
agreement of DURA and Spiros Corp. II with respect to the subject matter
hereof, and all prior or contemporaneous understandings or agreements,
whether written or oral, between DURA and Spiros Corp. II with respect to
such subject matter are hereby superseded in their entirety.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.
DURA PHARMACEUTICALS, INC.
By: /s/ Cam L. Garner
-------------------------------------------------
Cam L. Garner
President and Chief Executive Officer
SPIROS DEVELOPMENT CORPORATION II, INC.
By: /s/ David S. Kabakoff
-------------------------------------------------
David S. Kabakoff,
President and Chief Executive Officer
[SIGNATURE PAGE TO MANUFACTURING AND
MARKETING AGREEMENT]
<PAGE>
SCHEDULE 1.1
GLOSSARY
<PAGE>
SCHEDULE 1.1
GLOSSARY
"AFFILIATE" of a person shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. "Control" (and, with correlative meanings, the
terms "controlled by" and "under common control with") shall mean the possession
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting stock, by contract or
otherwise. In the case of a corporations, "control" shall mean, among other
things, the direct or indirect ownership of more than fifty percent (50%) of its
outstanding voting stock.
"AGREEMENTS" shall mean the Manufacturing and Marketing Agreement, the
Technology Agreement and the Development Agreement.
"ALBUTEROL OPTION" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"ALBUTEROL AND PRODUCT OPTION AGREEMENT" shall mean the Albuterol and
Product Option Agreement dated as of December 22, 1997, between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"ALBUTEROL OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 1.5 of the Albuterol and Product Option Agreement.
"ALBUTEROL PROGRAM ASSETS" shall have the meaning assigned to it in Section
1.1 of the Albuterol and Product Option Agreement.
"ALBUTEROL PRODUCT" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"AVAILABLE FUNDS" shall mean the sum of (a) the net proceeds to Spiros
Corp. II from the sale of the Units in the Offering and the Contribution, (b)
all royalties remitted to Spiros Corp. II by DURA (or its Affiliates) from the
Sale of Spiros Products pursuant to the Agreements, (c) the Option Proceeds, if
any, (d) any other amounts provided by DURA to Spiros Corp. II, if any and (e)
interest or other income earned through temporary investment of the amounts
described in clauses (a), (b), (c) or (d).
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as amended
from time to time.
"CLAIM" shall mean any and all liabilities, damages, losses, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees).
SCHEDULE 1.1
<PAGE>
"CONFIDENTIAL INFORMATION" shall mean all Program Technology disclosed by
DURA (and its Affiliates) to Spiros Corp. II or by Spiros Corp. II to DURA
pursuant to the Agreements or the Services Agreement.
"CONTRIBUTION" shall have the meaning assigned in Section 5.2 of the
Development Agreement.
"CORE TECHNOLOGY" shall mean the DURA Core Technology, the DDSI Core
Technology and the Spiros Core Technology.
"DDSI CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DDSI as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DDSI Patent Rights; PROVIDED,
HOWEVER, that DDSI Core Technology shall also include Technology acquired by
DDSI from a third party after the date of the closing of the Offering necessary
or useful to the development of the Spiros Products, except to the extent that
there are any limitations or restrictions on DDSI's ability to license or
sublicense such Technology. "Owned or controlled" shall include Technology that
DDSI owns, or under which DDSI is licensed and has the right to grant
sublicenses and/or grant immunity from suit.
"DDSI INDEMNITEE" shall mean DDSI, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DDSI PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DDSI (or the rights to
which have been assigned to DDSI) as of the date of the Technology Agreement
relating to dry powder inhalers, powder storage systems and/or formulation
methods for dry powder inhalation, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
patent applications and (c) any patent issued or issuing upon any of the
foregoing.
"DESIGNATED COMPOUND(S)" shall mean any compounds for delivery using the
System selected by Spiros Corp. II, and agreed to be developed by DURA.
"DEVELOPED TECHNOLOGY" shall mean any Technology including, without
limitation, any enhancements, substitutions or improvements to the Core
Technology that is (a) discovered, developed or otherwise acquired by DURA
pursuant to the terms of the Development Agreement or (b) otherwise acquired by
or on behalf of Spiros Corp. II during the term of the Development Agreement.
"DEVELOPMENT" shall mean the further development of the Program Technology
for the purpose of identifying, developing, manufacturing, marketing and
commercializing Spiros Products and
SCHEDULE 1.1
<PAGE>
the making of the Other Expenditures.
"DEVELOPMENT AGREEMENT" shall mean the Development Agreement dated as of
December 22, 1997, between DURA and Spiros Corp., as amended, modified or
supplemented from time to time.
"DEVELOPMENT COSTS" shall mean the Direct Development Costs, the Indirect
Development Costs and the Other Expenditures.
"DEVELOPMENT TERM" shall mean the period commencing on the Closing Date and
ending on the earlier of (a) the Option Closing Date or (b) the date the Option
terminates or expires other than by exercise.
"DIRECT DEVELOPMENT COSTS" shall mean all costs incurred by DURA or its
Affiliates in respect of the Development, other than Indirect Development
Costs, determined in accordance with generally accepted accounting principles
consistent with DURA's internal accounting system, allocated on a reasonable
and consistent basis. Direct Development Costs shall consist primarily of
fully-burdened payroll costs (burdened to include benefits, payroll taxes and
an allocation of facilities and overhead costs) and any other such costs
generated internally by DURA in respect of the Development.
"DPI" shall mean the motor-driven dry powder inhaler (other than an inahler
designed to deliver a single dose of a drug) developed by DURA, DDSI and/or
Spiros Corp. and to be developed by DURA and/or Spiros Corp. II.
"DURA COMMON STOCK" shall mean the Common Stock of DURA, par value $.001
per share.
"DURA CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DURA as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DURA Patent Rights and DURA
Trademarks; PROVIDED, HOWEVER, that DURA Core Technology shall also include
Technology acquired by DURA from a third party after the date of the closing of
the Offering necessary or useful to the development of the Spiros Products,
except to the extent that there are any limitations or restrictions on DURA's
ability to license or sublicense such Technology. "Owned or controlled" shall
include Technology that DURA owns, or under which DURA is licensed and has the
right to grant sublicenses and/or grant immunity from suit.
"DURA INDEMNITEE" shall mean DURA, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DURA PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DURA (or the rights to
which have been assigned to DURA) as of the date of the Technology Agreement
relating to DPIs, PSSs and/or formulation methods for dry powder inhalation, (b)
any
SCHEDULE 1.1
<PAGE>
patent application constituting an equivalent, counterpart, reissue,
extension or continuation (including, without limitation, a continuation in part
or a subdivision) of any of the foregoing patent applications and (c) any patent
issued or issuing upon any of the foregoing.
"DURA TRADEMARKS" shall mean Spiros=TM=.
"EVENT OF DEFAULT" shall mean any of the following events: (a) at any
time, if DURA or Spiros Corp. II fails to perform or observe or otherwise
breaches any of its Material Obligations, and such failure or breach continues
unremedied for a period of sixty (60) days after receipt by of written notice
thereof from the other party; (b) at any time, effective as set forth in a
written notice from the other party if DURA or Spiros Corp. II shall (i) seek
the liquidation, reorganization, dissolution or winding-up of itself or the
composition or readjustment of its debts (other than pursuant to a merger with
an Affiliate), (ii) apply for or consent to the appointment of, or the taking
possession by, a receiver, custodian, trustee or liquidator for itself or of all
or a substantial part of its assets, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the Bankruptcy
Code, (v) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts (other than pursuant to a merger with an Affiliate) or
(vi) adopt any resolution of its Board of Directors or shareholders for the
purpose of effecting any of the foregoing (other than pursuant to a merger with
an Affiliate); or (c) at any time, effective as set forth in a written notice
from the other party, if a proceeding or case shall be commenced without the
application or consent of DURA or Spiros Corp. II as applicable, and such
proceeding or case shall continue undismissed, or an order, judgment or decrees
approving or ordering any of the following shall be entered and continued
unstayed and in effect, for a period of sixty (60) days from and after the date
service of process is effected, seeking (i) DURA's or Spiros Corp. II's, as
applicable, liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of DURA or Spiros Corp. II or for
all or any substantial part of its assets or (iii) similar relief in respect of
DURA or Spiros Corp. II under any law relating to bankruptcy, insolvency,
reorganization, winding-up or the composition or readjustment of debts.
"FDA" shall mean the United States Food and Drug Administration or any
successor agency or authority, the approval of which is required to market
health care products in the United States.
"FDA APPROVAL" shall mean the final regulatory approval of the FDA required
to commence commercial marketing of a health product.
SCHEDULE 1.1
<PAGE>
"FORCE MAJEURE" shall mean any act of God, any accident explosion, fire,
storm, earthquake, flood, drought, peril of the sea, riot, embargo, war or
foreign, federal, state or municipal order of general application, seizure,
requisition or allocation, any failure or delay of transportation, shortage of
or inability to obtain supplies, equipment, fuel or labor or any other
circumstance or event beyond the reasonable control of the party relying upon
such circumstance or event.
"INDIRECT DEVELOPMENT COSTS" shall mean all costs, fees and out-of-pocket
or other expenses, including the purchase of any capital equipment related to
the Development, incurred or paid by DURA to a third party, other than an
Affiliate of DURA, in respect of the Development, determined in accordance with
generally accepted accounting principles consistent with DURA's internal
accounting system, allocated on a reasonable and consistent basis.
"MANUFACTURING AND MARKETING AGREEMENT" shall mean the Manufacturing and
Marketing Agreement dated as of December 22, 1997 between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"MANUFACTURE" shall mean the manufacture and assembly of the Spiros
Products.
"MATERIAL OBLIGATION" shall mean the material obligations of a party under
the Technology Agreement, the Development Agreement or the Manufacturing and
Marketing Agreement.
"NET SALES" shall mean the gross amount invoiced for sales of Spiros
Products by DURA or its sublicensees, if any, to third parties less (i)
discounts actually allowed, (ii) credits for claims, allowances, retroactive
price reductions or returned Spiros Products, (iii) prepaid freight charges
incurred in transporting Spiros Products to customers, (iv) sales taxes and
other governmental charges actually paid in connection with the sales (but
excluding what is commonly known as income taxes) and (v) any royalty
obligations under the 1993 Royalty Agreement. Net Sales shall not include sales
between or among DURA, its Affiliates and its sublicensees unless such sales are
for end use rather than for purposes of resale.
"OFFERING" shall mean the underwritten public offering of the Units
pursuant to the Registration Statement.
"OPTION PROCEEDS" shall have the meaning assigned to it in Section 3 of the
Albuterol and Product Option Agreement.
"OPTION PRODUCT" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"OTHER EXPENDITURES" shall mean funds spent by Spiros Corp. II to acquire
capital equipment, develop a next generation inhaler system or to enhance the
System.
SCHEDULE 1.1
<PAGE>
"PATENT RIGHTS" shall mean any patents or patent applications within the
Spiros Corp. II Patent Rights, the DURA Patent Rights, the DDSI Patent Rights
and the Spiros Corp. Patent Rights.
"PERSON" shall mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust or other entity.
"PRODUCT OPTION" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"PRODUCT OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 2.5 of the Albuterol and Product Option Agreement.
"PROGRAM TECHNOLOGY" shall mean the Core Technology and the Developed
Technology.
"PSS" shall mean the powder storage system developed and to be developed by
DURA for use with the DPI.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
December 16, 1997, among DURA, Spiros Corp. II, Merrill Lynch & Co., and
Donaldson, Lufkin & Jenrette.
"PURCHASE OPTION" shall mean the option granted to the holder of Spiros
Corp. II's Special Common Stock to purchase all of the Spiros Corp. II Common
Stock as set forth in Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION CLOSING DATE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION EXERCISE PRICE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-1/S-3 filed by Spiros Corp. II and DURA dated October 10, 1997 (No. 333-
37673/333-37673-01), including all exhibits and any amendments thereof
and supplements thereto.
"RESEARCH FUNDS" shall mean the Available Funds, less (i) all general and
administrative expenses including, without limitation, those paid or payable
pursuant to the Development Agreement or the Services Agreement, and the
reasonable out-of-pocket expenses of Spiros Corp. II directors and reasonable
compensation for Spiros Corp. II's independent directors, less (ii) any amounts
paid to DURA under the Development Agreement or the Services Agreement, less
(iii) any costs and expenses incurred in the defense or settlement of any action
or claim or in respect of a judgment thereon, and less (iv) One Million Dollars
($1,000,000) to be retained by Spiros Corp. II as working capital in the event
DURA does not exercise the Purchase Option.
SCHEDULE 1.1
<PAGE>
"SALE(S)" or "SELL" shall mean the activity undertaken by a sales
representative during a sales call on physicians, physician assistants, nurses,
hospitals, clinics, health maintenance organizations, preferred provider
organizations and managed care companies (including all forms of communication
not involving face to face contact by such sales representatives), describing
the FDA-approved indicated uses, safety, effectiveness, contraindications, side
effects, warnings and other relevant characteristics of the Spiros Product, in a
fair and balanced manner consistent with the requirements of the Federal Food,
Drug, and Cosmetic Act, as amended (and the regulations thereunder).
"SPIROS CASSETTE SYSTEM" shall mean a DPI in which the PSS is in the form
of a cassette.
"SPIROS CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
Spiros Corp. as of the date of the closing of the Offering necessary or useful
to the development of the Spiros Products, and (b) the Spiros Corp. Patent
Rights; PROVIDED, HOWEVER, that Spiros Core Technology shall also include
Technology acquired by Spiros Corp. from a third party after the date of the
closing of the Offering necessary or useful to the development of the Spiros
Products, except to the extent that there are any limitations or restrictions on
Spiros Corp.'s ability to license or sublicense such Technology. "Owned or
controlled" shall include Technology that Spiros Corp. owns, or under which
Spiros Corp. is licensed and has the right to grant sublicenses and/or grant
immunity from suit.
"SPIROS CORP. INDEMNITEE" shall mean Spiros Corp., its successors and
assigns, and the directors, officers, employees, agents and counsel thereof.
"SPIROS CORP. PATENT RIGHTS" shall mean those certain inventions described
in claims of (a) the patent applications pending, filed by Spiros Corp. (or the
rights to which have been assigned to Spiros Corp.) as of the date of the
Technology Agreement relating to dry powder inhalers, powder storage systems
and/or formulation methods for dry powder inhalation, (b) any patent application
constituting an equivalent, counterpart, reissue, extension or continuation
(including, without limitation, a continuation in part or a subdivision) of any
of the foregoing patent applications and (c) any patent issued or issuing upon
any of the foregoing.
"SPIROS CORP. II CHARTER" shall mean Amended and Restated Certificate of
Spiros Development Corporation II, Inc. in effect as of the closing of the
Offering, as amended from time to time.
"SPIROS CORP. II COMMON STOCK" shall mean the Callable Common Stock of
Spiros Corp. II, $.001 par value.
"SPIROS CORP. II INDEMNITEE" shall mean Spiros Corp. II, its
SCHEDULE 1.1
<PAGE>
successors and assigns, and the directors, officers, employees, agents and
counsel thereof.
"SPIROS CORP. II PATENT RIGHTS" shall mean those certain inventions
described in claims of (a) any patent application having one or more claims
covering Developed Technology, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
applications or (c) any patent issued or issuing upon any of the foregoing
applications.
"SPIROS PRODUCT(S)" shall mean (a) any System used with a formulation of
albuterol, beclomethasone, ipratropium, an albuterol-ipratropium combination,
budesonide or a Designated Compound developed, produced, manufactured or
marketed by DURA on behalf of Spiros Corp. II using the Program Technology.
"SPIROS PRODUCT PROGRAM ASSETS" shall have the meaning assigned to it in
Section 2.1 of the Albuterol and Product Option Agreement.
"SYSTEM" shall mean the DPI and the PSS when used together.
"TECHNOLOGY" shall mean, solely with respect to motor-driven dry powder
inhalers and powder storage systems for drugs for delivery through such
inhalers, the manufacture thereof, and formulations of drugs to be delivered
through such inhalers, public and nonpublic technical or other information,
trade secrets, know-how, processes, formulations, concepts, ideas, preclinical,
clinical, pharmacological or other data and testing results, experimental
methods, or results, assays, descriptions, business or scientific plans,
depictions, customer lists and any other written, printed or electronically
stored materials, pharmaceutical compounds or any other natural or man-made
pharmaceutical materials and any and all other intellectual property, including
patents and patent applications, of any nature whatsoever. The term
"Technology" shall include, without limitation, any of the foregoing as it
relates to enhancements of, substitutions for or improvements to the Core
Technology.
"TECHNOLOGY AGREEMENT" shall mean the Technology License Agreement dated as
of December 22, 1997, among DURA, DDSI, Spiros Corp. and Spiros Corp. II, as
amended, modified or supplemented from time to time.
"TERRITORY" shall mean the entire world.
"UNDERWRITERS" shall have the meaning assigned to it in the Registration
Statement.
"UNITS" shall mean units, each consisting of one share of Spiros Corp. II
Common Stock and one warrant to purchase one-fourth of one share of DURA Common
Stock, all as described in the Registration Statement.
SCHEDULE 1.1
<PAGE>
"1993 ROYALTY AGREEMENT" shall have the meaning assigned to it in the
Registration Statement.
SCHEDULE 1.1
<PAGE>
EXHIBIT 99.5
SERVICES AGREEMENT
SERVICES AGREEMENT (this "Agreement") made as of the 22 day of December,
1997, among DURA PHARMACEUTICALS, INC., a Delaware corporation ("DURA"), and
SPIROS DEVELOPMENT CORPORATION II, INC., a Delaware corporation ("Spiros Corp.
II").
WHEREAS:
DURA and Spiros Corp. II desire to provide the services described herein on
the terms set forth herein. Any capitalized terms not defined herein shall have
the meaning assigned to such terms in the Glossary attached as SCHEDULE 1.1 to
this Agreement.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. SERVICES. Upon the request of Spiros Corp. II from time to time, DURA
will supply Spiros Corp. II with management and administrative services as
mutually agreed upon. Such services will be provided at reasonable times and
upon reasonable notice, as mutually agreed to by the parties.
2. COMPENSATION. Spiros Corp. II shall pay to DURA a fee of $100,000,
quarterly in arrears within 30 days of the date of the invoice received from
DURA for the services provided.
3. REIMBURSEMENT. Upon the consummation of the Offering, Spiros Corp. II
shall reimburse DURA for all out-of-pocket expenses incurred by DURA in
connection with the services provided hereunder, including those out-of-pocket
expenses incurred pursuant to the Offering. In addition, Spiros Corp. II shall
reimburse DURA for its direct and indirect costs, including the fully burdened
cost of labor for DURA's employees that performed services in connection with
the Offering.
4. TERM AND TERMINATION.
A. This Agreement shall terminate upon the later of (i) one year
after the termination of the Purchase Option (as defined in the Prospectus
relating to the Offering) or (ii) upon the exercise of the Purchase Option.
This Agreement can be terminated by Spiros Corp. II at any time after
termination of the Purchase Option. Either party may, in its discretion,
terminate this Agreement in the event that the Technology Agreement,
Development Agreement or Manufacturing and Marketing Agreement terminates as
a result of an Event of Default by the other party.
B. Notwithstanding the foregoing, in the event that the Offering is
not
<PAGE>
consummated and is withdrawn, this Agreement shall terminate and be of no
further force and effect.
5. INDEMNIFICATION OF DURA. Spiros Corp. II hereby agrees to indemnify,
protect and hold DURA harmless from any and all liabilities, costs or expenses
incurred by DURA as a result of services rendered by DURA under this Agreement,
including lawsuits of and claims by third parties, except for liabilities, costs
or expenses resulting from DURA's own negligence or wilful misconduct.
6. FORCE MAJEURE. DURA shall not be liable for delay in performance of
any of its obligations hereunder if such delay is due to causes beyond its
reasonable control including, without limitation, acts of God, fires, strikes,
acts of ware, or intervention of any government or authority; provided, however,
that any such delay or failure shall be remedied by such party as soon as
possible.
7. RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended or is to be construed to constitute DURA and Spiros Corp. II as
partners or joint venturers or DURA as an employee of Spiros Corp. II. Neither
party hereto shall have any express or implied right or authority to assume or
create any obligations on behalf of or in the name of the other party or to bind
the other party to any contract, agreement or undertaking with any third party.
8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
9. NOTICES. Any notice or other communication required or permitted to
be given to any party under this Agreement shall be given in writing and shall
be delivered by hand or by registered mail, postage prepaid and return receipt
requested, or by reputable overnight delivery service or courier, addressed to
each party at the following addresses or such other address as may be designated
by notice pursuant to this Section 9:
If to Spiros Corp. II: Spiros Corporation II, Inc.
c/o Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
-2-
<PAGE>
If to DURA: Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
with a copy to the attention
of General Counsel
Any notice or communication given in conformity with this Section 9 shall be
deemed to be effective when received by the addressee, if delivered by hand or
delivery service or courier, and three days after mailing, if mailed.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts to
be performed wholly within the State of California. Except as otherwise
provided herein, any claim or controversy arising out of or related to this
Agreement or any breach thereof shall be submitted to a court of competent
jurisdiction in the State of California and the parties hereby consent to the
jurisdiction and venue of such court.
11. SEVERABILITY. If any provision in this Agreement is deemed to be or
becomes invalid, illegal or unenforceable in any jurisdiction, (i) such
provision will be deemed amended in such jurisdiction to conform to applicable
laws of such jurisdiction so as to be valid and enforceable or, it cannot be so
amended without materiality altering the intention of the parties, it will be
deleted, (ii) the validity, legality and enforceability of such provision will
not in any way be affected or impaired thereby in any other jurisdiction and
(iii) the remaining provisions of this Agreement shall continue in full force
without being impaired or invalidated in any way.
12. AMENDMENTS. No amendment, modification or addition hereto shall be
effective or binding on either party unless set forth in writing and executed by
a duly authorized representative of both parties.
13. 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 breach or failure to perform shall be deemed to be
a waiver of any future breach or failure to perform or of any other right
arising under this Agreement.
14. HEADINGS. The section headings contained in this Agreement are
included for convenience only and form no part of the agreement between the
parties.
15. ASSIGNMENT. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that DURA may assign such
rights and obligations hereunder to an Affiliate or to any person or entity with
which DURA is merged or consolidated or which
-3-
<PAGE>
purchases all or substantially all of the assets of DURA. DURA may subcontract
all or any portion of its duties hereunder to third parties, in its sole
discretion; provided, however, that any such subcontractor shall be bound by the
terms of this Agreement.
16. NO EFFECT ON OTHER AGREEMENTS. No provision of this Agreement shall
be construed so as to negate, modify or affect in any way the provisions of any
other agreement between the parties unless specifically referred to, and solely
to the extent provided, in any such other agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
DURA PHARMACEUTICALS, INC.,
a Delaware corporation
By: /s/ Cam L. Garner
--------------------------------------------------
Name: Cam L. Garner
-------------------------------------------------
Title: Chairman, President & CEO
-------------------------------------------------
SPIROS DEVELOPMENT CORPORATION II, INC.,
a Delaware corporation
By: /s/ David S. Kabakoff
--------------------------------------------------
Name: David S. Kabakoff
-------------------------------------------------
Title: Chairman, President & CEO
-------------------------------------------------
[SIGNATURE PAGE TO SERVICES AGREEMENT]
<PAGE>
SCHEDULE 1.1
GLOSSARY
SCHEDULE 1.1
<PAGE>
SCHEDULE 1.1
GLOSSARY
"AFFILIATE" of a person shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. "Control" (and, with correlative meanings, the
terms "controlled by" and "under common control with") shall mean the possession
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting stock, by contract or
otherwise. In the case of a corporations, "control" shall mean, among other
things, the direct or indirect ownership of more than fifty percent (50%) of its
outstanding voting stock.
"AGREEMENTS" shall mean the Manufacturing and Marketing Agreement, the
Technology Agreement and the Development Agreement.
"ALBUTEROL OPTION" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"ALBUTEROL AND PRODUCT OPTION AGREEMENT" shall mean the Albuterol and
Product Option Agreement dated as of December 22, 1997, between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"ALBUTEROL OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 1.5 of the Albuterol and Product Option Agreement.
"ALBUTEROL PROGRAM ASSETS" shall have the meaning assigned to it in Section
1.1 of the Albuterol and Product Option Agreement.
"ALBUTEROL PRODUCT" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.
"AVAILABLE FUNDS" shall mean the sum of (a) the net proceeds to Spiros
Corp. II from the sale of the Units in the Offering and the Contribution, (b)
all royalties remitted to Spiros Corp. II by DURA (or its Affiliates) from the
Sale of Spiros Products pursuant to the Agreements, (c) the Option Proceeds, if
any, (d) any other amounts provided by DURA to Spiros Corp. II, if any and (e)
interest or other income earned through temporary investment of the amounts
described in clauses (a), (b), (c) or (d).
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as amended
from time to time.
"CLAIM" shall mean any and all liabilities, damages, losses, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees).
SCHEDULE 1.1
<PAGE>
"CONFIDENTIAL INFORMATION" shall mean all Program Technology disclosed by
DURA (and its Affiliates) to Spiros Corp. II or by Spiros Corp. II to DURA
pursuant to the Agreements or the Services Agreement.
"CONTRIBUTION" shall have the meaning assigned in Section 5.2 of the
Development Agreement.
"CORE TECHNOLOGY" shall mean the DURA Core Technology, the DDSI Core
Technology and the Spiros Core Technology.
"DDSI CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DDSI as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DDSI Patent Rights; PROVIDED,
HOWEVER, that DDSI Core Technology shall also include Technology acquired by
DDSI from a third party after the date of the closing of the Offering necessary
or useful to the development of the Spiros Products, except to the extent that
there are any limitations or restrictions on DDSI's ability to license or
sublicense such Technology. "Owned or controlled" shall include Technology that
DDSI owns, or under which DDSI is licensed and has the right to grant
sublicenses and/or grant immunity from suit.
"DDSI INDEMNITEE" shall mean DDSI, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DDSI PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DDSI (or the rights to
which have been assigned to DDSI) as of the date of the Technology Agreement
relating to dry powder inhalers, powder storage systems and/or formulation
methods for dry powder inhalation, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
patent applications and (c) any patent issued or issuing upon any of the
foregoing.
"DESIGNATED COMPOUND(S)" shall mean any compounds for delivery using the
System selected by Spiros Corp. II, and agreed to be developed by DURA.
"DEVELOPED TECHNOLOGY" shall mean any Technology including, without
limitation, any enhancements, substitutions or improvements to the Core
Technology that is (a) discovered, developed or otherwise acquired by DURA
pursuant to the terms of the Development Agreement or (b) otherwise acquired by
or on behalf of Spiros Corp. II during the term of the Development Agreement.
"DEVELOPMENT" shall mean the further development of the Program Technology
for the purpose of identifying, developing, manufacturing, marketing and
commercializing Spiros Products and
SCHEDULE 1.1
<PAGE>
the making of the Other Expenditures.
"DEVELOPMENT AGREEMENT" shall mean the Development Agreement dated as of
December 22, 1997, between DURA and Spiros Corp., as amended, modified or
supplemented from time to time.
"DEVELOPMENT COSTS" shall mean the Direct Development Costs, the Indirect
Development Costs and the Other Expenditures.
"DEVELOPMENT TERM" shall mean the period commencing on the Closing Date and
ending on the earlier of (a) the Option Closing Date or (b) the date the Option
terminates or expires other than by exercise.
"DIRECT DEVELOPMENT COSTS" shall mean all costs incurred by DURA or its
Affiliates in respect of the Development, other than Indirect Development
Costs, determined in accordance with generally accepted accounting principles
consistent with DURA's internal accounting system, allocated on a reasonable
and consistent basis. Direct Development Costs shall consist primarily of
fully-burdened payroll costs (burdened to include benefits, payroll taxes and
an allocation of facilities and overhead costs) and any other such costs
generated internally by DURA in respect of the Development.
"DPI" shall mean the motor-driven dry powder inhaler (other than an inahler
designed to deliver a single dose of a drug) developed by DURA, DDSI and/or
Spiros Corp. and to be developed by DURA and/or Spiros Corp. II.
"DURA COMMON STOCK" shall mean the Common Stock of DURA, par value $.001
per share.
"DURA CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DURA as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DURA Patent Rights and DURA
Trademarks; PROVIDED, HOWEVER, that DURA Core Technology shall also include
Technology acquired by DURA from a third party after the date of the closing of
the Offering necessary or useful to the development of the Spiros Products,
except to the extent that there are any limitations or restrictions on DURA's
ability to license or sublicense such Technology. "Owned or controlled" shall
include Technology that DURA owns, or under which DURA is licensed and has the
right to grant sublicenses and/or grant immunity from suit.
"DURA INDEMNITEE" shall mean DURA, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.
"DURA PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DURA (or the rights to
which have been assigned to DURA) as of the date of the Technology Agreement
relating to DPIs, PSSs and/or formulation methods for dry powder inhalation, (b)
any
SCHEDULE 1.1
<PAGE>
patent application constituting an equivalent, counterpart, reissue,
extension or continuation (including, without limitation, a continuation in part
or a subdivision) of any of the foregoing patent applications and (c) any patent
issued or issuing upon any of the foregoing.
"DURA TRADEMARKS" shall mean Spiros-TM-.
"EVENT OF DEFAULT" shall mean any of the following events: (a) at any
time, if DURA or Spiros Corp. II fails to perform or observe or otherwise
breaches any of its Material Obligations, and such failure or breach continues
unremedied for a period of sixty (60) days after receipt by of written notice
thereof from the other party; (b) at any time, effective as set forth in a
written notice from the other party if DURA or Spiros Corp. II shall (i) seek
the liquidation, reorganization, dissolution or winding-up of itself or the
composition or readjustment of its debts (other than pursuant to a merger with
an Affiliate), (ii) apply for or consent to the appointment of, or the taking
possession by, a receiver, custodian, trustee or liquidator for itself or of all
or a substantial part of its assets, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the Bankruptcy
Code, (v) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts (other than pursuant to a merger with an Affiliate) or
(vi) adopt any resolution of its Board of Directors or shareholders for the
purpose of effecting any of the foregoing (other than pursuant to a merger with
an Affiliate); or (c) at any time, effective as set forth in a written notice
from the other party, if a proceeding or case shall be commenced without the
application or consent of DURA or Spiros Corp. II as applicable, and such
proceeding or case shall continue undismissed, or an order, judgment or decrees
approving or ordering any of the following shall be entered and continued
unstayed and in effect, for a period of sixty (60) days from and after the date
service of process is effected, seeking (i) DURA's or Spiros Corp. II's, as
applicable, liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of DURA or Spiros Corp. II or for
all or any substantial part of its assets or (iii) similar relief in respect of
DURA or Spiros Corp. II under any law relating to bankruptcy, insolvency,
reorganization, winding-up or the composition or readjustment of debts.
"FDA" shall mean the United States Food and Drug Administration or any
successor agency or authority, the approval of which is required to market
health care products in the United States.
"FDA APPROVAL" shall mean the final regulatory approval of the FDA required
to commence commercial marketing of a health product.
SCHEDULE 1.1
<PAGE>
"FORCE MAJEURE" shall mean any act of God, any accident explosion, fire,
storm, earthquake, flood, drought, peril of the sea, riot, embargo, war or
foreign, federal, state or municipal order of general application, seizure,
requisition or allocation, any failure or delay of transportation, shortage of
or inability to obtain supplies, equipment, fuel or labor or any other
circumstance or event beyond the reasonable control of the party relying upon
such circumstance or event.
"INDIRECT DEVELOPMENT COSTS" shall mean all costs, fees and out-of-pocket
or other expenses, including the purchase of any capital equipment related to
the Development, incurred or paid by DURA to a third party, other than an
Affiliate of DURA, in respect of the Development, determined in accordance with
generally accepted accounting principles consistent with DURA's internal
accounting system, allocated on a reasonable and consistent basis.
"MANUFACTURING AND MARKETING AGREEMENT" shall mean the Manufacturing and
Marketing Agreement dated as of December 22, 1997 between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.
"MANUFACTURE" shall mean the manufacture and assembly of the Spiros
Products.
"MATERIAL OBLIGATION" shall mean the material obligations of a party under
the Technology Agreement, the Development Agreement or the Manufacturing and
Marketing Agreement.
"NET SALES" shall mean the gross amount invoiced for sales of Spiros
Products by DURA or its sublicensees, if any, to third parties less (i)
discounts actually allowed, (ii) credits for claims, allowances, retroactive
price reductions or returned Spiros Products, (iii) prepaid freight charges
incurred in transporting Spiros Products to customers, (iv) sales taxes and
other governmental charges actually paid in connection with the sales (but
excluding what is commonly known as income taxes) and (v) any royalty
obligations under the 1993 Royalty Agreement. Net Sales shall not include sales
between or among DURA, its Affiliates and its sublicensees unless such sales are
for end use rather than for purposes of resale.
"OFFERING" shall mean the underwritten public offering of the Units
pursuant to the Registration Statement.
"OPTION PROCEEDS" shall have the meaning assigned to it in Section 3 of the
Albuterol and Product Option Agreement.
"OPTION PRODUCT" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"OTHER EXPENDITURES" shall mean funds spent by Spiros Corp. II to acquire
capital equipment, develop a next generation inhaler system or to enhance the
System.
SCHEDULE 1.1
<PAGE>
"PATENT RIGHTS" shall mean any patents or patent applications within the
Spiros Corp. II Patent Rights, the DURA Patent Rights, the DDSI Patent Rights
and the Spiros Corp. Patent Rights.
"PERSON" shall mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust or other entity.
"PRODUCT OPTION" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.
"PRODUCT OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 2.5 of the Albuterol and Product Option Agreement.
"PROGRAM TECHNOLOGY" shall mean the Core Technology and the Developed
Technology.
"PSS" shall mean the powder storage system developed and to be developed by
DURA for use with the DPI.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
December 16, 1997, among DURA, Spiros Corp. II, Merrill Lynch & Co., and
Donaldson, Lufkin & Jenrette.
"PURCHASE OPTION" shall mean the option granted to the holder of Spiros
Corp. II's Special Common Stock to purchase all of the Spiros Corp. II Common
Stock as set forth in Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION CLOSING DATE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter.
"PURCHASE OPTION EXERCISE PRICE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-
1/S-3 filed by Spiros Corp. II and DURA dated October 10, 1997 (No. 333-
37673/333-37673-01), including all exhibits and any amendments thereof
and supplements thereto.
"RESEARCH FUNDS" shall mean the Available Funds, less (i) all general and
administrative expenses including, without limitation, those paid or payable
pursuant to the Development Agreement or the Services Agreement, and the
reasonable out-of-pocket expenses of Spiros Corp. II directors and reasonable
compensation for Spiros Corp. II's independent directors, less (ii) any amounts
paid to DURA under the Development Agreement or the Services Agreement, less
(iii) any costs and expenses incurred in the defense or settlement of any action
or claim or in respect of a judgment thereon, and less (iv) One Million Dollars
($1,000,000) to be retained by Spiros Corp. II as working capital in the event
DURA does not exercise the Purchase Option.
SCHEDULE 1.1
<PAGE>
"SALE(S)" or "SELL" shall mean the activity undertaken by a sales
representative during a sales call on physicians, physician assistants, nurses,
hospitals, clinics, health maintenance organizations, preferred provider
organizations and managed care companies (including all forms of communication
not involving face to face contact by such sales representatives), describing
the FDA-approved indicated uses, safety, effectiveness, contraindications, side
effects, warnings and other relevant characteristics of the Spiros Product, in a
fair and balanced manner consistent with the requirements of the Federal Food,
Drug, and Cosmetic Act, as amended (and the regulations thereunder).
"SPIROS CASSETTE SYSTEM" shall mean a DPI in which the PSS is in the form
of a cassette.
"SPIROS CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
Spiros Corp. as of the date of the closing of the Offering necessary or useful
to the development of the Spiros Products, and (b) the Spiros Corp. Patent
Rights; PROVIDED, HOWEVER, that Spiros Core Technology shall also include
Technology acquired by Spiros Corp. from a third party after the date of the
closing of the Offering necessary or useful to the development of the Spiros
Products, except to the extent that there are any limitations or restrictions on
Spiros Corp.'s ability to license or sublicense such Technology. "Owned or
controlled" shall include Technology that Spiros Corp. owns, or under which
Spiros Corp. is licensed and has the right to grant sublicenses and/or grant
immunity from suit.
"SPIROS CORP. INDEMNITEE" shall mean Spiros Corp., its successors and
assigns, and the directors, officers, employees, agents and counsel thereof.
"SPIROS CORP. PATENT RIGHTS" shall mean those certain inventions described
in claims of (a) the patent applications pending, filed by Spiros Corp. (or the
rights to which have been assigned to Spiros Corp.) as of the date of the
Technology Agreement relating to dry powder inhalers, powder storage systems
and/or formulation methods for dry powder inhalation, (b) any patent application
constituting an equivalent, counterpart, reissue, extension or continuation
(including, without limitation, a continuation in part or a subdivision) of any
of the foregoing patent applications and (c) any patent issued or issuing upon
any of the foregoing.
"SPIROS CORP. II CHARTER" shall mean Amended and Restated Certificate of
Spiros Development Corporation II, Inc. in effect as of the closing of the
Offering, as amended from time to time.
"SPIROS CORP. II COMMON STOCK" shall mean the Callable Common Stock of
Spiros Corp. II, $.001 par value.
"SPIROS CORP. II INDEMNITEE" shall mean Spiros Corp. II, its
SCHEDULE 1.1
<PAGE>
successors and assigns, and the directors, officers, employees, agents and
counsel thereof.
"SPIROS CORP. II PATENT RIGHTS" shall mean those certain inventions
described in claims of (a) any patent application having one or more claims
covering Developed Technology, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
applications or (c) any patent issued or issuing upon any of the foregoing
applications.
"SPIROS PRODUCT(S)" shall mean (a) any System used with a formulation of
albuterol, beclomethasone, ipratropium, an albuterol-ipratropium combination,
budesonide or a Designated Compound developed, produced, manufactured or
marketed by DURA on behalf of Spiros Corp. II using the Program Technology.
"SPIROS PRODUCT PROGRAM ASSETS" shall have the meaning assigned to it in
Section 2.1 of the Albuterol and Product Option Agreement.
"SYSTEM" shall mean the DPI and the PSS when used together.
"TECHNOLOGY" shall mean, solely with respect to motor-driven dry powder
inhalers and powder storage systems for drugs for delivery through such
inhalers, the manufacture thereof, and formulations of drugs to be delivered
through such inhalers, public and nonpublic technical or other information,
trade secrets, know-how, processes, formulations, concepts, ideas, preclinical,
clinical, pharmacological or other data and testing results, experimental
methods, or results, assays, descriptions, business or scientific plans,
depictions, customer lists and any other written, printed or electronically
stored materials, pharmaceutical compounds or any other natural or man-made
pharmaceutical materials and any and all other intellectual property, including
patents and patent applications, of any nature whatsoever. The term
"Technology" shall include, without limitation, any of the foregoing as it
relates to enhancements of, substitutions for or improvements to the Core
Technology.
"TECHNOLOGY AGREEMENT" shall mean the Technology License Agreement dated as
of December 22, 1997, among DURA, DDSI, Spiros Corp. and Spiros Corp. II, as
amended, modified or supplemented from time to time.
"TERRITORY" shall mean the entire world.
"UNDERWRITERS" shall have the meaning assigned to it in the Registration
Statement.
"UNITS" shall mean units, each consisting of one share of Spiros Corp. II
Common Stock and one warrant to purchase one-fourth of one share of DURA Common
Stock, all as described in the Registration Statement.
SCHEDULE 1.1
<PAGE>
"1993 ROYALTY AGREEMENT" shall have the meaning assigned to it in the
Registration Statement.
SCHEDULE 1.1
<PAGE>
Exhibit 99.6
Contact: David S. Kabakoff
Executive Vice President
Dura Pharmaceuticals, Inc.
(619) 457-2553
DURA PHARMACEUTICALS, INC. FILES REGISTRATION STATEMENT
WITH SPIROS DEVELOPMENT CORPORATION II, INC.
San Diego, CA - October 10, 1997 - Dura Pharmaceuticals, Inc. (Nasdaq NNM:
DURA) and Spiros Development Corporation II, Inc. (Spiros Corp. II), a separate
newly-formed Delaware corporation, today announced the filing of a combined
registration statement with the Securities and Exchange Commission (SEC) with
respect to a proposed public offering of units. Each unit will consist of one
share of callable common stock of Spiros Corp. II and one warrant to purchase
one-fourth of one share of Dura common stock. Application has been made to have
the units listed for quotation on the Nasdaq National Market under the symbol
"SDCO".
Spiros Corp. II was formed in September 1997 primarily to continue to fund
the development of Spiros-TM-, a proprietary pulmonary drug delivery system, and
to conduct formulation work, clinical trials and commercialization for four
leading asthma drugs (albuterol, beclomethasone, ipratropium and budesonide) and
certain combinations and alternative formulations thereof for use in Spiros.
Dura will receive an option to acquire all (but not less than all) of the
shares of the Spiros Corp. II callable common stock through December 31, 2002 at
escalating predetermined prices. The Spiros Corp. II callable common stock and
the Dura warrants which comprise the units will trade only as units through
December 31, 1999 or such earlier date that Dura exercises its purchase option.
The proceeds from the proposed offering are estimated to be
approximately $75 million ($86.25 million if the underwriters' over-allotment
option is exercised in full). Spiros Corp. II will receive all of the net
proceeds from the proposed offering. Immediately prior to the consummation
of the proposed offering, Dura will contribute $75 million in cash to Spiros
Corp. II.
Prior to the closing of the proposed offering and subject to providing
formal notice of exercise, Dura intends to exercise its option to purchase all
of the outstanding shares of the callable common stock of Spiros Development
Corporation (Spiros Corp.), a separate, private company formed in 1995 to
develop Spiros, for an estimated purchase price of $45.7 million. Dura expects
to record charges to its earnings for the $75 million contribution to Spiros
Corp. II and for substantially all of the Spiros Corp. purchase price in the
respective periods in which those transactions occur.
Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette Securities Corp. are
managing the offering. A prospectus relating to these securities may be
obtained from Merrill Lynch & Co., Prospectus Department, 250 Vesey Street,
World Financial Center, North Tower, New York, New York 10281 or from Donaldson,
Lufkin & Jenrette
<PAGE>
Securities Corp., 277 Park Ave., New York, New York 10172, Attention:
Prospectus Department.
Dura Pharmaceuticals, Inc. is a San Diego based developer and marketer of
prescription pharmaceutical products for the treatment of allergies, asthma, and
related respiratory conditions. Dura has focused on the U.S. respiratory market
because of its size and growth opportunities through two major strategies: (1)
acquiring respiratory prescription pharmaceuticals and/or businesses developing
or marketing such pharmaceuticals targeted at high-prescribing respiratory
physicians, and (2) developing Spiros, a pulmonary drug delivery system.
A registration statement relating to these securities has been filed with
the SEC but has not yet become effective. These securities may not be sold nor
may offers be accepted prior to the time the registration statement becomes
effective. This press release shall not constitute an offer to sell nor the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Except for the historical and factual information contained herein, the
matters discussed in this press release may contain forward-looking statements
which involve risks and uncertainties, including the timely development of the
Spiros system, competitive products and pricing, Dura's and Spiros Corp. II's
limited manufacturing experience, dependency upon third parties and their
successful development efforts, and other risks detailed from time to time in
the companies' filings with the SEC. Actual results may differ materially from
those projected. Forward-looking statements represent the companies' judgment
as of the date of this release. Each of Dura and Spiros Corp. II disclaim,
however, any intent or obligation to update any forward-looking statements.
* * *
<PAGE>
Contact: David S. Kabakoff
Executive Vice President
Dura Pharmaceuticals, Inc.
(619) 457-2553
DURA PHARMACEUTICALS, INC. AND SPIROS DEVELOPMENT
CORPORATION II, INC. ANNOUNCE PUBLIC OFFERING OF UNITS
San Diego, CA - December 17, 1997 - Dura Pharmaceuticals, Inc. (Nasdaq NNM:
DURA) and Spiros Development Corporation II, Inc. (Spiros Corp. II), a separate
newly-formed Delaware corporation, today announced the public offering of 5.5
million Units at a price of $16 per Unit. Each Unit will consist of one share
of callable common stock of Spiros Corp. II and one warrant to purchase
one-fourth of one share of Dura common stock. The Units will trade on the Nasdaq
National Market under the symbol "SDCOZ". All of the net proceeds of the
offering will be paid to Spiros Corp. II. The callable common stock of Spiros
Corp. II and the warrants will trade only as units through December 31, 1999, or
such earlier date as Dura may exercise an option to purchase all of the shares
of Spiros Corp. II common stock outstanding at the time of exercise or as such
option expires unexercised.
Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette Securities Corp. are
managing the offering. Dura and Spiros Corp. II have granted the underwriters a
30-day over-allotment option to purchase up to an additional 825,000 Units.
A copy of the final prospectus relating to these securities may be obtained
from Merrill Lynch & Co., Prospectus Department, 250 Vesey Street, World
Financial Center, North Tower, New York, New York 10281 or from Donaldson,
Lufkin & Jenrette Securities Corp., 277 Park Ave., New York, New York 10172,
Attention: Prospectus Department.
Spiros Corp. II was formed in September 1997 primarily to continue to fund
the development of Spiros-TM-, a proprietary pulmonary drug delivery system, and
to conduct formulation work, clinical trials and commercialization for four
leading asthma drugs (albuterol, beclomethasone, ipratropium and budesonide) and
certain combinations and
<PAGE>
Dura and Spiros Development Corp. II Announce Public Offering of Units
Page 2
(more)
alternative formulations thereof for use in Spiros.
Dura Pharmaceuticals, Inc. is a San Diego based developer and marketer of
prescription pharmaceutical products for the treatment of allergies, asthma, and
related respiratory conditions. Dura has focused on the U.S. respiratory market
because of its size and growth opportunities through two major strategies: (1)
acquiring respiratory prescription pharmaceuticals and/or businesses developing
or marketing such pharmaceuticals targeted at high-prescribing respiratory
physicians, and (2) developing Spiros, a pulmonary drug delivery system.
Except for the historical and factual information contained herein, the
matters discussed in this press release may contain forward-looking statements
which involve risks and uncertainties, including the timely development of the
Spiros system, competitive products and pricing, Dura's and Spiros Corp. II's
limited manufacturing experience, dependency upon third parties and their
successful development efforts, and other risks detailed from time to time in
the companies' filings with the SEC. Actual results may differ materially from
those projected. Forward-looking statements represent the companies' judgment
as of the date of this release. Each of Dura and Spiros Corp. II disclaim,
however, any intent or obligation to update any forward-looking statements.
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