SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) July 15, 1999
INCARA PHARMACEUTICALS CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or other jurisdiction of incorporation)
0-27410 56-1924222
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(Commission File Number) (I.R.S. Employer
Identification Number)
P.O. Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC 27709
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 919-558-8688
INTERCARDIA, INC.
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
Overview
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On July 16, 1999, Incara Pharmaceuticals Corporation, formerly Intercardia,
Inc., ("Incara" or the "Company") announced the restructuring of its corporate
relationship with Interneuron Pharmaceuticals, Inc. ("Interneuron"), to reduce
Interneuron's approximately 61.4% ownership of Incara to approximately 9.0%.
Through a series of transactions, Interneuron exchanged 4,229,381 of the
4,511,084 shares of Incara common stock it owned for an effective increase from
19.9% to 65.0% in its direct ownership of CPEC LLC ("CPEC"). In addition,
Interneuron cancelled certain debt owed to it by Incara and CPEC's predecessor,
CPEC, Inc., a Nevada corporation. Incara's ownership of CPEC decreased from
80.1% to 35.0%.
CPEC is a subsidiary that holds the rights to BEXTRA(R) (bucindolol HCl),
including the exclusive, worldwide license from Bristol-Myers Squibb Company to
develop bucindolol for congestive heart failure and left ventricular
dysfunction. BEXTRA is currently being tested by the National Institutes of
Health and the Department of Veterans Affairs in a Phase III clinical study
known as BEST (Beta-blocker Evaluation of Survival Trial) for the treatment of
congestive heart failure.
The change in the Company's name from Intercardia, Inc. to Incara
Pharmaceuticals Corporation was effected following the restructuring. The
Company's Nasdaq symbol has been changed to INCR. With the redemption of the
common stock owned by Interneuron, Incara now has approximately 3.1 million
shares of common stock outstanding.
Before the restructuring, Incara had funded approximately 80.1% of the net
expenses related to bucindolol and Interneuron funded approximately 19.9%, which
was in proportion to their respective ownership interests in CPEC, Inc. With the
restructuring, Incara and Interneuron have agreed to jointly fund 35% and 65%,
respectively, of CPEC's expenses related to the development of BEXTRA in the
territory consisting of the United States and Japan (the "CPEC Territory").
Incara and Interneuron also have agreed to share, in the same 35%/65%
proportion, any profits from the commercialization of BEXTRA in the CPEC
Territory, subject to certain adjustments.
BEXTRA Development in the CPEC Territory
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As part of the restructuring, Incara and Interneuron entered into an Amended and
Restated Limited Liability Company Agreement of CPEC LLC dated July 15, 1999
(the "LLC Agreement"), which governs the management, funding and income-sharing
activities related to BEXTRA in the CPEC Territory. Interneuron and Incara are
the only two members of CPEC. The LLC Agreement is filed as an exhibit to this
Report and is incorporated herein by reference.
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The Board of Directors of CPEC, consisting of three directors designated by
Interneuron and two directors designated by Incara, is responsible for the
management of CPEC. CPEC's operating activities are to be supervised by a
committee comprised of an equal number of representatives of Interneuron and
Incara (the "BEXTRA Committee"). An Interneuron representative is chairman of
the BEXTRA Committee. The LLC Agreement contains provisions for dispute
resolution and arbitration and also identifies the types of transactions
involving CPEC that must be approved by Incara.
The two companies have agreed on a budget for external BEXTRA development
expenses through September 30, 2000. Budgets for periods after that date are to
be recommended by the BEXTRA Committee and approved by the CPEC Board. Because
neither party is entitled to payment from CPEC for the internal costs it incurs
in performing services on behalf of CPEC, the salaries and benefits of Incara
employees performing such services will be the responsibility of Incara and will
not be shared expenses.
Interneuron is to fund 65% of authorized BEXTRA expenses, and Incara is to fund
35%. If a party defaults on its funding obligation and the other party does not
wish to make up the differential, the defaulted amount is treated as a loan by
CPEC to the defaulting party, bearing interest at 20%. A loan to a defaulted
member will be offset against any dividends otherwise payable by CPEC to the
member.
If the non-defaulting party elects to pay the defaulting party's share, the
non-defaulting party will receive an increase in its profit ownership percentage
equal to 1% for each $325,000 it pays in excess of its own share. The defaulting
party's profit share will be reduced commensurately. The maximum increase or
reduction of a party's ownership interest is 10%. The funding obligations of
each company remain the same, even if the profit-sharing ratio is adjusted.
Once the maximum 10% adjustment has been reached, further defaulted funding
obligations, if paid by the non-defaulting party, are to be returned to the
non-defaulting party when adequate funds are available as a dividend from CPEC,
together with a 40% annualized return.
Bucindolol Development in the Knoll Territory
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The rights to develop and market bucindolol in all countries other than the
United States and Japan (such other countries being referred to as the "Knoll
Territory") remain licensed to BASF Pharma/Knoll AG ("Knoll") of Germany under a
1996 development agreement (the "Knoll Agreement"). Knoll is currently
conducting a Phase III study of bucindolol known as BEAT (Bucindolol Evaluation
after Acute myocardial infarction Trial) in Europe. Incara is continuing to
participate with Knoll in funding 40% of the development expenses and will share
in 40% of any profits or losses from the Knoll Territory under the Knoll
Agreement.
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Incara received an exclusive license of CPEC's rights in the Knoll Territory
under an Assignment, Assumption and License Agreement dated July 15, 1999
between CPEC and Incara, which is filed as an exhibit to this Report and is
incorporated herein by reference. As consideration for the exclusive license,
Incara will pay CPEC a royalty of 6.5% on net sales of bucindolol in the Knoll
Territory and 65% of the milestone payable by Knoll if sales of bucindolol in
the Knoll Territory exceed $200 million in any 12-month period. If earned, the
royalty and milestone payments will be paid to CPEC and CPEC will distribute
such amounts to Interneuron as a special dividend. Because Incara owes CPEC a
royalty based on net sales but receives compensation from Knoll based on net
profits in the Knoll Territory, Incara could be required to pay CPEC a royalty
even though it does not receive a payment from Knoll.
A failure by Incara to pay CPEC the 6.5% royalty from the Knoll Territory would
be treated as debt of Incara to CPEC, bearing interest at 20% per annum.
Financial Statements
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The Company does not believe that any restatement of its historical financial
statements will be required as a result of the restructuring transaction. For
subsequent periods, however, Incara will no longer consolidate CPEC in its
consolidated financial statements because Incara's ownership of CPEC has
decreased from 80.1% to 35.0%. Instead, Incara will account for CPEC using the
equity method of accounting. As part of the restructuring, Interneuron cancelled
approximately $2.2 million of debt owed to it by CPEC. This cancellation of debt
will be treated as a contribution to capital by Interneuron to Incara.
Incara will recognize a taxable gain on the sale of 65% of CPEC to Interneuron.
Management of Incara believes that it has current operating losses, net
operating loss carryforwards and tax credit carryforwards sufficient to offset
this taxable gain.
Certain Intercompany Arrangements
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The 1995 Intercompany Services Agreement between Interneuron and Incara was
terminated upon the restructuring. Arrangements related to Incara's May 1998
purchase of Transcell Technologies, Inc. ("Transcell", now operating as Incara
Research Laboratories) from Interneuron (the "Transcell Merger") continue,
including Incara's obligations to pay a 1.5% royalty to Interneuron on sales of
products, if any, resulting from the collaboration between Transcell and Merck &
Co., Inc. ("Merck"). In exchange for retaining 281,703 shares of Incara common
stock in the restructuring, Interneuron has waived its right to receive the
shares owed to it by Incara as part of the second stock issuance installment due
in August 1999 under the Transcell Merger. In February 2000, Incara will issue
to Interneuron additional shares of Incara common stock as part of the third
stock issuance installment due in connection with the Transcell Merger.
Incara and Interneuron have entered into a Registration Rights Agreement dated
as of July 15, 1999, providing Interneuron with rights to have Incara register
under the
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Securities Act of 1933 certain Incara shares that Interneuron receives pursuant
to the Transcell Merger or as a royalty from the collaboration with Merck.
On July 15, 1999, Glenn L. Cooper, M.D., President and Chief Executive Officer
of Interneuron, who was Chairman of the Board of Incara, resigned as a director
of Incara.
Forward-looking Statements
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This Report contains, in addition to historical information, statements by the
Company with respect to expectations about its business and future financial
results, which are "forward-looking" statements under the Private Securities
Litigation Reform Act of 1995. These statements and other statements made
elsewhere by the Company or its representatives, which are identified or
qualified by words such as "likely," "will," "suggests," "expects," "may,"
"believe," "could," "should," "would," "anticipates" or "plans," or similar
expressions, are based on a number of assumptions that are subject to risks and
uncertainties. Actual results could differ materially from those currently
anticipated or suggested due to a number of factors, including those set forth
herein, those set forth in the Company's Annual Report on Form 10-K and in the
Company's other SEC filings, and including, risks relating to the need for
additional funds, dependence on collaborative partners, competition, the early
stage of products under development, uncertainties relating to clinical trials
and regulatory reviews. All forward-looking statements are based on information
available as of the date hereof, and the Company does not assume any obligation
to update such forward-looking statements.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
10.40 Exchange Agreement dated July 15, 1999, between Intercardia, Inc. and
Interneuron Pharmaceuticals, Inc.
10.41 Registration Rights Agreement dated July 15, 1999, between
Interneuron Pharmaceuticals, Inc. and Intercardia, Inc.
10.42 Amended and Restated Limited Liability Company Agreement of CPEC LLC
dated July 15, 1999, among CPEC LLC, Intercardia, Inc. and
Interneuron Pharmaceuticals, Inc.
10.43 Assignment, Assumption and License Agreement dated July 15, 1999,
between CPEC LLC and Intercardia, Inc.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INCARA PHARMACEUTICALS CORPORATION
Date: July 23, 1999 /s/ Richard W. Reichow
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Richard W. Reichow, Executive Vice President,
Chief Financial Officer and Treasurer
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INDEX TO EXHIBITS
10.40 Exchange Agreement dated July 15, 1999, between Intercardia, Inc. and
Interneuron Pharmaceuticals, Inc.
10.41 Registration Rights Agreement dated July 15, 1999, between
Interneuron Pharmaceuticals, Inc. and Intercardia, Inc.
10.42 Amended and Restated Limited Liability Company Agreement of CPEC LLC
dated July 15, 1999, among CPEC LLC, Intercardia, Inc. and
Interneuron Pharmaceuticals, Inc.
10.43 Assignment, Assumption and License Agreement dated July 15, 1999,
between CPEC LLC and Intercardia, Inc.
Exhibit 10.40
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT is entered into as of July 15, 1999, between
INTERCARDIA, INC., a Delaware corporation ("Intercardia"), and INTERNEURON
PHARMACEUTICALS, INC., a Delaware corporation ("Interneuron"). All terms not
otherwise defined herein are used as defined in Article 1 below.
R E C I T A L S
A. Intercardia owns 100% of the limited liability company interests of
CPEC LLC, a Delaware limited liability company ("CPEC").
B. Interneuron (i) owns 4,511,084 shares, representing approximately
61.4%, of the outstanding shares of common stock, $.001 par value, of
Intercardia ("Common Stock") and (ii) holds the Intercardia Note.
C. CPEC holds the exclusive, worldwide rights under the BMS License to
develop and commercialize Bucindolol, a nonselective beta-blocker with mild
vasodilating properties, for use as a pharmaceutical therapy for congestive
heart failure and left ventricular dysfunction.
D. Bucindolol is being evaluated in a Phase III clinical study in the
United States, referred to as "BEST" (for Beta-blocker Evaluation of Survival
Trial), which is being conducted by the Veterans Administration and the National
Institutes of Health. CPEC contributes to the funding of BEST.
E. Pursuant to the Knoll Agreement, BASF Pharma/Knoll AG ("Knoll") holds
an exclusive sublicense from CPEC for the development, commercialization and
sale of Bucindolol outside the United States, Puerto Rico and Japan.
F. Interneuron wishes to buy, and Intercardia wishes to sell, 65% of the
CPEC Interests in exchange for (i) the redemption by Intercardia of 4,229,381 of
the shares of Intercardia Common Stock held by Interneuron, and (ii)
cancellation of the Intercardia Note.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 When used in this Agreement, the capitalized terms not otherwise
defined herein shall have the corresponding meanings set forth below.
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"AFFILIATE" means with respect to a specified Person, any Person
that directly or indirectly controls, is controlled by, or is under common
control with, the specified Person. The term "control" means the ownership,
directly or indirectly, of over 50% of the voting securities or interests of the
Person in question, or the right to receive over 50% of the profits or earnings
of a Person, or the power to direct or cause the direction of the management and
policies of that Person, whether by contract or otherwise.
"BMS LICENSE" means the Agreement dated as of December 6, 1991, as
further amended by the parties thereto, between Bristol-Myers Squibb Company and
Cardiovascular Pharmacology and Engineering Consultants, Inc. a
predecessor-in-interest of CPEC.
"BUCINDOLOL" means the compound Benzonitrile,
2-[2-hydroxy-3-[[2-(1H-indol-3-yl)-1, 1-dimethylethyl]amino]propoxy]-,
monohydrochloride, also known under the trademark "BEXTRA".
"CLOSING" has the meaning specified in Section 2.2 below.
"CPEC" means CPEC LLC, and, where applicable, its
predecessors-in-interest, CPEC, Inc., a Nevada corporation, and Cardiovascular
Pharmacology and Engineering Consultants, Inc., a California corporation ("CPEC
CALIFORNIA").
"CPEC INTERESTS" means the limited liability company interests of
CPEC.
"CPEC TERRITORY" means the United States of America, the District of
Columbia, Puerto Rico and Japan.
"EXCHANGE" has the meaning specified in Section 2.1 below.
"INTERCARDIA NOTE" means the promissory note of Intercardia dated
July 15, 1999, issued to Interneuron in the principal amount of $2,000,000.
"INTERCARDIA SHARES" has the meaning specified in Section 2.1
hereof.
"INTERCOMPANY AGREEMENT" means the Intercompany Services Agreement
effective as of December 4, 1995, between Intercardia and Interneuron.
"KNOLL AGREEMENT" means the Development, Manufacturing, Marketing
and License Agreement effective as of December 19, 1996, among Intercardia, CPEC
and Knoll.
"KNOLL TERRITORY" means all countries with the exception of the
United States of America, the District of Columbia, Puerto Rico and Japan.
"LLC AGREEMENT" means the Amended and Restated Limited Liability
Company Agreement of CPEC LLC among CPEC, Interneuron and Intercardia, dated as
of the date hereof.
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"PARTY" shall mean Intercardia or Interneuron, as the context may
require, and "PARTIES" means Intercardia and Interneuron.
"TRANSCELL MERGER SHARES" shall mean the number of shares of Common
Stock calculated in accordance with Section 3.1 hereof.
ARTICLE 2 - EXCHANGE OF SECURITIES
2.1 Exchange of CPEC Interests and Intercardia Securities. On the terms
and subject to the conditions hereinafter set forth, at the Closing Intercardia
will redeem all of the shares of Common Stock held by Interneuron as of such
date, less the Transcell Merger Shares (such net amount of shares being referred
to as the "Intercardia Shares"), in exchange for the transfer by Intercardia to
Interneuron of 65% of the CPEC Interests and cancellation of the Intercardia
Note (the "Exchange"). Immediately following the completion of the Exchange,
Interneuron will own 65% of the CPEC Interests and Intercardia will own 35% of
the CPEC Interests.
2.2 Closing. The closing of the Exchange (the "Closing") shall take place
on July 15, 1999, at a mutually satisfactory time and location.
2.3 Conditions of the Parties to the Closing.
2.3.1 Conditions of Interneuron. Interneuron's obligation to
consummate the Closing is subject to satisfaction of the following conditions
(unless waived in its sole discretion), in form and substance reasonably
satisfactory to Interneuron and its counsel:
(a) Execution by Intercardia and Interneuron of the LLC
Agreement substantially in the form of EXHIBIT A to this Agreement;
(b) Receipt of the Assignment, Assumption and License
Agreement executed by CPEC and Intercardia with respect to the Knoll
Agreement and the development and marketing of Bucindolol in the
Knoll Territory, substantially in the form of EXHIBIT B to this
Agreement;
(c) Execution by Intercardia of a Registration Rights
Agreement, substantially in the form of EXHIBIT C to this Agreement;
(d) Receipt and acceptance by Interneuron of an opinion of
Hempstead & Co. to the effect that the consideration to be received
by Interneuron in the Exchange is fair from a financial point of
view to it and its stockholders;
(e) All consents and approvals of third parties that are
required to be obtained by Interneuron as of the Closing have been
obtained (or have been waived by the third party); and
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(g) The obligations of Intercardia under this Agreement to be
satisfied by it as of the Closing are satisfied.
2.3.2 Conditions of Intercardia. Intercardia's obligation to
consummate the Closing is subject to satisfaction of the following conditions
(unless waived in its sole discretion), in form and substance reasonably
satisfactory to Intercardia and its counsel:
(a) Receipt of a certificate or certificates representing the
Intercardia Shares, duly endorsed for transfer in blank;
(b) Execution of the LLC Agreement by Interneuron and
Intercardia substantially in the form of EXHIBIT A to this
Agreement;
(c) Receipt of the Assignment, Assumption and License
Agreement executed by CPEC with respect to the Knoll Agreement and
the development and marketing of Bucindolol in the Knoll Territory,
substantially in the form of EXHIBIT B to this Agreement;
(d) Receipt and acceptance of an opinion of ING Baring Furman
Selz LLC to the effect that the consideration to be paid to
Intercardia in the Exchange is fair from a financial point of view
to Intercardia's stockholders (other than Interneuron);
(e) Receipt of the Intercardia Note, marked "cancelled";
(f) All consents and approvals of third parties that are
required to be obtained by Intercardia as of the Closing have been
obtained (or have been waived by the third party); and
(g) The obligations of Interneuron under this Agreement to be
satisfied by it as of the Closing are satisfied.
2.4 Mutual Representations and Warranties of the Parties. Each of
Intercardia and Interneuron hereby represents and warrants to the other as of
the Closing as follows:
2.4.1 Due Authorization. The execution, delivery and performance of
this Agreement have been duly and validly authorized by their respective Boards
of Directors. This Agreement constitutes its legal, valid and binding obligation
(assuming due execution and delivery by the other Party). Neither the Exchange
nor the execution and performance of this Agreement will violate its Certificate
of Incorporation or By-Laws or any agreement, commitment, statute, judgment,
order, injunction, decree or award against, or binding upon, it.
2.4.2 No Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
person, entity or
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governmental authority is required on its part as a condition of executing this
Agreement or completing the Exchange.
2.4.3 Ownership of Securities. It is the lawful owner of record and
beneficially of the securities to be delivered by it in the Exchange, free and
clear of any lien, charge, encumbrance, option, pledge or other claim of any
nature whatsoever.
2.5 Investment Intention. Interneuron represents and warrants to
Intercardia that it is acquiring the CPEC Interests for its own account solely
for the purpose of investment and not with a view to, or for sale in connection
with, any distribution thereof. Interneuron acknowledges that the CPEC Interests
are not registered under the Securities Act of 1933, as amended (the "Act"), and
the CPEC Interests may not be transferred or sold except pursuant to the
registration provisions of the Act or pursuant to an applicable exemption
therefrom.
2.6 Access to Information. Each Party acknowledges that it has had full
access to all information requested by it related to the Exchange and that it is
fully capable of evaluating the risks of the transactions contemplated herein.
2.7 Intercardia Representations. Intercardia represents and warrants to
Interneuron that (a) the books and records of CPEC are complete in all material
respects and have been maintained in accordance with generally accepted
accounting principles consistently applied; (b) Intercardia has provided
Interneuron with copies of all agreements material to CPEC or to Bucindolol; (c)
CPEC is a limited liability company duly formed, validly existing and in good
standing under the laws of the State of Delaware and has all requisite limited
liability power and authority to carry on its business as now conducted and
proposed to be conducted; and (d) other than the CPEC Interests, there are no
other securities convertible into, exchangeable for or exercisable into any CPEC
Interests or other securities of CPEC.
2.8 Publicity. Each Party will submit to the other Party for review and
comment the proposed form of press release to be issued by it announcing the
completion of the Exchange. Review of each Party's press release will be in
accordance with the Intercompany Agreement. Each Party is entitled to file this
Agreement and related documents with the Securities and Exchange Commission.
Prior to such filing, the Parties will cooperate to determine if confidential
treatment is appropriate for proprietary or sensitive information, in which case
both Parties will make appropriate requests for confidential treatment (or file
a joint request).
2.9 Expenses. Each Party shall bear its own expenses incurred in
connection with the negotiation and execution of this Agreement and the
completion of the Exchange, whether or not the transaction is consummated.
Without limiting the foregoing, each Party is liable for the costs of obtaining
a fairness opinion with respect to the Exchange and any fees or taxes which may
be charged or assessed against it in connection with the Exchange or the
subsequent performance of this Agreement.
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2.10 No Brokers. Each Party represents to the other that no third party is
entitled to any broker's, finder's or similar fee in connection with its
participation in the Exchange or the performance of its rights or obligations
under this Agreement following the Exchange.
ARTICLE 3 - CERTAIN POST-CLOSING OBLIGATIONS OF THE PARTIES
3.1 Payments under Transcell Merger Agreement. All outstanding obligations
of Intercardia and Interneuron arising under the Agreement and Plan of Merger
dated as of March 2, 1998 among Intercardia, Interneuron and Transcell
Technologies, Inc. (the "Transcell Merger Agreement") shall survive the Closing
except that Interneuron hereby waives payment of the Second Installment of the
Merger Consideration due under Section 4.1 of the Merger Agreement in August
1999, and shall retain at the Closing, in lieu of receipt of the Second
Installment, 281,703 shares of Common Stock, calculated by dividing the dollar
amount of the Second Installment payable to Interneuron, by the average closing
price of the Common Stock on the Nasdaq National Market during the 90 trading
days ending two trading days prior to the Closing. The shares of Common Stock
calculated pursuant to the immediately preceding sentence are referred to herein
as the "Transcell Merger Shares."
3.2 Payments to Former Stockholders of CPEC California.
3.2.1 Adjusted Proportion of CPEC Payments. Effective upon the
Closing, Interneuron shall assume 45% of Intercardia's obligations under the
Acquisition Agreement dated as of May 13, 1994 (the "CPEC Acquisition
Agreement") for Additional Purchase Price to the Sellers (each as defined in the
CPEC Acquisition Agreement). Interneuron will issue sufficient shares of
Interneuron common stock, $.001 par value ("IPI Common Stock"), to the former
stockholders of CPEC California to satisfy such obligation. Interneuron and
Intercardia will coordinate the delivery to the former stockholders of CPEC
California of the IPI Common Stock owed by Interneuron and the IPI Common Stock
owed by Intercardia (as described in Section 3.2.2 below).
3.2.2 Interneuron Shares. Interneuron will provide Intercardia with
a sufficient number of shares of IPI Common Stock to permit Intercardia to fund
its share of the Additional Purchase Price. Intercardia will pay Interneuron an
amount equal to the fair market value of the IPI Common Stock at the time of
issuance. The amount shall be payable, at Intercardia's election, in cash or in
shares of Common Stock having a fair market value equal to the fair market value
of the IPI Common Stock. The fair market value of each company's common stock
shall be the closing price on the Nasdaq National Market on the trading date
immediately preceding the payment date; provided, that if the common stock of
either Interneuron or Intercardia is not then traded on the Nasdaq National
Market, fair market value of such company's common stock shall be the average of
the closing bid and asked prices of such company's common stock on the Nasdaq
Stock Market or, if not so traded, the over-the-counter market or, if not so
traded, shall be mutually agreed upon. If the Parties cannot mutually agree to
such value, fair market value shall be determined by an independent appraiser
acceptable to each Party, the costs of which shall be shared equally by each
Party.
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3.2.3 Amendment to CPEC Acquisition Agreement. Interneuron and
Intercardia hereby waive performance or non-compliance with any obligations
which may have arisen under Section 8.6 of the CPEC Acquisition Agreement
whether pursuant to this Agreement or otherwise, and hereby agree that,
effective from and after the Closing, Section 8.6 of the CPEC Acquisition
Agreement is hereby deleted in its entirety.
3.3 Employee Benefit Plans. Interneuron will maintain and Intercardia will
fund through September 30, 1999 on behalf of (a) any employees of Intercardia
through September 30, 1999; (b) all employees of Intercardia who were eligible
as of the Closing Date or during the period from Closing through September 30,
1999 for coverage under IRC 4980B ("COBRA Coverage") and (c) all family members
of each employee referred to in (a) and (b) who qualified for COBRA Coverage as
of the Closing Date under the Plans (the individuals referred to in (a), (b) and
(c) being collectively, the "Plan Beneficiaries"), the employee benefit plans
listed on EXHIBIT D hereto (the "Plans"), on substantially the same terms as the
Plans were administered to the Plan Beneficiaries immediately prior to the
Closing. Intercardia will reimburse Interneuron on a monthly basis for the
internal and out-of-pocket costs of such Plans, calculated as if the first and
second sentences of Section 4.1(a) of the Intercompany Agreement were applicable
to such internal and out-of-pocket costs, within 10 days following receipt of
Interneuron's invoice or statement containing such costs. Intercardia will
assume administration and funding of the Plans for all of the Plan Beneficiaries
after September 30, 1999.
3.4 Termination of Certain Intercompany Agreements. The Intercompany
Agreement shall automatically terminate and be of no further force and effect
from and after the Closing, except (i) for purposes of calculating Interneuron's
costs under Section 3.3 above; (ii) for as long as Interneuron maintains the
Plans, Article V of the Intercompany Agreement shall survive and continue to be
applicable; and (iii) the provisions of Section 3.2 of the Intercompany
Agreement relating to the coordination of financial reporting (including audit
rights) shall terminate as of October 1, 1999, but shall remain in effect with
respect to any fiscal periods prior to such date. The Tax Allocation Agreement
dated December 4, 1995 between Interneuron and Intercardia shall terminate as of
the Closing, with respect to any tax periods after the Closing.
3.5 Reconciliation of Intercompany Accounts. The initial settlement of
intercompany accounts between Interneuron and Intercardia shall be completed at
or prior to the Closing. Additional adjustments for expenses incurred by
Interneuron or Intercardia which relate to periods prior to the Closing will be
made as and when they come due, until all expenses or accruals are finally
reconciled.
3.6 Certain Tax Matters.
3.6.1 Preparation of Tax Returns. Intercardia and Interneuron will
cooperate in the preparation and filing of tax returns that report, value and/or
characterize the transactions contemplated by this Agreement, to ensure
consistent filings with federal, state and local taxing authorities.
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3.6.2 Calculation of Section 382 Ownership Changes. Intercardia
hereby requests that Interneuron prepare an analysis of the status of Section
382 of the Internal Revenue Code ownership changes for Interneuron and Transcell
Technologies, Inc. for periods from September 30, 1991 through the Closing,
which Intercardia will use in determining its available net operating loss
carryforwards.
ARTICLE 4 - MISCELLANEOUS
4.1 Notices. Any notice required to be given hereunder shall be in
writing, shall refer specifically to this Agreement, and shall be sent by
facsimile transmission (with a confirmatory copy sent by overnight courier), by
courier service (with proof of service), by hand delivery or by certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows, or to such other addressee as shall be properly designated
in accordance with these notice provisions:
IF TO INTERNEURON:
Interneuron Pharmaceuticals, Inc.
99 Hayden Avenue, Suite 200
Lexington, MA 02421
Facsimile: (781) 862-3859
Telephone: (781) 402-3400
Attention: Glenn L. Cooper, M.D.
IF TO INTERCARDIA:
Intercardia, Inc.
Post Office Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC 27709
Facsimile: 919-544-1245
Telephone: 919-558-8688
Attention: Clayton I. Duncan
With a copy to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, NC 27607
Facsimile: 919-781-4865
Telephone: 919-781-4000
Attention: Larry E. Robbins, Esq.
<PAGE>
4.2 Arbitration. Any disputes arising between the Parties relating to,
arising out of or in any way connected with this Agreement or any term or
condition hereof, or the performance by either Party of its obligations
hereunder, whether before or after termination of the Agreement, shall be
finally resolved by binding arbitration. Whenever a Party shall decide to
institute arbitration proceedings, it shall give written notice to that effect
to the other Party. The Party giving such notice shall refrain from instituting
the arbitration proceedings for a period of sixty (60) days following such
notice. During such period, the Parties shall make good faith efforts to
amicably resolve the dispute without arbitration. Any arbitration hereunder
shall be conducted under the rules of the American Arbitration Association. Each
such arbitration shall be conducted by a panel of three arbitrators: one
arbitrator shall be appointed by each of Interneuron and Intercardia and the
third shall be appointed by the two arbitrators; provided, however, if no
mutually acceptable arbitrator can be agreed to by the first two arbitrators, a
third shall be appointed by the American Arbitration Association. Any such
arbitration shall be held in New York, New York. The arbitrators shall have the
authority to direct the Parties as to the manner in which the Parties shall
resolve the disputed issues, to render a final decision with respect to such
disputed issues, or to grant specific performance with respect to any such
disputed issue. Judgment upon the award so rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. Nothing
in this Section shall be construed to preclude either Party from seeking
provisional remedies, including but not limited to, temporary restraining orders
and preliminary injunctions, from any court of competent jurisdiction, in order
to protect its rights pending arbitration, but such preliminary relief shall not
be sought as a means of avoiding arbitration. In no event shall a demand for
arbitration be made after the date when institution of a legal or equitable
proceeding based on such claim, dispute or other matter in question would be
barred by the applicable statute of limitations.
4.3 Indemnification.
4.3.1 General. Each Party shall indemnify, defend and hold harmless
the other Party and its Affiliates, employees, officers, directors, stockholders
and agents (each, an "Indemnified Party") from and against any losses, damages,
expenses or liabilities (including reasonable attorneys' fees) ("Liabilities")
resulting from (i) any representation or warranty made by a Party as of the
Closing that was not true in all material respects when made; or (ii) breach by
a Party of any covenant required to be performed by it under this Agreement.
4.3.2 Pre-Closing Acts or Omissions of CPEC. Interneuron shall
indemnify, defend and hold harmless an Intercardia Indemnified Party for 20% of
any Liabilities incurred by the Intercardia Indemnified Party for any act or
omission of CPEC occurring prior to the Closing, and Intercardia shall
indemnify, defend and hold harmless an Interneuron Indemnified Party for 80% of
any Liabilities incurred by the Interneuron Indemnified Party for any act or
omission of CPEC (which for purposes of this Section 4.3.2 includes any act or
omission by Intercardia on behalf of CPEC) occurring prior to the Closing,
including, without limitation, any Liability arising from the (i) breach by CPEC
(whether before or after the Closing) of any obligations relating to the supply
of Bucindolol prior to the Closing, or any breach of the royalty and other
<PAGE>
obligations to BMS under the BMS License with respect to the CPEC Territory,
(ii) use by any person of any product containing Bucindolol that was
manufactured, marketed, sold or distributed by or on behalf of CPEC or any
licensee in the CPEC Territory, and (iii) use by CPEC or any licensee thereof of
Bucindolol Intellectual Property in the CPEC Territory. In any circumstance
where both Interneuron and Intercardia incur Liabilities to the same third party
with respect to the same or substantially similar act or omission, each Party's
Liabilities shall be added together (counting the Liability owed to the third
party only once), and Interneuron shall be responsible for 20% of the aggregate
Liabilities and Intercardia shall be responsible for 80% of the aggregate
Liabilities.
4.3.3 Post-Closing Acts or Omissions of CPEC relating to the CPEC
Territory. Interneuron shall indemnify, defend and hold harmless an Intercardia
Indemnified Party for 65% of any Liabilities incurred by such Intercardia
Indemnified Party and Intercardia shall indemnify, defend and hold harmless an
Interneuron Indemnified Party for 35% of any Liabilities incurred by the
Interneuron Indemnified Party, resulting from any act or omission of CPEC (which
for purposes of this Section 4.3.3 includes any act or omission by Intercardia
or Interneuron on behalf of CPEC) occurring after the Closing related to the
manufacture, marketing, sale or distribution of Bucindolol or any product
containing Bucindolol in the CPEC Territory, including, without limitation, any
Liability arising from the (i) breach by CPEC of any obligations relating to the
supply of Bucindolol after the Closing for purposes of the CPEC Territory, or
any breach of the royalty and other obligations to BMS under the BMS License
with respect to the CPEC Territory, (ii) use by any person of any product
containing Bucindolol that was manufactured, marketed, sold or distributed by or
on behalf of CPEC or any licensee in the CPEC Territory, and (iii) use by CPEC
or any licensee thereof of Bucindolol Intellectual Property in the CPEC
Territory.
4.3.4 Post-Closing Acts or Omissions of Intercardia relating to the
Knoll Territory. Intercardia shall indemnify, defend and hold harmless an
Interneuron Indemnified Party from and against any Liabilities incurred by such
Interneuron Indemnified Party resulting from any act or omission of Intercardia
occurring after the Closing related to the manufacture, marketing, sale or
distribution of Bucindolol or any product containing Bucindolol in the Knoll
Territory, including, without limitation (i) breach by Intercardia of the Knoll
Agreement, any obligations relating to the supply of Bucindolol after the
Closing for purposes of the Knoll Territory, or any breach of the royalty and
other obligations to BMS under the BMS License with respect to the Knoll
Territory, (ii) the use by any person of any product containing Bucindolol that
was manufactured, marketed, sold or distributed by or on behalf of Intercardia
or any licensee thereof in the Knoll Territory, and (iii) the use by Intercardia
or any licensee thereof of Bucindolol Intellectual Property in the Knoll
Territory.
4.3.5 Exception to Indemnification Obligations; Limitation on
Liability. An Indemnified Party shall not be entitled to indemnification under
this Section 4.3 to the extent the Liability resulted from its own gross
negligence or willful misconduct. In no event may an Indemnified Party be
entitled to recover from the indemnifying party any Liabilities consisting of or
in the nature of lost profits, special or consequential damages, or punitive
damages.
<PAGE>
4.3.6 Procedures. As a condition of indemnification under this
Section 4.3, the Indemnified Party must give written notice to the indemnifying
Party of the existence and nature of such claim within 30 business days after
receiving actual knowledge of such claim. Within 20 days thereafter, the Party
receiving an indemnity notice relating to a claim by a third party must elect or
decline in writing to accept such claim for defense. As to any other type of
indemnity claim (e.g., for breach), the Party receiving the notice must indicate
within the 20-day period whether it accepts or disputes the indemnification
obligation; if it accepts the obligation, payment of such amount shall be made
no later than 30 days thereafter. If a third party claim has been accepted for
defense by the indemnifying Party, the Indemnified Party shall not have any
authority to resolve, compromise or settle the third party claim without the
indemnifying Party's written consent. An Indemnified Party may participate in,
but not control, the defense of a claim for which it is receiving indemnity, at
its own cost and expense. Claims against CPEC or the Parties under Section 4.3.3
above shall be defended jointly, with mutually acceptable counsel.
4.4 Entire Agreement. This Agreement and the documents required to be
delivered at the Closing, as specified in Section 2.3 hereof, together
constitute the entire agreement between the Parties with respect to the subject
matter hereof and supersede all prior agreements, negotiations and
understandings, whether oral or written, and may not be amended, supplemented,
or waived, except by performance or by an instrument in writing signed by the
Party or parties to be bound.
4.5 Limited Assignment; Binding Effect. Neither this Agreement nor any
right, remedy, obligation or liability arising under this Agreement or by reason
hereof shall be assignable by either Party to another person or entity, without
the prior written consent of the other Party; however, each Party may assign
this Agreement to an Affiliate or to a successor to substantially all of its
business. This Agreement shall be binding upon and shall inure to the benefit of
the Parties and their respective successors and permitted assigns.
4.6 Further Assurances. Each Party shall take all reasonable actions as
may be necessary or requested by the other Party to carry out and consummate the
transactions contemplated by this Agreement.
4.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to
conflict-of-laws provisions.
<PAGE>
4.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument.
4.9 No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer on any person other than a Party, any benefits,
rights or remedies.
IN WITNESS WHEREOF, each Party has caused its duly authorized
representative to execute this Agreement as of the date first above written.
INTERNEURON PHARMACEUTICALS, INC.
By:____________________________________
Name:
Title:
INTERCARDIA, INC.
By:____________________________________
Name:
Title:
Exhibit 10.41
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of July 15,1999 (the "Effective Date") by and
between Interneuron Pharmaceuticals, Inc., a Delaware corporation ("IPI"), and
Intercardia, Inc., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Exchange Agreement, dated as of the date
hereof, between IPI and the Company (the "Exchange Agreement"), IPI is (i)
acquiring on the date hereof, 65% of the limited liability interests of CPEC in
exchange for the redemption by the Company of (x) 4,229,381 shares of Common
Stock of the Company, par value $.001 per share (the "Common Stock"), net of the
number (281,703) of shares (the "Retained Shares") of common stock equal to the
Second Merger Installment (as defined in the Merger Agreement) and (y)
cancellation of a promissory note issued by the Company to IPI;
WHEREAS, pursuant to an Amended and Restated Limited Liability
Company Agreement dated as of the date hereof, among CPEC, IPI and the Company
(the "LLC Agreement"), IPI may receive from the Company from time to time
additional shares of Common Stock (the "CPEC Milestone Shares") in exchange for
IPI issuing to the Company shares of Common Stock, $.001 par value, of IPI
pursuant to the Acquisition Agreement dated as of May 13, 1994;
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of
March 2, 1998 by and among the Company, IPI and Transcell Technologies, Inc.
(the "Merger Agreement"), IPI is entitled to receive additional shares of Common
Stock (the "Merger Shares") in February 2000 , as the Third Merger Installment,
respectively, of the Merger Consideration (each as defined in the Merger
Agreement and, under the Exchange Agreement, has waived payment of the Second
Merger installment);
WHEREAS, pursuant to an Assignment and Assumption and Royalty
Agreement dated as of May 8, 1998 between the Company and IPI (the "Royalty
Agreement"), IPI is entitled to receive certain royalties from the Company which
are payable in shares of Common Stock (the "Royalty Shares") (unless the Company
and IPI agree that such royalties may be paid in cash);
The Company and IPI wish to establish certain rights and obligations
with respect to the shares of Common Stock IPI owns and may receive pursuant to
any of the agreements referred to above.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, IPI and the Company agree as follows:
<PAGE>
1. DEFINITIONS. In this Agreement, the following terms shall have the
meaning specified, unless the context otherwise requires:
1.1 "Affiliate" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person. The term "control" means the ownership, directly or
indirectly, of over 50% of the voting securities or interests of the Person in
question, or the right to receive over 50% of the profits or earnings of a
Person, or the power to direct or cause the direction of the management and
policies of that Person, whether by contract or otherwise.
1.2 "Contingent Shares" shall mean the CPEC Milestone Shares, the Merger
Shares and/or the Royalty Shares.
1.3 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, or any successor act, all
as the same shall be in effect at the time.
1.4 "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
1.5 "Registrable Securities" means the Retained Shares and/or the
Contingent Shares, provided that all such securities shall no longer be
registrable securities at such time as they are eligible for sale under Rule 144
under the Securities Act during any one three-month period.
1.6 "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with SECTION 2, including, without limitation, all
registration and filing fees, all fees and expenses of complying with securities
or blue sky laws (including reasonable fees and disbursement of counsel in
connection with blue sky qualifications of the Registrable Securities), rating
agency fees, all printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits required by or
incident to such performance and compliance, but excluding any fees and expenses
of counsel for holders of Registrable Securities or any underwriting discounts
and commissions applicable to the Registrable Securities.
1.7 "SEC" means the Securities and Exchange Commission.
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<PAGE>
1.8 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, or any successor act, all as the
same shall be in effect at the time.
1.9 "Transfer" means any sale, bequest, exchange, assignment or gift, the
creation of any security interest or other encumbrance and any other disposition
of any kind, whether voluntary or involuntary, affecting title to or possession
of any of the Registrable Securities.
2. REGISTRATION RIGHTS.
2.1 DEMAND REGISTRATION.
2.1.1 Upon request by IPI at any time or from time to time after the
Effective Date, the Company shall file a registration statement on Form S-3, if
available and if not available, on such other form which is available and
suitable for a secondary offering of securities under the Securities Act (the
"Resale Registration Statement") with regard to any Registrable Securities held
by or issuable to IPI, as soon as practicable, but no later than 30 days after
such request, to the end that the Registrable Securities may be publicly sold
under the Securities Act thereafter, subject to the provisions of this
Agreement, and the Company will use its best efforts to cause such registration
to become effective as soon thereafter as practicable; provided, that IPI shall
furnish the Company with appropriate information relating to IPI and in
connection therewith as the Company may reasonably request.
2.1.2 All Registration Expenses in connection with the Resale Registration
Statement under this SECTION 2.1 shall be borne by the Company, except that IPI
shall bear the fees of its own counsel and any underwriting discounts or
commissions applicable to any of the Registrable Securities sold by it.
2.1.3 Pursuant to this SECTION 2.1, the Company shall not be obligated to
effect more than two Resale Registration Statements per year. A Resale
Registration Statement will not be deemed to have been effected unless it has
become effective.
2.1.4 The provisions of this SECTION 2.1 shall be subject to the condition
that if:
2.1.4.1 prior to filing of the Resale Registration Statement, the
Company has fixed plans (as evidenced by a resolution of the Board of
Directors of the Company adopted prior to the date the Company receives
such request) to engage in, or has become party to an agreement or letter
of intent contemplating, a public offering of Common Stock for its own
account through one or more underwriters proposing to underwrite such
offering on a firm
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<PAGE>
commitment basis (or, if such offering involves the issuance of
rights to stockholders of the Company, on a standby basis), then the
Company shall either: (a) include Registrable Securities, subject to
the provisions of SECTION 2.4 herein or (b) file a Resale
Registration Statement within ninety (90) days after the
effectiveness (or such shorter period as the managing underwriter of
such offering may agree) or abandonment of the registration
statement relating to the offering; or
2.1.4.2 prior to filing of the Resale Registration Statement, the
Company has become party to an agreement or letter of intent or filed
materials with the SEC contemplating a material business acquisition by the
Company, whether by way of merger, consolidation, acquisition of assets,
acquisition of securities or otherwise, and, if such proposed acquisition
were consummated, the Company would be required to include in such
registration statement financial statements and/or other information
concerning the business of any other party to such proposed acquisition,
then the Company may delay the filing of the Resale Registration Statement
to a date after such business combination has become effective; or
2.1.4.3 prior to the filing of the Resale Registration Statement, the
Company has become party to an agreement or letter of intent contemplating
a merger or consolidation of the Company into or with, or a sale or
transfer of all or substantially all of the business and assets of the
Company to, any other corporation or entity, then the Company may delay the
filing of the Resale Registration Statement to a date after the transaction
contemplated by such agreement or letter of intent becomes effective or is
abandoned.
2.2 PIGGY-BACK AND INCIDENTAL REGISTRATION.
2.2.1 Subject to the provisions of SECTION 2.4.3 hereof, if at any time
after the Effective Date, the Company proposes to register any securities under
the Securities Act, whether or not for sale for its own account or for the
account of any security holder (other than securities to be issued pursuant to
an employee compensation program or securities issued in a merger, acquisition
or similar transaction) in a manner and on a form which would permit
registration of Registrable Securities for sale to the public under the
Securities Act, it may each such time give written notice to IPI of its
intention to do so and, upon the written request of IPI made within ten (10)
business days after the receipt of any such notice (which request shall specify
the Registrable Securities intended to be disposed of by IPI), the Company will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
IPI thereof, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered; PROVIDED that if, at any time after
giving written notice of its intention to register any securities and prior to
the
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<PAGE>
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of such
determination to IPI and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration.
2.2.2 A registration effected under this SECTION 2.2 shall relieve the
Company of its obligation to effect a Resale Registration Statement under
SECTION 2.1, if the registration effected under this SECTION 2.2 includes
Registrable Securities.
2.2.3 the Company will pay all Registration Expenses in connection with any
registration of Registrable Securities pursuant to this SECTION 2.2, except that
IPI shall bear the fees of its own counsel and any underwritten discounts or
commissions applicable to any of the Registrable Securities sold by it.
2.3 REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of SECTION 2.1 OR 2.2 to effect the registration of Registrable
Securities under the Securities Act, the Company will, subject to the provisions
of SECTION 2.4:
2.3.1 prepare and file with the SEC a registration statement with respect
to such Registrable Securities, and use its best efforts to cause such
registration statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such Registrable Securities, not to
exceed the period expiring on the earlier of (i) the sale of all the Registrable
Securities or (ii) the date on which all the Registrable Securities become
eligible for resale under Rule 144 during any three-month period;
2.3.2 prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to comply with the provisions of the Securities Act for such period as
may be reasonably necessary to effect the sale of such Registrable Securities,
not to exceed the period expiring on the earlier of (i) the sale of all the
Registrable Securities or (ii) the date on which all the Registrable Securities
become eligible for resale under Rule 144 during any three-month period;
2.3.3 furnish to IPI such number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as IPI may
reasonably request, in conformity with the requirements of the Securities Act,
in order to facilitate the public offering of the Registrable Securities;
2.3.4 use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as IPI may reasonably request, except that
the Company shall not for any purpose be required to qualify to do business as a
foreign corporation or execute a general consent to service of process in any
jurisdiction wherein it is not so qualified;
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<PAGE>
2.3.5 notify IPI after the Company shall receive notice thereof, of the
time when such registration statement has become effective or a supplement to
any prospectus forming a part of such registration statement has been filed;
2.3.6 for a period expiring on the earlier of (i) the sale of all the
Registrable Securities or (ii) the date on which all the Registrable Securities
become eligible for resale under Rule 144 during any three-month period, prepare
and file with the SEC and notify IPI of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
2.3.7 advise IPI after the Company shall receive notice thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of such
registration statement and use its best efforts to obtain its withdrawal;
2.3.8 use its best efforts to list such securities on each securities
exchange on which the Common Stock are then listed, if such securities are not
already so listed and if such listing is then permitted under the rules of such
exchange.
2.4 UNDERWRITTEN OFFERINGS.
2.4.1 UNDERWRITTEN OFFERINGS IN CONNECTION WITH DEMAND REGISTRATION.
Whenever a Resale Registration Statement pursuant to SECTION 2.1 is effected
through an underwritten offering, securities owned by other holders may be
included in such registration without the consent of IPI, subject to the terms
hereof. The underwriter shall be selected by IPI and shall be reasonably
acceptable to the Company. Notwithstanding any other provision contained herein,
if the underwriters determine that the amount of Registrable Securities to be
sold in any such underwritten offering should be limited due to market
conditions or otherwise, all holders of securities other than IPI proposing to
sell their securities in such underwriting and registration shall participate,
if at all, pro rata in the securities being underwritten, such participation to
be based on the number of shares of Common Stock (on an as-converted basis, if
applicable, solely for purposes of determining participation rights) as to which
registration was requested by such holders.
2.4.2 UNDERWRITING AGREEMENT IN CONNECTION WITH DEMAND REGISTRATION
STATEMENT. If requested by the underwriters for any offering pursuant to a
Resale Registration Statement, IPI and any other holder of securities desiring
to include securities in such registration, shall be a party to an underwriting
agreement for such offering, such agreement
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<PAGE>
to contain such representations and warranties by the Company, and such other
terms and provisions as are customarily contained in agreements of this type,
including, without limitation, indemnities and rights to contribution to the
effect and to the extent provided in ARTICLE 3 and the other securities shall be
included in the offering on the same financial terms as the Registrable
Securities being sold by the underwriters.
2.4.3 UNDERWRITTEN OFFERINGS IN CONNECTION WITH "PIGGY-BACK" AND INCIDENTAL
REGISTRATIONS. Subject to SECTION 2.2, if at any time the Company proposes to
register any Registrable Securities under the Securities Act for sale for its
own account or for the account of any security holder and such Registrable
Securities are to be distributed by or through one or more underwriters, and
Registrable Securities are included in such registration pursuant to the terms
of SECTION 2.2 herein, then IPI shall be a party to the underwriting agreement
between the Company and such underwriters, such agreement to contain such
representations and warranties by the Company, and such other terms and
provisions as are customarily contained in agreements of this type, including,
without limitation, indemnities and rights to contribution to the effect and to
the extent provided in ARTICLE 3. The Company may also require that the
Registrable Securities requested for inclusion pursuant to this SECTION 2.4.3 be
included in the offering on the same financial terms as the securities otherwise
being sold through the underwriters. If in the good faith judgment of the
managing underwriter of such underwritten public offering, the inclusion of any
or all of the Registrable Securities requested for inclusion pursuant to this
SECTION 2.4.3 together with any other Registrable Securities which have similar
piggyback registration rights (such securities and the Registrable Securities
being collectively referred to as the "Requested Stock") would jeopardize the
success of the offering, the number of shares of Requested Stock otherwise to be
included in the underwritten public offering may be reduced pro rata (by number
of Common Stock (on an as-converted basis, if applicable, solely for purposes of
determining participation rights)) among the holders thereof requesting such
registration or excluded in their entirety if so required by such managing
underwriter.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give IPI and its
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and will give each of them such reasonable access
to its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be reasonably necessary, in the
opinion of counsel to the Company, to conduct a reasonable investigation within
the meaning of the Securities Act. IPI shall furnish to the Company such
information regarding IPI and the distribution proposed by IPI as the Company
may reasonably request and as shall be required in connection with any
registration referred to in this SECTION 2.
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<PAGE>
3. INDEMNIFICATION AND CONTRIBUTION.
3.1 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under SECTION 2:
3.1.1 The Company will indemnify and hold harmless and will reimburse IPI,
its officers, directors, employees or agents, each underwriter, and each person
who controls any of them within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (a "Controlling Person") from and against, any
and all loss, damage, liability, cost and expense, including reasonable
attorney's fees and expenses, joint or several, to which they, or any of them,
may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses arise out of or are based on (i)
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading or (iii) any violation by the Company of the Securities Act, any
state securities or "blue sky" laws or any rule or regulation thereunder in
connection with such registration; provided, HOWEVER, that the Company will not
be liable in any such case to the extent that (i) any such loss, damage,
liability, cost or expenses arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in reliance
upon information furnished in writing by or on behalf of IPI specifically for
use in the preparation thereof or (ii) a copy of the Prospectus was not
delivered by or on behalf of IPI to such person unless the failure is the result
of noncompliance by the Company with Section 2.3.3 hereof.
3.1.2 IPI will indemnify and hold harmless and will reimburse the Company,
its directors and officers, any Controlling Person and any underwriter from and
against any and all loss, damage, liability, cost or expense, including
reasonable attorneys' fees and expenses, joint or several, to which they, or any
of them, may become subject under the Securities Act or otherwise, insofar as
such losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, in each case only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon written information furnished by or on behalf of IPI
specifically for use in the preparation thereof. IPI shall not be obligated
hereunder to indemnify the Company for any amount paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of IPI (which consent shall not be unreasonably withheld). In no
event, however, shall the liability of IPI for indemnification under this
SECTION 3.1.2 exceed the proceeds received by IPI from its sale of Registrable
Securities under such registration statement.
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<PAGE>
3.1.3 Promptly after receipt by an indemnified party pursuant to the
provisions of SECTION 3.1.1 OR 3.1.2 of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of SECTION 3.1.1 OR 3.1.2,
promptly notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party unless such failure to give
notice shall materially prejudice the indemnifying party in the defense of such
claim. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
PROVIDED, HOWEVER, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those available
to the indemnified party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select one
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties at the expense of the indemnifying party unless in
the reasonable judgment of the indemnified parties a conflict of interest may
exist among such indemnified parties, in which event the indemnified parties
shall be obligated to pay the fees and expenses of such additional counsel. An
indemnified party may retain its own counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of the indemnified party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party pursuant to the provisions of said SECTION
3.1.1 OR 3.1.2 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
3.2 CONTRIBUTION.
3.2.1 If the indemnification provided for in SECTION 3.1.1 OR 3.1.2 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages or liabilities referred to therein, then
the indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of such indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or
-9-
<PAGE>
alleged omission to state a material fact, such statement or omission has been
made by, or relates to information supplied by, such indemnifying party or
indemnified parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages and liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in SECTION 3.1.3, any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this SECTION 3.2.1 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in SECTION 3.2.1. In no event, however,
shall IPI be required to contribute any amount under this SECTION 3.2.1 in
excess of the proceeds received by IPI from its sale of Registrable Securities
under such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed in Delaware, without giving effect to any choice of law or
other conflict of law provision or rule.
4.2 ASSIGNMENT. Except as otherwise expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the successors of
the Company and its successors and assigns and IPI and any subsequent holders of
Registrable Securities and the respective successors and assigns of each of
them.
4.3 NOTICES. Any notice or other communication under this Agreement shall
be considered given and received when (i) delivered personally in writing, (ii)
received by registered mail, return receipt requested or (iii) sent by
facsimile, with a copy confirmed by registered mail, return receipt requested,
by the parties at the following addresses and telecopier numbers (or at such
other addresses and telecopier numbers as a party may specify by notice to the
others):
If to the Company:
Intercardia, Inc.
P.O. Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC 27709
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<PAGE>
Attention: President
Fax No.: (919) 544-1245
with a copy to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail
Suite 300
Raleigh, NC 27607
Attention: Donald R. Reynolds, Esq.
Fax No.: (919) 781-4865
If to IPI:
Interneuron Pharmaceuticals, Inc.
99 Hayden Avenue
Lexington, MA 02421
Attention: President
Fax No.: (781) 862-3859
with a copy to:
Bachner Tally Polevoy & Misher LLP
380 Madison Avenue
New York, NY 10017
Attention: Jill M. Cohen, Esq.
Fax No.: (212) 682-5729
4.4 TITLES AND SUBTITLES. The titles of the Articles and Sections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
4.5 COUNTERPARTS; FACSIMILE. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
This Agreement may be executed by facsimile, which shall be deemed an original.
4.6 FURTHER ASSURANCES. Each of the Company and IPI agree to take such
actions and execute such documents as is necessary to carry out the intents and
purposes of this Agreement and the transactions contemplated hereby.
4.7 COMPLETE AGREEMENT; MODIFICATION AND TERMINATION. This Agreement
contains a complete statement of all the arrangements among the parties with
respect to its subject matter, supersedes all existing agreements among them
concerning that subject matter and cannot be changed or terminated except in
writing signed by all of the parties.
-11-
<PAGE>
IN WITNESS WHEREOF, each Party has caused its duly authorized
representative to execute this Agreement as of the date first above written.
INTERNEURON PHARMACEUTICALS, INC.
By:/s/ MICHAEL W. ROGERS
----------------------------
Name: Michael W. Rogers
Title: Executive Vice President
INTERCARDIA, INC.
By: /s/ Richard W. Reichow
-------------------------------
Name: Richard W. Reichow
Title: Executive Vice President & CFO
-12-
Exhibit 10.42
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
CPEC LLC
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF CPEC LLC
(the "Agreement") is made as of July 15, 1999, among CPEC LLC, a Delaware
limited liability company ("CPEC"), INTERNEURON PHARMACEUTICALS, INC., a
Delaware corporation ("Interneuron"), and INTERCARDIA, INC., a Delaware
corporation ("Intercardia"), as members of CPEC, the other Persons (as defined
below), if any, who become members of CPEC in accordance with this Agreement
(whose names shall be set forth as Members on SCHEDULE A hereto). All
capitalized terms not otherwise defined herein are used as defined in Article I
below.
R E C I T A L S
- - - - - - - -
A. CPEC is a limited liability company formed by Intercardia pursuant to
the Delaware Act, by filing a Certificate of Formation of CPEC with the office
of the Secretary of State of the State of Delaware and by entering into the
Limited Liability Agreement of CPEC LLC, dated as of July 6, 1999 (the "Original
Agreement").
B. Through a merger of CPEC, Inc., a Nevada corporation, into CPEC, CPEC
has acquired all of the rights of CPEC, Inc. in and to Bucindolol Intellectual
Property, including the exclusive, worldwide rights under the BMS License, to
develop and commercialize Bucindolol, a nonselective beta-blocker with mild
vasodilating properties, for use as a pharmaceutical therapy for congestive
heart failure and left ventricular dysfunction.
C. Concurrently with the execution of this agreement, Interneuron and
Intercardia have entered into an Exchange Agreement which provides, upon the
terms and subject to the conditions thereof, for (i) the redemption by
Intercardia of 4,229,381 of the shares of Common Stock, $.001 par value, of
Intercardia owned by Interneuron, and (ii) the cancellation by Interneuron of a
promissory note issued by Intercardia in the principal amount of $2,000,000 in
exchange for the transfer by Intercardia to Interneuron of 65% of the limited
liability company interests of CPEC (the "Exchange").
D. Concurrently with execution of this Agreement, CPEC is executing the
License Agreement providing for the assignment and license to and assumption by
Intercardia of all of CPEC's rights and obligations under the Knoll Agreement
for the development and commercialization of Bucindolol outside the United
States, Puerto Rico and Japan by BASF Pharma/Knoll AG ("Knoll").
E. The parties wish to set forth the rights and responsibilities and the
powers and limitations of CPEC and the Members.
<PAGE>
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereby agree as follows:
ARTICLE I --
DEFINED TERMS
Section 1.1 Definitions. For purposes of this Agreement, capitalized terms
not otherwise defined herein shall have the corresponding meanings specified
below.
"ADDITIONAL MEMBERS" has the meaning set forth in Section 14.1 hereof.
"AFFILIATE" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person. The term "control" means the ownership, directly or
indirectly, of over 50% of the voting securities or interests of the Person in
question, or the right to receive over 50% of the profits or earnings of a
Person, or the power to direct or cause the direction of the management and
policies of that Person, whether by contract or otherwise.
"AGREED VALUE" means, with respect to any asset, the asset's adjusted
federal income tax basis, except that (i) the Agreed Value of any asset
contributed to CPEC shall be its gross fair market value at the time of the
contribution; (ii) the Agreed Value of any asset distributed in kind to any
Member shall be the gross fair market value of such asset on the date of such
distribution; and (iii) the Agreed Value of any asset shall be adjusted to equal
its gross fair market value at the time of a revaluation in CPEC's assets in
connection with a contribution or distribution as described in Treasury
Regulations Section 1.704-1(b)(2)(iv)(f)(5), if the Board reasonably determines
that such adjustments are necessary or appropriate to reflect the relative
economic interests of the Members of the Company.
"AGREEMENT" means this Amended and Restated Limited Liability Company
Agreement of CPEC LLC, as it may be further amended or restated from time to
time in accordance with the provisions hereof.
"APPLICABLE FISCAL QUARTER" has the meaning specified in Section 8.5.3
hereof.
"APPROVED BUDGET" has the meaning specified in Section 8.3 hereof.
"BEST" means the Beta-blocker Evaluation in Survival Trial being conducted
by the National Institutes of Health and the Veterans Administration to evaluate
the use of Bucindolol in treating patients with congestive heart failure.
"BEXTRA COMMITTEE" has the meaning specified in Section 8.2 hereof.
<PAGE>
"BMS LICENSE" means the Agreement dated as of December 6, 1991, as
amended, between Bristol-Myers Squibb Company and Cardiovascular Pharmacology
and Engineering Consultants, Inc., a predecessor-in-interest of CPEC.
"BOARD" means the Board of Directors of CPEC.
"BUCINDOLOL" means the compound Benzonitrile,
2-[2-hydroxy-3-[[2-(1H-indol-3-yl)-1, 1-dimethylethyl]amino]propoxy]-,
monohydrochloride, also known under the trademark "BEXTRA".
"BUCINDOLOL INTELLECTUAL PROPERTY" means the Trademarks and any patents,
patent applications, copyrights, know-how, processes, formulae, data (including,
but not limited to, preclinical, clinical, and marketing data) and trade secrets
relating to the manufacture, development, commercialization or use of Bucindolol
including any Improvement made or acquired by CPEC during the term of this
Agreement.
"CAPITAL ACCOUNT" means, with respect to any Member, the account
maintained for such Member in accordance with the provisions of Section 4.4
hereof.
"CAPITAL CONTRIBUTION" means, with respect to any Member, the aggregate
amount of money and the fair market value of any property (other than money)
contributed to CPEC pursuant to Sections 4.1, 8.5.1, 8.6.1 and 8.6.4 hereof with
respect to such Member's Interest.
"CERTIFICATE" means the Certificate of Formation of CPEC and any and all
amendments thereto and restatements thereof filed by or on behalf of CPEC with
the office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section (ss.) of the Code includes any
corresponding provision of any federal tax statute in effect on the date in
question under this Agreement.
"COVERED PERSON" means a Member, Director, Officer, employee or agent of
CPEC, or any officers, directors, shareholders, partners, employees,
representatives or agents of a Member.
"CPEC" means CPEC LLC, the limited liability company formed under the
Delaware Act and, where the context requires, any of its
predecessors-in-interest, including CPEC, Inc., a Nevada corporation, ("CPEC,
Inc.") and Cardiovascular Pharmacology and Engineering Consultants, Inc., a
California corporation.
"CPEC TERRITORY" means the United States of America, the District of
Columbia, Puerto Rico and Japan.
"DELAWARE ACT" means the Delaware Limited Liability Company Act, 6 Del.C.
ss. 18-101, et seq., as amended from time to time.
<PAGE>
"DIRECTOR" means a Person designated as a director of CPEC and duly
elected pursuant to Article VI hereof.
"DIVIDEND(S)" means the distribution(s) by CPEC to Members pursuant to the
Delaware Act or this Agreement.
"EXCESS FUNDED AMOUNT" has the meaning specified in Section 8.8 hereof.
"FISCAL QUARTER" means each three calendar month period of each Fiscal
Year that ends on March 31, June 30, September 30 and December 31, except in the
case of CPEC's first and last Fiscal Quarters, which may be less than three (3)
full calendar months.
"FISCAL YEAR" means (i) the period commencing upon the formation of CPEC
and ending on September 30, 1999, or (ii) any subsequent twelve (12) month
period commencing on October 1 and ending on September 30, or any portion
thereof for which CPEC is required to allocate Profits, Losses and other items
of CPEC income, gain, loss or deduction pursuant to Article IX hereof.
"FUNDING PERCENTAGE" has the meaning specified in Section 8.5.1 hereof.
"FUNDING REQUIREMENTS" has the meaning specified in Section 8.3 hereof.
"GAAP" means U.S. generally accepted accounting principles.
"IMPROVEMENT" has the meaning specified in Section 8.9.2 hereof.
"INTERCARDIA" means Intercardia, Inc. and any transferee of its entire
Interest under this Agreement that is admitted as a Member.
"INTEREST" means a Member's limited liability interest in CPEC, including
all rights and benefits to which such Member is entitled under this Agreement,
the Delaware Act or other Laws.
"INTERNEURON" means Interneuron Pharmaceuticals, Inc. and any transferee
of its entire Interest under this Agreement that is admitted as a Member.
"KNOLL AGREEMENT" means the Development, Manufacturing, Marketing and
License Agreement effective as of December 19, 1996, among Intercardia, CPEC and
Knoll.
"KNOLL TERRITORY" means all countries with the exception of the United
States of America, the District of Columbia, Puerto Rico and Japan.
"KNOLL TERRITORY ROYALTY" means the amounts payable by Intercardia to CPEC
under the License Agreement, consisting of a royalty on Net Sales of Bucindolol
in the Knoll Territory and the specified share of one "milestone" payment under
Section 3.4 of the Knoll Agreement.
<PAGE>
"LAWS" means:
(i) all constitutions, treaties, laws, statutes, codes,
ordinances, orders, decrees, rules and regulations, whether
domestic, foreign or international;
(ii) all judgments, orders, writs, injunctions, decisions, rulings,
decrees and awards of any governmental body;
(iii) all policies, practices and guidelines of any governmental
body; and
(iv) any amendment, modification, re-enactment, restatement or
extension of the foregoing,
in each case binding on or affecting the party or Person referred to in the
context in which such word is used.
"LICENSE AGREEMENT" means the Assignment, Assumption and License Agreement
between CPEC and Intercardia, executed as of the date of this Agreement,
relating to the development and commercialization of Bucindolol in the Knoll
Territory.
"MAJORITY MEMBER" means the Person (including any Affiliate of a Person)
beneficially owning over 50% of the Percentage Interests of CPEC as of the date
in question under this Agreement or, notwithstanding actual ownership of
Percentage Interests, any other Member that is deemed the Majority Member
pursuant to Section 8.6.5 hereof. Interneuron is the Majority Member immediately
following the execution of this Agreement.
"MEMBER" means any Person admitted as a Member, an Additional Member or a
substitute Member of CPEC pursuant to the provisions of this Agreement, in such
capacity as a member of CPEC. For purposes of the Delaware Act, the Members
shall constitute one (1) class or group of members. Following execution of this
Agreement, the only Members of CPEC are Interneuron and Intercardia.
"MINORITY MEMBER" means any Member other than the Majority Member.
Intercardia is the Minority Member immediately following the execution of this
Agreement.
"NET CASH" for any period means the excess, if any, of (i) the gross cash
proceeds available to CPEC from all sources over (ii) the portion thereof used
to establish or fund reserves or pay for all CPEC expenses, debt payments,
capital improvements, replacements and contingencies, all as determined or
designated by the Board. "Net Cash" shall not be reduced by depreciation,
amortization, cost recovery deductions or similar allowances, but shall be
increased by any reductions of reserves previously established pursuant to the
first sentence of this definition. The term "Net Cash" also shall include all
other funds deemed available for distribution and designated as Net Cash by the
Board.
"OFFICER" means a person designated as an officer of CPEC and duly elected
pursuant to Article VII hereof.
<PAGE>
"ONCE-A-DAY FORMULATION" means the administration of Bucindolol using a
once-a-day formulation including the formulation currently being developed by
SkyePharma AG (formerly JAGO Pharma AG) under an Agreement for Feasibility Study
dated March 15, 1996, as amended, with CPEC.
"PERCENTAGE INTEREST" means the rights of a Member with respect to the
receipt of certain Dividends and allocations, expressed as a portion of one
hundred percent, as such may be adjusted from time to time in accordance with
Section 8.6 hereof, as shown on SCHEDULE B hereto.
"PERSON" includes any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"PRIORITY DIVIDEND" has the meaning specified in Section 10.2 hereof.
"PRIORITY RETURN" has the meaning specified in Section 10.2 hereof.
"PROFITS" and "LOSSES" means, for each Fiscal Year, an amount equal to
CPEC's taxable income or loss for such Fiscal Year, determined in accordance
with Section 703(a) of the Code, with the following adjustments, without
duplication:
(i) Such income or loss shall be increased or decreased, as
applicable, by the amount, if any, of tax-exempt income not
otherwise taken into account in computing Profits and Losses;
(ii) Such income or loss shall be reduced or increased, as
applicable, by the amount, if any, of expenditures not
otherwise taken into account in computing Profits and Losses
that are (A) described in Section 705(a)(2)(B) of the Code or
(B) treated as Code Section 705(a)(2)(B) expenditures pursuant
to Treasury Regulations Section 1.704-1(b)(2)(iv)(i);
(iii) Gain or loss on a disposition, and depreciation or
amortization, of any asset shall be computed with reference to
such asset's Agreed Value in lieu of such asset's adjusted
federal income tax basis; and
(iv)
Notwithstanding any other provision of this definition, (A) any item
of income, gain, loss, deduction or credit that is specially
allocated pursuant to SCHEDULE E attached hereto shall not be taken
into account in computing Profits or Losses, and (B) the amount of
gross revenues specially allocated to Interneuron pursuant to the
License Agreement under Section 9.2.2 hereof and the amount of gross
revenues specially allocated with respect to a Member's accrued
Priority Return under Section 9.2.3 hereof shall be excluded from
CPEC's income and shall not
<PAGE>
be taken into account in computing Profits or Losses.
"SIDE LETTER" means the letter agreement between Intercardia and
Interneuron effective as of the date of this Agreement and incorporated by
reference herein.
"SPECIAL DIVIDEND" has the meaning specified in Section 10.1 hereof.
"SUPERMAJORITY VOTE" means the written approval of, or the affirmative
vote by, Members holding at least 80% of the Percentage Interests.
"TAX MATTERS PARTNER" has the meaning specified in Section 12.1 hereof.
"TRADEMARK" means the registered trademark BEXTRA(R), any other trademark,
trade name or service mark used as a product identifier for Bucindolol and any
variations thereof, in each case, whether or not registered.
"TREASURY REGULATIONS" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
ARTICLE II --
MEMBERSHIP AND TERM
Section 2.1 Membership.
2.1.1 Duties. The Members hereby agree that the rights, duties
and liabilities of the Members shall be as provided in the Delaware Act, except
as otherwise provided herein.
2.1.2 Membership Information. The name and mailing address of
each Member and the Agreed Value of the amount contributed to the capital of
CPEC is listed on SCHEDULE A attached hereto. The name and mailing address of
each Member and the initial Percentage Interest of each Member is listed on
SCHEDULE B attached hereto. The Secretary shall update SCHEDULE A and SCHEDULE B
from time to time as necessary, but in any event as of the end of each Fiscal
Year if there was a change during or as of the end of that Fiscal Year and when
required to include information about any new Member. Any such update shall not
constitute an amendment of this Agreement requiring Member approval. Any
reference in this Agreement to SCHEDULE A or SCHEDULE B shall be deemed to be a
reference to SCHEDULE A or SCHEDULE B, respectively, as amended and in effect
from time to time.
Section 2.2 Name. The name of CPEC is CPEC LLC. The Board may change the
name from time to time, with notice to the Members.
Section 2.3 Term. The term of CPEC commenced on July 6, 1999, and shall
continue in perpetuity, unless and until CPEC is dissolved in accordance with
the provisions of this
<PAGE>
Agreement. The existence of CPEC as a separate legal entity shall continue until
cancellation of the Certificate in the manner required by the Delaware Act.
Section 2.4 Registered Agent and Office. CPEC's registered agent and
office in the State of Delaware shall be The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, New Castle County, Delaware 19801.
The Board may change the registered agent and/or registered office from
time to time.
Section 2.5 Principal Place of Business. The principal place of business
of CPEC shall be at 99 Hayden Avenue, Lexington, Massachusetts 02421. The Board
may change the location of CPEC's principal place of business from time to time,
with notice to the Members.
Section 2.6 Qualification in Other Jurisdictions. The Board may cause CPEC
to be qualified, formed or registered under assumed or fictitious name statutes
or similar Laws in any jurisdiction in which such qualification or registration
is deemed appropriate. Any Officer, as an authorized person within the meaning
of the Delaware Act, may execute, deliver and file any certificates (and any
amendments and/or restatements thereof) to be filed with the Delaware Secretary
of State or necessary for CPEC to qualify to do business in a jurisdiction in
which CPEC may wish to conduct business.
Section 2.7 Limited Liability Company Agreement. This Agreement amends,
restates and supersedes in its entirety the Original Agreement. The Members
agree that during the term of CPEC, the rights and obligations of the Members
with respect to CPEC will be determined in accordance with the terms and
conditions of this Agreement to the greatest extent permitted by applicable law.
Except as otherwise provided herein, this Agreement is intended to control with
respect to any inconsistencies between any non-mandatory provision of the
Delaware Act and any provision hereof.
ARTICLE III --
PURPOSE AND POWERS OF CPEC
Section 3.1 Purpose. The nature of the business to be conducted and
promoted by CPEC is the development and commercialization of Bucindolol, subject
to the License Agreement, and engaging in any and all activities necessary,
convenient, desirable or incidental to such purpose. Without limiting the
foregoing, CPEC may engage in (i) filing, prosecuting, and maintaining
intellectual property rights of CPEC related to Bucindolol; (ii) conducting
preclinical, clinical and post-marketing studies related to Bucindolol; (iii)
filing regulatory applications in its name related to Bucindolol; and (iv)
manufacturing, sales and marketing activities and arrangements relating to
Bucindolol.
Section 3.2 Powers of CPEC. CPEC shall have the power and authority to
take any and all actions necessary or appropriate for the furtherance of the
purpose set forth in Section 3.1, subject to the restrictions or conditions
specified in this Agreement and the License Agreement, which power includes, but
is not limited to, the power to conduct its business, carry on its operations
and have and exercise the powers granted to a limited liability company by the
<PAGE>
Delaware Act in any state, territory, district or possession of the United
States, or in any foreign country, that may be necessary, convenient or
incidental to the accomplishment of the purpose of CPEC.
Section 3.3 Certain Limitations on Powers. Notwithstanding any other
provision of this Agreement but subject to Section 3.4 hereof, neither CPEC nor
the Board nor any Director or Officer of CPEC shall take any of the following
actions on behalf of CPEC, unless authorized to do so by Supermajority Vote of
the Members at a meeting of the Members or evidenced in a written consent or
instrument in lieu of a meeting:
(a) the sale, transfer or assignment of all or substantially all of
its assets (whether in the form of intangible, personal or real property),
directly or indirectly, by merger, consolidation or otherwise, or convert
to another form of entity. This restriction does not apply to any sale,
transfer or assignment, by merger, consolidation or otherwise, by a Member
of substantially all of its assets, including its ownership of Interests,
as long as the assets related to Bucindolol that were held by CPEC
immediately prior to the transaction remain in CPEC immediately after the
transaction; or
(b) the termination by CPEC of the BMS Agreement before its term, or
execution of an amendment to the BMS Agreement that would materially
adversely affect CPEC's rights under such agreement or materially increase
the obligations of CPEC under that agreement; or
(c) the execution or amendment of any oral or written contract or
arrangement between CPEC and (i) any of CPEC's Members, Directors or
Officers, (ii) a Member's Directors or Officers, or (iii) a Member's
Affiliates, in each case involving payment by CPEC of cash or other
consideration of (A) $1,000,000 or more in the aggregate during a Fiscal
Year, or (B) $1,000,000 or more in any one transaction; and in each case
excluding (x) amounts agreed to as part of an Approved Budget, provided
that the Board members designated by the disinterested Member have
approved the budget, and (y) amounts distributed as a Dividend to Members
pursuant to this Agreement; or
(d) the redemption, repurchase or retirement of any Member's
Interest; or
(e) the taking of any other action required by another provision of
this Agreement or the Delaware Act to be approved by a Supermajority Vote
or unanimous approval of the Members.
Section 3.4 Termination of Supermajority Provisions. The Supermajority
Voting requirement to approve any type of transaction specified in paragraphs
(a) through (e) of Section 3.3 (except amendments to this Agreement under
Section 17.6 and except to the extent required by the Delaware Act) shall
terminate in the event and effective on the first March 31 or September 30 (but
no sooner than September 30, 2001) that all of the following have occurred: (i)
the Percentage Interest of the Minority Member has been reduced by 10% in
accordance with Section 8.6 hereof, (ii) CPEC has been in possession of either
the BEST database or the draft of the initial manuscript for the BEST study for
nine months, (iii) the Majority Member has paid all
<PAGE>
of its Funding Requirements to such date on a timely basis (i.e., by the
beginning of the Applicable Fiscal Quarter for quarterly Funding Requirements or
within the 10 day period provided for deficiency funding, as provided for in the
last sentence of Section 8.5.3) and (iv) Minority Member has failed to meet any
or all of its Funding Requirements on a timely basis since the payment default
that triggered the 10% reduction in the Minority Member's Percentage Interest.
Upon the termination of Supermajority Voting requirements, the affirmative
approval of Members holding over 50% of the Percentage Interests shall be
sufficient authorization for any transaction (except to the extent required by
the Delaware Act).
ARTICLE IV --
CAPITAL CONTRIBUTIONS, INTERESTS,
CAPITAL ACCOUNTS AND ADVANCES
Section 4.1 Capital Contributions. Each Member has contributed or is
deemed to have contributed to the capital of CPEC the amount set forth opposite
the Member's name on SCHEDULE A attached hereto, as updated in accordance with
Section 2.1.2 hereof. The amount specified on SCHEDULE A constitutes the Capital
Contributions made or deemed to have been made by each Member. Each Member shall
make additional capital contributions to CPEC as provided in Section 8.5 hereof,
and may make additional capital contributions as provided in Sections 8.6.1 and
8.6.4. No Member shall have any personal liability for the payment or repayment
of any Capital Contribution of any other Member.
Section 4.2 Member's Interest. A Member's Interest shall for all purposes
be personal property. A Member has no interest in specific CPEC property.
Section 4.3 Status of Capital Contributions. The amount of a Member's
Capital Contributions may be returned to it, in whole or in part, only with the
consent of all of the Members. Any such returns of Capital Contributions shall
be made to all Members in proportion to the balance in their Capital Accounts.
Notwithstanding the foregoing, no return of a Member's Capital Contributions
shall be made hereunder if such distribution would violate applicable law. Under
circumstances requiring a return of any Capital Contribution, no Member shall
have the right to demand or receive property other than cash, except as may be
specifically provided in this Agreement or as may be specifically agreed to by
all of the Members.
Section 4.4 Capital Accounts. An individual Capital Account shall be
established and maintained for each Member pursuant to the principles of this
Section 4.4 and Treasury Regulation Section 1.704-1(b)(2)(iv). Each Capital
Account shall be maintained in accordance with the following provisions:
(a) to a Member's Capital Account there shall be credited such
Member's Capital Contributions (consisting of cash or the fair market
value of any property, net of any liabilities that CPEC assumes or that
are secured by such contributed property and CPEC takes the property
subject to such liabilities); such Member's distributive share of Profits;
and such Member's distributive share of other items of, or in the nature
of, income or gain, including, without limitation, special allocations of
gross revenues
<PAGE>
pursuant to Sections 9.2.2 or 9.2.3 and special allocations pursuant to
SCHEDULE E hereto;
(b) to a Member's Capital Account there shall be debited the amount
of cash and the fair market value of property distributed by CPEC to such
Member (net of any liabilities that Member assumes or that are secured by
such distributed property and the Member takes the property subject to
such liabilities); such Member's distributive share of Losses; and such
Member's distributive share of other items of, or in the nature of, loss
or deduction, including, without limitation, special allocations pursuant
to SCHEDULE E hereto;
(c) upon the transfer of all or any portion of any Member's
Interest in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent that
it relates to the transferred Interest;
(d) In the event that the values of CPEC's assets are adjusted in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f), the
Capital Accounts of all Members shall be adjusted simultaneously to
reflect the aggregate adjustments as if CPEC recognized gain or loss equal
to the amount of such aggregate adjustment and allocated such gain or loss
to the Members at such time pursuant to the terms of this Agreement; and
(e) In accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(e), upon any actual or deemed distribution to a Member
of any of CPEC's property (other than cash or cash equivalents), the
Capital Accounts of all Members shall, immediately prior to any such
distribution, be credited or debited to reflect any unrealized gain or
unrealized loss attributable to such distributed property, as if such
unrealized gain or unrealized loss had been recognized in a sale of such
property immediately prior to such distribution for an amount equal to the
fair market value of such property, and had been allocated to the Members
at such time pursuant to the provisions of this Agreement.
Section 4.5 Capital Account Statements. Simultaneously with providing the
Member its Form K-1, CPEC will provide to each Member a reconciliation in
reasonable detail of all activity in all Members' Capital Accounts for the
preceding Fiscal Year.
ARTICLE V --
MEMBERS
Section 5.1 Powers of Members. The Members shall have the power to
exercise any and all rights or powers granted to the Members pursuant to the
express terms of this Agreement. The Members also shall have the power to amend
this Agreement to authorize the Board to possess and exercise any right or power
not already vested in the Board pursuant to Article VI or any other provision of
this Agreement. In addition to the foregoing, the Members have the power to
exercise any and all other rights or powers of CPEC and to do all lawful acts
and things as are not by this Agreement directed or required to be exercised or
done by the Board. Except as provided herein, the Members shall have no power to
bind CPEC.
<PAGE>
Section 5.2 Reimbursement of Expenses. A Member shall not be entitled to
any reimbursement by CPEC of its internal or out-of-pocket expenses, or for any
compensation (whether as interest, salary, draw or otherwise) in its capacity as
a Member, or for any contributions or services rendered to CPEC, except for
Dividends authorized under Article X hereof or for amounts specifically
authorized in an Approved Budget.
Section 5.3 Partition. Each Member waives any and all rights that it may
have to maintain an action for partition of CPEC's property.
Section 5.4 Resignation. A Member may resign from CPEC prior to the
dissolution and winding up of CPEC only upon the sale, assignment or transfer of
all of its Interests in accordance with Article XV hereof. The consent of the
other Members is not required for such resignation. CPEC shall have no
obligation to compensate the resigning Member for the value of its Capital
Account, all of which shall be deemed assigned to the transferee of the Member.
Section 5.5 Meetings of Members.
5.5.1 Notice of Meetings. Meetings of the Members shall be
called by the President at the request of the Majority Member at any time or at
the request of any other Member not more than twice in any Fiscal Year. Such
request shall state the purpose or purposes of the proposed meeting. Written
notice of a 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 10 nor more than 60 days before the date of the meeting, to each Member
entitled to vote at such meeting. Business transacted at any meeting of Members
shall be limited to the purposes stated in the notice, unless otherwise agreed
to by the Board.
5.5.2 Quorum. The holders of a majority of the Percentage
Interests, present in person or represented by proxy, shall constitute a quorum
at all meetings of the Members for the transaction of business. If a quorum is
not present or represented at any meeting, the Members present (whether in
person or represented by proxy), may adjourn the meeting from time to time, by
announcement at the meeting, until a quorum is available. Any business which
might have been transacted at the meeting as originally notified may be
transacted at an adjourned meeting where a quorum is present. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each Member of record entitled to vote at the meeting.
5.5.3 Acts of Members. When a quorum is present at any
meeting, the vote of the holders of the majority of the Percentage Interests,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one which under any provision of
this Agreement requires a different vote. Each Member shall be entitled to vote
in person or by proxy.
5.5.4 Electronic Communications. Members may participate in a
meeting of the Members by means of conference telephone or other communications
method that
<PAGE>
allows all persons participating in the meeting to hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
If all the participants are participating by conference telephone or similar
communications equipment, the meeting shall be deemed to be held at the
principal place of business of CPEC.
5.5.5 Action by Written Consent. Unless otherwise provided in
this Agreement, any action that may or is required to be taken at any meeting of
the Members of CPEC may be taken without a meeting, with five (5) days' prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the Members representing the percentage required under
this Agreement or the Delaware Act to approve such action at a meeting of the
Members. Prompt notice of the action taken without a meeting by less than
unanimous consent shall be given to those Members who have not consented in
writing.
Section 5.6 Duties of Members. In addition to each Member's obligations
specifically set forth in this Agreement, a Majority Member shall have duties to
the other Members comparable to the duties, if any, owed by a controlling
stockholder of a Delaware corporation to minority stockholders under relevant
principles of Delaware law.
ARTICLE VI --
MANAGEMENT
Section 6.1 Board of Directors.
6.1.1 Powers; Number. Subject to the limitations on powers
specified in Section 3.3, the business and affairs of CPEC, including the
supervision of the BEXTRA Committee and the approval of annual budgets for CPEC,
shall be managed by or under the direction of a Board of Directors consisting of
five Directors. A person elected a Director is by such election designated a
Manager by the Members for purposes of the Act. The authorized number of
Directors may be increased or decreased only by Supermajority Vote of the
Members.
6.1.2 Designation Authority. Three of the Directors shall be
designated and elected by the Majority Member, and two of the Directors shall be
designated and elected by the Minority Member. The initial Directors designated
by Interneuron as the Majority Member and Intercardia as the Minority Member are
set forth on SCHEDULE C to this Agreement. The right to designate Directors
under this Agreement shall be assignable to any transferee or purchaser of all,
but not less than all, of a Member's Percentage Interest of CPEC. The right to
designate Directors shall automatically terminate if there is no Member
qualified as a Majority Member, at which time the five Director-nominees who
receive the greatest number of votes of Members shall be elected.
6.1.3 Successors. Each Director shall hold office until a
successor is elected and qualified or until such Director's earlier death,
resignation or removal, without the necessity for periodic reelection or
reappointment. Directors need not be Members. In the event a designee of either
the Majority Member or the Minority Member should cease to be a Director for any
reason, the vacancy may be filled by the Member having the right to designate
and elect
<PAGE>
that Director, without a meeting of the Members.
Section 6.2 Meetings of the Board of Directors. The Board of Directors of
CPEC may hold meetings, both regular and special, within or outside the State of
Delaware, at such time and place as shall be specified in a notice given as
hereinafter provided, or as shall be specified in a written waiver signed by all
of the Directors. The Board of Directors shall meet in person or by telephone
conference at least once each calendar quarter. Written notice stating the
place, date and hour of the meeting shall be given to each Director not less
than five (5) days before the date of the meeting.
Section 6.3 Quorum and Acts of the Board. A quorum of the Board shall
require (i) a majority of all the Directors and (ii) a majority of the Directors
designated by the Majority Member for the transaction of business at a meeting
and (iii) at least one director designated by the Minority Member. Decisions by
the Board shall require the affirmative vote of a majority of the quorum, except
as otherwise provided in this Agreement. If an Intercardia designee is not
present at two consecutive meetings called in accordance with Section 6.2, then
an Intercardia designee shall not be required to be present in order for a
quorum of the Board to be constituted. If a quorum is not present at any meeting
of the Board, the Directors present may adjourn the meeting from time to time,
by announcement at the meeting, until a quorum is available. Any action required
or permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 6.4 Electronic Communications. Members of the Board, or any
committee designated by the Board, may participate in a Board or committee
meeting by means of conference telephone or other communications method that
allows all persons participating in the meeting to hear each other. Such
participation in a meeting shall constitute presence in person at the meeting.
If a majority of the participants are participating by conference telephone or
similar communications equipment, the meeting shall be deemed to be held at the
principal place of business of CPEC.
Section 6.5 Committees of Directors. The Board, by action of all the
members, may designate one or more committees. Any such committee shall have and
may exercise the powers and authority of the Board specifically delegated in the
Board resolution establishing the committee. Each committee shall keep regular
minutes of its meetings and report to the Board when required.
Section 6.6 Compensation of Directors. A Director who also is an employee
of a Member or an Affiliate thereof shall not receive compensation, in cash or
in kind, for services to CPEC as a Director. Any other Directors may be
compensated in such amounts as may be approved by the Board. A Director may be
reimbursed by CPEC for reasonable out-of-pocket travel, meal and lodging
expenses incurred in connection with attendance at meetings of the Board of
Directors upon submission to the President of appropriate documentation
evidencing such expenses.
<PAGE>
Section 6.7 Removal of Directors. Unless otherwise restricted by Law, any
Director may be removed, with or without cause, only by the Member authorized to
designate and elect such Director, in a writing to the other Members and to the
Secretary of CPEC. If no member qualifies as a Majority Member, the Directors
may be removed with or without cause by a majority vote of the Members.
Section 6.8 Directors as Agents. The Directors, to the extent of their
powers and limitations set forth in this Agreement, are agents of CPEC for the
purpose of CPEC's business, and the actions of the Directors taken in accordance
with such powers shall bind CPEC.
ARTICLE VII --
OFFICERS
Section 7.1 Officers. The Officers of CPEC shall be chosen by the Board
and shall consist of at least a President, a Vice President-Research and
Development, a Secretary and a Treasurer. The Board also may choose one or more
Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person. The Officers of CPEC shall hold office
until their successors are chosen and qualified. Any Officer elected or
appointed by the Board may be removed at any time by the affirmative vote of the
Board. Any vacancy occurring in any office of CPEC shall be filled by the Board.
No Officer shall be entitled to receive any compensation from CPEC for services
in such capacity, in cash or in kind, without the approval of all of the members
of the Board, except for reimbursement of reasonable out-of-pocket travel, meal
and lodging expenses consistent with activities and amounts in the Approved
Budget and upon submission of appropriate documentation and approval of the
President.
Section 7.2 The President. The President shall be the chief executive
officer of CPEC, shall preside at all meetings of the Members and the Board,
shall be responsible for the general management of the business of CPEC and
shall see that all orders and resolutions of the Board are carried into effect.
The President shall execute any contracts or instruments, except (i) where
required or permitted by Law to be otherwise signed and executed; (ii) where
execution thereof shall be expressly delegated by the Board to some other
Officer or agent of CPEC; or (iii) as otherwise permitted in Section 7.3 hereof.
Section 7.3 The Vice President. In the absence of the President or in the
event of the President's inability 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, if any, shall perform such other duties
and have such other powers as the Board may from time to time prescribe.
Section 7.4 The Secretary and Assistant Secretary. The Secretary shall be
responsible for filing legal documents and maintaining the non-financial records
of CPEC. The Secretary shall give, or cause to be given, notice of all meetings
of the Members and special meetings of
<PAGE>
the Board, and shall perform such other duties as may be prescribed by the Board
or President. The Assistant Secretary or Assistant Secretaries shall, in the
absence of the Secretary or in the event of the Secretary's inability 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 may from time to time
prescribe.
Section 7.5 The Treasurer and Assistant Treasurer. The Treasurer shall
have the custody of CPEC funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to CPEC and shall
deposit all moneys and other valuable effects in the name and to the credit of
CPEC in such depositories as may be designated by the Board. The Treasurer shall
disburse the funds of CPEC as is required under this Agreement, taking proper
vouchers for such disbursements, and shall render to the Board and the Members
an account of the financial condition of CPEC as provided in Section 11.3
hereof. The Assistant Treasurer or Assistant Treasurers shall, in the absence of
the Treasurer or in the event of the Treasurer's inability 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 may from time to time prescribe.
Section 7.6 Officers as Agents. The Officers, to the extent of their
powers and limitations set forth in this Agreement or otherwise vested in them
by action of the Board, are agents of CPEC for the purpose of CPEC's business,
and the actions of the Officers taken in accordance with such powers shall bind
CPEC.
Section 7.7 Duties of Board and Officers. Except to the extent
specifically modified by this Agreement, each Director and Officer shall have
the fiduciary duties comparable to those of directors and officers of business
corporations organized under the General Corporation Law of the State of
Delaware.
ARTICLE VIII -
UNDERSTANDINGS RELATED TO DEVELOPMENT OF
BUCINDOLOL IN THE CPEC TERRITORY
Section 8.1 Development of Bucindolol. CPEC will use commercially
reasonable efforts to develop and commercialize Bucindolol. Each Member will
cooperate with CPEC and each other in good faith to facilitate the development
of Bucindolol subject to the License Agreement, and will comply in all material
respects with all applicable Laws in the performance of their respective
responsibilities under this Agreement, whether performed for itself or on behalf
of CPEC. Unless prohibited by law, CPEC will make regulatory filings, such as
the New Drug Application for Bucindolol, in its name by an officer of CPEC
designated by the Board to have responsibility for regulatory filings.
Section 8.2 BEXTRA Committee.
8.2.1 Membership. An operating committee (the "BEXTRA
Committee") with equal representation by each Member (but not more than seven
members each)
<PAGE>
shall monitor and coordinate the operating activities and budget related to the
development, manufacture and marketing of Bucindolol in the CPEC Territory,
subject to the supervision of the Board. The initial representatives of each
Member shall be designated promptly following the Closing. The Chairman of the
BEXTRA Committee shall be designated by the Majority Member. Representatives may
be changed from time to time as appropriate (for example, to substitute
marketing representatives for development personnel), by notice in accordance
with Section 17.1 hereof.
8.2.2 Non-Member Participation. Either Member may invite
consultants or other personnel to attend meetings of the BEXTRA Committee, upon
reasonable advance notice to the other Member. Any such participants must be
obligated to observe the confidentiality provisions under Section 17.4 hereof.
Without limiting the foregoing, Interneuron acknowledges that Intercardia may
invite Knoll representatives to attend such meetings when required under the
Knoll Agreement or as otherwise may be appropriate (e.g., to discuss safety
monitoring and adverse event reporting systems) and the Members may invite
representatives of any licensee in the CPEC Territory under comparable terms and
conditions. The Members will exchange information and update each other on the
status and results of their respective activities on behalf of CPEC, to the
extent not exchanged outside the meetings.
8.2.3 Operations. The BEXTRA Committee shall meet in person or
by telephone conference monthly or as otherwise agreed, with the location
alternating between each Member's facilities. Decisions by the Committee shall
be by affirmative vote of a majority of each Member's representatives on the
Committee. If the Committee fails to reach a consensus on any specific matter
within five (5) business days (or any shorter period required by law or
regulatory authority), either Member can request that the matter in question be
submitted for dispute resolution under Section 17.2 hereof.
Section 8.3 Budget Through Fiscal 2000. The budgets of CPEC and allocation
of responsibilities between the Members through Fiscal Year ending September 30,
2000 are set forth as SCHEDULE D to this Agreement (SCHEDULE D and any other
budget approved for subsequent Fiscal Years as provided in Section 8.4 hereof
are referred to as the "Approved Budget"). SCHEDULE D sets forth the estimated
funding requirements of CPEC (the "Funding Requirements") to perform development
activities and to fund out-of-pocket fees and expenses paid to third parties for
corporate and administrative services performed or incurred on behalf of CPEC,
including, but not limited to, legal, accounting and insurance fees and
expenses, between the date hereof and September 30, 2000. Except as specifically
identified in SCHEDULE D, each Member acknowledges that it is not entitled to
receive any reimbursement from CPEC for the internal costs of participating in
the management of CPEC or performing its activities as contemplated under the
Approved Budget. If CPEC enters into a transaction for the commercialization of
bucindolol in the CPEC Territory with a third party, the BEXTRA Committee and
the Board may revise the Approved Budget to reallocate responsibilities and
revise the Funding Requirements.
Section 8.4 Budget for Periods after Fiscal Year 2000. The BEXTRA
Committee will prepare and recommend to the Board an annual budget and
allocation of responsibilities of CPEC for each Fiscal Year beginning after
September 30, 2000, no later than 60 days before the
<PAGE>
Fiscal Year begins. The budget shall be prepared in good faith and shall be
commercially reasonable. Neither Member shall be entitled to any reimbursement
for the internal costs of participating in the management of CPEC or performing
any of the budgeted activities, unless specifically agreed to by both parties
and included in an Approved Budget. Each annual budget and allocation of
responsibilities shall be subject to review, modification and approval by the
Board and, when so approved, shall be deemed the "Approved Budget" for such
period.
Section 8.5 Funding of CPEC.
8.5.1 Proportional Sharing; Limited Liability. Interneuron and
Intercardia will fund 65% and 35%, respectively, of the Funding Requirements
under an Approved Budget and arising after the Closing, regardless of their
respective Percentage Interests. The respective percentage of each Member is
referred to herein as the "Funding Percentage". The Funding Percentages shall be
reduced proportionately in the event any Additional Members are admitted. A
Member shall not be obligated to fund in excess of its respective Funding
Percentage of Funding Requirements. Funding Requirements paid by each Member
shall be deemed Capital Contributions of such Member. The provisions of this
Section 8.5 are intended solely to benefit the Members and, to the fullest
extent permitted by applicable law, shall not be construed as conferring any
benefit upon any creditor of CPEC (and no such creditor shall be a third-party
beneficiary of this Agreement). No Member shall have any duty or obligation to
any creditor of CPEC to fund any Funding Requirement, to make any Capital
Contributions or to cause the Board to call for Capital Contributions.
8.5.2 Changes to Approved Budgets. Changes to the Funding
Requirements under an Approved Budget may be made by the Board, provided,
however, that the approval of both Interneuron and Intercardia shall be required
for (i) increases representing in the aggregate 20% or more of the Approved
Budget then in effect (the "Periodic Limit") and (ii) increases during any
Fiscal Year which individually represent less than the Periodic Limit but which
represent in the aggregate 20% or more of the Approved Budget (the "Annual
Limit") in effect at the beginning of that Fiscal Year (or in effect as a result
of a subsequent increase over the Periodic Limit or the Annual Limit which was
approved by Interneuron and Intercardia).
8.5.3 Notice and Payment. At least 45 days in advance (the
"Invoice Date") of each Fiscal Quarter commencing with the Fiscal Quarter
beginning January 1, 2000 (the "Applicable Fiscal Quarter"), CPEC will notify
each Member of the total estimated Funding Requirements for the Applicable
Fiscal Quarter, and invoice each Member for its respective share (the "Invoiced
Amount") of such Funding Requirements in accordance with Sections 8.5.1 and
8.5.2. No later than 30 days before the beginning of the Applicable Fiscal
Quarter, each Member will remit to CPEC its respective required Invoiced Amount
for the Applicable Fiscal Quarter. Any payments not made at least 30 days before
the beginning of the Fiscal Quarter shall accrue interest at the rate of 20% per
annum until paid. Each Member's respective Funding Requirements for the periods
up to and including December 31, 1999 shall be paid to CPEC upon execution of
this Agreement. If the actual amounts paid by CPEC during the Applicable Fiscal
Quarter aggregate less than the Invoiced Amounts for the Applicable Fiscal
Quarter, the excess amounts shall remain in CPEC but may be considered by the
Board in determining the Funding Requirements for the immediately following
Applicable Fiscal Quarter. If the actual
<PAGE>
amounts required to be paid by CPEC during the Applicable Fiscal Quarter exceed
the Funding Requirements for the Applicable Fiscal Quarter but are within the
Approved Budget (subject to the provisions of Section 8.5.2 hereof), CPEC will
invoice each Member for its respective share of the deficiency, which shall be
due in 10 days.
8.5.4 Reimbursement from Third Party. If (i) CPEC receives
from the third party (the "Designated Third Party") designated by Intercardia
and Interneuron in the Side Letter, cash payments that are specifically
identified by the Designated Third Party in writing as reimbursement for
services or activities performed or for other costs incurred by Intercardia or
Interneuron on behalf of CPEC, as evidenced by a schedule and invoice provided
by the Member performing the service or incurring the cost (the "Reimbursement
Payments"), and (ii) CPEC has not previously reimbursed the Member performing
the services or incurring the cost for the full amount of the Reimbursement
Payment, then the portion of the Reimbursement Payment received by CPEC from the
Designated Third Party equal to the amount not reimbursed by CPEC to the Member
performing the service or incurring the cost shall be remitted within 10 days to
the Member performing the service or incurring the cost, as a reimbursement for
services performed or for other costs incurred. This provision shall not apply
(i) if the definitive agreement with the Designated Third Party does not contain
economic terms that are comparable in all material respects to the economic
terms set forth in the Side Letter, (ii) with respect to any payments by the
Designated Third Party that are not designated in writing as Reimbursement
Payments or (iii) if cash payments for reimbursement are received from any third
party other than the Designated Third Party.
Section 8.6 Adjustments of Percentage Interests. The Percentage Interests
of the Members will be adjusted in the following circumstances.
8.6.1 Adjustment for Excess Funding. If either Member fails to
pay its share of the Funding Requirements for any Applicable Fiscal Quarter
(including any deficiency referred to in the last sentence of Section 8.5.3) and
such default is not cured by the last day of the Fiscal Quarter immediately
preceding the Applicable Fiscal Quarter (or, if applicable, the 10-day period
for payment of a deficiency under the last sentence of Section 8.5.3) the other
Member may, but is not obligated to, make up such deficiency. If the
non-defaulting Member elects to make up such deficiency, the payment by the
non-defaulting Member shall be deemed an additional Capital Contribution by the
non-defaulting Member. Upon payment of the deficiency by the non-defaulting
member of all or any portion of such deficiency, the Percentage Interest of the
non-defaulting Member shall be increased, and the Percentage Interest of the
defaulting Member shall be decreased, by 1% for every $325,000 (or a pro rata
portion of 1% for amounts less than $325,000) of the defaulting Member's Funding
Requirement that was paid by the non-defaulting Member, subject to the maximum
adjustment specified in Section 8.6.3 hereof.
8.6.2 Adjustment Following Funding Default under Knoll
Agreement. If Intercardia fails to make the payments to Knoll required under
Article III of the Knoll Agreement and (i) CPEC becomes liable for such amounts
in a proceeding that is not subject to further appeal (and Intercardia has been
given the opportunity to defend the proceeding under Article XIII hereof), (ii)
Intercardia has not paid the liability, and (iii) no compensation is being
<PAGE>
paid to CPEC by Knoll for Bucindolol rights in the Knoll Territory; then in such
event the default by Intercardia under the Knoll Agreement shall be treated as a
default by Intercardia on its obligations with respect to Funding Requirements
in an amount equal to the CPEC liability (plus any fees and expenses incurred by
CPEC in defense of any related legal action but reduced by any of such amounts
that were paid by Intercardia) and as such shall be subject to the provisions of
Section 8.6.1 hereof. This provision shall not apply to funding obligations of
CPEC, Intercardia and Interneuron for fiscal years 1999 and 2000 that have been
or will be deferred as described in the Side Letter.
8.6.3 Maximum Reduction. No adjustment of Percentage Interests
pursuant to this Section 8.6 will reduce or increase a Member's Percentage
Interest by more than 10% in the aggregate. Accordingly, Interneuron's
Percentage Interest shall not be reduced to less than 55% and Intercardia's
Percentage Interest shall not be reduced to less than 25% pursuant to this
Section 8.6. Once the Percentage Interests are adjusted in this manner, the
original Percentage Interests in effect after the Closing may not be restored
without the consent of both Interneuron and Intercardia. If a non-defaulting
Member funds in excess of $3,250,000 of a defaulting Member's liabilities under
Section 8.6, the excess shall be treated as an excess payment under Section 8.8
hereof.
8.6.4 Timing of Adjustment. The adjustment to Percentage
Interests shall be effective as of the last day of the Fiscal Quarter in which
the payment by the non-defaulting Member was made.
8.6.5 Effect of Adjustments on Majority Membership. If the
non-defaulting Member is the Minority Member, the Minority Member shall become
the Majority Member for purposes of this Agreement on the first March 31 or
September 30 (but no sooner than September 30, 2001) that all of the following
have occurred: (i) the Percentage Interest of the Majority Member has been
reduced by 10% in accordance with Section 8.6 hereof, (ii) CPEC has been in
possession of either the BEST database or the draft of the initial manuscript
for the BEST study for nine months, (iii) the Minority Member has paid all of
its Funding Requirements to such date on a timely basis (i.e., by the beginning
of the Applicable Fiscal Quarter for quarterly Funding Requirements or within
the 10-day period provided for deficiency funding, as provided for in the last
sentence of Section 8.5.3) and (iv) Majority Member has failed to meet any or
all of its Funding Requirements on a timely basis since the payment default that
triggered the 10% reduction in the Majority Member's Percentage Interest.
Section 8.7 Member Debt. A Member shall be deemed indebted to CPEC in the
following circumstances (the principal amount and interest described below shall
be deemed "Member Debt"):
8.7.1 Funding Default. A default in a Funding Requirement that
is not paid by the non-defaulting Member as permitted in Section 8.6.1 above
shall be due and payable by the defaulting Member to CPEC on demand, and such
indebtedness shall bear interest at a rate of 20% per annum.
<PAGE>
8.7.2 Default on Knoll Territory Royalty. A default by
Intercardia on its obligation to pay CPEC the Knoll Territory Royalty shall be
due and payable by Intercardia to CPEC on demand, and such indebtedness shall
bear interest at a rate of 20% per annum.
8.7.3 Set-off of Member Debt Against Dividends. Any Dividends
otherwise payable under Article X to a defaulting Member shall be reduced by the
amount of Member Debt owed to CPEC by that defaulting Member. The Member Debt
shall be deemed cancelled to the extent paid directly by the defaulting Member
or set-off against that Member's Dividend.
Section 8.8 Excess Payments. If a Member funds more than $3,250,000 of a
defaulting Member's share of Funding Requirements under Section 8.6 hereof and
the Percentage Interest of the non-defaulting Member has been increased by 10%,
the amount funded in excess of $3,250,000 (the "Excess Funded Amount") shall
constitute an additional Capital Contribution by the non-defaulting Member. No
adjustment to the Percentage Interests of the Members shall be made with respect
to such Capital Contribution. The Excess Funded Amount shall be returned to the
non-defaulting Member as a "Priority Dividend" pursuant to Section 10.2.
Section 8.9 Inventions; Offer of Future Bucindolol Developments.
8.9.1 Inventions; Exchange of Information. CPEC shall own all
inventions, improvements or discoveries, know-how and data made, invented or
reduced to practice in the course of an activity pursuant to an Approved Budget
during the term of this Agreement, whether made by CPEC or by Intercardia or
Interneuron on behalf of CPEC. Each of Intercardia and Interneuron shall
promptly disclose to CPEC and to each other any such Bucindolol discovery or
invention made by it during the term of this Agreement, and shall assign to CPEC
all rights in and to such discovery or invention. CPEC's rights shall be
automatically included in and subject to the License Agreement. Interneuron,
CPEC and Intercardia also will promptly disclose to the other on an ongoing
basis all technical information and data related to Bucindolol developed or
produced by or provided to it during the term of this Agreement, subject to the
limitations on use specified in this Agreement and the License Agreement.
8.9.2 Bucindolol Developments.
(a) A Member shall notify the BEXTRA Committee if it
desires to undertake an activity related to Bucindolol that is outside the
scope of the Approved Budget and could result in a new claim, indication,
formulation, dosage form, delivery method or use of Bucindolol (an
"Improvement"). The scope, timing and estimated cost of such activity and
description of the Improvement also shall be provided to the BEXTRA
Committee. Subject to Section 8.9.2(c), the BEXTRA Committee shall
determine, within thirty (30) days of receipt of such notice and
information, whether to recommend to the Board that CPEC participate in
such activity and, if so, shall prepare for Board approval a proposed
budget for funding such activity. Upon Board approval (which must occur,
if at all, within sixty (60) days of receipt of the BEXTRA Committee
recommendation and proposed budget) the activity and the budget approved
by the Board shall be included in the Approved Budget. CPEC's percentage
funding of the costs of the
<PAGE>
Improvement shall be based on a good faith estimate by the BEXTRA
Committee and the Board of the costs of developing and commercializing the
Improvement in the CPEC Territory, considering the costs of developing and
commercializing the Improvement being assumed by third parties in the CPEC
Territory and the Knoll Territory, and taking into account any other
relevant factors. (If Interneuron is making the proposal, the approval of
all of Intercardia's designated Directors shall constitute sufficient Board
authorization, but such approval is not otherwise required.)
(b) If the BEXTRA Committee or Board declines to
recommend or approve CPEC's participation in the proposed activity, the
Member making the proposal shall have the right to proceed with the
activity at its own expense, shall own all rights in and to the results of
such activity, and shall have the right to use the results thereof in the
development, marketing or commercialization of Bucindolol in any country,
whether in or outside the CPEC Territory provided, however, that (i) if
the data, know-how or other results of such activity are required to be
reported to a regulatory authority in the CPEC Territory, the Member
proceeding with the activity shall provide such information to CPEC and
CPEC shall have the right of access to such information for regulatory
reporting purposes, but if CPEC desires to use such information to seek
expansion of the label or similar authorization related to Bucindolol, the
Member and CPEC shall negotiate in good faith a commercially reasonable
license from such Member to CPEC to such Improvement and (ii) if the
Member proceeding with the activity seeks to use the Improvement in the
CPEC Territory and such use would require the use of any of the Bucindolol
Intellectual Property owned by CPEC, the Members and CPEC shall negotiate
in good faith a commercially reasonable license from CPEC to such Member
to such Bucindolol Intellectual Property.
(c) Notwithstanding paragraphs (a) and (b) of this
Section 8.9.2, the decision to proceed or decline participation in the
Once-a-Day Formulation of Bucindolol shall not be required to be made by
the BEXTRA Committee until the earlier of 90 days after the BEXTRA
Committee receives either (i) the BEST database or (ii) the draft of the
initial manuscript reporting the BEST data.
Section 8.10 Safety Data Collection and Reporting. CPEC, Intercardia and
Interneuron will cooperate to establish a system for the timely collection and
reporting of product complaints, adverse events and similar occurrences related
to Bucindolol that allows CPEC and Intercardia to report such occurrences on a
timely basis to regulatory authorities in the CPEC Territory and the Knoll
Territory, respectively, in compliance with applicable Laws.
ARTICLE IX --
ALLOCATIONS
Section 9.1 Profits and Losses.
9.1.1 Profits. After giving effect to the special allocation
provisions contained in SCHEDULE E hereto, and subject to Section 9.2 hereof,
Profits for each Fiscal Year or
<PAGE>
other period shall be allocated among the Members in the following order and
priority:
(a) First, to the extent Losses have been allocated
pursuant to Sections 9.1.2(b), (c), (d), (e) or (f) of this Agreement for
any prior period, Profits shall be allocated to and among the Members
first to offset any losses allocated pursuant to Section 9.1.2(f) of this
Agreement, then to offset any Losses allocated pursuant to Section
9.1.2(e) of this Agreement, then to offset any Losses allocated pursuant
to Section 9.1.2(d) of this Agreement, then to offset any Losses allocated
pursuant to Section 9.1.2(c) of this Agreement, and then to offset any
Losses allocated pursuant to Section 9.1.2(b) of this Agreement (in each
case, among the Members in proportion to their respective shares of the
Losses at each level of priority being offset). To the extent any
allocations of Losses are offset pursuant to this Section 9.1.1(a), such
Losses shall be disregarded for purposes of computing subsequent
allocations pursuant to this Section 9.1.1(a); and
(b) The balance of any Profits shall then be allocated
among the Members in proportion to their respective Percentage Interests,
as determined as of the end of each applicable Fiscal Quarter or other
applicable period within the Fiscal Year or other period.
9.1.2 Losses. After giving effect to the special allocation
provisions set forth on SCHEDULE E hereto, and subject to Section 9.2 hereof,
Losses for each Fiscal Year or other period shall be allocated among the Members
in the following order and priority:
(a) First, if each Member has a Capital Account balance
in excess of its "Target Amount", which shall be defined for purposes of
this Agreement as the greater of (i) zero and (ii) the sum of (A) such
Member's amount, if any, of unpaid Priority Dividend (I.E., the amount of
any Excess Funded Amount contributed by such Member and not yet returned
as a repayment thereof by CPEC, plus such Member's amount of any accrued
and unpaid Priority Return) as of the end of the Fiscal Year or other
period, plus (B) in the case of Interneuron only, the amount of any
accumulated but unpaid Special Dividends to Interneuron as of the end of
such Fiscal Year or other period (including any Special Dividend accruing
during the Fiscal Year or other period with respect to which this
allocation is being made, even though not payable until 41 days after the
end of the Fiscal Year or other period), Losses shall be allocated to and
among the Members in proportion to their respective Funding Percentages
until any Member's Capital Account balance is reduced to its Target
Amount;
(b) Second, Losses shall be allocated to each Member
whose Capital Account balance (prior to taking into account the allocation
of Losses under this Section 9.1.2(b), but after taking into account any
allocation of Losses under Section 9.1.2(a) above) exceeds its Target
Amount, in proportion to their respective Funding Percentages, until each
such Member's Capital Account balance is reduced to its Target Amount;
<PAGE>
(c) Third, to the extent that the Capital Account
balance (prior to taking into account the allocation of Losses under this
Section 9.1.2(c), but after taking into account any allocation of Losses
under the earlier subsections of this Section 9.1.2) of any Member other
than Intercardia is greater than zero, Losses shall be allocated to each
such Member having such a Capital Account balance, in proportion to their
respective amounts of unpaid Priority Dividend (within the meaning of
Section 9.1.2(a) above) as of the end of the Fiscal Year or other period,
until Interneuron's Capital Account balance is reduced to its amount of
accumulated but unpaid Special Dividends (within the meaning of clause
(ii)(B) of Section 9.1.2(a) above) and each such other Member's Capital
Account balance is reduced to zero;
(d) Fourth, to the extent that the Capital Account
balance (prior to taking into account the allocation of Losses under this
Section 9.1.2(d), but after taking into account any allocation of Losses
under the earlier subsections of this Section 9.1.2) of Interneuron is
greater than zero, Losses shall be allocated to Interneuron until its
Capital Account balance is reduced to zero;
(e) Fourth, to the extent that the Capital Account
balance (prior to taking into account the allocation of Losses under this
Section 9.1.2(e), but after taking into account any allocation of Losses
under the earlier subsections of this Section 9.1.2) of Intercardia is
greater than zero, Losses shall be allocated to Intercardia until its
Capital Account balance is reduced to zero; and
(f) The balance of any Losses shall then be allocated
among the Members in proportion to their respective Funding Percentages.
Section 9.2 Other Allocation Rules.
9.2.1 General. Except as otherwise provided in this Agreement,
all items of CPEC income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Members in the same
proportions as they share Profits and Losses for the Fiscal Year or other period
in question. Profits, Losses and any such other items shall be determined on an
annual basis, or any other frequency determined by the Members using any method
that is permissible under Section 706 of the Code and the Treasury Regulations
thereunder. Profits and Losses shall be prorated to take into account
adjustments to Percentage Interests made during the Fiscal Year under Section
8.6 hereof. Any special allocation of gross revenues pursuant to Sections 9.2.2
or 9.2.3 below shall be made and reflected in the Members' Capital Account
balances prior to the making of any allocations of Profits or Losses pursuant to
Section 9.1.
9.2.2 Special Allocation of License Agreement Revenues. For
each Fiscal Year or other period, Interneuron shall be specially allocated gross
revenues of CPEC in an amount equal to the amount, if any, of royalties and
milestone payments includable in CPEC's income with respect to such Fiscal Year
or other period under the License Agreement.
<PAGE>
9.2.3 Special Allocation Regarding Priority Return. For each
Fiscal Year or other period, there shall be a special allocation of CPEC's gross
revenues to any Member having any unrepaid Excess Funding Amount during the
period in an amount equal to the amount, if any, by which (i) the cumulative
amount of Priority Return accrued with respect to such Member's Excess Funded
Amount through the end of such Fiscal Year or other period, exceeds (ii) the
cumulative amount of gross revenues previously allocated with respect to such
Member's Interest pursuant to this Section 9.2.3 for all prior periods.
9.2.4 Priority of Special Allocations. For any Fiscal Year or
other period, if CPEC's gross revenues are less than the total amounts of
special allocations otherwise required under Sections 9.2.2 and 9.2.3 for such
Fiscal Year or other period, allocations of CPEC's gross revenues, to the extent
available, shall be made in the following order and priority: first, to
Intercardia for any amount to which it is entitled pursuant to Section 9.2.3;
second, to Interneuron for any amount to which it is entitled pursuant to
Section 9.2.2; and third, to Interneuron and any other Members (other than
Intercardia) for any amounts to which they are entitled pursuant to Section
9.2.3 (in proportion to the respective amounts to which each such Member would
otherwise be entitled pursuant to Section 9.2.3). To the extent the amount of
special allocations of gross revenues to any Member under Sections 9.2.2 or
9.2.3 have been reduced for any period pursuant to this Section 9.2.4, the
amount of such reduction shall cumulate and be allocable in future periods under
Sections 9.2.2 or 9.2.3, as applicable, with the same priority.
Section 9.3 Acknowledgment. The Members are aware of the income tax
consequences of the allocations made by this Article IX and agree to be bound by
the provisions of this Article IX in reporting their shares of CPEC income and
loss for income tax purposes. The Members intend that the allocation provisions
set forth in this Agreement are intended to comply with Section 704(b) of the
Code and the Treasury Regulations issued thereunder and the provisions are to be
interpreted in a manner consistent with those Treasury Regulations.
ARTICLE X --
DIVIDENDS
Section 10.1 Special Dividend. If at such time there is no amount of
accrued but unpaid Priority Dividend payable to Intercardia under Section 10.2,
there shall be distributed to Interneuron within 41 days after the end of each
Fiscal Quarter the amount, if any, of the Knoll Territory Royalty payable to
CPEC for such Fiscal Quarter (the "Special Dividend"), without offset or
deduction. If at such time any Priority Dividend payable to Intercardia has not
been paid in full, then payment of the Special Dividend shall be deferred and
shall cumulate until such time as such Priority Dividend has been paid in full
to Intercardia, at which time, subject to the limitations described in Section
10.4 and 10.5, the accumulated amounts shall be distributed to Interneuron.
Section 10.2 Priority Dividend. A Dividend shall be paid with respect to
any outstanding Excess Funded Amount (as such, a "Priority Dividend") paid by a
non-defaulting Member under Section 8.8. The Priority Dividend shall be equal to
the sum of (i) the outstanding amount of the Excess Funded Amount, plus (ii) a
priority return ("Priority Return")
<PAGE>
equal to 40%, compounded annually, of the principal amount of the Excess Funded
Amount outstanding from time to time, until repaid in full. Payments of the
Priority Dividend shall be allocated first to payments of any accrued and unpaid
Priority Return, and then to repayment of the outstanding principal balance of
the Excess Funded Amount.
Section 10.3 Payment of Dividends. Unless prohibited by applicable law,
CPEC shall distribute Dividends from Net Cash, if any, within 41 days after the
end of each Fiscal Quarter, which shall be paid and applied in the following
order and priority:
10.3.1 First, any Priority Dividend owed to Intercardia shall
be paid in accordance with Section 10.2.
10.3.2 Second, any Priority Dividend owed to Interneuron or
any other Member shall be paid in accordance with Section 10.2.
10.3.3 Third, any balance of Net Cash shall be paid as regular
Dividends to the Members in proportion to their respective Percentage Interests,
determined as of the last day of the Fiscal Quarter for which the Dividend is
calculated.
Section 10.4 Limitations on Dividend. Notwithstanding any provision to the
contrary contained in this Agreement, CPEC, and the Board on behalf of CPEC,
shall not make a Dividend to any Member on account of its interest in CPEC if
such Dividend would violate Section 18-607 of the Delaware Act or other
applicable Laws (which shall include, for these purposes, any contractual
limitations or restrictions to which CPEC is subject, whether in connection with
loan or financing documents or otherwise).
Section 10.5 Set-offs. Before making any distribution of any Special
Dividend, Priority Dividend or regular Dividend to a Member under this Article
X, CPEC shall set-off against such Dividend all Member Debt and any other
amounts (including interest) owed by such Member to CPEC, beginning with the
oldest of such liability or indebtedness. The amount of Dividends otherwise
payable to Intercardia that are set-off by CPEC under Section 8.7.3 hereof for
Member Debt arising out of Intercardia's failure to pay CPEC the Knoll Territory
Royalty shall be distributed to Interneuron as a Special Dividend which shall be
paid to Interneuron and shall take priority over any Priority Dividend owed to
Intercardia, notwithstanding the first two sentences of Section 10.1. However,
if Intercardia's failure to pay the Knoll Territory Royalty resulted from
Knoll's default on its obligation to pay Intercardia, the offset of the Knoll
Territory Royalty shall not take priority over any unpaid Priority Dividend
owing to Intercardia. The amount of any Dividend that is set-off against any
other type of Member Debt under this Section 10.5 shall not be actually
distributed to any Member, but instead shall give rise to treatment as follows:
(i) such amount shall be treated and deemed to be a Dividend distribution to the
obligor under the Member Debt (the "Obligor") for purposes of this Agreement,
including, without limitation, maintenance of Capital Accounts and determining
the amount of any unpaid Priority Dividend or Special Dividend to which the
Obligor is thereafter entitled; (ii) such amount shall be treated as having been
paid by the Obligor to CPEC immediately thereafter in repayment against the
Obligor's Member Debt; and (iii) CPEC shall retain such amount of offset
Dividend as proceeds from the repayment of the Member Debt, and such amount
shall be an available asset in the
<PAGE>
immediately succeeding Fiscal Quarter for CPEC to (A) use to reduce the total
amount of Funding Requirements of all of the Members in a subsequent period, (B)
take into account as an additional source of funds in determining the amount of
Net Cash available in the immediately succeeding Fiscal Quarter for distribution
to all of the Members, or (C) apply in part to such a reduction of Funding
Requirements and in remaining part as an additional source of funds in such a
determination of Net Cash.
ARTICLE XI --
BOOKS AND RECORDS
Section 11.1 Books and Records. CPEC shall maintain, at its principal
place of business, complete and accurate books and records that show all costs
and expenses incurred, all charges made, all credits made and received and all
income derived in connection with the operation of CPEC business in accordance
with GAAP consistently applied. Such books of account, together with a copy of
this Agreement and of the Certificate, shall be open to copying, inspection,
examination, review and verification at reasonable times by each Member and its
duly authorized representative, at the Member's cost and expense, for any
purpose reasonably related to such Member's interest in CPEC. CPEC shall not
have the authority to withhold confidential information from a Member pursuant
to Section 18-305c of the Delaware Act, as long as the Member requesting the
information is in compliance in all material respects with its confidentiality
obligations under Section 17.5 hereof.
Section 11.2 Accounting Method. For financial reporting purposes, the
books and records of CPEC shall be kept on the accrual method of accounting
applied in a consistent manner in accordance with GAAP and shall otherwise be
appropriate and adequate for CPEC's business.
Section 11.3 Financial Statements. CPEC shall use its best efforts to
provide Interneuron and Intercardia with unaudited financial statements within
10 business days following the end of the first, second and third Fiscal
Quarters of each Fiscal Year. CPEC will furnish to each Member within 24 hours
after receipt by CPEC, copies of any written reports provided by a collaborative
partner that relate to the amount or calculation of Net Sales of Bucindolol for
the Fiscal Quarter or the Fiscal Year, and in any event shall use its best
efforts to provide each Member with audited financial statements for and as of
the end of such Fiscal Year, within 60 days following the end of such Fiscal
Year and will provide each Member with unaudited financial statements for and as
of the end of such Fiscal Year as soon as they are available. Each Member shall
be entitled to have a representative present to observe the annual audit.
ARTICLE XII --
TAX MATTERS
Section 12.1 Tax Matters Partner. The Majority Member is hereby designated
as "Tax Matters Partner" of CPEC for purposes of any election under ss.
6231(a)(7) of the Code. If the
<PAGE>
Majority Member ceases to be qualified to serve as the Tax Matters Partner under
the Code and Treasury Regulations, the Board shall designate another Member to
serve in such capacity. The Tax Matters Partner shall, within ten (10) days of
the receipt of any notice from the Internal Revenue Service in any
administrative proceeding at CPEC level relating to the determination of any
CPEC item of income, gain, loss, deduction or credit, mail or otherwise deliver
a copy of such notice to each Member.
Section 12.2 Taxation as Partnership. From and after execution of
this Agreement, CPEC shall be treated as a partnership for U.S. federal income
tax purposes.
Section 12.3 Preparation of Tax Filings. The Tax Matters Partner shall
prepare and file, or cause to be prepared and filed, on a timely basis, all
applicable federal and state tax returns on behalf of CPEC. Intercardia shall
receive a draft copy of CPEC's tax returns prior to their filing and shall
cooperate with the Tax Matters Partner in the preparation of all such filings,
upon reasonable request. The Tax Matters Partner or CPEC shall distribute to
each Member a copy of each state or federal tax return, including schedules,
promptly after the corresponding filing date.
ARTICLE XIII --
LIABILITY AND INDEMNIFICATION
Section 13.1 No Personal Liability. To the fullest extent permitted by the
Delaware Act, the debts, obligations and liabilities of CPEC, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of CPEC, and no Member, Director, Manager or Officer shall be
obligated personally for any such debt, obligation or liability of CPEC solely
by reason of being a Member, Director, Manager or Officer.
Section 13.2 Reliance on Others. A Covered Person shall be fully protected
in relying in good faith upon the records of CPEC and upon such information,
opinions, reports or statements presented to CPEC by any Person as to matters
the Covered Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of CPEC, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, Profits, Losses or Net
Cash or any other facts pertinent to the existence and amount of assets from
which Dividends to Members might properly be paid.
Section 13.3 Fiduciary Duty. To the extent that, at law or in equity, a
Covered Person has duties (including fiduciary duties) and liabilities relating
thereto to CPEC or to any other Covered Person, a Covered Person acting under
this Agreement shall not be liable to CPEC or to any Member for its good faith
reliance on the provisions of this Agreement. The express provisions of this
Agreement, to the extent that they expand or restrict the duties and liabilities
of a Covered Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of such Covered
Person.
Section 13.4 Indemnification. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from CPEC
for any loss, damage, claim or
<PAGE>
expense, including reasonable legal fees, ("Liabilities") incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of CPEC and in a manner reasonably
believed to be within the scope of authority conferred on such Covered Person by
this Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any Liabilities incurred by such Covered Person if
such Person has been determined in a final judgment from which no appeal has or
may be taken to have acted in a manner which constituted breach of a fiduciary
duty, gross negligence or willful misconduct with respect to such acts or
omissions. Any indemnity under this Section 13.4 shall be provided out of and to
the extent of CPEC assets only. No Covered Person shall have any personal
liability with respect to such indemnity
Section 13.5 Expenses. To the fullest extent permitted by applicable law,
expenses (including reasonable legal fees) incurred by a Covered Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by CPEC prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by CPEC of an undertaking by or on
behalf of the Covered Person to repay such amount if it shall be determined that
the Covered Person is not entitled to be indemnified as authorized in Section
13.4 hereof.
Section 13.6 Insurance. CPEC shall purchase and maintain insurance,
including products liability and directors and officers' liability insurance, to
the extent and in such amounts as the Board shall deem reasonable, for its own
account and/or on behalf of Covered Persons and such other Persons as the Board
shall determine, against any liability that may be asserted against or expenses
that may be incurred by any such Person in connection with the activities of
CPEC or such indemnities, regardless of whether CPEC would have the power to
indemnify such Person against such liability under the provisions of this
Agreement. CPEC may enter into indemnity contracts with Covered Persons and such
other Persons as the Board shall determine and adopt written procedures pursuant
to which arrangements are made for the advancement of expenses and the funding
of obligations under Section 13.4 hereof and containing such other procedures
regarding indemnification as are appropriate. Each Member shall be identified as
an additional insured on any such policies. Upon request, CPEC shall furnish a
Member a summary of the coverage amounts of each CPEC insurance policy.
Section 13.7 Outside Businesses. Any Member or Affiliate thereof may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of CPEC, and CPEC (except as set forth herein) and the Members shall have no
rights by virtue of this Agreement in and to such independent ventures or the
income or profits derived therefrom, and the pursuit of any such venture, even
if competitive with the business of CPEC, shall not be deemed wrongful or
improper. Except as set forth in this Agreement, no Member or Affiliate thereof
shall be obligated to present any particular investment opportunity to CPEC even
if such opportunity is of a character that, if presented to CPEC, could be taken
by CPEC, and any Member or Affiliate thereof shall have the right to take for
its own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment opportunity.
<PAGE>
ARTICLE XIV --
ADDITIONAL MEMBERS
Section 14.1 Right to Participate in Certain Sales of Additional
Securities.
14.1.1 Offer of Additional Interests. CPEC will not sell or
issue any Interests, or securities convertible into or exchangeable for
Interests, or options, warrants or rights carrying any rights to purchase
Interests or capital stock of CPEC, unless CPEC first submits a written offer to
each Member (collectively, the "Offerees"), identifying the terms of the
proposed sale (including price, number or aggregate principal amount of
Interests or securities and all other material terms) and offers to each Offeree
in proportion to their respective Percentage Interests the opportunity to
purchase its pro rata allotment of the Interests or securities on terms and
conditions, including price, not less favorable than those on which CPEC
proposes to sell such Interests or securities to a third party or parties.
CPEC's offer pursuant to this Section 14.1 shall remain open and irrevocable for
a period of 15 days, and if such Offeree elects to purchase, such Offeree shall
be required to elect to purchase by giving written notice thereof to CPEC within
such 15-day period and to consummate such purchase within five days thereafter.
Any Interests or securities so offered which are not purchased by either Offeree
pursuant to such offer may be sold by CPEC, but only on the terms and conditions
set forth in the initial offer, at any time within 90 days following the
termination of the above-referenced 15-day period but may not be sold to any
other person or on terms and conditions, including price, that are more
favorable to the purchaser than those set forth in such offer or after such
90-day period without renewed compliance with this Section 14.1.
14.1.2 Exceptions to Participation Right. Notwithstanding the
foregoing, the right to purchase granted under this Section 14.1 shall terminate
immediately prior to the initial public offering of Interests or securities of
CPEC (or any successor to CPEC) and shall be inapplicable with respect to (i)
options to purchase Interests or securities of CPEC granted or to be granted
pursuant to any stock option plan or other employee benefit plan approved by the
Board; (ii) CPEC securities issued as a result of any stock split, stock
dividend, reclassification or reorganization or similar event with respect to
the Interests or capital stock; (iii) CPEC Interests issuable or issued pursuant
to the equity adjustment provisions of Section 8.6 of this Agreement; (iv)
Interests or securities issued or issuable by CPEC in connection with an
acquisition, joint venture, license or other collaborative agreement with a
third party; or (v) any Member that owns less than 50% of the Interests held by
it immediately after execution of this Agreement.
Section 14.2 Admission. If any Interest remains to be acquired following
completion of the procedures set forth in Section 14.1, CPEC may invite the
Person to be admitted as an Additional Member to the extent of such remaining
Interests, and upon the same terms previously offered. Such Person shall be
admitted when it (i) executes this Agreement or a counterpart of this Agreement
and (ii) is named as a Member on SCHEDULE A hereto. The legal fees and expenses
associated with such admission shall be borne by the Additional Member.
Section 14.3 Allocations. Additional Members shall not be entitled to any
retroactive allocation of CPEC's income, gains, losses, deductions, credits or
other items; provided that,
<PAGE>
subject to the restrictions of ss. 706(d) of the Code, Additional Members shall
be entitled to their respective share of CPEC's income, gains, losses,
deductions, credits and other items arising under contracts entered into before
the effective date of the admission of any Additional Members to the extent that
such income, gains, losses, deductions, credits and other items arise after such
effective date. To the extent consistent with ss. 706(d) of the Code and
Treasury Regulations promulgated thereunder, CPEC's books may be closed at the
time Additional Members are admitted (as though CPEC's tax year had ended) or
CPEC may credit to the Additional Members pro rata allocations of CPEC's income,
gains, losses, deductions, credits and items for that portion of CPEC's Fiscal
Year after the effective date of the admission of the Additional Members.
Section 14.4 Transfers among Members. Except for the restrictions set
forth in Section 15.3, nothing in this Agreement shall be deemed to prohibit any
Member from transferring any or all of its Interest to another Member, upon
mutually agreeable terms.
ARTICLE XV --
ASSIGNMENT AND PLEDGE OF INTERESTS
Section 15.1 Assignability of Interests. Subject to the restrictions set
forth in Section 15.3, a Member may sell, transfer, assign or pledge the whole
or any part of its Interest, upon notice to CPEC and execution of a counterpart
to this Agreement by the transferee. CPEC shall notify the other Members
promptly following such transfer.
Section 15.2 Recognition of Assignment by CPEC. No assignment or pledge of
any Interest, or any part thereof, that is in violation of this Article XV shall
be valid or effective, and neither CPEC nor the Members shall recognize the same
for the purpose of making Dividends pursuant to this Agreement. Neither CPEC nor
the Members shall incur any liability as a result of refusing to make any such
Dividends to the assignee of any such invalid assignment.
Section 15.3 Certain Transfers Requiring Consent. The consent of the other
Members will be required for any transfer of an Interest that would render CPEC
not to be a partnership for federal income tax purposes, that would result in a
"termination" of CPEC under Code Section 708(b)(1)(B), or that would be to any
nonresident alien or any other person that is not a "United States person" (as
defined by Code Section 7701(a)(30)).
ARTICLE XVI --
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 16.1 No Dissolution. CPEC shall not be dissolved by the admission
of Additional Members or substitute Members in accordance with the terms of this
Agreement, or by the death, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of any other event under the Delaware
Act that terminates the continued membership of a Member in CPEC.
<PAGE>
Section 16.2 Events Causing Dissolution. CPEC shall be dissolved and its
affairs shall be wound up upon the occurrence of any of the following events:
(i) the written consent of all Members;
(ii) the entry of a decree of judicial dissolution of CPEC under
Section 18-802 of the Delaware Act; or
(iii) at any time there are no Members, unless CPEC is continued in
accordance with the Delaware Act.
Section 16.3 Liquidation. Upon dissolution of CPEC, the Board shall carry
out the winding up of CPEC and shall immediately commence to wind up CPEC's
affairs; provided, however, that a reasonable time shall be allowed for the
orderly liquidation of the assets of CPEC and the satisfaction of liabilities to
creditors so as to enable the Members to minimize the normal losses attendant
upon a liquidation. The Members shall continue to share Profits and Losses
during liquidation in the same proportions, as specified in Article IX hereof,
as before liquidation. The proceeds of liquidation shall be distributed in the
following order and priority:
(i) to creditors of CPEC, in satisfaction of the liabilities of
CPEC (whether by payment or the making of reasonable provision
for payment thereof); and
(ii) to the Members in accordance with their Capital Account
balances, after giving effect to all contributions, Dividends
and allocations for all periods, to be made in the priorities
and amounts set forth in Article X hereof.
Section 16.4. Distribution in Kind. Upon the dissolution and liquidation
of CPEC, the Board may make distributions in liquidation in kind in the
proportions and priorities provided in Section 16.3 hereof. In such event, the
assets to be distributed in kind shall be valued, and appropriate
pre-liquidation adjustments shall be made to the Capital Accounts of the Members
in accordance with Article IX hereof to reflect the Profits or Losses that would
have been realized and allocated to the Capital Accounts of the Members on a
sale of such assets at their fair market value, prior to distribution of such
assets in kind as provided in Section 16.3.
Section 16.5 Termination. CPEC shall terminate when all of the assets of
CPEC, after payment of or due provision for all debts, liabilities and
obligations of CPEC, shall have been distributed to the Members in the manner
provided for in this Article XVI and the Certificate shall have been canceled in
the manner required by the Delaware Act.
Section 16.6 Claims of the Members. The Members and former Members shall
look solely to CPEC's assets for the return of their Capital Contributions, and
if the assets of CPEC remaining after payment of or due provision for all debts,
liabilities and obligations of CPEC are insufficient to return such Capital
Contributions, the Members and former Members shall have no recourse against
CPEC or any other Member.
<PAGE>
ARTICLE XVII --
MISCELLANEOUS
Section 17.1 Notices. Any notice required to be given hereunder shall be
in writing, shall refer specifically to this Agreement (except in the case of
Member or Director meetings), and shall be sent by facsimile transmission (with
a confirmatory copy sent by overnight courier), by courier service (with proof
of service), by hand delivery or by certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows, or to such
other addressee as shall be properly designated in accordance with these notice
provisions. All such notices shall be deemed to have been given when received at
the address specified below.
IF TO INTERNEURON:
Interneuron Pharmaceuticals, Inc.
99 Hayden Avenue
Lexington, MA 02421
Facsimile: (781) 862-3859
Telephone: (781) 402-3400
Attention: Glenn L. Cooper, M.D.
IF TO INTERCARDIA:
Intercardia, Inc.
Post Office Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC 27709
Facsimile: 919-544-1245
Telephone: 919-558-8688
Attention: Clayton I. Duncan
With a copy to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, NC 27607
Facsimile: 919-781-4865
Telephone: 919-781-4000
Attention: Larry E. Robbins, Esq.
IF TO CPEC: at the address specified in Section 2.5 of this Agreement.
IF TO A DIRECTOR: at such Director's mailing address as provided to CPEC.
IF TO ANY OTHER MEMBER: at the address set forth opposite its name on
SCHEDULE A, or at such other address as such Member may hereafter
designate by written notice to CPEC.
<PAGE>
Section 17.2 Dispute Resolution.
17.2.1 Procedures. If a dispute arises with respect to the
development or commercialization of Bucindolol that can not be resolved by the
BEXTRA Committee or the Board, but excluding any dispute relating specifically
to interpretation of this Agreement), Intercardia may request that the matter be
submitted to the Chief Executive Officers of Intercardia and Interneuron for
resolution. If Intercardia has not requested such submission within 10 days
after the dispute arises, or if the Chief Executive Officers fail to resolve
such dispute following good faith discussions, the matter shall be resolved by
the Chief Executive Officer of Interneuron. Under no circumstances shall
Intercardia be bound by a decision that it has not agreed to that would put it
in material breach of the Knoll Agreement (unless such provision or the decision
would increase CPEC's obligations or materially adversely affect its rights.) In
no event may Intercardia use the preceding sentence to avoid or reduce its
Funding Requirements under this Agreement on the basis that compliance with the
Funding Requirements would render it unable to satisfy its funding obligations
under the Knoll Agreement. The dispute resolution mechanism in this Section
17.2.1 shall terminate if at any time Interneuron is not the Majority Member.
17.2.2 Arbitration. Any disputes (or portions thereof) arising
between the Parties relating to interpretation of this Agreement (excluding
matters related to the development or commercialization of Bucindolol subject to
resolution under Section 17.2.1 above), whether before or after termination of
the Agreement, shall be finally resolved by binding arbitration. Whenever a
Party shall decide to institute arbitration proceedings, it shall give written
notice to that effect to the other Party. The Party giving such notice shall
refrain from instituting the arbitration proceedings for a period of sixty (60)
days following such notice. During such period, the Parties shall make good
faith efforts to amicably resolve the dispute without arbitration. Any
arbitration hereunder shall be conducted under the rules of the American
Arbitration Association. Each such arbitration shall be conducted by a panel of
three arbitrators: one arbitrator shall be appointed by each of Interneuron and
Intercardia and the third shall be appointed by the two arbitrators; provided,
however, if no mutually acceptable arbitrator can be agreed to by the first two
arbitrators, a third shall be appointed by the American Arbitration Association.
Any such arbitration shall be held in New York, New York. The arbitrators shall
have the authority to direct the Parties as to the manner in which the Parties
shall resolve the disputed issues, to render a final decision with respect to
such disputed issues, or to grant specific performance with respect to any such
disputed issue. Judgment upon the award so rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. Nothing
in this Section shall be construed to preclude either Party from seeking
provisional remedies, including but not limited to, temporary restraining orders
and preliminary injunctions, from any court of competent jurisdiction, in order
to protect its rights pending arbitration, but such preliminary relief shall not
be sought as a means of avoiding arbitration. In no event shall a demand for
arbitration be made after the date when institution of a legal or equitable
proceeding based on such claim, dispute or other matter in question would be
barred by the applicable statute of limitations.
<PAGE>
Section 17.3 Failure to Pursue Remedies. The failure of any Member to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
Section 17.4 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any Member
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by Law or otherwise.
Section 17.5 Confidentiality. Each Member may have access through CPEC
(including as a Member, Director or member of the BEXTRA Committee) or otherwise
under this Agreement to confidential or proprietary information of CPEC, the
other Member or third parties. In such event, the receiving party shall hold in
confidence and not disclose to any third party any information from the
disclosing party that is marked as confidential or proprietary, and shall cause
its Representatives to do the same. This restriction shall not apply to
information that becomes part of the public domain through no fault of the
receiving party or is obtained from a third party who is not under any
obligation of confidentiality. In addition, Intercardia may disclose such
information to Knoll for purposes of the Knoll Agreement, and any receiving
party may disclose the information to a consultant, collaborator or potential
collaborator if necessary in connection with the conduct of its responsibilities
under this Agreement, as long as such person is bound by confidentiality
obligations comparable to the obligations under this Agreement. If the receiving
party receives a subpoena or becomes subject to any other legal process
requiring disclosure of the disclosing party's confidential or proprietary
information, it will promptly notify the disclosing party and cooperate to
minimize the scope of the disclosure to the extent practicable. This Section
17.5 shall continue for five years from and after termination of this Agreement.
Section 17.6 Amendments. Any amendment to this Agreement shall be adopted
and be effective as an amendment hereto if in writing and approved by Members
constituting a Supermajority Vote.
Section 17.7 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal Representatives and assigns.
Section 17.8 Interpretation. Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. Except as otherwise specified, all references
herein to "Articles," "Sections" and "Paragraphs" shall refer to corresponding
provisions of this Agreement.
Section 17.9 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
<PAGE>
Section 17.10 Counterparts. This Agreement may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same document. All counterparts shall be construed together and shall constitute
one instrument.
Section 17.11 Integration. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.
Section 17.12 Governing Law. This Agreement and the rights of the parties
hereunder shall be interpreted in accordance with the laws of the State of
Delaware, and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
Representatives to execute this Agreement as of the date first above stated.
INTERNEURON PHARMACEUTICALS, INC.
By:___________________________________
Name:
Title:
INTERCARDIA, INC.
By:___________________________________
Name:
Title:
CPEC LLC
By:___________________________________
Name:
Title:
Exhibit 10.43
ASSIGNMENT, ASSUMPTION AND LICENSE AGREEMENT
This ASSIGNMENT, ASSUMPTION AND LICENSE AGREEMENT (the "Agreement") is
made and executed as of July 15, 1999, by and between CPEC LLC, a Delaware
limited liability company ("CPEC"), and INTERCARDIA, INC., a Delaware
corporation ("Intercardia"). Capitalized terms not otherwise defined herein are
used as defined in Article I hereof.
R E C I T A L S
A. CPEC owns or has certain rights to certain patents, patent
applications, technology, data, know-how and other rights related to Bucindolol
for use as a pharmaceutical therapy for congestive heart failure and/or left
ventricular dysfunction.
B. Intercardia and CPEC are parties to an agreement with BASF Pharma/Knoll
AG dated as of December 19, 1996 (the "Knoll Agreement") related to the
development and commercialization of Bucindolol in the Knoll Territory.
C. Interneuron Pharmaceuticals, Inc., a Delaware corporation
("Interneuron"), wishes to acquire, and Intercardia wishes to sell, 65% of the
limited liability company interests of CPEC, in exchange for certain shares of
Intercardia common stock owned by Interneuron (the "Exchange").
D. Following the Exchange, Intercardia and Interneuron will jointly
develop Bucindolol in the CPEC Territory under the LLC Agreement.
E. As a condition of the Exchange, (i) CPEC desires to assign to
Intercardia, and Intercardia desires to assume, all rights and obligations of
CPEC under the Knoll Agreement and (ii) CPEC desires to license to Intercardia,
and Intercardia desires to license from CPEC, the intellectual property rights
of CPEC related to Bucindolol in the Knoll Territory.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, receipt of which is
hereby acknowledged, CPEC and Intercardia hereby agree as follows:
ARTICLE I -
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, capitalized terms not
otherwise defined herein shall have the corresponding meanings specified below.
"AFFILIATE" means, when used with reference to a specified person or
entity, any person or entity that directly or indirectly controls, is controlled
by or is under common control with, the specified person. The term "control"
means the ownership, directly or indirectly, of over 50% of the outstanding
voting securities of an entity, or the right to receive over 50% of the profits
or earnings of an entity, or the power to director or cause the direction of the
management and
<PAGE>
policies of a person or entity, whether by contract or otherwise.
"BEAT" means the Bucindolol Evaluation in Acute Myocardial Infarction
Trial being conducted by Knoll.
"BEST" means the "Beat-blocker Evaluation of Survival Trial" being
conducted by the National Institutes of Health and the Veterans Administration,
evaluating the use of Bucindolol in treating patients with congestive heart
failure.
"BMS LICENSE" means the Agreement dated as of December 6, 1991, between
Bristol-Myers Squibb Company and Cardiovascular Pharmacology and Engineering
Consultants, Inc., a predecessor-in-interest of CPEC.
"BUCINDOLOL" means the compound Benzonitrile,
2-[2-hydroxy-3-[[2-(1H-indol-3-yl)-1,1-dimethylethyl]amino]propoxy]-,
monohydrochloride, also known under the trademark "BEXTRA".
"BUCINDOLOL INTELLECTUAL PROPERTY" means the Trademarks and any patents,
patent applications, copyrights, know-how, processes, formulae, data (including,
but not limited to, preclinical, clinical, and marketing data) and trade secrets
relating to the manufacture, development, commercialization or use of Bucindolol
including any Improvement made or acquired by CPEC during the term of this
Agreement.
"CPEC" means CPEC LLC or any predecessors-in-interest, including CPEC,
Inc., a Nevada corporation, and Cardiovascular Pharmacology and Engineering
Consultants, Inc., a California corporation.
"CPEC TERRITORY" means the United States of America, the District of
Columbia, Puerto Rico and Japan.
"FIELD" means use of Bucindolol as a pharmaceutical therapy for congestive
heart failure and/or left ventricular dysfunction.
"IMPROVEMENT" means any discovery or invention related to a new claim,
indication, formulation, dosage form, delivery method, or use of Bucindolol.
"KNOLL" means BASF Pharma/Knoll AG and any sublicensee thereof under the
Knoll Agreement.
"KNOLL TERRITORY" means all countries with the exception of the United
States of America, the District of Columbia, Puerto Rico and Japan.
"LLC AGREEMENT" means the Amended and Restated Limited Liability Agreement
of CPEC among CPEC, Interneuron and Intercardia, dated as of the date of this
Agreement.
<PAGE>
"NET SALES" shall have the meaning specified in Section 6.1 of the Knoll
Agreement.(1)
"ONCE-A-DAY-FORMULATION" means the administration of Bucindolol using a
once-a-day formulation, including the formulation, currently being developed by
SkyePharma AG (formerly JAGO Pharma AG) under an Agreement for Feasibility Study
dated March 15, 1996, as amended.
"PRODUCT" means Bucindolol and any finished product containing Bucindolol
as the active ingredient.
"TRADEMARK" means the registered trademark BEXTRA(R), any other trademark,
trade name or service mark used as a product identifier for Bucindolol and any
variations thereof, in each case, whether or not registered.
ARTICLE II -
ASSIGNMENT OF KNOLL AGREEMENT;
GRANT OF LICENSE TO INTERCARDIA
2.1 Assignment and Assumption of Knoll Agreement. Effective upon the date
of this Agreement, CPEC hereby assigns all of its rights under the Knoll
Agreement to Intercardia, and Intercardia hereby assumes and agrees to perform,
pay and discharge all of Intercardia's and CPEC's obligations under the Knoll
Agreement arising after the date of this Agreement, as such relate to the
development or commercialization of Bucindolol or the Product in the Knoll
Territory. Without limiting the foregoing, Intercardia will be responsible for
all funding obligations of Intercardia and CPEC under the Knoll Agreement
related to the development or commercialization of Bucindolol or the Product in
the Knoll Territory from and after the date of this Agreement. Nothing in this
Agreement is intended to assign or modify CPEC's rights and obligations, if any,
to Knoll for the supply of Bucindolol for purposes of the CPEC Territory.
2.2 Knoll Revenues to Intercardia. In return for the assumption of CPEC's
obligations under the Knoll Agreement, Intercardia shall be entitled to receive
all revenues from commercialization of Bucindolol or the Product in the Knoll
Territory, including royalties, milestone payments and other payments or
reimbursements by Knoll under the Knoll Agreement, which relate to periods after
the date of this Agreement, subject to Intercardia's obligations to pay CPEC the
royalties and share of the milestone payment specified in Article 3 below.
- --------------------------
(1) SECTION 6.1 OF THE KNOLL AGREEMENT STATES IN PART: "NET SALES SHALL MEAN THE
TOTAL AMOUNT INVOICED BY KNOLL OR ITS AFFILIATES OR SUBLICENSEES, FOR SALES OF
LICENSED PRODUCT LESS COMMISSION, DISCOUNTS, RETURNS AND RETURN ALLOWANCES,
SALES, USE OR VALUE-ADDED TAXES, DUTIES AND OTHER CREDITS OR ALLOWANCES SHOWN ON
THE INVOICES; PROVIDED, HOWEVER, NET SALES SHALL WITH RESPECT TO UNAFFILIATED
THIRD PARTIES INCLUDE THE SALES AMOUNT TO SUCH UNAFFILIATED THIRD PARTIES OR
AGENTS (AND NOT THE VALUE OF RESALES BY SUCH THIRD PARTIES OR AGENTS) AND
ROYALTIES PAYABLE TO THIRD PARTIES IN CONNECTION WITH SALES BY UNAFFILIATED
THIRD PARTIES OR AGENTS SHALL BE A DEDUCTIBLE EXPENSE. EXPENSES SHALL BE BASED
ON ACTUAL COSTS INCURRED AND SHALL NOT INCLUDE GENERAL ADMINISTRATIVE, CORPORATE
OR AFFILIATE OVERHEAD OR RESERVES...."
<PAGE>
2.3 License of Bucindolol Intellectual Property.
(a) Subject to the terms and conditions herein, CPEC hereby grants
to Intercardia an exclusive (even as to CPEC) right and license under the
Bucindolol Intellectual Property in the Knoll Territory to make, have made, use,
modify, further develop, improve, market, sell and otherwise commercially
exploit the Product in the Field. The foregoing license includes CPEC's rights
in and to any Improvement that CPEC, makes, discovers, owns or acquires after
the date hereof. The license granted to Intercardia hereunder specifically
includes a sublicense of CPEC's rights in the Knoll Territory under the BMS
License, and is granted subject to the terms of the BMS License.
(b) CPEC acknowledges and agrees that Knoll is a permitted licensee
of Intercardia under this Agreement. The license granted to Intercardia
(including the sublicense of the BMS License) may not be sublicensed by
Intercardia to any other third party for the development or commercialization of
the Product in the Knoll Territory without CPEC's consent, which shall not be
unreasonably withheld. However, CPEC's consent shall not be required with
respect to any sublicensing by Knoll of its rights or obligations pursuant to
the Knoll Agreement to the extent permitted under the Knoll Agreement as of the
date of this Agreement.
(c) Promptly following the execution of this Agreement, Intercardia
will notify Knoll in form and substance reasonably acceptable to CPEC of the
transfer of CPEC's obligations to Intercardia hereunder and will request that
Knoll notify CPEC of any payment defaults or other breaches by Intercardia under
the Knoll Agreement. Intercardia will further seek Knoll's agreement that CPEC
may but shall not be obligated to cure any default or other breaches by
Intercardia thereunder. Intercardia will provide CPEC with a copy of Knoll's
acknowledgement of such notice when available.
2.4 Exchange of Product Information.
(a) Each of CPEC and Intercardia shall promptly make available to
the other party for the purposes set forth in Section 2.4(b) below, all
technical, scientific and marketing data and information owned or possessed by
it during the term of this Agreement relating to Bucindolol or the Product,
including (i) all information relating to indications for use and conditions of
Bucindolol or the Product whether or not in the Field and whether existing on
the date of this Agreement or arising thereafter, including, without limitation,
the database, study report, case report forms and other data and documentation
available to CPEC from BEST, (ii) all data and documentation received by
Intercardia under the Knoll Agreement related to BEAT and the progress of
development of Bucindolol in the Knoll Territory will be reported by Intercardia
to CPEC, (iii) BMS Know-How (as defined in the BMS License) and (iv) all other
methods, processes, know-how and trade secrets related to Bucindolol or the
Product, whether or not patented or patentable. In addition, CPEC shall furnish
Intercardia with one complete copy (including appendices) of the New Drug
Application ("NDA") as filed with the U.S. Food and Drug Administration, and any
amendments to the NDA and a copy of any material correspondence to or from the
FDA relating to the safety or efficacy of Bucindolol and Intercardia shall
furnish CPEC with the European filing and a copy of any material correspondence
to or from the European regulatory authorities, to the extent a copy of such
filing
<PAGE>
and correspondence is available to Intercardia.
(b) Each party may report data about the safety or efficacy of
Bucindolol received from the other party to a regulatory authority, to the
extent required by applicable laws and regulations. Intercardia also may furnish
any of the foregoing data and information received from CPEC to Knoll or any
other permitted licensee of Intercardia, for use in the development or
commercialization of the Product in the Knoll Territory. CPEC shall be entitled
to use the any of the foregoing data in the development or commercialization of
Bucindolol in the CPEC Territory. Any other data or information received by CPEC
from Intercardia under this Agreement that constitutes an Improvement will be
owned by CPEC if the costs of such Improvement are shared by CPEC pursuant to
Section 8.9 of the LLC Agreement.
2.5 Improvements. Improvements shall be governed by Section 8.9 of the LLC
Agreement, subject to the provisions of the Knoll Agreement.
2.6 Safety Data Collection and Reporting. CPEC and Intercardia will
cooperate to establish a system for the timely collection and reporting of
product complaints, adverse events and similar occurrences related to the
Product that allows CPEC and Intercardia to report such occurrences to
regulatory authorities in the CPEC Territory and the Knoll Territory,
respectively, in compliance with applicable laws and regulations.
ARTICLE III --
ROYALTIES, ETC.
3.1 Royalties to CPEC on Net Sales. In consideration of the exclusive
rights granted by CPEC hereunder, Intercardia shall pay CPEC a royalty equal to
6.5% of Net Sales of the Product in the Knoll Territory. CPEC shall be entitled
to the foregoing royalty on Net Sales of the Once-a-Day Formulation of
Bucindolol, whether or not CPEC shares in the cost of developing the Improvement
under Section 8.9 of the LLC Agreement. The royalty shall be payable by
Intercardia on Net Sales of the Product in the Knoll Territory, whether sold
directly by Intercardia, Knoll (or an affiliate thereof) or any other permitted
sublicensee of Intercardia.
3.2 Duration of Royalty Obligation. Intercardia's obligation to pay CPEC
royalties under Section 3.1 of this Agreement shall continue for fifteen years
from the first commercial sale of the Product in the Knoll Territory, or
termination or expiration of the Knoll Agreement in accordance with its terms,
whichever is longer.
3.3 Milestone Payments under Knoll Agreement. Intercardia will pay CPEC
65% of the $10 million milestone payment received under Section 3.4(d) of the
Knoll Agreement (i.e., if Net Sales of the Product in the Knoll Territory exceed
$200 million in any consecutive twelve-month period). Intercardia shall notify
CPEC in writing 10 days after the receipt of payment of this milestone and such
notice shall be accompanied by payment. Intercardia will be entitled to retain
the entire $10 million milestone payment due under Section 3.4(c) of the Knoll
Agreement upon the first regulatory approval of the Product in certain countries
of the European Community.
<PAGE>
3.4 Currency. The payments to CPEC under 3.1 and 3.3 shall be paid in U.S.
dollars, converted from foreign currency in the same manner as Knoll converts
royalties from foreign currency into U.S. dollars under the Knoll Agreement.
3.5 Place of Payment. All payments to CPEC under this Agreement shall be
made by check or wire transfer in immediately available funds in legal currency
of the United States and shall be delivered to CPEC at the address or account
designated in writing by CPEC from time to time.
3.6 Timing of Payment and Royalty Reports. Royalties shall be paid by
Intercardia to CPEC within 40 days after the end of each calendar quarter. The
payment shall be accompanied by a report of Intercardia, setting forth in
reasonable detail the calculation of the royalties payable to CPEC for such
calendar quarter, including the Net Sales of the Product and the currency
conversion calculation. In addition, Intercardia will furnish CPEC within 24
hours after receipt by Intercardia with copies of any written reports provided
by Knoll that relate to the amount or calculation of Net Sales in the Knoll
Territory.
3.7 Defaults in Payment Obligations; Interest. If Intercardia defaults in
its payment obligations to CPEC with respect to Net Sales of the Product in the
Knoll Territory or the milestone payment to be shared with CPEC, interest shall
accrue on the defaulted amount at the rate of 20% per annum until the defaulted
payment, with accrued interest, is paid. The amount of the defaulted payment and
accrued interest shall be treated as "Member Debt" under Section 8.7 of the LLC
Agreement. If such default does not stem from a payment default by Knoll to
Intercardia, Intercardia, at CPEC's request, shall assign to CPEC the right to
receive a portion of the royalty or any other payment due under Section 3.4 of
the Knoll Agreement, if any, owed by Knoll to Intercardia sufficient to satisfy
such default. If Knoll has defaulted on its payment obligation, Intercardia, at
CPEC's request, will use all commercially reasonable efforts to exercise its
rights and remedies under the Knoll Agreement, and will keep CPEC informed of
all such efforts. The foregoing shall be in addition to any other rights and
remedies CPEC may have under this Agreement or otherwise, at law or in equity,
for such default.
3.8 Third Party Royalties. Intercardia shall be responsible for the timely
payment of any royalties payable to BMS under the BMS License upon Net Sales of
the Product in the Knoll Territory. Intercardia shall be responsible for any
other royalties or similar payments owed to third parties as a result of
Intercardia's commercialization of Product in the Knoll Territory under this
Agreement.
3.9 Repatriation Restrictions. Intercardia shall exercise reasonable due
diligence to determine if restrictions on the transfer of currency exist in any
country which would prevent Intercardia from making payments in the United
States. If an unexpected currency restriction occurs, Intercardia shall take all
reasonable steps to obtain a waiver of such restrictions or to otherwise enable
Intercardia to make such payments, failing which, if Intercardia is prevented
from making any payment under this Agreement by virtue of restrictions on
currency conversion or repatriation under the statutes, laws, codes or
governmental regulations of the country from which the sales are generated or
the payment is to be made, then such payments may be paid by depositing them in
the local currency to CPEC's account in a bank acceptable to CPEC in the country
whose currency is involved.
<PAGE>
3.10 Taxes. If laws, rules or regulations require withholding of income
taxes or other taxes imposed upon payments payable by Intercardia to CPEC as set
forth in this Article 3, Intercardia shall make such withholding payments as
required and subtract such withholding payments from the payments set forth in
this Article 3. Intercardia shall submit appropriate proof of payment of the
withholding taxes to CPEC within a reasonable period of time. Intercardia will
use efforts consistent with its usual business practices to minimize foreign
withholding taxes and CPEC shall cooperate with such efforts. Intercardia will
be responsible for any other taxes and assessments on sales of the Product and
its other activities under this Agreement.
3.11 Records. Intercardia will maintain for three (3) years after the
submission of each report under Section 3.5 hereof complete and accurate books
and records in sufficient detail to enable the milestone payment and the
royalties payable hereunder to be verified. Upon reasonable prior notice to
Intercardia, CPEC or its duly authorized representative, at CPEC's cost and
expense, shall have access to and the right to copy the books and records of
Intercardia to conduct an inspection, examination, review or verification
thereof. Such access shall be available not more than twice each calendar year,
during normal business hours, during the term of this Agreement and for a period
of three (3) years after its expiration or termination.
ARTICLE IV --
CERTAIN RESPONSIBILITIES OF THE PARTIES
4.1 Commercialization of Product and Indications. Intercardia shall use
commercially reasonable efforts to develop and commercialize the Product in the
Knoll Territory, and shall comply in all material respects with all applicable
laws, rules and regulations in the performance of its activities in the Knoll
Territory. Intercardia shall inform CPEC, through updates to CPEC's BEXTRA
Committee, of the development and commercialization status of the Product in the
Knoll Territory. Intercardia will promptly notify CPEC if at any time it
discontinues in its entirety the development or commercialization of the Product
in the Knoll Territory, at which time this Agreement may be terminated by CPEC
as provided in Section 6.2(a) hereof.
4.2 Government Approvals. Intercardia shall be responsible, directly or
through Knoll or any other permitted licensee of Intercardia, for obtaining and
maintaining all approvals, licenses, registrations or authorizations, including
pricing and reimbursement approvals, of any national, state or local regulatory
agency, department, bureau or other government entity, necessary for the
manufacture, use, storage, transport or sale of Product sold in the Knoll
Territory. Any of the foregoing may be filed, obtained or maintained in the name
of Intercardia or any licensee thereof.
4.3 Supply of Bucindolol. Intercardia shall be responsible for obtaining
supplies of Bucindolol drug substance and the finished Product from Knoll AG or
any other qualified third party manufacturer for purposes of the Knoll
Territory. CPEC shall not be obligated to supply Intercardia with any part of
Intercardia's requirements for Bucindolol unless otherwise agreed by the parties
in writing.
<PAGE>
ARTICLE V --
PROTECTION OF LICENSED TECHNOLOGY
5.1 Restrictions on Use of Trademarks. Intercardia shall maintain any
registrations of Trademarks to be used in the Knoll Territory in its name, to
the extent permitted by applicable law. All Trademarks will be assigned to CPEC
upon termination of this Agreement under Section 6.2 hereof. Intercardia agrees
that any rights arising to it from the use of the Trademark(s) included in the
Bucindolol Intellectual Property and any goodwill associated therewith shall
inure to the benefit of CPEC. Intercardia shall not have the right to use a
Trademark for any purpose other than the marketing of a Product under this
Agreement.
5.2 Prosecution of Patents and Trademarks. Intercardia shall be
responsible, at its cost and expense, for prosecuting and maintaining all
Trademarks and patent applications, for filing and prosecuting all patent
reissues and re-examinations, for applying for and obtaining any patent term
extensions, and for paying all maintenance fees, in each case to the extent
related to the Bucindolol Intellectual Property in the Knoll Territory provided,
however, if Intercardia elects not to file, prosecute or maintain a trademark or
patent application or patent included in the Bucindolol Intellectual Property in
the Knoll Territory, CPEC shall have the right, at its sole expense, to file,
prosecute, or maintain such trademark or patent application or patent, and
Intercardia shall cooperate in the filing, prosecution, or maintenance of such
patent application or patent.
5.3 Cooperation. Each party shall cooperate with the other party
including, without limitation, executing all lawful papers and instruments and
making all rightful oaths and declarations, as may be necessary in the
preparation and prosecution of the Bucindolol Intellectual Property for purposes
of the Knoll Territory.
5.4 Infringement.
(a) Each party shall promptly give written notice to the other party
of any infringement or possible infringement of any of the Bucindolol
Intellectual Property by a third party. The Parties will thereafter consult and
cooperate fully to determine a course of action, including, without limitation,
the commencement of legal action by any Party. However, Intercardia, directly or
through its licensee, shall be responsible, at its discretion and at its cost
and expense, for prosecuting any such infringement in the Knoll Territory. In
such event, CPEC shall cooperate with Intercardia, at Intercardia's expense.
Intercardia shall not settle or compromise any such suit in a manner that
imposes any obligations or restrictions on CPEC or its Affiliates, without
CPEC's prior written consent (which consent shall not be unreasonably withheld).
(b) If Intercardia fails to prosecute such infringement in a
reasonable period of time (but in no event later than sixty (60) days after CPEC
provides Intercardia with notice thereof), CPEC shall have the right, but not
the obligation, to prosecute such infringement at its own expense. In such
event, Intercardia shall cooperate with CPEC, at CPEC's expense. CPEC shall not
settle or compromise any such suit in a manner that imposes any obligations or
restrictions on Intercardia or its Affiliates or licensees, without
Intercardia's prior written consent (which consent shall not be unreasonably
withheld).
<PAGE>
ARTICLE VI --
TERMINATION
6.1 Term. This Agreement shall continue in effect until expiration of all
royalty obligations and other obligations hereunder, unless sooner terminated
under this Article VI.
6.2 Termination by CPEC. Subject to the provisions of Section 9.2, CPEC
shall have the right to terminate this Agreement upon sixty (60) calendar days
notice to Intercardia, if
(a) Intercardia notifies CPEC that Intercardia has discontinued the
development or commercialization of the Product in its entirety in the Knoll
Territory; or
(b) CPEC has received notice from Knoll or Intercardia that
Intercardia has defaulted on a payment obligation under the Knoll Agreement and
such default is continuing ninety (90) days after notice to Intercardia of such
default.
6.3 Termination by Intercardia. Subject to the provisions of Section 9.2
hereof, Intercardia shall have the right to terminate this Agreement upon ninety
(90) days notice to CPEC upon breach by CPEC of any covenant, representation or
warranty under this Agreement that is continuing ninety (90) calendar days after
Intercardia gives CPEC written notice of such breach.
6.4 Rights and Duties Upon Termination. Within 30 days after termination
of this Agreement under Sections 6.2 or 6.3:
(a) Each party shall return to the other party any confidential or
proprietary information of the other party received pursuant to this Agreement
or otherwise.
(b) Upon termination of this Agreement by CPEC under Section 6.2,
Intercardia shall deliver to CPEC all Bucindolol Intellectual Property which is
embodied in physical form, shall assign the Trademarks to CPEC (or any designee
thereof), and shall deliver a copy of any and all promotional materials and
other data, information, test results, marketing information, customer lists and
records, distributor lists and records, sales data and projections, and any
other information under Intercardia's control that is related to the
manufacture, marketing or sale of the Product in the Knoll Territory, to the
extent permitted to be delivered by the Knoll Agreement or applicable law.
(c) Upon termination of this Agreement by CPEC under Section 6.2,
Intercardia may sell, to the extent permitted by applicable law, any remaining
inventory and finished goods for a period not to exceed six (6) months, subject
to the royalty obligations and other provisions of this Agreement.
(d) Upon termination of this Agreement by Intercardia under Section
6.3, the licenses granted to Intercardia under Article II hereof shall be fully
paid.
<PAGE>
(e) Upon termination of this Agreement by CPEC under Section 6.2(b)
hereof, CPEC may, but shall not be obligated to, upon written notice to Knoll
and Intercardia, assume all rights and obligations of Intercardia under the
Knoll Agreement. In such event, CPEC shall pay Intercardia a commercially
reasonable royalty on Net Sales of Bucindolol in the Knoll Territory, if and to
the extent CPEC has recovered all amounts previously owed by Intercardia to CPEC
under this Agreement. The royalty to Intercardia shall be negotiated by the
parties in good faith.
(f) Expiration or termination of this Agreement shall not relieve
the Parties of any obligation accruing prior to such expiration or termination.
6.5 Survival of Contents. Notwithstanding anything else in this Agreement
to the contrary, the parties agree that Articles VI, VII, VIII and IX shall
survive the termination of this Agreement, together with any other provisions to
the extent required for the full observation and performance of the surviving
terms by any of the parties hereto.
ARTICLE VII --
DISCLAIMERS
7.1 No Warranty. CPEC MAKES NO EXPRESS OR IMPLIED WARRANTIES, STATUTORY OR
OTHERWISE, CONCERNING THE BUCINDOLOL INTELLECTUAL PROPERTY, THE PRODUCT OR ANY
INFORMATION COMMUNICATED TO INTERCARDIA BY CPEC. SPECIFICALLY, BUT WITHOUT
LIMITING THE FOREGOING, CPEC MAKES NO EXPRESS OR IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS (FOR A PARTICULAR PURPOSE OR OTHERWISE), QUALITY OR
USEFULNESS OF THE TECHNOLOGY OR THE PRODUCT. THE RIGHTS GRANTED HEREUNDER ARE
GRANTED ON AN "AS IS" BASIS.
ARTICLE VIII --
INDEMNITY
8.1 Indemnification by Intercardia. Intercardia will indemnify and hold
harmless CPEC and its Affiliates, employees, officers, directors, stockholders
and agents (a "CPEC Indemnified Party") from and against any and all liability,
loss, damages, costs, or expenses (including reasonable attorneys' fees) which
the CPEC Indemnified Party may incur, suffer or be required to pay resulting
from or arising in connection with (i) the breach by Intercardia of any
covenant, representation or warranty of Intercardia contained in this Agreement,
or (ii) the successful enforcement by a CPEC Indemnified Party of any of the
foregoing.
8.2 Indemnification by CPEC. CPEC will indemnify and hold harmless
Intercardia and its Affiliates, employees, officers, directors, shareholders and
agents (a "Intercardia Indemnified Party") from and against any and all
liability, loss, damages, costs or expenses (including reasonable attorneys'
fees) which the Intercardia Indemnified Party may incur, suffer or be required
to pay resulting from or arising in connection with (i) the breach by CPEC of
any covenant, representation or warranty of CPEC contained in this Agreement, or
(ii) the successful enforcement by a Intercardia Indemnified Party of any of the
foregoing.
<PAGE>
8.3 Conditions to Indemnification. As a condition of indemnification under
Sections 8.1 and 8.2, the party seeking indemnification must give written notice
to the other party of the existence and nature of such claim within thirty (30)
business days after receiving actual knowledge of such claim. Within twenty (20)
days thereafter, the party receiving an indemnity notice relating to a claim by
a third party must elect or decline in writing to accept such claim for defense.
As to any other type of indemnity claim (e.g., for breach), the party receiving
the notice must indicate within the twenty (20)-day period whether it accepts or
disputes the indemnification obligation; if it accepts the obligation, payment
of such amount shall be made no later than 30 days thereafter. If a third party
claim has been accepted for defense by the indemnifying party, the indemnified
party shall not have any authority to resolve, compromise or settle the third
party claim without the indemnifying party's written consent. An indemnified
party may participate in, but not control, the defense of a claim for which it
is receiving indemnity, at its own cost and expense.
8.4 Rights Not Exclusive. The indemnification rights and obligations under
this Article VIII shall be in addition to any other indemnification rights and
obligations of the parties.
ARTICLE IX --
MISCELLANEOUS
9.1 Notices. Any notice required to be given hereunder shall be in
writing, shall refer specifically to this Agreement, and shall be sent by
facsimile transmission (with a confirmatory copy sent by overnight courier), by
courier service (with proof of service), by hand delivery or by certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows, or to such other addressee as shall be properly designated
in accordance with these notice provisions. All such notices shall be deemed to
have been given when received at the address specified below.
IF TO CPEC:
c/o Interneuron Pharmaceuticals, Inc.
99 Hayden Avenue, Suite 200
Lexington, MA 02421
Facsimile: 781-862-3859
Telephone: 781-402-3400
Attention: Glenn L. Cooper, M.D.
<PAGE>
IF TO INTERCARDIA:
Intercardia, Inc.
Post Office Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC 27709
Facsimile: 919-544-1245
Telephone: 919-558-8688
Attention: Clayton I. Duncan
With a copy to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, NC 27607
Facsimile: 919-781-4865
Telephone: 919-781-4000
Attention: Larry E. Robbins, Esq.
9.2 Arbitration. Any disputes arising between the Parties relating to,
arising out of or in any way connected with this Agreement or any term or
condition hereof, or the performance by either Party of its obligations
hereunder, whether before or after termination of the Agreement, shall be
finally resolved by binding arbitration, provided that no termination shall be
effective until resolution of the arbitration referred to in this Section 9.2.
Whenever a Party shall decide to institute arbitration proceedings, it shall
give written notice to that effect to the other Party. The Party giving such
notice shall refrain from instituting the arbitration proceedings for a period
of sixty (60) days following such notice. During such period, the Parties shall
make good faith efforts to amicably resolve the dispute without arbitration. Any
arbitration hereunder shall be conducted under the rules of the American
Arbitration Association. Each such arbitration shall be conducted by a panel of
three arbitrators: one arbitrator shall be appointed by each of Interneuron and
Intercardia and the third shall be appointed by the two arbitrators; provided,
however, if no mutually acceptable arbitrator can be agreed to by the first two
arbitrators, a third shall be appointed by the American Arbitration Association.
Any such arbitration shall be held in New York, New York. The arbitrators shall
have the authority to direct the Parties as to the manner in which the Parties
shall resolve the disputed issues, to render a final decision with respect to
such disputed issues, or to grant specific performance with respect to any such
disputed issue. Judgment upon the award so rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. Nothing
in this Section shall be construed to preclude either Party from seeking
provisional remedies, including but not limited to, temporary restraining orders
and preliminary injunctions, from any court of competent jurisdiction, in order
to protect its rights pending arbitration, but such preliminary relief shall not
be sought as a means of avoiding arbitration. In no event shall a demand for
arbitration be made after the date when institution of a legal or equitable
proceeding based on such claim, dispute or other matter in question would be
barred by the applicable statute of limitations.
<PAGE>
9.3 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by Law or otherwise.
9.4 Confidentiality. Each party may have access through CPEC (including as
a member, director or member of the BEXTRA Committee) or otherwise under this
Agreement to confidential or proprietary information of CPEC or third parties
(including Knoll). In such event, the receiving party shall hold in confidence
and not disclose to any third party any information from the disclosing party
that is marked as confidential or proprietary, and shall cause its
representatives to do the same. This restriction shall not apply to information
that becomes part of the public domain through no fault of the receiving party
or is obtained from a third party who is not under any obligation of
confidentiality. In addition, Intercardia may disclose such information to Knoll
for purposes of the Knoll Agreement, and any receiving party may disclose the
information to a consultant, collaborator or potential collaborator who is
subject to obligations of confidentiality comparable to those set forth in this
Section 9.4, if necessary in connection with the conduct of its responsibilities
under this Agreement. If the receiving party receives a subpoena or becomes
subject to any other legal process requiring disclosure of the disclosing
party's confidential or proprietary information, it will promptly notify the
disclosing party and cooperate to minimize the scope of the disclosure to the
extent practicable. This Section 9.4 shall continue for five years from and
after termination of this Agreement.
9.5 Amendments. Any amendment to this Agreement shall be effective only if
adopted by both parties in writing.
9.6 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of all of the parties and, to the extent permitted by this Agreement,
their successors, legal representatives and assigns.
9.7 Interpretation. Throughout this Agreement, nouns, pronouns and verbs
shall be construed as masculine, feminine, neuter, singular or plural, whichever
shall be applicable. All references herein to "Articles," and "Sections" shall
refer to corresponding provisions of this Agreement.
9.8 Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
9.9 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same
document. All counterparts shall be construed together and shall constitute one
instrument.
<PAGE>
9.10 Governing Law. This Agreement and the rights of the parties hereunder
shall be interpreted in accordance with the laws of the State of Delaware, and
all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
9.11 Consistency with Knoll Agreement. If any term of this Agreement is
inconsistent with the Knoll Agreement as such exists as of the date hereof,
Intercardia shall notify CPEC of such circumstance and the provision of this
Agreement shall be modified to the extent required to be consistent with the
Knoll Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the date first above stated.
INTERCARDIA, INC.
By:__________________________________
Name:
Title:
CPEC LLC
By:___________________________________
Name:
Title:
