<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SENSUS DRUG DEVELOPMENT CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2834 74-2716835
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE) (I.R.S. EMPLOYER
</TABLE>
98 SAN JACINTO BOULEVARD, SUITE 430
AUSTIN, TEXAS 78701
(512) 487-2000
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS)
JOHN A. SCARLETT, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SENSUS DRUG DEVELOPMENT CORPORATION
98 SAN JACINTO BOULEVARD, SUITE 430
AUSTIN, TEXAS 78701
(512) 487-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
BRIAN C. CUNNINGHAM, ESQ. ALAN L. JAKIMO, ESQ.
ROBERT J. BRIGHAM, ESQ. BROWN & WOOD LLP
MATTHEW W. SONSINI, ESQ. ONE WORLD TRADE CENTER
COOLEY GODWARD LLP NEW YORK, NEW YORK 10048-0557
FIVE PALO ALTO SQUARE (212) 839-5300
3000 EL CAMINO REAL
PALO ALTO, CALIFORNIA 94036
(650) 843-5000
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF SECURITIES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par value......... $46,000,000 $13,750
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</TABLE>
(1) Includes the shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act
of 1933, as amended.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used
in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent international offering outside
the United States and Canada (the "International Prospectus"). The complete
U.S. Prospectus follows immediately. Following the U.S. Prospectus are certain
pages of the International Prospectus, which include an alternate front cover
page, a section titled "Certain United States Federal Tax Considerations for
Non-United States Holders," an alternate underwriting section and an alternate
back cover page. All other pages of the U.S. Prospectus and the International
Prospectus are identical.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 28, 1998
PROSPECTUS
SHARES
[LOGO OF SENSUS]
SENSUS DRUG DEVELOPMENT CORPORATION
COMMON STOCK
----------
All of the shares of Common Stock, par value $0.001 per share
("Common Stock"), offered hereby are being offered by Sensus Drug Development
Corporation, a Delaware corporation ("Sensus" or the "Company"). Of the
shares of Common Stock offered hereby, shares are being offered for
sale initially in the United States and Canada by the U.S. Underwriters (the
"U.S. Offering") and shares are being offered for sale initially in a
concurrent offering outside the United States and Canada by the International
Managers (the "International Offering" and, together with the U.S. Offering,
the "Offerings.") The initial public offering price and the underwriting
discount per share will be identical for both offerings.
Prior to the Offerings, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for information
related to the factors to be considered in determining the initial public
offering price of the Common Stock. The Company has applied to have the Common
Stock approved for inclusion on the Nasdaq National Market under the symbol
"SENS."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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- -------------------------------------------------------------------------------
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO PUBLIC DISCOUNT(1) TO COMPANY(2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.......... $ $ $
- -------------------------------------------------------------------------------
Total(3)........... $ $ $
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the U.S. Underwriters and the International
Managers options to purchase up to an additional shares and
shares of Common Stock, respectively, in each case exercisable
within 30 days after the date hereof, solely to cover over-allotments, if
any. If such options are exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about , 1998.
----------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
BANCAMERICA ROBERTSON STEPHENS
----------
The date of this Prospectus is , 1998.
<PAGE>
[A silhouette of a patient with acromegaly is depicted, showing enlarged hands
and feet, thickened brow and protruding jaw. A graphic depicts the cause of
acromegaly to be a tumor of the pituitary gland, leading to excess secretion
of growth hormone and production of Insulin-like Growth Factor-I. The
associated consequences of increased Insulin-like Growth Factor-I levels are
demonstrated with graphics of the principal organs affected in acromegaly--an
enlarged heart, the potential for colon cancer, bone and cartilage changes and
a diseased pancreas associated with diabetes.]
[A graphic shows the effect of Trovert in blocking the action of growth
hormone and thus decreasing the production of Insulin-like Growth Factor-I in
these patients.]
[CAPTION FOR ARTWORK:]
Acromegaly is caused by excess levels of Insulin-like Growth Factor ("IGF-
I"), which result from excess secretion of growth hormone ("GH") by non-
malignant pituitary tumors. The most common symptoms of acromegaly are soft-
tissue swelling, abnormal growth of the hands and feet, sweating and
headaches. Over several years, the brow and lower jaw protrude, the nasal bone
enlarges and spacing of the teeth increases. Acromegaly is associated with
serious health consequences, including diabetes mellitus, hypertension, and
increased risk of cardiovascular disease and cancer. Sensus' first drug
candidate, Trovert, is currently being tested in a Phase III clinical trial.
Trovert has been genetically engineered to interfere with GH action. Based on
the results of Phase II clinical trials, Sensus believes that Trovert may
offer a significantly improved efficacy and side-effect profile compared to
existing drug therapies for acromegaly. There can be no assurance that Sensus
will receive regulatory approval of Trovert for commercial marketing.
Sensus(TM), Trovert(TM), the Sensus Drug Development Corporation logo and
the Trovert logo are trademarks of the Company. All other brand names or
trademarks appearing in this Prospectus are the property of their respective
holders.
----------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO
COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated,
all information in this Prospectus assumes (i) that the Underwriters' over-
allotment option will not be exercised, and (ii) the conversion of all shares
of the Company's Preferred Stock, $0.001 par value per share ("Preferred
Stock"), into Common Stock upon the closing of the Offerings. See "Description
of Capital Stock" and "Underwriting."
THE COMPANY
Sensus is an emerging pharmaceutical company that is developing drugs to
treat endocrine and metabolic diseases and disorders. The Company's first drug
candidate, Trovert (B2036PEG), belongs to a novel class of compounds called
growth hormone antagonists ("GHAs") that inhibit the action of growth hormone
("GH"). Trovert is initially targeted for the treatment of acromegaly, a
disease caused by excess GH, and certain complications associated with
diabetes. The Company is currently conducting a multi-center Phase III clinical
trial of Trovert for post-surgical treatment of acromegaly and intends to file
for U.S. and European regulatory approval for this indication in the second
half of 1999. In addition, the Company is currently conducting an initial Phase
II clinical trial of Trovert for diabetic retinopathy, the leading cause of
blindness in the United States.
Acromegaly results from excess secretion of growth hormone by non-malignant
pituitary tumors. Over-secretion of GH stimulates liver and other cells to
produce excess levels of Insulin-like Growth Factor-I ("IGF-I"), previously
known as somatomedin-C, resulting in the manifestations of the disease. These
manifestations include soft-tissue swelling, abnormal growth of the hands and
feet, overgrowth of bone and cartilage in the face and other parts of the body,
and enlargement of body organs, including the liver, spleen, kidneys and heart.
Acromegaly is associated with significantly increased mortality due to
cardiovascular disease and cancer. The primary goal of existing treatments for
acromegaly is to reduce GH and IGF-I levels to normal in order to reduce the
morbidity and mortality associated with this disease. While the primary
treatment for acromegaly is surgical removal of the pituitary tumor, many
patients, particularly those with large tumors, also require post-surgical drug
therapy, radiation therapy, or both.
Sensus estimates that in North America, Europe and Japan there are currently
more than 40,000 diagnosed acromegalics, with approximately 20,000 who receive
drug therapy. The most widely used of the drugs currently approved for
acromegaly include certain somatostatin analogs that inhibit the secretion of
GH. A significant portion of acromegalic patients treated with somatostatin
analogs, however, do not respond to these drugs, and a substantial portion
experience gastrointestinal and other adverse reactions ("side effects"). Based
on the results of its Phase II clinical trials, Sensus believes that Trovert
may offer a significantly improved efficacy and side-effect profile compared to
drugs currently approved for acromegaly.
The Company is pursuing acromegaly as an initial indication for Trovert
because: (i) Trovert may prove to be more effective and be accompanied by
significantly fewer side effects than currently approved drugs in a large
portion of acromegalic patients; (ii) the disease mechanism for acromegaly is
well understood; (iii) IGF-I levels are easily measured and accurately reflect
the severity of the patient's disease, which should facilitate clinical
development of Trovert; (iv) acromegaly is a chronic disease frequently
requiring long-term medical therapy; (v) Trovert's current designation by the
U.S. Food and Drug Administration (the "FDA") as an "Orphan Drug" for the
treatment of acromegaly may provide certain regulatory, marketing and tax
benefits to the Company; and (vi) treatment of acromegaly in the United States
and Europe is primarily provided at a limited number of medical centers and
thus represents a niche market that can be accessed with a relatively small
sales force.
The Company believes that Trovert may also be effective in treating certain
complications associated with Type 1 and Type 2 diabetes. In April 1998, Sensus
began an initial Phase II clinical trial in patients with diabetic retinopathy.
In 1999, Sensus plans to begin an initial Phase II clinical trial in patients
with diabetic nephropathy,
3
<PAGE>
a disease that leads to kidney failure. In addition to Trovert, Sensus has
several other growth hormone antagonists in pre-clinical development.
Sensus' management has significant experience in drug development, enabling
the Company to manage effectively the pre-clinical studies and clinical trials
of its drug candidates conducted by third-party research organizations. The
Company has licensed Trovert and other GHA technologies from Genentech, Inc.
("Genentech") and Ohio University's Edison Biotechnology Institute ("OU/EBI").
Sensus intends to sell its proposed products for niche market indications (such
as acromegaly) using a small direct sales force. The Company will seek
marketing or distribution partners for those indications which are likely to
require substantial expenditures for clinical development or sales and
marketing (such as certain complications associated with diabetes). Sensus
currently outsources the production of Trovert to a contract manufacturing
organization and anticipates that, if the drug is approved for sale by the FDA
and other regulatory authorities, commercial quantities will be produced by one
or more contract manufacturers.
The Company's objective is to establish a leading position in the treatment
of endocrine and metabolic diseases and disorders. The Company intends to
achieve this objective by: (i) gaining regulatory approvals initially in the
United States and the European Union for the use of Trovert in the post-
surgical treatment of acromegaly; (ii) retaining commercial rights to Trovert
and other products for niche market indications and establishing a small direct
sales force focused on the acromegaly market; (iii) managing the clinical and
regulatory development of Trovert and other drugs internally; (iv) outsourcing
manufacturing; (v) developing Trovert for additional indications through
clinical trials and obtaining related regulatory approvals; and (vi) acquiring
and in-licensing additional products and technologies.
The Company's executive offices are located at 98 San Jacinto Boulevard,
Suite 430, Austin, Texas 78701. Its telephone number is (512) 487-2000.
4
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company..... shares
Common Stock to be outstanding after the
Offerings (1).......................... shares
Use of proceeds......................... The net proceeds to be received by the
Company from the Offerings will be
used for clinical trials of Trovert,
additional research and development
activities, commercialization of
Trovert, including the establishment
of a direct sales and marketing
organization and contract
manufacturing, and for working capital
and general corporate purposes,
including repayment of debt. See "Use
of Proceeds."
Proposed Nasdaq National Market Symbol.. SENS
</TABLE>
- --------
(1) Based on the number of shares outstanding as of June 30, 1998. Excludes (i)
1,415,000 shares of Common Stock subject to outstanding options issued
under the Company's 1996 Stock Option Plan, as amended (the "1996 Stock
Option Plan"); (ii) 160,000 shares of Common Stock subject to other
outstanding options; and (iii) 230,000 shares of Common Stock reserved for
issuance upon exercise of an outstanding warrant. See "Management--Employee
Benefit Plans," "Description of Capital Stock" and "Underwriting."
RISK FACTORS
Purchasers of Common Stock in the Offerings should carefully consider the
risk factors set forth under the caption "Risk Factors" and the other
information included in this Prospectus prior to making an investment decision.
See "Risk Factors."
5
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION SIX MONTHS ENDED INCEPTION
(JUNE 23, 1994) YEAR ENDED DECEMBER 31, JUNE 30, (JUNE 23, 1994)
TO DECEMBER 31, -------------------------- ------------------ TO JUNE 30,
1994 1995 1996 1997 1997 1998 1998
--------------- ------- ------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues .............. $ -- $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Research and
development ......... 110 3,322 5,021 10,965 2,775 7,493 26,911
General and
administrative ...... 390 1,127 1,097 1,597 761 1,557 5,768
----- ------- ------- -------- -------- -------- --------
Total expenses ........ 500 4,449 6,118 12,562 3,536 9,050 32,679
===== ======= ======= ======== ======== ======== ========
Loss from operations .. (500) (4,449) (6,118) (12,562) (3,536) (9,050) (32,679)
Interest
income/(expense),
net ................. (17) (83) (35) 73 (33) 177 115
----- ------- ------- -------- -------- -------- --------
Net loss .............. $(517) $(4,532) $(6,153) $(12,489) $ (3,569) $ (8,873) $(32,564)
===== ======= ======= ======== ======== ======== ========
Pro forma diluted net
loss per share (1) ... $ (0.82) $ (0.39)
======== ========
Shares used to compute
pro forma diluted net
loss per share (1) ... 15,238 22,992
======== ========
<CAPTION>
PRO FORMA
ACTUAL AS ADJUSTED
JUNE 30, JUNE 30,
1998 1998(2)
-------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ............................................... $ 3,774
Working capital ......................................................... 1,421
Total assets ............................................................ 6,048
Total debt .............................................................. 1,600
Deficit accumulated during the development stage ........................ (32,564)
Total stockholders' equity .............................................. 1,970
</TABLE>
- --------
(1) Pro forma diluted net loss per share reflects the conversion of all
outstanding shares of Preferred Stock into shares of Common Stock. See Note
1 of Notes to Financial Statements for a description of the shares used in
calculating pro forma diluted net loss per share.
(2) Presented on a pro forma as adjusted basis to give effect to (i) the
conversion of all outstanding shares of Preferred Stock into an aggregate
of 16,284,604 shares of Common Stock upon completion of the Offerings and
(ii) the issuance of shares of Common Stock by the Company at
the initial public offering price of $ per share (the midpoint of
the estimated range of the initial public offering price) and the
application of the estimated net proceeds. See "Use of Proceeds" and
"Capitalization."
7
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Accordingly, prospective investors should consider carefully
the following factors, together with the other information contained in this
Prospectus, in evaluating the Company and its business before purchasing the
shares of Common Stock offered hereby. This Prospectus contains forward-
looking statements that involve risk and uncertainty. Actual results and the
timing of certain events could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
other factors discussed elsewhere in this Prospectus. See "Special Note
Regarding Forward-Looking Statements."
UNCERTAINTIES RELATED TO CONDUCTING CLINICAL TRIALS AND CLINICAL TRIAL
RESULTS; DEPENDENCE ON SINGLE DRUG CANDIDATE
Trovert is Sensus' first drug candidate, and acromegaly is the Company's
initial target indication for this drug. The Company has not yet completed the
clinical trial program for Trovert or any other product and, accordingly, has
not begun to market or generate revenue from the commercialization of any
products. The Company's clinical trial program for Trovert includes a Phase
III clinical trial for acromegaly that began in July 1998 and an additional
clinical trial for acromegaly expected to begin in the fall of 1998. No
assurance can be given that the Company will successfully complete its
clinical trial program for Trovert in a timely manner and with a successful
demonstration of safety and effectiveness. While the results of initial
clinical trials can often be encouraging, such results are not necessarily
predictive of the results obtained from subsequent and more extensive testing.
Historically, many pharmaceutical companies have suffered significant setbacks
in advanced clinical trials, even after promising results in earlier trials.
The rate of completion of any clinical trial depends upon a number of factors,
including subject enrollment in the trial. Delays in subject enrollment can
result in increased costs and trial delays. Furthermore, a clinical trial may
have to be suspended or terminated prior to completion if the subjects
participating in the trial are experiencing a high rate of side effects or are
being exposed to unacceptable health risks, or if other regulatory
requirements are not being satisfied. Sensus' failure to complete its clinical
trial program of Trovert for acromegaly in a timely manner and with a
successful demonstration of safety and effectiveness would have a material
adverse effect on the Company's business, financial condition and results of
operations.
The remainder of the Company's drug candidates are still in research and
development or pre-clinical studies. Any additional product candidates will
require significant research, development, pre-clinical and clinical testing,
regulatory approval and expenditures of resources prior to commercialization.
The Company expects, therefore, to be dependent on completing the clinical and
regulatory development of Trovert and generating revenues from the sale of
Trovert while it continues the research and clinical and regulatory
development of its other drug candidates. There can be no assurance that the
Company will be successful in its efforts to develop Trovert for other
indications, such as diabetic retinopathy and diabetic nephropathy. Although
the Company is currently seeking to develop other drug candidates and to
expand the number of drug candidates it has under development, there can be no
assurance that it will be successful in such development or expansion. If
Trovert does not successfully complete clinical testing and meet applicable
regulatory requirements, or is not successfully manufactured or marketed, the
Company may not have the financial resources to continue research and
development of other product candidates. See "--No Assurance of Marketing
Approval; Government Regulation" and "Business--Acromegaly" and "--Diabetes."
NO ASSURANCE OF MARKETING APPROVAL; GOVERNMENT REGULATION
The Company's research and development activities, pre-clinical studies,
clinical trials, and the manufacturing and marketing of its products are
subject to extensive regulation by the FDA and regulatory authorities outside
the United States. Satisfying the regulatory requirements for approval of a
drug takes many years and requires the expenditure of substantial resources.
Although the FDA may be consulted in developing protocols for clinical trials,
there is no assurance that the FDA will accept the clinical trials as adequate
or well-controlled or accept the results of those trials. Data obtained from
pre-clinical and clinical activities are
8
<PAGE>
susceptible to varying interpretations which could delay, limit or prevent FDA
regulatory approval. Similarly, the FDA may determine that product candidates
are not eligible for or will not receive expedited review, whether or not the
FDA has previously indicated that such product candidates may be eligible for
expedited review. In addition, delays or rejections may result from changes in
FDA policies about drug approval during the period of product development.
Similar delays may also be encountered in other countries. There can be no
assurance that regulatory review will be conducted in a timely manner or that
regulatory approval will be obtained for any drugs developed by the Company,
including Trovert. Moreover, if regulatory approval for a product candidate is
granted, the approval may entail limitations on the indicated uses for which
it may be marketed. Further, even if regulatory approval is obtained, a
marketed drug, its bulk chemical supplier, its manufacturer and its
manufacturing facilities are subject to continual review and periodic
inspections, and discovery of previously unknown problems with a product,
supplier, manufacturer or facility may result in restrictions on the sale of
the Company's products, including a withdrawal of such products from the
market. Failure to comply with the applicable regulatory requirements can,
among other things, result in fines, suspensions of regulatory approvals,
product recalls, operating restrictions and criminal prosecution. Further,
additional government regulation may be established which could prevent or
delay regulatory approval of the Company's products.
The Company believes that regulatory approvals for the New Drug Application
("NDA") in the United States and Marketing Authorization Application ("MAA")
in the European Union that the Company plans to file for Trovert for treatment
of acromegaly will involve, among other uncertainties, the resolution of three
key assumptions. First, the Company believes that the respective regulatory
authorities will be able to determine the approvability of Trovert for
acromegaly using reduction of IGF-I levels as the principal clinical endpoint,
rather than improvement of clinical symptoms (such as soft tissue swelling,
sweating and headaches) or the number of subjects who achieve normalization of
IGF-I levels. This belief is based on the central role played by excess IGF-I
in the pathology of acromegaly, the technical difficulties inherent in
measuring clinical symptoms of the disease, and the criteria that regulatory
authorities have historically used in approving somatostatin analogs. Second,
the Company believes that the elevated GH levels that may remain in Trovert-
treated patients will not result in resurgence or growth of the patient's
pituitary tumor or have other serious side effects that would, if present,
have a significant adverse impact on the assessment of the safety of Trovert.
Third, the Company believes that questions regarding the possible accumulation
of Trovert metabolites in the patient and possible side effects due to the
presence of polyethylene glycol polymers on Trovert will not significantly
delay the approval of the NDA or MAA if Trovert is otherwise determined to be
safe and effective. In the event that any uncertainties relating to these
assumptions are not resolved in the Company's favor, the Company could be
required to conduct additional preclinical studies or clinical trials before
regulatory approval is granted, thereby significantly delaying any such
approval, or the product could be determined to be non-approvable by one or
more regulatory agencies. See "Business--Government Regulation."
RELIANCE ON CONTRACT MANUFACTURERS; SCARCITY OF RAW MATERIALS
The Company does not operate its own manufacturing facilities and relies
instead on contract manufacturers to produce its proposed products for
research, pre-clinical studies and clinical trials. The Company believes that
there are relatively few contract manufacturers that are capable of
manufacturing the Company's proposed products, including Trovert, and
currently only one manufacturer, Covance Biotechnology Services Inc. ("CBSI"),
is producing Trovert for the Company's research, pre-clinical studies and
clinical trials. The Company has not signed an agreement for the supply of the
commercial quantities of Trovert required for market launch and ongoing
commercial sales. Moreover, the Company believes that CBSI does not currently
have the capacity to supply quantities of Trovert sufficient to satisfy
anticipated demand in the year following market launch. Although the Company
has identified a limited number of additional contract manufacturers that it
believes are capable of manufacturing Trovert, there can be no assurance that
the Company will be able to enter into manufacturing agreements on a timely
basis on acceptable terms or at all. The supply of Trovert for its market
launch and commercialization will require the Company and CBSI to implement
certain increases in scale and related manufacturing and process improvements,
and to establish an internal quality assurance program to support the contract
production and testing of Trovert. No assurance can be given that these
increases in scale,
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related improvements and quality assurance program will be successfully
implemented, and failure to do so could result in a delay of market launch,
higher cost of goods or an inadequate supply of drug to meet market demand if
regulatory approval is obtained.
The Company will also need to undertake further testing of the stability of
Trovert as a bulk drug substance and final drug product. While the Company
believes that future stability studies will support an acceptable shelf life,
there can be no assurance that Trovert will have adequate stability in its
current formulation.
Furthermore, the proposed products under development by the Company have
never been manufactured on a commercial scale, and there can be no assurance
that such products can be manufactured at a cost or in quantities necessary to
make them commercially viable. The production of Trovert requires certain key
raw materials for which there are a limited number of suppliers, and there can
be no assurance that such raw materials will be supplied on acceptable terms
in quantities that are adequate to produce Trovert for clinical trials or on a
commercial scale. If the Company should encounter delays or difficulties in
its relationship with CBSI or any other manufacturers, the Company's pre-
clinical and clinical testing schedule could be delayed, resulting in delays
in the submission of applications for regulatory approval or the market
introduction of its products. Any such delays, shortages of supply, or shelf
life problems could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Process
Development and Manufacturing."
LIMITED SALES AND MARKETING EXPERIENCE; LACK OF DISTRIBUTION CAPABILITY;
DEPENDENCE ON FUTURE COLLABORATORS
The Company has not previously sold, marketed or distributed any products.
To market and sell any products directly, the Company must develop a sales and
marketing organization with technical expertise and supporting distribution
capability. Significant additional expenditures, management resources and time
will be required for the Company to develop a sales and marketing organization
and supporting distribution capability. The Company intends to market Trovert
directly for the treatment of acromegaly in the United States and Europe and
to enter into marketing agreements with one or more parties for other
indications, territories and drug candidates. To the extent that the Company
enters into marketing or distribution arrangements with third parties, any
revenues the Company receives will depend upon the efforts of these parties.
The amount and timing of funds and other resources to be devoted under such
arrangements will be controlled by the other parties and will be subject to
financial and other difficulties that the other parties may experience. There
can be no assurance that the Company will be able to establish in-house
marketing, sales and distribution capabilities or relationships with third
parties, or that it will be successful in gaining market acceptance for its
products. To the extent that the Company enters into co-promotion or other
licensing arrangements, any revenues received by the Company will depend upon
the efforts of third parties, and there can be no assurance that such efforts
will be successful. There can be no assurance that any third party will market
the Company's products successfully or that any third-party collaboration will
be on terms favorable to the Company. If the Company's marketing partner does
not market a product successfully, the Company's business could be adversely
affected. There can be no assurance that the Company will be able to establish
sales, marketing and distribution capabilities, that it will be able to enter
into one or more collaborative marketing agreements, or that it or its
collaborators, if any, will be successful in gaining marketing acceptance for
any products that the Company may develop. The Company's failure to establish
marketing capabilities or to enter into marketing arrangements with third
parties would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Sales and
Marketing."
EARLY STAGE OF DEVELOPMENT; HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT;
UNCERTAINTY OF FUTURE PROFITABILITY
The Company is at an early stage of development and currently has no
marketed products. To date, the Company has been engaged in research and
development activities and has not generated any revenues from the sale of
products or otherwise. The Company has incurred significant operating losses
since inception. As of June 30, 1998, the Company had an accumulated deficit
of approximately $32.6 million. The process of
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developing the Company's products requires significant research and
development, pre-clinical testing and clinical trials, as well as regulatory
approvals. In addition, commercialization of the Company's drug candidates
will require manufacturing scale-up and certain other activities related to
manufacturing and the establishment of a sales and marketing organization.
These activities, together with the Company's general and administrative
expenses, are expected to result in operating losses for the foreseeable
future. In addition, the Company's results of operations will for the next
several years be dependent upon the approval and sale of a single proposed
product, Trovert, for the treatment of acromegaly. The Company's ability to
achieve profitability is dependent, in part, on its ability to successfully
complete development of its proposed products, obtain required regulatory
approvals and manufacture and market its products directly or through
partners. There can be no assurance that the Company will achieve revenues or
profitability in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company may be required to raise substantial additional capital over a
period of several years in order to develop and commercialize its products.
The Company's future capital requirements will depend on numerous factors,
including the costs associated with developing, manufacturing and
commercializing its products, developing a direct marketing and sales force,
maintaining existing, or entering into future, licensing and distribution
agreements, protecting intellectual property rights, expanding facilities and
consummating possible future acquisitions of technologies, products or
businesses. The Company may consume available resources more rapidly than
currently anticipated, resulting in the need for additional funding sooner
than originally planned. The Company may be required to raise additional
capital through a variety of sources, including the public equity market,
private equity financings, collaborative arrangements, and public or private
debt. There can be no assurance that additional capital will be available on
favorable terms, if at all. If adequate funds are not available, the Company
may be required to significantly reduce or refocus its operations or to obtain
funds through arrangements that may require the Company to relinquish rights
to certain of its products, technologies or potential markets, which would
have a material adverse effect on the Company's business, financial condition
and results of operations. To the extent that additional capital is raised
through the sale of equity, the issuance of such securities would result in
ownership dilution to the Company's existing stockholders. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in large part on the ability of its
licensors to obtain patents and the Company's ability to license or acquire
the rights to additional patents, maintain trade secrets and operate without
infringing the proprietary rights of others, both in the United States and in
other countries. Pursuant to the OU/EBI License Agreement, Sensus has acquired
an exclusive license to certain U.S. and foreign patents and pending patent
applications relating to certain GHA technologies. Pursuant to the Genentech
Agreement, the Company has acquired an exclusive license, for treating,
diagnosing or preventing GH-related diseases in humans, to products containing
certain GHAs as well as certain related compounds identified by Genentech
during the three-year period following July 11, 1994 under patents and patent
applications specified in such agreement. The patent positions of
biotechnology and pharmaceutical companies can be highly uncertain and involve
complex legal and factual questions, and therefore the breadth of claims
allowed in biotechnology and pharmaceutical patents and their enforceability
cannot be predicted. Therefore, there can be no assurance that additional
patents will issue in respect of applications that have been licensed by the
Company or that any patent will issue on technology arising from additional
research being funded or licensed by the Company. In addition, there can be no
assurance that the claims in any existing or subsequently issued patent will
be sufficient to protect the Company's products or that such patents will not
be challenged, invalidated, held unenforceable or circumvented, or that the
rights granted thereunder will provide proprietary protection or competitive
advantages to the Company.
The commercial success of Sensus also will depend, in part, on the Company's
not infringing patents issued to others and not breaching the technology
license agreements pursuant to which intellectual property utilized in
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any of the Company's products is licensed by the Company. A number of
pharmaceutical companies, biotechnology companies, universities and research
institutions have filed patent applications or received patents in the areas
of the Company's programs or in the broad area of biotechnology. Some of these
applications or patents may limit or preclude the Company's patents or patent
applications, or conflict in certain respects with claims made under the
Company's patents or patent applications. Such a conflict could result in a
significant reduction of the coverage of the Company's patents or patent
applications, if issued. Where patents exist or if patents are issued that are
infringed by the manufacture, use or sale of any of the Company's products,
the Company may be required to obtain licenses to these patents or to develop
or obtain alternative technology. If any licenses are required, there can be
no assurance that the Company will be able to obtain them on commercially
favorable terms, if at all. The Company's breach of an existing license or
failure to obtain a license to technology required to commercialize its
products could have a material adverse impact on the Company. Litigation,
which could result in substantial costs to the Company, may also be necessary
to enforce any patents issued to or licensed by the Company, or to determine
the scope and validity of third-party proprietary rights. If a third party
prepares and files a patent application in the United States that claims
technology also claimed by a patent or patent application of the Company or
that claims technology that is obvious from that claimed by the Company's
patents or patent applications, the Company may have to participate in
interference proceedings declared by the Patent and Trademark Office ("PTO")
to determine priority of invention, which could result in substantial costs to
the Company, even if the eventual outcome is favorable to the Company. An
adverse outcome could subject the Company to significant liabilities to third
parties and require the Company to license disputed rights from third parties
or to cease using such technology. Patents or patent applications licensed to
the Company by different owners and that claim the same invention or obvious
variations of the same invention may also result in costly interference
proceedings for the Company and result in loss of patent rights.
The Company also relies on trade secrecy to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. Sensus protects its proprietary technology and processes, in part,
by confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or
that the Company's trade secrets will not otherwise become known or be
independently discovered by competitors. See "Business--Strategic Licensing
Agreements" and "--Patents and Proprietary Rights."
COMPETITION; RAPID TECHNOLOGICAL CHANGE
The pharmaceutical industry is intensely competitive and the Company is
pursuing areas of product development in which there is potential for
extensive technological innovation in relatively short periods of time. Rapid
technological change or developments by others may result in the Company's
technologies or potential products becoming obsolete or noncompetitive. The
Company's competitors may succeed in developing technologies or products that
are more effective than those of the Company. Many companies, including
biotechnology, chemical and pharmaceutical companies, are actively engaged in
the research, development and sale of products that may compete with the
Company's development programs for the treatment of acromegaly and certain
complications of diabetes. Many of these companies have substantially greater
financial, technical and marketing resources than the Company. In addition,
some of these companies have considerable experience in pre-clinical studies,
clinical trials and other regulatory approval procedures. Moreover, certain
academic institutions, governmental agencies and other research organizations
are conducting research and developing technology in areas in which the
Company is working. These institutions may market competitive commercial
products based on this technology directly or through joint ventures and may
license this technology to third parties for further development and
commercialization. There can be no assurance that the Company's competitors
will not develop more efficacious or more affordable products, or achieve
earlier product development, patent protection, regulatory approval or product
commercialization than the Company.
Among the drug products that compete, or are being developed to compete, in
the Company's targeted markets, particularly acromegaly, are somatostatin
analogs, dopamine agonists and somatostatin receptor type-specific agonists.
Currently, approximately 80% of acromegalic patients utilizing drug therapy
are treated with Sandostatin, either as monotherapy or in combination with a
dopamine agonist. Sandostatin is a somatostatin
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analog that is administered by subcutaneous injection three times each day. A
longer-acting form of Sandostatin, Sandostatin LAR ("Sandostatin LAR"), which
requires monthly intramuscular injections, has been approved and launched in
several countries in Europe, and the NDA for Sandostatin LAR was recently
submitted to the FDA. The efficacy and side-effect profile of Sandostatin LAR
appears to be very similar to Sandostatin. Somatuline lanreotide
("Somatuline") is another long-acting somatostatin analog. Somatuline works by
the same mechanism as Sandostatin and requires intramuscular injections every
7 to 14 days. Somatuline has been approved in four European countries, and is
being tested in a Phase III clinical trial program in the United States for
the treatment of acromegaly. Dopamine agonists are another class of drugs used
for treating acromegaly. Dopamine is a neurotransmitter that is produced in
the brain and acts as a hormone. Parlodel bromocriptine ("Parlodel") is a
dopamine agonist that reduces GH secretion in some patients but normalizes GH
and IGF-I levels in less than 20% of patients. Side effects of Parlodel
include headaches, nasal stuffiness, nausea, vomiting and depression, causing
the product to be used infrequently today. Dostinex cabergoline ("Dostinex"),
a more specific dopamine agonist, is currently being studied in acromegaly but
is not approved in the United States. Certain somatostatin receptor type-
specific agonists are under development at several companies. These
somatostatin agonists are specific for one of the several known subtypes of
the somatostatin receptor. It is possible that some of the side effects of the
current somatostatin agonists may be avoided and their efficacy may be
enhanced by use of such a receptor type-specific product. The Company also is
aware of a Japanese company that is developing a GHA based on a mutated form
of GH originally discovered in a child afflicted with dwarfism. There can be
no assurance that, if approved, the Company's products will compete
successfully against existing drugs or new drugs that may be developed by
others or that the Company will be able to price its products at the same
level as these existing or new drugs. See "Business--Acromegaly--Current
Treatments" and "--Competition."
DEPENDENCE ON THIRD PARTIES TO CONDUCT PRE-CLINICAL STUDIES AND CLINICAL
TRIALS
The Company relies and will continue to rely on third party contract
research organizations and other research institutions to conduct its pre-
clinical studies and clinical trials. Dependence on such third parties may
result in delays in completing, or the failure to complete, such trials if
such third parties fail to perform under their agreements with the Company or
fail to meet regulatory standards in the performance of their obligations
under such agreements. Moreover, a significant portion of the Company's
research and development is, or will be, conducted under sponsored research
programs with several teaching hospitals, universities and other research
institutions. The Company depends on the availability of the principal
investigator for each such program, and the Company cannot assure that these
individuals or their research staffs will be available to conduct research and
development. In the case of acromegaly, there is a particularly small number
of physicians and research staffs who specialize in treating this disease.
Furthermore, the Company's academic collaborators are not employees of the
Company. As a result, the Company has limited control over their activities
and can expect that only limited amounts of their time will be dedicated to
Company activities. The Company's academic collaborators may have
relationships with other commercial entities, some of whom are known to
compete with the Company. In addition, the Company may encounter significant
delays in introducing its products into certain markets or find that the
development, manufacture or sale of its products in such markets is adversely
affected by the absence of certain collaborative or contractual agreements.
See "--Reliance on Contract Manufacturers; Scarcity of Raw Materials,"
"Business--Strategic Licensing Agreements" and "--Patents and Proprietary
Rights."
DEPENDENCE ON, AND NEED TO ATTRACT AND RETAIN, KEY EMPLOYEES AND CONSULTANTS
The Company is highly dependent on the principal members of its scientific
and management staff. Currently, the Company is seeking to hire certain senior
executives, including a Chief Financial Officer. The Company also relies on
consultants and advisors, including its scientific advisors, to assist the
Company in formulating its research and development strategy. Attracting and
retaining qualified personnel, consultants and advisors will be critical to
the Company's success. To pursue its product development and marketing plans,
the Company will need to hire additional qualified scientific personnel to
perform research and development, as well as personnel with expertise in
clinical testing, government regulation, manufacturing and marketing.
Expansion
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in product development, sales and marketing is also expected to require the
addition of management personnel and the development of additional expertise
by existing management personnel. The Company faces competition for qualified
individuals from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. Competition for qualified
personnel is intense, and the process of hiring such qualified personnel is
often lengthy. There can be no assurance that the Company can retain and
recruit such personnel on a timely basis, if at all. The Company's management
and other employees may voluntarily terminate their employment with the
Company at any time. The loss of the services of key personnel, or the
inability to attract and retain additional qualified personnel, could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management."
MANAGEMENT OF GROWTH
The Company's success will depend in significant part on the expansion of
its operations and the effective management of growth, which will place
significant demands on the Company's management, operational and financial
resources. To manage such growth, the Company must expand its facilities,
augment its operational, financial and management systems and hire and train
additional qualified personnel. The Company's failure to manage growth
effectively would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Future Operations" and
"Business."
RISKS OF INTERNATIONAL OPERATIONS
The Company expects that international operations will contribute
significantly to the Company's success. International operations are subject
to a number of risks, including government regulation, political and economic
instability or conflicts, trade restrictions, changes in tariffs and taxes,
difficulties in staffing and managing international operations, problems in
establishing or managing distributor relationships and general economic
conditions. In addition, fluctuations in the value of foreign currencies
relative to the U.S. dollar may adversely affect the Company's business,
financial condition and results of operations. See "Business--Sales and
Marketing."
HEALTH CARE REIMBURSEMENT; GOVERNMENTAL REFORMS
The Company's ability to commercialize its products successfully in the
United States, Europe and other jurisdictions, if regulatory approval of such
products is obtained, will depend in part and may depend significantly on the
extent to which reimbursement for the costs of such products and related
treatments will be available to recipients from government health
administration authorities, private health care insurers, health maintenance,
managed care and similar organizations. Third-party payers are increasingly
challenging the pricing of medical products and services. Significant
uncertainty exists as to the reimbursement status of newly approved health
care products, and there can be no assurance that coverage will be available
to users of any of the Company's proposed products that are approved and
marketed. In the United States, government and other third-party payers are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new products approved for marketing. If
third-party reimbursement is not available for the Company's proposed products
or is inadequate, the market acceptance of these products could be adversely
affected, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
The trend toward managed health care in the United States, the growth of
organizations such as HMOs, and legislative proposals to reform health care
and government insurance programs could adversely affect the amount of
reimbursement available from governmental or private payers for pharmaceutical
products or could affect the ability to set prices for newly approved
therapeutic products, such as those proposed by the Company. It is uncertain
what proposals will be adopted or what actions governmental or private payers
for health care goods and services may take in response to proposed or actual
legislation in the United States or other important
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markets. The Company cannot predict the outcome of health care reform
proposals or the effect any such reforms may have on the Company's business.
See "Business--Government Regulation."
HAZARDOUS MATERIALS
The Company's research and development activities involve the use of
hazardous materials, chemicals and/or various radioactive compounds by its
contractors, and the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident,
the Company could be held liable for any damages that result and any such
liability could exceed the resources of the Company. The Company's contractors
may incur substantial costs to comply with environmental regulations, which
costs may be passed on to the Company.
RISK OF PRODUCT LIABILITY; AVAILABILITY OF INSURANCE
Clinical trials, manufacturing, marketing and sales of potential products by
the Company or its future strategic alliance partners, if any, may expose the
Company to liability claims from the use of such products. Although the
Company carries product liability insurance to cover its clinical trials,
there can be no assurance that the Company or its future strategic alliance
partners will be able to retain such insurance or, if retained, that
sufficient insurance coverage can be acquired at an acceptable cost.
Furthermore, the Company's product liability insurance does not cover the
commercialization of its drug candidates, and there can be no assurance that
the Company will be able to obtain such coverage on acceptable terms, or at
all. An inability to obtain sufficient insurance coverage at an acceptable
cost or otherwise to protect against potential product liability claims could
prevent or inhibit the commercialization of products developed by the Company
or its strategic alliance partners. A successful product liability claim or
recall would have a material adverse effect on the Company's business,
financial condition and results of operations. While the Company may be
entitled to indemnification against losses by its strategic alliance partners,
there can be no assurance that this indemnification would be available or
adequate should any such claim arise.
POTENTIAL ADVERSE EFFECTS OF YEAR 2000 PROBLEM
Many currently installed computer systems and software programs were
designed to use only a two-digit date code field. These date code fields will
need to accept four digit entries to distinguish 21st Century dates from 20th
Century dates. Until the date code fields are updated, the systems and
programs could fail or give erroneous results when referencing dates following
December 31, 1999. Such failure or errors could occur prior to the actual
change in century. The Company relies on computer applications to manage and
monitor its accounting and administrative functions. In addition, the
Company's customers, suppliers and service providers (including financial
institutions) are reliant upon computer applications, some of which may
contain software that may fail as a result of the upcoming change in century,
with respect to functions that materially affect their interactions with the
Company. The Company is currently assessing whether any of its customers,
suppliers or service providers will be adversely affected by the upcoming
change in century. Failure of the Company's software or that of its customers,
suppliers or service providers could have a material adverse impact on the
Company's business, financial condition and result of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS
Upon completion of the Offerings, the Company's principal stockholders,
executive officers and directors together will beneficially own approximately
% of the outstanding shares of Common Stock ( % if the Underwriters'
over-allotment option is exercised in full). As a result, these stockholders,
if acting together, will be able to control matters requiring approval by the
stockholders of the Company, including approvals of amendments to the
Company's Certificate of Incorporation, certain mergers, a sale of all or
substantially all of the assets of the Company, going private transactions and
other fundamental transactions. In addition, the Company's Certificate of
Incorporation, as it is proposed to be amended and restated concurrently with
the
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closing of this Offering (the "Restated Certificate"), does not provide for
cumulative voting with respect to the election of directors. Consequently, the
present directors and executive officers of the Company, together with the
Company's principal stockholders, will be able to control the election of the
members of the Board of Directors of the Company (the "Board of Directors").
Such a concentration of ownership may have the effect of delaying or
preventing a change in control of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares over current
market prices. See "Principal Stockholders."
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE; ANTI-TAKEOVER PROVISIONS
The Restated Certificate authorizes the Board of Directors of the Company,
without stockholder approval, to issue additional shares of Common Stock and
to fix the rights, preferences and privileges of, and issue up to 5,000,000
shares of, Preferred Stock with voting, conversion, dividend and other rights
and preferences that could adversely affect the voting power or other rights
of the holders of Common Stock. The issuance of Preferred Stock, rights to
purchase Preferred Stock or additional shares of Common Stock may have the
effect of delaying or preventing a change in control of the Company. In
addition, the possible issuance of Preferred Stock or additional shares of
Common Stock could discourage a proxy contest, make more difficult the
acquisition of a substantial block of the Company's Common Stock or limit the
price that investors might be willing to pay for shares of the Company's
Common Stock. Further, the Restated Certificate provides that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may
not be effected by any consent in writing. Special meetings of the
stockholders of the Company may be called only by the Chairman of the Board of
Directors, the Chief Executive Officer of the Company or by the Board of
Directors pursuant to resolution adopted by a majority of the total number of
authorized directors. These and other provisions contained in the Restated
Certificate and the Company's Bylaws, as well as certain provisions of
Delaware law, could delay or make more difficult certain types of transactions
involving an actual or potential change in control of the Company or its
management (including transactions in which stockholders might otherwise
receive a premium for their shares over then current market prices) and may
limit the ability of stockholders to remove current management of the Company
or approve transactions that stockholders may deem to be in their best
interests and, therefore, could adversely affect the price of the Company's
Common Stock. See "Description of Capital Stock."
BROAD DISCRETION IN APPLICATION OF NET PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be $ ($ if the
Underwriters' over-allotment option is exercised in full) after deducting the
underwriting discount and estimated offering expenses. The Company intends to
use the net proceeds from the Offerings principally for the Company's clinical
trial program for Trovert, additional research and development activities,
commercialization of Trovert, including the establishment of a sales and
marketing organization and contract manufacturing, working capital and general
corporate purposes, including the repayment of debt. The Company's management
and Board of Directors will have broad discretion with respect to the
application of such proceeds, and the amounts and timing of the expenditures
for these purposes may vary significantly depending on numerous factors, such
as the status of the Company's research and development efforts, the
regulatory approval process, technological advances, determinations as to
commercial potential, the terms of collaborative agreements entered into by
the Company, if any, and the status of competitive products and technologies.
See "Use of Proceeds."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after the Offerings. The initial
public offering price, which was determined by negotiations between the
Company and the Underwriters, will not necessarily be indicative of the market
price at which the Common Stock of the Company will trade after the Offerings.
See "Underwriting" for a discussion of the factors considered in determining
the
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initial public offering price. In addition, in recent years the stock market
in general, and the shares of biotechnology companies in particular, have
experienced extreme price fluctuations. These broad market and industry
fluctuations may have a material adverse effect on the market price of the
Common Stock. In the future, the Company's operating results may vary from the
expectations of public market analysts and investors, and, as a result, the
price of the Common Stock would be materially and adversely affected.
Announcements of technological innovations or new commercial products by the
Company or its competitors, disputes or other developments concerning
proprietary rights, including patents and litigation matters, publicity
regarding new products or technologies under development by the Company, its
licensors or its competitors, general market conditions, quarterly
fluctuations in the Company's revenues and financial results, as well as the
other factors described in these "Risk Factors" and elsewhere in this
Prospectus, may have a significant impact on the market price of the Common
Stock.
SHARES ELIGIBLE FOR FUTURE SALE AND POTENTIAL ADVERSE EFFECT ON MARKET PRICE;
REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
following the Offerings could adversely affect the market price for the
Company's Common Stock. The number of shares of Common Stock available for
sale in the public market is limited by restrictions under the Securities Act
of 1933, as amended (the "Securities Act"), and lock-up agreements pursuant to
which all directors, officers and substantially all of the stockholders of the
Company have agreed not to sell or otherwise dispose of any of their shares
for 180 days from the date hereof without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). However, Merrill
Lynch may at any time without notice, release all or any portion of the
securities subject to lock-up agreements. As a result of such restrictions,
and based upon the number of shares outstanding on June 30, 1998, on the date
of this Prospectus shares of the Company's Common Stock, other than the
shares offered hereby, will be eligible for sale pursuant to
Rule 144 promulgated under the Securities Act. An additional
shares and shares issuable upon exercise of outstanding vested
options will be eligible for sale 180 days after the date of this Prospectus
upon expiration of the lock-up agreements and in compliance with certain
limitations set forth in the Securities Act. After the Offerings, the holders
of approximately 16,284,604 shares of Common Stock and the holder of a warrant
to purchase 230,000 shares of Common Stock will be entitled to certain demand
and piggyback registration rights with respect to registration of such shares
under the Securities Act. If such holders by exercising their demand or
piggyback registration rights cause a large number of securities to be
registered and sold in the public market, such sales could have an adverse
effect on the market price for the Company's Common Stock. If the Company was
to include in a Company-initiated registration shares held by such holders
pursuant to the exercise of their piggyback registration rights, such sales
may have an adverse effect on the Company's ability to raise needed capital.
See "Shares Eligible For Future Sale" and "Description of Capital Stock--
Registration Rights."
IMMEDIATE AND SUBSTANTIAL DILUTION; ABSENCE OF DIVIDENDS
Purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
investment from the initial public offering price. Additional dilution will
occur upon exercise of outstanding options. The Company has not declared or
paid cash dividends on its Common Stock since inception and does not intend to
pay any cash dividends in the foreseeable future. Future cash dividends, if
any, will be determined by the Board of Directors. See "Dilution," "Shares
Eligible for Future Sale" and "Dividend Policy."
17
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "anticipates,"
"expects" and words of similar import, constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others: uncertainties related to conducting clinical trials and clinical
trial results; dependence on single drug candidate; no assurance of marketing
approval; government regulation; reliance on contract manufacturers; scarcity
of raw materials; limited sales and marketing experience; lack of distribution
capability; dependence on future collaborators; early stage of development;
history of operating losses; accumulated deficit; uncertainty of future
profitability; future capital needs; uncertainty of additional funding;
uncertainty of protection of patents and proprietary rights; competition;
rapid technological change; dependence on third parties to conduct pre-
clinical studies and clinical trials; dependence on, and need to attract and
retain, key employees and consultants; management of growth; risks of
international sales and operations; health care reimbursement; government
reforms; hazardous materials; risk of product liability; availability of
insurance; potential adverse effects of year 2000 problem; control by
management and existing stockholders; availability of preferred stock for
issuance; anti-takeover provisions; broad discretion in application of net
proceeds; no prior public market for common stock; possible volatility of
stock price; shares eligible for future sale and potential adverse effect on
market price; registration rights; immediate and substantial dilution; and
absence of dividends. These factors are discussed in more detail elsewhere in
this Prospectus, including, without limitation, under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business." Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements contained herein to reflect future
events or developments.
18
<PAGE>
THE COMPANY
Sensus is an emerging pharmaceutical company that is developing drugs to
treat endocrine and metabolic diseases and disorders. The Company's first drug
candidate, Trovert (B2036PEG), belongs to a novel class of compounds called
growth hormone antagonists that inhibit the action of growth hormone. Trovert
is initially targeted for the treatment of acromegaly, a disease caused by
excess growth hormone, and certain complications associated with diabetes. The
Company is currently conducting a multi-center Phase III clinical trial of
Trovert for post-surgical treatment of acromegaly and intends to file for U.S.
and European regulatory approval for this indication in the second half of
1999. In addition, the Company is currently conducting an initial Phase II
clinical trial of Trovert for diabetic retinopathy, the leading cause of
blindness in the United States.
The Company was incorporated in Delaware in 1994. Unless the context
otherwise requires, "Sensus" and the "Company" refer to Sensus Drug
Development Corporation. The Company's executive offices are located at 98 San
Jacinto Boulevard, Suite 430, Austin, Texas 78701. Its telephone number is
(512) 487-2000. The Company's web site address is http://www.sensuscorp.com.
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Common Stock
offered hereby are estimated to be $ million ($ million if
the Underwriters' over-allotment option is exercised in full) after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by the Company.
The Company anticipates using the net proceeds from the Offerings for the
Company's Phase III clinical trial of Trovert for acromegaly, additional
research and development activities, commercialization of Trovert, including
the establishment of a sales and marketing organization and contract
manufacturing, and for working capital and general corporate purposes,
including repayment of $1.6 million of indebtedness, payable in four equal
quarterly installments with the final payment due on June 30, 1999 and bearing
interest at 7.6% per annum. See Note 7 of Notes to Financial Statements. The
amounts and timing of the expenditures for these purposes may vary
significantly depending on numerous factors, such as the status of the
Company's research and development efforts, the regulatory approval process,
technological advances, determinations as to commercial potential, the terms
of collaborative agreements entered into by the Company, if any, and the
status of competitive products and technologies, among others. In addition,
the Company's research and development expenditures will vary as programs are
added, extended or terminated. The Company may also use a portion of the net
proceeds to acquire or invest in businesses, products and technologies that
are complementary to those of the Company, although no such acquisitions are
planned or being negotiated as of the date of this Prospectus, and no portion
of the net proceeds has been allocated for any specific acquisition.
The Company believes that its available cash, cash equivalents and short-
term investments, together with the net proceeds of the Offerings and the
interest thereon, will be sufficient to meet its capital requirements at least
through the first quarter of 2000. Pending application of the net proceeds as
described above, the Company intends to invest the net proceeds in short-term,
interest-bearing, investment-grade securities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its Common Stock
since inception and does not intend to pay any cash dividends in the
foreseeable future. Future cash dividends, if any, will be determined by the
Board of Directors. See "Risk Factors--Dividends" and "Description of Capital
Stock."
20
<PAGE>
CAPITALIZATION
The following table sets forth at June 30, 1998: (i) the actual
capitalization of the Company and (ii) the pro forma as adjusted
capitalization to give effect to the conversion of all outstanding shares of
Preferred Stock into Common Stock and to give effect to the sale of
shares of the Common Stock offered hereby at an assumed initial
offering price of $ and the application of the net estimated proceeds
therefrom as described under "Use of Proceeds." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Financial Statements and related Notes thereto
and the other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------------- -------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Short-term debt, including current
portion of long-term debt (1) .......... $ 1,600 $ --
================= ================
Long-term debt, less current portion .... $ -- $ --
Stockholders' equity:
Preferred Stock, $0.001 par value;
21,000,000 shares authorized,
16,284,604 convertible shares issued
and outstanding, actual; and 5,000,000
shares authorized, none issued and
outstanding, pro forma as adjusted
(2) .................................. 16 --
Common Stock, $0.001 par value;
32,000,000 shares authorized;
6,728,389 shares issued and
outstanding, actual; and 30,000,000
shares authorized, shares issued and
outstanding, pro forma as adjusted
(3) .................................. 7
Additional paid-in capital ............ 34,511
Deficit accumulated during the
development stage .................... (32,564)
----------------- ----------------
Total stockholders' equity .......... 1,970
----------------- ----------------
Total capitalization .............. $ 1,970 $
================= ================
</TABLE>
- --------
(1) See Note 7 of Notes to Financial Statements for a description of the
Company's short-term debt.
(2) Upon the consummation of the Offerings, all outstanding shares of
Preferred Stock will convert into Common Stock.
(3) Gives effect to the conversion of all outstanding shares of Preferred
Stock into Common Stock and the sale of shares offered by the Company
hereby, at an assumed initial public offering price of $ per share
(the midpoint of the estimated range of the initial public offering
price), and the application of the estimated net proceeds therefrom, as if
all such transactions had been effected on June 30, 1998. Based on the
number of shares outstanding as of June 30, 1998. Excludes (i) 1,415,000
shares of Common Stock subject to outstanding options issued under the
1996 Stock Option Plan at a weighted average exercise price of $0.75 per
share; (ii) 160,000 shares of Common Stock subject to other outstanding
options issued at a weighted average exercise price of $0.15 per share;
and (iii) 230,000 shares of Common Stock reserved for issuance upon
exercise of an outstanding warrant at a price of $3.00 per share. See "The
Company," "Use of Proceeds," "Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
21
<PAGE>
DILUTION
The pro forma net tangible book value of the Common Stock at June 30, 1998,
was approximately $2.0 million, or $0.09 per share of Common Stock. Pro forma
net tangible book value per share represents the amount of total tangible
assets of the Company less total liabilities, divided by 23,012,993, the
number of shares of Common Stock outstanding as of June 30, 1998, after giving
effect to the conversion of all outstanding shares of Preferred Stock into an
aggregate of 16,284,604 shares of Common Stock upon completion of the
Offerings. After giving effect to the sale of the shares of Common Stock
offered hereby at an assumed initial public offering price of $ per share
(the midpoint of the estimated range of the initial public offering price) and
after deducting the estimated offering expenses and underwriting discounts and
commissions, the adjusted pro forma net tangible book value per share at June
30, 1998, was $ . This represents an immediate increase in pro forma net
tangible book value per share of $ to existing stockholders and an
immediate dilution per share of $ to new investors purchasing shares in the
Offerings.
The following table illustrates the per share dilution described above:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ............... $
Pro forma net tangible book value per share at June 30, 1998 .. $ 0.09
Increase per share attributable to new investors ..............
------
Adjusted pro forma net tangible book value per share after the
Offerings ....................................................
-----
Dilution to new investors per share ........................... $
=====
</TABLE>
The following table sets forth on a pro forma basis at June 30, 1998, the
number of shares of Common Stock purchased from the Company, the total cash
consideration paid for such shares and the average consideration paid per
share by the existing stockholders and by the new investors. The following
computations assume an initial public offering price of $ per share (the
midpoint of the estimated range of the initial public offering price) before
deduction of the estimated offering expenses and underwriting discounts and
commissions.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1) ..................... 23,012,993 % $35,848,209 % $1.56
New investors ............
---------- --- ----------- ---
Total .................. % $ %
========== === =========== ===
</TABLE>
- --------
(1) Includes 16,284,604 shares of Common Stock that will be issued upon
conversion of the Preferred Stock.
The foregoing tables assume no exercise of outstanding options and exclude
(i) 1,415,000 shares of Common Stock reserved for issuance upon exercise of
stock options granted pursuant to the 1996 Stock Option Plan, at a weighted
average exercise price of $0.75 per share outstanding as of June 30, 1998 and
(ii) 160,000 shares of Common Stock reserved for issuance upon exercise of
other stock options at a weighted average exercise price of $0.15 per share
outstanding as of June 30, 1998. To the extent that options are exercised in
the future, there will be further dilution to new stockholders. See
"Management--Employee Benefit Plans."
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
Financial Statements and Notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which are included
elsewhere in this Prospectus. The statements of operations data for the years
ended December 31, 1995, 1996 and 1997, and the balance sheet data at December
31, 1996 and 1997, are derived from audited financial statements included
elsewhere in this Prospectus. The statement of operations data for the period
from June 23, 1994 (inception) to December 31, 1994, and the balance sheet
data at June 30, 1994 and 1995, are derived from audited financial statements
not included herein. The statements of operations data for the six months
ended June 30, 1997 and 1998 and the period from June 23, 1994 (inception) to
June 30, 1998, and the balance sheet data at June 30, 1998 are derived from
unaudited financial statements included elsewhere in this Prospectus. The
unaudited financial statements include all adjustments (consisting only of
normal recurring adjustments) which the Company considers necessary to present
fairly the financial data included herein. The results for the six months
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION SIX MONTHS ENDED INCEPTION
(JUNE 23, 1994) YEAR ENDED DECEMBER 31, JUNE 30, (JUNE 23, 1994)
TO DECEMBER 31, --------------------------- ----------------- TO JUNE 30,
1994 1995 1996 1997 1997 1998 1998
--------------- ------- -------- -------- ------- -------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues .............. $ -- $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Research and
development ......... 110 3,322 5,021 10,965 2,775 7,493 26,911
General and
administrative ...... 390 1,127 1,097 1,597 761 1,557 5,768
----- ------- -------- -------- ------- -------- --------
Total expenses ........ 500 4,449 6,118 12,562 3,536 9,050 32,679
----- ------- -------- -------- ------- -------- --------
Loss from operations .. (500) (4,449) (6,118) (12,562) (3,536) (9,050) (32,679)
Interest
income/(expense),
net ................. (17) (83) (35) 73 (33) 177 115
----- ------- -------- -------- ------- -------- --------
Net loss .............. $(517) $(4,532) $ (6,153) $(12,489) $(3,569) $ (8,873) $(32,564)
===== ======= ======== ======== ======= ======== ========
Pro forma diluted net
loss per share (1) ... $ (0.82) $ (0.39)
======== ========
Shares used to compute
pro forma diluted net
loss per share (1) ... 15,238 22,992
======== ========
<CAPTION>
DECEMBER 31,
------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998
--------------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents .......... $ (40) $ 1,447 $ 45 $ 17,243 $ 3,774
Working capital
(deficit) ............ (641) 350 (3,119) 10,561 1,421
Total assets .......... 272 1,698 209 17,585 6,048
Short-term debt,
including current
portion of long-term
debt ................. -- -- -- -- 1,600
Long-term debt, net of
current portion ...... -- -- -- -- --
Deficit accumulated
during the development
stage ................ (517) (5,049) (11,202) (23,690) (32,564)
Total stockholders'
equity (deficit) ..... (516) 512 (2,976) 10,793 1,970
</TABLE>
- --------
(1) Pro forma diluted net loss per share reflects the conversion of all
outstanding shares of Preferred Stock into shares of Common Stock. See
Note 1 of Notes to Financial Statements for a description of the shares
used in calculating pro forma diluted net loss per share.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the Company's results of operations and
financial condition should be read in conjunction with the Financial
Statements and related Notes thereto and other financial information included
elsewhere in this Prospectus. Except for the historical information contained
herein, the discussion in this Prospectus contains certain forward-looking
statements that involve risks and uncertainties, such as statements of the
Company's plans, objectives, expectations and intentions. The cautionary
statements made in this Prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this Prospectus.
The Company's actual results could differ materially from those discussed
here. Factors that could cause or contribute to such differences include those
discussed in "Risk Factors," as well as those discussed elsewhere herein.
OVERVIEW
Sensus is an emerging pharmaceutical company that is developing drugs to
treat endocrine and metabolic diseases and disorders. The Company's first drug
candidate, Trovert (B2036PEG), belongs to a novel class of compounds called
growth hormone antagonists ("GHAs") that inhibit the action of growth hormone
("GH"). Trovert is initially targeted for the treatment of acromegaly, a
disease caused by excess GH, and certain complications associated with
diabetes. The Company is currently conducting a multi-center Phase III
clinical trial of Trovert for post-surgical treatment of acromegaly and
intends to file for U.S. and European regulatory approval for this indication
in the second half of 1999. In addition, the Company is currently conducting
an initial Phase II clinical trial of Trovert for diabetic retinopathy, the
leading cause of blindness in the United States.
To date, the Company has been engaged in research and development activities
and has not generated any revenues from the sale of any products or otherwise.
The Company has incurred significant operating losses since its inception and
expects to incur additional losses from development stage activities for the
foreseeable future, primarily due to continued increases in the cost of
clinical and regulatory development of Trovert. As of June 30, 1998, the
Company had an accumulated deficit of approximately $32.6 million. The process
of developing the Company's products requires significant research and
development, pre-clinical testing and clinical trials, as well as regulatory
approvals. These activities, together with the Company's general and
administrative expenses, are expected to result in operating losses for the
foreseeable future. In addition, the Company's results of operations will, for
the next several years, be dependent upon the approval and sale of a single
proposed pharmaceutical product, Trovert, for the treatment of acromegaly. The
Company's ability to achieve profitability is dependent, in part, on its
ability to successfully complete development of its proposed products, obtain
required regulatory approvals and manufacture and market its products directly
or through partners. There can be no assurance that the Company will achieve
revenues or profitability in the future.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Revenues. The Company has been a development stage company since its
inception and had no revenues during the six month periods ended June 30, 1998
and June 30, 1997.
General and Administrative Expenses. General and administrative expenses
increased to $1.6 million in the six months ended June 30, 1998 from $761,000
in the six months ended June 30, 1997. This increase of $796,000 was primarily
attributable to increases of $277,000 in personnel expenses, $123,000 in
public relations costs and $141,000 in marketing costs.
Research and Development Expenses. Research and development expenses
increased to $7.5 million in the first six months of 1998 from $2.8 million
for the first six months of 1997. This increase of $4.7 million was
primarily attributable to an increase of $3.0 million for the cost of
manufacturing Trovert for use in clinical trials.
24
<PAGE>
Net Interest Income/(Expense). Net interest income increased to $176,000 in
the first six months of 1998 from net interest expense of $33,000 for the six
months ended June 30, 1997. This net interest income increase of $209,000 was
due to interest income earned on cash available from the issuance of Series C
Preferred Stock in October 1997.
Net Loss. Net loss increased to $8.9 million for the six months ended June
30, 1998 from $3.6 million for the six months ended June 30, 1997. This
increased loss of $5.3 million was primarily attributable to the increase in
research and development expenses.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 30, 1996
Revenues. The Company has been a development stage company since its
inception and had no revenues during the years ended December 31, 1997 and
1996.
General and Administrative Expenses. General and administrative expenses
increased to $1.6 million in 1997 from $1.1 million in 1996. This increase of
$500,000 was primarily attributable to increases of $120,000 in personnel
expenses and $105,000 in travel-related costs.
Research and Development Expenses. Research and development expenses
increased to $11.0 million in 1997 from $5.0 million in 1996. This increase of
$6.0 million was primarily attributable to an increase of $5.4 million for the
cost of manufacturing Trovert for use in clinical trials.
Net Interest Income/(Expense). Net interest income increased to $73,000 in
1997 from net interest expense of $35,000 in 1996. This net interest income
increase of $108,000 is due to interest income earned on cash available from
the issuance of Series C Preferred Stock in October 1997.
Net Loss. Net loss increased to $12.5 million for the year ended December
31, 1997 from $6.2 million for the year ended December 31, 1996. This
increased loss of $6.3 million was primarily attributable to the increase in
research and development expenses.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues. The Company has been a development stage company since its
inception and had no revenues during the years ended December 31, 1996 and
1995.
General and Administrative Expenses. General and administrative expenses
remained constant at $1.1 million in both 1996 and 1995. A decrease in
personnel costs of $193,000 was offset by an increase in other general and
administrative costs of $163,000.
Research and Development Expenses. Research and development expenses
increased to $5.0 million in 1996 from $3.3 million in 1995. This increase of
$1.7 million was primarily attributable to an increase of $1.5 million for the
cost of manufacturing Trovert for use in clinical trials.
Net Interest Expense. Net interest expense decreased to $35,000 in 1996 from
$83,000 in 1995. This $48,000 decrease was due to the reduction in amounts
borrowed from related parties.
Net Loss. Net loss increased to $6.2 million for the year ended December 31,
1996 from $4.5 million for the year ended December 31, 1995. This increase of
$1.7 million was primarily attributable to the increase in research and
development expenses.
NET OPERATING LOSS AND TAX CREDIT CARRY-FORWARDS
As of June 30, 1998, the Company's federal net operating loss carry-forwards
were approximately $29.8 million and research and orphan drug credit carry-
forwards ("tax credit carry-forwards") were approximately $2.7 million. If not
utilized, the net operating loss carry-forwards will begin to expire in 2009.
The tax credit
25
<PAGE>
carry-forwards will begin to expire in 2012, if not utilized. A significant
portion of the net operating loss and tax credit carry-forwards are subject to
an annual limitation on utilization due to certain changes in ownership of the
Company which have occurred since inception. This limitation could result in
the expiration of net operating loss and tax credit carry-forwards before
utilization. Because of the uncertainties related to the Company's future
operating results and possible inability to realize the benefits of these
deferred tax assets, a full valuation allowance has been recorded, the effect
of which is to offset the value of these assets for financial reporting
purposes. See Note 5 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 30, 1998, the Company has financed its
operations primarily through private sales of Preferred Stock through which
the Company raised net cash proceeds totaling $32.1 million. During 1995, 1996
and 1997, the Company borrowed $3.5 million from a related party, all of which
was repaid in 1998. In 1998, the Company borrowed $2.9 million, of which $1.6
million remained outstanding at June 30, 1998.
Net cash used in operating activities from inception of the Company through
June 30, 1998 was $27.5 million attributable primarily to an accumulated net
loss of $32.6 million partially offset by noncash expenses of $2.7 million and
increases in accounts payable and accrued expenses of $2.5 million.
Net cash used in investing activities from inception of the Company through
June 30, 1998 was $2.2 million attributable to the purchase of property and
equipment of $597,000 for the Company's administrative offices and to a short-
term investment of $1.6 million which collateralizes the Company's outstanding
note payable as of June 30, 1998.
Net cash provided by financing activities from inception of the Company
through June 30, 1998 was $33.5 million primarily attributable to $32.1
million from the sale of Preferred Stock and a $2.9 million bank term note, of
which $1.3 million has been repaid, which were offset by deferred costs of
$163,000 for the Offerings.
As of June 30, 1998, the Company had approximately $3.8 million of
unrestricted cash and cash equivalents and $1.6 million in short-term
restricted cash investments collateralizing the $1.6 million bank term note.
The Company had no material commitments other than its bank note and those
under its office facility and equipment leases.
The Company believes that the net proceeds from the Offering(s), together
with its current cash and cash equivalents, will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures through
the first quarter of 2000. Thereafter, the Company may seek to sell additional
equity or debt securities or to obtain additional credit facilities to fund
research and development costs, launch its products, and for general corporate
purposes. The sale of additional equity or convertible debt securities could
result in additional dilution to the Company's stockholders. There can be no
assurance that financing will be available in amounts or on terms acceptable
to the Company, if at all. See "Risk Factors--Future Capital Needs;
Uncertainty of Additional Funding."
26
<PAGE>
POTENTIAL ADVERSE EFFECTS OF YEAR 2000 PROBLEM
Many currently installed computer systems and software programs were
designed to use only a two-digit date code field. These date code fields will
need to accept four digit entries to distinguish 21st Century dates from 20th
Century dates. Until the date code fields are updated, the systems and
programs could fail or give erroneous results when referencing dates following
December 31, 1999. Such failure or errors could occur prior to the actual
change in century. The Company relies on computer applications to manage and
monitor its accounting and administrative functions. In addition, the
Company's customers, suppliers and service providers (including financial
institutions) are reliant upon computer applications, some of which may
contain software that may fail as a result of the upcoming change in century,
with respect to functions that materially affect their interactions with the
Company. The Company is currently assessing whether any of its customers,
suppliers or service providers will be adversely affected by the upcoming
change in century. Failure of the Company's software or that of its customers,
suppliers or service providers could have a material adverse impact on the
Company's business, financial condition and results of operations.
27
<PAGE>
BUSINESS
OVERVIEW
Sensus is an emerging pharmaceutical company that is developing drugs to
treat endocrine and metabolic diseases and disorders. The Company's first drug
candidate, Trovert (B2036PEG), belongs to a novel class of compounds called
growth hormone antagonists ("GHAs") that inhibit the action of growth hormone
("GH"). Trovert is initially targeted for the treatment of acromegaly, a
disease caused by excess GH, and certain complications associated with
diabetes. The Company is currently conducting a multi-center Phase III
clinical trial of Trovert for post-surgical treatment of acromegaly and
intends to file for U.S. and European regulatory approval for this indication
in the second half of 1999. In addition, the Company is currently conducting
an initial Phase II clinical trial of Trovert for diabetic retinopathy, the
leading cause of blindness in the United States.
Acromegaly results from excess secretion of growth hormone by non-malignant
pituitary tumors. Over-secretion of GH stimulates liver and other cells to
produce excess levels of Insulin-like Growth Factor-I ("IGF-I"), previously
known as somatomedin-C, resulting in the manifestations of the disease. These
manifestations include soft-tissue swelling, abnormal growth of the hands and
feet, overgrowth of bone and cartilage in the face and other parts of the
body, and enlargement of body organs, including the liver, spleen, kidneys and
heart. Acromegaly is associated with significantly increased mortality due to
cardiovascular disease and cancer. The primary goal of existing treatments for
acromegaly is to reduce GH and IGF-I levels to normal in order to reduce the
morbidity and mortality associated with this disease. While the primary
treatment for acromegaly is surgical removal of the pituitary tumor, many
patients, particularly those with large tumors, also require post-surgical
drug therapy, radiation therapy, or both.
Sensus estimates that in North America, Europe and Japan there are currently
more than 40,000 diagnosed acromegalics, with approximately 20,000 who receive
drug therapy. The most widely used of the drugs currently approved for
acromegaly include certain somatostatin analogs that inhibit the secretion of
GH. A significant portion of acromegalic patients treated with somatostatin
analogs, however, do not respond to these drugs, and a substantial portion
experience gastrointestinal and other adverse reactions ("side effects").
Based on the results of its Phase II clinical trials, Sensus believes that
Trovert may offer a significantly improved efficacy and side-effect profile
compared to drugs currently approved for acromegaly.
The Company is pursuing acromegaly as an initial indication for Trovert
because: (i) Trovert may prove to be more effective and be accompanied by
significantly fewer side effects than currently approved drugs in a large
portion of acromegalic patients; (ii) the disease mechanism for acromegaly is
well understood; (iii) IGF-I levels are easily measured and accurately reflect
the severity of the patient's disease, which should facilitate clinical
development of Trovert; (iv) acromegaly is a chronic disease frequently
requiring long-term medical therapy; (v) Trovert's current designation by the
U.S. Food and Drug Administration (the "FDA") as an "Orphan Drug" for the
treatment of acromegaly may provide certain regulatory, marketing and tax
benefits to the Company; and (vi) treatment of acromegaly in the United States
and Europe is primarily provided at a limited number of medical centers and
thus represents a niche market that can be accessed with a relatively small
sales force.
The Company believes that Trovert may also be effective in treating certain
complications associated with Type 1 and Type 2 diabetes. In April 1998,
Sensus began an initial Phase II clinical trial in patients with diabetic
retinopathy. In 1999, Sensus plans to begin an initial Phase II clinical trial
in patients with diabetic nephropathy, a disease that leads to kidney failure.
In addition to Trovert, Sensus has several other growth hormone antagonists in
pre-clinical development.
Sensus' management has significant experience and expertise in drug
development, enabling the Company to manage effectively the pre-clinical
studies and clinical trials of its drug candidates conducted by third party
research organizations. The Company has licensed Trovert and other GHA
technologies from Genentech, Inc. ("Genentech") and Ohio University's Edison
Biotechnology Institute ("OU/EBI"). Sensus intends to sell its proposed
products for niche market indications (such as acromegaly) using a small
direct sales force. The
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Company will seek marketing or distribution partners for those indications
which are likely to require substantial expenditures for clinical development
or sales and marketing (such as certain complications associated with
diabetes). Sensus currently outsources the production of Trovert to a contract
manufacturing organization and anticipates that, if the drug is approved for
sale by the FDA and other regulatory authorities, commercial quantities will
be produced by one or more contract manufacturers.
The Company's objective is to establish a leading position in the treatment
of endocrine and metabolic diseases and disorders. The Company intends to
achieve this objective by: (i) gaining regulatory approvals initially in the
United States and the European Union for the use of Trovert in post-surgical
treatment of acromegaly; (ii) retaining commercial rights to Trovert and other
products for niche market indications and establishing a small direct sales
force focused on the acromegaly market; (iii) managing the clinical and
regulatory development of Trovert and other drugs internally; (iv) outsourcing
manufacturing; (v) developing Trovert for additional indications through
clinical trials and obtaining related regulatory approvals; and (vi) acquiring
and in-licensing additional products and technologies.
MEDICAL BACKGROUND
Many of the metabolic processes required for human health are controlled by
the endocrine system. The endocrine system is comprised of glands containing
specialized cells that produce and secrete hormones, which are transported by
the bloodstream to "target" cells throughout the body. The surface membranes
of these target cells contain hormone-binding proteins, called receptor
proteins ("receptors"). The binding of hormones, such as GH, to receptors
signals the target cells either to begin or to end various metabolic
processes.
GH is made in the pituitary gland and is secreted into the bloodstream.
Among the targets of GH are GH receptors on the surface of liver and other
cells. Single GH molecules bind pairs of GH receptors, and the paired, or
"dimerized," GH receptors initiate an intracellular signaling process referred
to as "GH signal transduction" or "GH action." This process leads to the
production of IGF-I, a protein that stimulates the growth and replication of
bone, skin and other cells.
In healthy individuals, rising levels of GH and IGF-I lead to the secretion
in the hypothalamus of somatostatin, a hormone that binds to receptors on the
surface of GH-secreting cells in the pituitary gland. When somatostatin
molecules bind to a sufficient number of these receptors, GH secretion is
inhibited, and serum levels of both GH and IGF-I consequently decline.
Somatostatin receptors comprise a family of several receptor "sub-types." It
is generally believed that there are at least five such sub-types. Since
existing somatostatin analogs bind to more than one sub-type, their use in
treating acromegaly can cause various side effects. It is believed that the
development of somatostatin analogs that bind more specifically to the
somatostatin receptor sub-types in the pituitary gland may result in
acromegaly drugs that have less side effects than existing non-specific
somatostatin analogs. Several companies are believed to be working on the
development of sub-type specific somatostatin analogs.
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[GRAPHIC APPEARS HERE]
[A schematic diagram showing the physiological relationship among the
pituitary gland, growth hormone and Insulin-like Growth Factor-I and also the
mechanism of GH signal transduction.]
There are several well-documented medical conditions associated with
insufficient or excess levels of GH and IGF-I. Children whose pituitary glands
secrete insufficient levels of GH, usually due to a genetic defect, develop
short stature (dwarfism). These children generally are treated with GH
injections that raise the level of IGF-I. Conversely, hypersecretion of GH
from a pituitary tumor in pre-pubescent children leads to excessive IGF-I
levels that cause long bone growth and an enlarged body (gigantism).
Hypersecretion of GH from a pituitary tumor following puberty, and the
resulting high IGF-I levels, cause other complications, including enlargement
of the hands, feet and internal organs (acromegaly). Excess levels of GH and
IGF-I are associated with diabetes mellitus, hypertension, increased risk of
cardiovascular disease and cancer. IGF-I levels are easily measured and
accurately reflect the severity of the patient's disease, which should
facilitate clinical development of Trovert for acromegaly.
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GROWTH HORMONE ANTAGONISTS
GHAs are genetically engineered analogs of GH that bind to GH receptors more
effectively than GH, but without causing the production of IGF-I, thus
blocking GH action at the cellular level. This ability to bind to GH receptors
without causing the production of IGF-I is referred to as an "antagonistic"
effect. By competing with GH molecules for binding to GH receptors, GHA
molecules reduce the number of GH receptors to which the GH molecules can bind
and thus cause a reduction in IGF-I production. GHAs are made by mutating one
or more of the amino acids that make up the naturally-occurring GH protein.
While the mutated GHA protein retains an enhanced capacity for binding to the
cell-surface GH receptor, the resulting GHA:GH receptor complex does not
initiate the intracellular signal transduction process that leads to the
production of IGF-I. Both GH and GHAs are eliminated naturally from the body.
Unlike a patient's own GH, GHAs are foreign to the patient and can cause an
anti-GHA "immunogenic" response by the patient's immune system.
SENSUS' GROWTH HORMONE ANTAGONISTS
Sensus' first drug candidate, Trovert, is a GHA that currently is being
tested in a Phase III clinical trial. Trovert has been designed to compete
better than GH for binding to GH receptors. Of the two sites on the B2036
protein portion of Trovert that bind to GH receptors, one has been genetically
engineered to have increased capacity to bind to GH receptors, while the other
has been genetically engineered to interfere with dimerization. Trovert
results from the addition of polyethylene glycol polymers ("pegylation") to
the B2036 protein. The polyethylene glycol polymers on Trovert prolong its
half-life (a measure of its duration of action) to approximately 72 hours from
the approximately 20 minute half-life for the unpegylated form of the B2036
protein. In addition to prolonging the half-life of Trovert, pegylation also
appears to reduce the protein's immunogenicity.
In addition to Trovert, Sensus has several highly potent, second-generation
GHAs in pre-clinical development. These compounds use the same protein as
Trovert but have altered pegylation patterns that are designed to provide
significantly increased potency and result in approximately the same half-life
as Trovert. In July 1998, the Company initiated a pharmacology study in
animals comparing the in vivo potency and half-life of several of these
second-generation GHAs to that of Trovert. Sensus intends to initiate
additional pre-clinical studies of one or more of these second-generation GHAs
in 1998 and, if these studies are successful, to submit to the FDA an
Investigational New Drug ("IND") application for one or more of these
compounds to begin clinical trials in 1999.
BUSINESS STRATEGY
The key elements of the Company's business strategy for establishing a
leading position in the treatment of endocrine and metabolic diseases and
disorders are:
Obtain Regulatory Approvals of Trovert for Acromegaly. The Company is
currently conducting a Phase III clinical trial of Trovert in acromegalic
patients to determine whether it significantly reduces IGF-I levels.
Assuming the successful completion of the acromegaly clinical development
program, the Company expects to file for U.S. and European regulatory
approval of Trovert for the treatment of acromegaly in the second half of
1999.
Retain Commercial Rights and Market Products Directly for Niche
Markets. The Company intends to market Trovert for acromegaly directly in
the United States and Europe through a small direct sales force. The
Company also intends to use such a sales force to commercialize or co-
promote products for other niche markets or indications. For indications
that require greater clinical development and selling resources and for
territories outside of the United States and Europe, the Company will seek
to establish corporate partnerships.
Actively Manage the Drug Development Process. The Company's management
has significant experience and expertise in developing and managing pre-
clinical studies and clinical trials. The Company
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believes that internal management of its drug development process provides
benefits with respect to protocol design, including clinical endpoint and
dosage design, and speed of product development.
Outsource Manufacturing to Deploy Resources Efficiently. To deploy its
resources efficiently, the Company outsources the manufacture of Trovert to
a contract manufacturing organization and intends to continue to outsource
the manufacture of Trovert if the drug is approved for commercial sale by
regulatory authorities.
Obtain Additional Indications for Trovert. The Company is conducting a
Phase II clinical trial of Trovert in patients with diabetic retinopathy.
The clinical trial is designed to evaluate whether Trovert causes
regression of this proliferative disorder. The Company believes that
Trovert may have applications for additional indications, including
diabetic nephropathy, and anticipates conducting clinical trials in such
indications if warranted by pre-clinical testing.
Acquire and In-license Additional Products and Technologies. The Company
intends to expand its product portfolio by acquiring, in-licensing and
commercializing additional products and technologies for treating endocrine
and metabolic diseases and disorders.
ACROMEGALY
Acromegaly results from excess secretion of growth hormone by non-malignant
pituitary tumors. Over-secretion of GH stimulates liver and other cells to
produce excess levels of IGF-I, causing the manifestations of the disease.
Early detection of acromegaly is rare because the symptoms are manifested
slowly over many years. Thus, acromegaly is most commonly diagnosed in middle-
aged adults who have had the disease for approximately ten years. The Company
estimates that there are currently more than 40,000 diagnosed acromegalics in
North America, Europe and Japan; however, because of the difficulty in
recognizing the symptoms and diagnosing the disease, the Company believes that
there are many more acromegalics who have not been diagnosed.
The most common symptoms of acromegaly are soft-tissue swelling, abnormal
growth of the hands and feet, sweating and headaches. Over several years, bony
changes alter the patient's facial features: the brow and lower jaw protrude,
the nasal bone enlarges and spacing of the teeth increases. Overgrowth of bone
and cartilage often leads to arthritis. When tissue thickens, it may trap
nerves, causing carpal tunnel syndrome, characterized by numbness and weakness
of the hands. Other symptoms of acromegaly include enlargement of body organs,
such as the liver, spleen, kidneys and heart.
Acromegaly is associated with serious health consequences, including
diabetes mellitus, hypertension and increased risk of cardiovascular disease
and cancer. Mortality rates among acromegalics are approximately double that
found in the general population. Cardiovascular complications of acromegaly,
including hypertension, premature coronary artery disease, congestive heart
failure and cardiac arrhythmias, are the major causes of morbidity and
mortality in acromegalics. Left ventricular hypertrophy (enlargement of the
heart) has adverse effects on cardiac function and contributes to the
mortality associated with the disease. Medical studies have shown that
normalization of GH and IGF-I levels leads to a rapid reduction in left
ventricular hypertrophy and a beneficial effect on life expectancy. Although
the cause of death is most commonly cardiovascular-related, significant
increases in mortality have been reported due to both lung infections and
cancer. In a study of acromegalic patients followed at U.S. Veterans
Administration hospitals from 1969 to 1985, the risk of developing
gastrointestinal cancer increased by 60% compared to the general population. A
145% increased rate of malignant tumors was observed in other studies. In
addition, up to 46% of acromegalic patients have been found to have colonic
polyps, which are frequently precursors of colon cancer.
The Company has targeted acromegaly as its first indication for Trovert for
the following reasons:
Inadequacy of Existing Therapies. Existing therapies lack sufficient
efficacy and are accompanied by significant side effects in a substantial
portion of acromegalic patients. Based on the results of Phase II clinical
trials, Sensus believes that Trovert may offer a significantly improved
efficacy and side-effect profile compared to existing drug therapies for
acromegaly.
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Well-understood Disease Mechanism. The role of excess GH and IGF-I in
acromegaly is well understood, permitting Trovert to be specifically
designed to block the action of GH at the cellular level, thereby lowering
the production of IGF-I.
Easily Measured Indicator of Disease Activity. IGF-I levels are easily
measured and accurately reflect the severity of the patient's disease,
which should facilitate clinical development of Trovert for this
indication.
Chronic Disease Requiring Long-term Treatment. Acromegaly is a chronic
disease frequently requiring long-term medical therapy.
Orphan Drug Designation for the Treatment of Acromegaly. The FDA's
current designation of Trovert as an "Orphan Drug" for the treatment of
acromegaly may provide the Company with certain regulatory, marketing and
tax benefits.
Accessible Target Market. Acromegaly represents a niche market that can
be accessed with a relatively small sales force because treatment is
primarily provided in the United States and Europe at a limited number of
medical centers. The Company believes that there is already significant
awareness of Trovert in the academic medical community among physicians who
specialize in treating acromegaly.
CURRENT TREATMENTS
The primary goal of existing treatments for acromegaly is to reduce GH and
IGF-I levels to normal in order to reduce the morbidity and mortality
associated with this disease. Currently, the primary treatment for acromegaly
is surgical removal of the pituitary tumor. Many patients, particularly those
with large tumors, also require drug therapy, radiation therapy, or both.
Sensus estimates that in North America, Europe and Japan there are currently
more than 40,000 diagnosed acromegalics, with approximately 20,000 who receive
drug therapy.
Surgery. Surgery is performed by reaching the pituitary gland through an
incision above the gums and removing tumor tissue in a procedure called
transsphenoidal surgery. Surgery provides a permanent cure for only
approximately 20% to 30% of acromegalic patients because it is frequently very
difficult to remove all tumor tissue at the time of surgery, particularly in
patients with macroadenomas (tumors greater than ten millimeters in diameter
at the time of diagnosis). A majority of these patients either fail to have
normalization of GH and IGF-I levels after surgery or, after a period of
normalized GH and IGF-I levels, experience recurrence of the disease due to
incomplete resection of the tumor and regrowth of tumor tissue. Complications
of surgery may include cerebrospinal fluid leaks, meningitis and damage to the
surrounding pituitary tissue, requiring lifelong pituitary hormone replacement
therapy.
Radiation Therapy. Radiation therapy is frequently prescribed for patients
whose tumor tissue remains after surgery, and this therapy is often combined
with drug therapy. Many acromegalic patients who undergo radiation therapy
also require drug therapy to lower their GH and IGF-I levels during the five
to ten years it takes for radiation therapy to achieve its maximum effect.
Although radiation therapy generally lowers GH levels by about 75% after five
years, this degree of improvement is frequently inadequate to normalize IGF-I
levels. Radiation therapy also causes a gradual loss of production of other
pituitary hormones, requiring many patients to be supplemented with thyroid
hormone, cortisol and either testosterone or estrogen. Loss of vision and
brain injury have been reported as rare complications of radiation treatments.
The Company believes that, due to the concerns of both patients and physicians
about side effects, radiation therapy has become less favored during the last
decade, particularly in the United States. Gamma knife radiation therapy,
however, involves a focused, multi-beam radiation treatment of the tumor and
surrounding tissue and may result in fewer side effects than conventional
radiation therapy.
Drug Therapy. Several medications are used to treat acromegaly. Sandostatin
octreotide acetate ("Sandostatin") is the most frequently prescribed drug
therapy. Sandostatin is a synthetic analog of the hormone somatostatin, which
inhibits GH production by binding to somatostatin receptors on the GH-
secreting tumor cells, signaling these cells to decrease secretion of GH.
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Currently, approximately 80% of acromegalic patients utilizing drug therapy
are treated with Sandostatin, either as monotherapy or in combination with
dopamine agonists. However, clinical trials conducted by its manufacturer have
shown that normalization of GH and IGF-I levels occurred in 45% and 46%,
respectively, of acromegalic patients treated with the drug. The Company
believes that certain patients who fail to respond to somatostatin analogs do
so in part because not all pituitary tumors express a sufficient number of
functional somatostatin receptors to which these drugs can bind. In addition,
because somatostatin receptors are found not only on pituitary cells but
throughout the body, Sandostatin also decreases the secretion of hormones
other than GH, which causes many side effects. Sandostatin has been shown to
decrease secretion of pancreatic polypeptide, glucagon, secretin, leutinizing
hormone, serotonin, gastrin, vasoactive polypeptide and insulin in addition to
GH. Sandostatin has also been shown to inhibit gallbladder function and
decrease bile secretion. In U.S. clinical trials, diarrhea, loose stools,
nausea and abdominal discomfort were each seen in 34% to 61% of acromegalic
subjects, while the incidence of gallstones was 27%. Other more serious side
effects, including several cases of pancreatitis, have also been reported with
Sandostatin treatment.
Sandostatin requires three to four subcutaneous injections daily and has an
annual cost at the pharmacy level of approximately $17,500 per patient in the
United States and Europe. According to its manufacturer, 1996 worldwide sales
of Sandostatin were approximately $219 million. The proportion of these sales
attributed to acromegaly is unknown.
A longer-acting form of Sandostatin, Sandostatin LAR ("Sandostatin LAR"),
which requires monthly intramuscular injections, has been approved and
launched in several countries in Europe, and the NDA for Sandostatin LAR was
recently submitted to the FDA. The efficacy and side-effect profile of
Sandostatin LAR appears to be very similar to Sandostatin. Somatuline
lanreotide ("Somatuline") is another long-acting somatostatin analog.
Somatuline works by the same mechanism as Sandostatin and requires
intramuscular injections every 7 to 14 days. Somatuline has been approved in
four European countries, and is being tested in a Phase III clinical trial
program in the United States for the treatment of acromegaly. Intramuscular
injection of these two drugs usually needs to be administered by a trained
individual.
Dopamine agonists are another class of drugs used for treating acromegaly.
Dopamine is a neurotransmitter that is produced in the brain and acts as a
hormone. Parlodel bromocriptine ("Parlodel") is a dopamine agonist that
reduces GH secretion in some patients but normalizes GH and IGF-I levels in
less than 20% of patients. Side effects of Parlodel include headaches, nasal
stuffiness, nausea, vomiting and depression, causing the product to be used
infrequently today. Dostinex cabergoline ("Dostinex"), a more specific
dopamine agonist, is currently being studied in acromegaly but is not approved
in the United States.
Certain somatostatin receptor type-specific agonists are under development
at several companies. These somatostatin agonists are specific for one of the
several known subtypes of the somatostatin receptor. It is possible that some
of the side effects of the current somatostatin agonists may be avoided and
their efficacy may be enhanced by use of such a receptor type-specific
product.
The Company also is aware of a Japanese company that is developing a GHA
based on a mutated form of GH originally discovered in a child afflicted with
dwarfism.
POTENTIAL FOR THE USE OF TROVERT
Based on the results of its Phase II clinical trials, Sensus believes that
Trovert may offer a significantly improved efficacy and side-effect profile
compared to drugs currently approved for acromegaly. The Company believes that
certain subjects who fail to adequately respond to somatostatin analogs do so
in part because their pituitary tumors do not express a sufficient number of
functional somatostatin receptors. In contrast, Trovert has been engineered to
bind to the GH receptor in a highly specific manner. Because Trovert blocks
the effects of excess GH at the cellular level, regardless of whether the
somatostatin signaling pathway is functioning normally, the Company believes
that Trovert has the potential to effectively treat most acromegalic patients
for whom other forms of drug therapy are currently ineffective. Since
somatostatin analogs decrease secretion of a number of
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hormones in addition to GH, the Company also believes that, compared to
somatostatin analogs, Trovert will have fewer side effects because the Company
believes that Trovert has a more specific effect on the endocrine system. The
Company plans to evaluate Trovert's efficacy and safety as an alternative to
surgery or radiation therapy in additional clinical trials conducted after the
NDA and MAA are submitted during the second half of 1999. See "Clinical
Development and Regulatory Program for Trovert--Trovert Development Program
for Acromegaly."
Acromegalic patients in the United States and Europe are generally treated
in a limited number of medical centers, which should enable Sensus to
independently market Trovert without a large sales and marketing
infrastructure. The Company will also seek to expand the market for Trovert by
increasing the diagnosis and awareness of acromegaly throughout the world. In
most cases, acromegalics are identified by health care professionals, who
refer patients to endocrinologists after observing signs of the disease.
Patients with less obvious physical manifestations of the disease, or those
who do not come in contact with healthcare professionals who are aware of the
disease, may remain undiagnosed. Sensus plans to collaborate with consumer-
based organizations to foster greater public and professional awareness of
acromegaly and to encourage appropriate identification and referral to
clinicians who specialize in treating acromegaly.
DIABETES
Diabetes mellitus is a common chronic disease, with 15.7 million Americans
estimated to be suffering from the disease in 1997, of whom approximately one-
third were undiagnosed. Of the approximately 10.5 million diagnosed patients,
approximately 800,000 have juvenile-onset, insulin-dependent ("Type 1")
diabetes, while the remainder have maturity-onset, non-insulin dependent
("Type 2") diabetes. Type 1 diabetes, an autoimmune disease in which the body
does not produce sufficient insulin, occurs most often in children and young
adults. Patients with Type 1 diabetes must take daily insulin injections to
stay alive. Patients with Type 2 diabetes have a metabolic disorder resulting
from the body's inability to properly use the insulin it makes and are treated
with diet, exercise, oral hypoglycemic agents and insulin. Both types of
diabetes are characterized by serious complications, including eye disease
(retinopathy), kidney disease (nephropathy) and cardiovascular disease.
Significant direct and indirect costs are associated with diabetes and its
complications. Although the relationship between GH, IGF-I and diabetes is
significantly less well understood than in acromegaly, there is evidence that
excess levels of GH and IGF-I are associated with the development of diabetic
complications, which may enable new therapeutic approaches by antagonizing the
effects of GH.
DIABETIC RETINOPATHY
Diabetic retinopathy is the leading cause of blindness in persons 25 to 74
years of age in the United States. Type 1 diabetics who have had their disease
for at least 10 to 15 years have a 90% chance of developing retinopathy. It is
estimated that in the United States, 12,000 to 24,000 patients with Type 1 and
Type 2 diabetes lose their eyesight each year from retinopathy. In diabetic
patients, hyperglycemia (high blood glucose levels) can result in oxygen
starvation (ischemia) of the retina of the eye. Retinal ischemia is thought to
stimulate the release of angiogenic factors that induce proliferation of
additional blood vessels ("neovascularization"). Because of their fragility,
these blood vessels may break and bleed into the surrounding retinal tissue.
This often also leads to scarring within the eye, which may pull the retina
forward, causing it to detach and vision to be lost.
Role of GH in the Disease Process. Excess levels of GH have been implicated
as a cause of diabetic retinopathy. Studies in diabetic pituitary dwarfs, who
have a congenital insufficiency of GH, have shown that they have a much lower
incidence of retinopathy than found in matched diabetic controls with normal
GH levels. In addition, two controlled studies of the effect of pituitary
ablation (destruction) by surgery or implantation of radioactive pellets in
the pituitary gland demonstrated a statistically significantly greater
reversal of retinal changes and preservation of vision in the ablated group
compared to the control group. The benefits of ablation of the pituitary gland
on diabetic retinopathy are related to the degree of GH deficiency achieved.
Effective use
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of pituitary ablation has been documented in over 900 patients with diabetic
retinopathy. The Company believes that by inhibiting the proliferative
response of retinal capillaries to diabetes-induced ischemia, GHAs may prove
useful in the treatment or prevention of diabetic retinopathy.
Current Treatments. Panretinal laser photocoagulation ("PRP"), in which a
laser is used to burn a large series of precise holes in the retina, is the
principal treatment for diabetic retinopathy. This treatment normally leads to
regression of new blood vessels. Although PRP is currently the mainstay of
treatment for diabetic retinopathy, its use can lead to irreversible retinal
damage and restriction of the visual field.
Potential for the Use of Trovert. Based on the Company's pre-clinical data,
a Phase II clinical trial in Type 1 and Type 2 diabetics with established
proliferative retinopathy was initiated in May 1998. If Trovert can be shown
to safely cause regression of neovascularization, Sensus believes that the
product will have the potential to become the preferred therapy for
proliferative diabetic retinopathy. This would open the possibility of
initially marketing Trovert through retinal ophthalmologists, who generally
diagnose the condition and initiate PRP therapy. Sensus is evaluating the
potential to access this market with a niche marketing strategy similar to
that planned for the acromegaly market, including marketing to a limited
number of retinal specialists. Potential corporate partners that could aid in
accessing this market would include pharmaceutical firms specializing in
ophthalmological products. See "Clinical Development and Regulatory Program
for Trovert--Clinical Development and Regulatory Strategy for Trovert as a
Treatment for Diabetic Retinopathy."
DIABETIC NEPHROPATHY
Diabetic kidney disease ("diabetic nephropathy") is the most common cause of
end-stage renal disease (kidney failure) ("ESRD") in the world. In the United
States, diabetics account for approximately 30% of all newly-treated patients
entering kidney dialysis. Between 1982 and 1992, the number of diabetic
patients needing therapy for ESRD rose at a compound annual rate of
approximately 15%, from 5,000 in 1982 to 20,000 in 1992. In the United States,
the health-care costs, including the costs associated with disabilities and
premature death, for diabetic patients in renal failure exceeded $2.1 billion
in 1992.
Role of GH in the Disease Process. Pre-clinical studies suggest that GH
and/or IGF-I play an important role in the development of diabetic
nephropathy. IGF-I receptors are located throughout the kidney. When animals
are made diabetic, there is an increase in the number of IGF-I receptors, an
immediate rise in IGF-I levels in kidney tissue and abnormal functioning of
the kidney. Studies have observed that GH-deficient rats, on the other hand,
are protected against developing diabetic kidney disease.
Studies have been conducted in which mice were genetically engineered to
produce excess GH or a GHA. Animals that produced excess GH developed severe
kidney disease resulting in their death due to kidney failure. In contrast,
the animals that produced a GHA had normal kidney function and structure. It
was also recently observed that diabetic and nondiabetic animals with elevated
GH levels developed severe kidney disease, while diabetic mice genetically
engineered to produce a GHA did not. Recent studies in diabetic mice treated
with a GHA demonstrated a significant decrease in kidney damage as measured by
the level of protein in the urine.
Current Treatments. Patients with most forms of kidney disease also develop
hypertension (high blood pressure) that hastens the onset of ESRD and the need
for dialysis. Antihypertensive treatment, usually in the form of angiotensin-
converting enzyme (ACE) inhibitors, delays the progression of established
diabetic nephropathy. If started early in the disease, ACE inhibitors may also
retard the onset of clinically overt renal disease. However, the underlying
disease process continues, and most patients eventually progress toward total
kidney failure and the need for dialysis.
Potential for the Use of Trovert. Because GHAs have been demonstrated to be
effective in ameliorating diabetic nephropathy in animal models, Sensus
believes that Trovert has the potential to prevent the development of diabetic
kidney disease and the progression of patients to dialysis. Because of the
high costs of studies
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designed to demonstrate this endpoint in humans, and the requirement to
promote the product to primary care physicians who treat the majority of
diabetic patients, Sensus may partner both the development and the marketing
of Trovert for this indication with a pharmaceutical company.
ADDITIONAL INDICATIONS
MALIGNANCIES
Elevated GH and IGF-I levels have been associated with several human
cancers, including breast cancer and prostate cancer. Independent studies have
shown that IGF-I receptors are present in cultured breast cancer cell lines
and in surgically removed tissue specimens from breast cancer. There are also
several studies in which the IGF-I receptor has been blocked by anti-receptor
antibodies, resulting in inhibition of the in vitro growth of breast cancer
cell lines. Sensus is currently sponsoring certain in vitro and in vivo
laboratory studies designed to evaluate the presence of GH receptors in
various cancer tissues and cells and the effect of GHAs on tumor cell
proliferation and on the growth of various malignancies.
GLUCOSE CONTROL AND INSULIN RESISTANCE
Type 1 diabetes is caused by auto-immune destruction of the pancreatic cells
that produce insulin. In poorly controlled Type 1 diabetics, GH secretion and
plasma GH levels are increased by 100% to 300%. The Company believes that by
blocking the effects of GH, Trovert may improve blood glucose control in Type
1 diabetics.
Type 2 diabetes is primarily characterized by insulin resistance rather than
insulin deficiency. GH itself induces insulin resistance. Thirty to forty
percent of acromegalics develop a mild form of insulin resistance, while 10%
to 20% develop diabetes, characterized by decreased insulin sensitivity of
both liver and muscle cells. In preliminary studies, GHAs have been shown to
counteract the anti-insulin effects of GH. Decreased insulin sensitivity is
due to changes in the intracellular mechanism by which insulin stimulates
muscle, liver and fat cells to take up and metabolize glucose from the
bloodstream. By blocking the effects of the elevated GH levels, the Company
believes that Trovert may improve insulin sensitivity in Type 2 diabetics, and
thus reduce the amount of insulin they must inject in order to control their
blood glucose levels.
VASCULAR EYE DISEASE (RETINOPATHY OF PREMATURITY; AGE-RELATED MACULAR
DEGENERATION)
Diabetic retinopathy is only one of several vascular eye diseases
characterized by neovascularization. Others include retinopathy of prematurity
("ROP"), the retinopathy associated with sickle cell anemia and age-related
macular degeneration. If the initial clinical trials of Trovert in diabetic
retinopathy are successful, Sensus plans to evaluate the utility of Trovert in
other vascular eye diseases, including ROP and age-related macular
degeneration.
CLINICAL DEVELOPMENT AND REGULATORY PROGRAM FOR TROVERT
The Company is currently enrolling acromegalic patients for a 100-subject
randomized double-blind placebo controlled, multi-center Phase III clinical
trial (SEN-3614) of Trovert. The Company also plans to initiate a clinical
trial (SEN-3617) that will study the effect of Trovert in acromegalic patients
who have responded inadequately to Sandostatin. In May 1998, the Company began
a multi-center Phase II clinical trial (SEN-3611) of 24 subjects with diabetic
retinopathy. As of June 30, 1998, the longest subject exposure to Trovert was
12 months.
37
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TROVERT DEVELOPMENT PROGRAM FOR ACROMEGALY
As of June 30, 1998, five clinical trials were completed or ongoing and five
clinical trials were planned as part of the Trovert development program for
acromegaly as summarized in the table below:
SUMMARY OF TROVERT CLINICAL TRIALS IN ACROMEGALIC SUBJECTS
<TABLE>
<CAPTION>
NUMBER OF
TRIAL NUMBER TRIAL DESCRIPTION(1) SUBJECTS(2) STATUS PURPOSE(1)
------------ -------------------- ----------- ------ ----------
<C> <S> <C> <C> <C>
3601 Phase I 36 Completed Determine Safety and
Pharmacokinetic and
Pharmacodynamic Profile
3602 Phase II, Open Label 6 Completed Determine Safety and
Efficacy
3604 Open Label, 12 Planned Determine Pharmacokinetic
Bioavailability and Pharmacodynamic Profile
3605 Open Label, Clearance in 24 Planned Determine Pharmacokinetic
Renally-Impaired and Pharmacodynamic Profile
Subjects
3611 Phase II, Double Blind, 46 Completed Determine Safety and
Placebo Controlled Efficacy
3613 Open Label Continuation 42 Ongoing Determine Safety
of 3611
3614 Phase III, Double Blind, 100 Ongoing Determine Safety and
Placebo Controlled Efficacy
3615 Open Label Continuation 100 Planned Determine Safety
of 3614
3617 Double Blind, Placebo 24 Planned Determine Safety and
Controlled in Efficacy
Sandostatin-refractory
subjects
3618 Open Label Continuation 24 Planned Determine Safety
of 3617
</TABLE>
- --------
(1) See "--Government Regulation" for a discussion of Phase I, Phase II and
Phase III clinical trials.
(2) Open Label Continuation trials include subjects enrolled in prior blinded
trials.
Phase II Program. In the Company's SEN-3611 Phase II clinical trial, 44
subjects completed the trial. The subjects received either placebo, 30 mg of
Trovert or 80 mg of Trovert by subcutaneous injection once weekly for six
weeks. At the end of this period, IGF-I levels were reduced by 0.4%, 15% and
31% in the placebo, Trovert 30 mg and Trovert 80 mg groups, respectively,
demonstrating a dose-dependent response to the drug. The results revealed a
statistically significant difference between the placebo and 80 mg groups in
the suppression of IGF-I levels. Following the completion of SEN-3611, 42
subjects were enrolled in an open label continuation trial (SEN-3613). During
SEN-3613, the acromegalic subjects in the trial were switched from weekly
injections of up to 80 mg of Trovert to daily injections of 10 mg to 20 mg.
This change to daily dosing was made to reduce the volume of each injection
and to respond to reports from some subjects of decreased symptomatic relief
four
38
<PAGE>
to six days after their weekly injections of Trovert. As of June 30, 1998, the
mean percentage reduction in IGF-I levels in subjects treated with daily
Trovert injections was 67%, and 29 of the 38 subjects (76%) still active in
the trial had normalized their IGF-I levels while receiving daily injections
of Trovert.
Treatment with Trovert has been well-tolerated during the Phase II clinical
trials. Some patients have reported side effects, such as nausea,
constipation, sleepiness, hypertension, flu-like symptoms, muscle ache and
bruising at the injection site, all of which were resolved without subsequent
effects. One subject was hospitalized with Meniere's disease, a form of
vertigo, which the Company believes was unrelated to the Trovert treatment. No
antibodies to Trovert or to GH were found in any of the subjects. Serial MRI
studies have shown no evidence of pituitary tumor growth in subjects on
Trovert.
Phase III Program. The Company's SEN-3614 Phase III clinical trial is
projected to be completed in the first half of 1999. It is a 100 subject, 12
week, double-blind, parallel-dose comparison of three Trovert dose groups (10,
15 and 20 mg/day) vs. placebo, being conducted in nine U.S. and five European
centers. The Company believes that if this trial demonstrates the safety and
efficacy of Trovert, it will be sufficient for an NDA submission. Based on
discussions with the FDA, the Company has also committed to complete as a
condition for approval a three-month toxicology study, a reproductive
toxicology study and an anti-proliferative effect study. In addition, the
Company has committed to conduct a carcinogenicity laboratory study that may
be completed following approval, if granted, of the NDA.
Several acromegalic patients who have been documented historically to be
resistant to Sandostatin therapy have been enrolled in Trovert studies and
have normalized their IGF-I levels while being treated with Trovert. Because
Trovert blocks GH at a cellular level by a mechanism of action different from
Sandostatin's effects on secretion of GH, the Company believes that many
patients with an inadequate response to Sandostatin and other somatostatin
analogs may be responsive to Trovert.
The Company plans to initiate a clinical trial (SEN-3617) that will study
the effect of Trovert in patients who have responded inadequately to
Sandostatin. This trial will be initiated in the second half of 1998, and the
Company expects to complete it by the second half of 1999. The Company
believes that inclusion of the results of SEN-3617 will not be required in the
NDA filing in the United States but may be required for the MAA filing in
Europe. This trial is designed to support certain product labeling claims for
the use of Trovert in patients who respond inadequately to Sandostatin.
DIABETES DEVELOPMENT PROGRAM
The Company believes that Trovert may also be effective in treating certain
complications associated with Type 1 and Type 2 diabetes. In April 1998,
Sensus initiated a Phase II clinical trial in patients with diabetic
retinopathy. Results from this clinical trial are expected in the first half
of 1999. In 1999, Sensus plans to begin an initial Phase II clinical trial in
patients with diabetic nephropathy, a disease that leads to kidney failure. As
of June 30, 1998, three clinical trial protocols were either completed or
ongoing as part of the Company's diabetes development program. These clinical
trials are summarized in the table below:
SUMMARY OF TROVERT CLINICAL TRIALS IN DIABETIC SUBJECTS
<TABLE>
<CAPTION>
NUMBER OF
TRIAL NUMBER TRIAL DESCRIPTION(1) SUBJECTS STATUS PURPOSE
------------ -------------------- --------- ------ -------
<C> <S> <C> <C> <C>
3621 Phase II, Open Label 10 Ongoing Determine Regression of
Diabetic Retinopathy
3622 Phase II, Open Label 6 Completed Determine Safety
3631 Phase II, Open Label 24 Ongoing Determine Safety and
Efficacy
</TABLE>
- --------
(1) See "--Government Regulation" for a discussion of Phase II clinical
trials.
39
<PAGE>
Clinical Development and Regulatory Strategy for Trovert as a Treatment for
Diabetic Retinopathy. Based upon data obtained in cooperation with the
National Eye Institute ("NEI") at the National Institutes of Health
demonstrating that neovascularization is a reversible phenomenon, the Company
intends to conduct clinical trials of Trovert in the treatment of diabetic
retinopathy. In particular, Sensus has initiated its SEN-3631 Phase II
clinical trial to assess whether Trovert can cause regression in patients with
neovascularization. Sensus expects results from this clinical trial to become
available in the first half of 1999. If the data from this clinical trial are
positive, Sensus anticipates designing a multi-center, placebo-controlled
clinical trial to confirm and extend such findings. The Company believes that
the diabetic retinopathy indication for Trovert should qualify for Subpart E
status. See "--Government Regulation."
If the results of the SEN-3621 Phase II regression trial in subjects with
neovascularization are positive, Sensus also plans to pursue studies in
patients with diabetic retinopathy that has not progressed to
neovascularization. The goal of such studies would be to evaluate the use of
Trovert to prevent the progression of early retinopathy neovascularization in
a large population of Type 1 and Type 2 diabetic patients. Because most
diabetic patients with non-proliferative retinopathy are cared for by primary
care physicians, and because the costs of such studies are very high, Sensus
is likely to seek a corporate partner for both the development and marketing
of Trovert for this indication. The Company plans to finalize its development
strategy in diabetic retinopathy after the results of its ongoing clinical
trials become known.
To evaluate the effects of Trovert on insulin sensitivity, the Company has
completed one clinical trial (SEN-3622) in Type 1 diabetic patients and is
conducting another clinical trial (SEN-3621) in Type 2 diabetic patients.
Clinical Development and Regulatory Strategy for Trovert as a Treatment for
Diabetic Nephropathy. Sensus plans to support additional pre-clinical studies
of the effect of GHAs in animal models of diabetic nephropathy and plans to
commence a small, open-label proof-of-concept clinical trial in humans with
nephropathy in 1999.
STRATEGIC LICENSING AGREEMENTS
OU/EBI Agreement. Pursuant to a Biotechnology Licensing and Transfer
Agreement (the "OU/EBI License Agreement") between OU/EBI and an affiliate of
the Company, Sensus has acquired an exclusive, worldwide license to make, use
and sell products based on GHAs and related technologies discovered at OU/EBI
during the term of a Sponsored Research Agreement ("SRA") with OU/EBI. Several
U.S. and foreign patent applications and issued patents are included in this
license. During the term of the SRA, Sensus is obligated to reimburse OU/EBI
for research being conducted by OU/EBI in the field of technologies relating
to GHAs. Sensus is obligated to make payments to OU/EBI for each product
derived from licensed technology upon attainment of certain development
milestones. In addition, Sensus is obligated to pay a royalty to OU/EBI,
subject to adjustment, on net sales for any products commercialized using the
licensed technology. The OU/EBI License Agreement expires on January 18, 2001,
unless extended by mutual agreement of the parties, and may be terminated by
OU/EBI prior to the expiration of its term upon Sensus' breach of the
agreement. Upon expiration of the OU/EBI License Agreement, Sensus will retain
all rights to the licensed technology provided that it has not breached the
agreement. See "Certain Transactions."
Genentech Agreement. In July 1994, Sensus and Genentech entered into a
license agreement (the "Genentech Agreement") which grants to Sensus the
exclusive (even as to Genentech), worldwide license for treating, diagnosing
or preventing GH-related diseases in humans, to make, have made, use and sell
products containing certain specified GHAs as well as certain related
compounds identified by Genentech during the three-year period following the
effective date of the agreement (July 11, 1994). The Company has granted to
Genentech a right of first offer whereby the Company must notify Genentech if
the Company wishes to sublicense certain GHAs to third parties to use and sell
in certain geographic regions. Genentech shall then be entitled to negotiate
exclusively with Sensus with respect to such rights for a limited period of
time. If an agreement between the parties is not reached, Sensus may grant
such rights to a third party on terms no more favorable than those last
offered to Genentech. Genentech has licensed to Sensus specific know-how that
includes
40
<PAGE>
all information, technology and materials which constitute proprietary
methods, processes, techniques, assay methodology, inventions, formulations or
biologically active materials useful for the development, use or sale of those
GHAs. Furthermore, Sensus has acquired know-how related to the development of
long-acting forms of GHAs from Genentech, as well as assay methodologies,
formulations and other methods useful for the development, use or sale of
certain GHAs. Sensus has met all milestones in the Genentech Agreement
required to be met to date, and the final milestone is the filing of the NDA
for a product candidate containing a GHA licensed from Genentech on or before
January 1, 2002. If Sensus does not reach the final milestone or breaches the
agreement, Genentech may terminate the license. Under the terms of the
Genentech Agreement, Genentech is entitled to receive a royalty on net sales
for any GHA sold by Sensus that is within the scope of a licensed Genentech
patent or patent application, or a reduced royalty on net sales for other
licensed products.
Under the Company's agreements with OU/EBI and Genentech, Sensus is
obligated to make royalty payments on the sale of products, if any, derived
from the licensed technology and may be obligated to make royalty payments
under both agreements with respect to a particular product. Although the
Genentech agreement contains certain royalty offset provisions, there can be
no assurance that such provisions will be applicable and will be available.
See "--Patents and Proprietary Rights" and "Risk Factors--Uncertainty of
Protection of Patents and Proprietary Rights."
PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in large part on its ability to obtain
patents (or license the rights to patents), maintain trade secrets and operate
without infringing the proprietary rights of others, both in the United States
and in other countries. Pursuant to the OU/EBI License Agreement, Sensus has
acquired an exclusive license to certain U.S. and foreign patents and pending
patent applications relating to certain GHA technologies. Pursuant to the
Genentech Agreement, the Company has acquired an exclusive license, for
treating, diagnosing or preventing GH-related diseases in humans, to products
containing certain GHAs as well as certain related compounds identified by
Genentech during the three-year period following July 11, 1994 under patents
and patent applications specified in such agreement. The patent positions of
biotechnology and pharmaceutical companies can be highly uncertain and involve
complex legal and factual questions, and therefore the breadth of claims
allowed in biotechnology and pharmaceutical patents and their enforceability
cannot be predicted. Therefore, there can be no assurance that additional
patents will issue in respect of applications that have been licensed by the
Company or that any patent will issue on technology arising from additional
research being funded by the Company or, if patents do issue, that claims
allowed will be sufficient to protect the Company's products or that such
patents will not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide proprietary protection or competitive
advantages to the Company.
The commercial success of Sensus will also depend, in part, on the Company's
not infringing patents issued to others and not breaching the technology
license agreements pursuant to which intellectual property utilized in any of
the Company's products is licensed by the Company. A number of pharmaceutical
companies, biotechnology companies, universities and research institutions
have filed patent applications or received patents in the areas of the
Company's programs or in the broad area of biotechnology. Some of these
applications or patents may limit or preclude the Company's patents or patent
applications, or conflict in certain respects with claims made under the
Company's patents or patent applications. Such a conflict could result in a
significant reduction of the coverage of the Company's patents or patent
applications, if issued. Where patents exist or if patents are issued that are
infringed by the manufacture, use or sale of any of the Company's products,
the Company may be required to obtain licenses to these patents or to develop
or obtain alternative technology. If any licenses are required, there can be
no assurance that the Company will be able to obtain them on commercially
favorable terms, if at all. The Company's breach of an existing license or
failure to obtain a license to technology required to commercialize its
products could have a material adverse impact on the Company. Litigation,
which could result in substantial costs to the Company, may also be necessary
to enforce any patents issued to or licensed by the Company, or to determine
the scope and validity of third-party proprietary rights. If a third party
prepares and files a patent application in the United States that claims
technology also claimed by a patent or patent
41
<PAGE>
application of the Company or that claims technology that is obvious from that
claimed by the Company's patents or patent applications, the Company may have
to participate in interference proceedings declared by the Patent and
Trademark Office ("PTO") to determine priority of invention, which could
result in substantial costs to the Company, even if the eventual outcome is
favorable to the Company. An adverse outcome could subject the Company to
significant liabilities to third parties and require the Company to license
disputed rights from third parties or to cease using such technology. Patents
or patent applications licensed to the Company by different owners and that
claim the same invention or obvious variations of the same invention may also
result in costly interference proceedings for the Company and result in loss
of patent rights.
The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. Sensus protects its proprietary technology and processes, in part,
by confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or
that the Company's trade secrets will not otherwise become known or be
independently discovered by competitors. See "Risk Factors--Uncertainty of
Presentation of Patents and Proprietary Rights--Patents and Proprietary
Rights" and "--Strategic Licensing Agreements."
PROCESS DEVELOPMENT AND MANUFACTURING
Trovert consists of pegylated B2036 protein as its active ingredient and
certain inactive ingredients. The manufacture of Trovert consists of several
steps, including fermentation using genetically engineered E. coli bacteria,
purification and pegylation of bulk quantities of the B2036 protein, drug
formulation and vial filling operations, and quality control and quality
assurance procedures.
The Company does not operate its own manufacturing facilities and relies
instead on contract manufacturers to produce its proposed products for
research, pre-clinical studies and clinical trials. The Company believes that
there are relatively few contract manufacturers that are capable of
manufacturing the Company's proposed products, including Trovert, and
currently only one manufacturer, Covance Biotechnology Services Inc. ("CBSI"),
is producing Trovert for the Company's research, pre-clinical studies and
clinical trials. The Company has not signed an agreement for the supply of the
commercial quantities of Trovert required for market launch and ongoing
commercial sales. The supply of Trovert for its market launch and
commercialization will require the Company and CBSI to implement certain
increases in scale, related manufacturing and process improvements and to
establish an internal quality assurance program to support the contract
production and testing of Trovert. No assurance can be given that these
increases in scale and related improvements and quality assurance program will
be successfully implemented, and failure to do so could result in a delay of
market launch, higher cost of goods or an inadequate supply of drug to meet
market demand if regulatory approval is obtained. The Company will also need
to undertake further testing of the stability of Trovert as a bulk drug
substance and final drug product. While the Company believes that future
stability studies will support an acceptable shelf life, there can be no
assurance that Trovert will have adequate stability in its current
formulation. Moreover, because a certain amount of lead time is required to
increase production of the drug, the Company believes that CBSI does not
currently have the capacity to supply quantities of Trovert sufficient to
satisfy anticipated demand in the year following market launch. Although the
Company has identified a limited number of additional contract manufacturers
that it believes are capable of manufacturing Trovert, there can be no
assurance that the Company will be able to enter into manufacturing agreements
on a timely basis on acceptable terms or at all. Furthermore, the proposed
products under development by the Company have never been manufactured on a
commercial scale, and there can be no assurance that such products can be
manufactured at a cost or in quantities necessary to make them commercially
viable.
The production of Trovert requires certain key raw materials for which there
are a limited number of suppliers, and there can be no assurance that such raw
materials will be supplied on acceptable terms in quantities that are adequate
to produce Trovert for clinical trials or on a commercial scale. If the
Company should encounter delays or difficulties in its relationship with CBSI
or any other manufacturers, the Company's pre-clinical and clinical testing
schedule could be delayed, resulting in delay in the submission of
applications for regulatory
42
<PAGE>
approval or the market introduction of its products. Any such delays,
shortages of supply or shelf life problems could have a material adverse
effect on the Company's business, financial condition and results of
operations.
COMPETITION
The pharmaceutical industry is intensely competitive and the Company is
pursuing areas of product development in which there is potential for
extensive technological innovation in relatively short periods of time. Rapid
technological change or developments by others may result in the Company's
technologies or potential products becoming obsolete or noncompetitive. The
Company's competitors may succeed in developing technologies or products that
are more effective than those of the Company. Many companies, including
biotechnology, chemical and pharmaceutical companies, are actively engaged in
the research, development and sale of products that may compete with the
Company's development programs for the treatment of acromegaly and certain
complications of diabetes. Many of these companies have substantially greater
financial, technical and marketing resources than the Company. In addition,
some of these companies have considerable experience in pre-clinical studies,
clinical trials and other regulatory approval procedures. Moreover, certain
academic institutions, governmental agencies and other research organizations
are conducting research and developing technology in areas in which the
Company is working. These institutions may market competitive commercial
products based on this technology directly or through joint ventures and may
license this technology to third parties for further development and
commercialization. There can be no assurance that the Company's competitors
will not develop more efficacious or more affordable products, or achieve
earlier product development, patent protection, regulatory approval or product
commercialization than the Company. Among the drug products that compete, or
are being developed to compete, in the Company's targeted markets,
particularly acromegaly, are: somatostatin analogs, dopamine agonists and
somatostatin receptor type-specific agonists. There can be no assurance that,
if approved, the Company's products will compete successfully against existing
drugs or new drugs that may be developed by others. The Company expects that
its proposed products will compete on the basis of, among other things,
safety, efficacy, reliability, price, quality of life factors (including the
frequency and method of drug administration), marketing, distribution,
reimbursement and effectiveness of intellectual property rights. See "Risk
Factors--Competition; Rapid Technological Change" and "Business--Aeromegaly--
Current Treatments."
SALES AND MARKETING
Acromegaly represents a niche market that can be accessed with a relatively
small sales force because treatment in the United States and Europe is
primarily provided at a limited number of medical centers. The Company
therefore intends to market Trovert for acromegaly directly in the United
States and Europe through a small direct sales force. The Company also intends
to use such a sales force to commercialize or co-promote products for other
niche markets or indications. In markets that require greater selling and
promotional resources and for territories outside of the United States and
Europe, the Company will seek to establish corporate partnerships.
The Company believes that there is already significant awareness of Trovert
in the academic medical community among physicians who specialize in treating
acromegaly. Compared to acromegaly, the other indications contemplated for
GHAs (particularly, diabetic retinopathy and nephropathy) are much larger and
will require the Company to seek out one or more corporate partners with
significant clinical development experience and large sales forces in these
markets. There can be no assurances, however, that such corporate partnerships
will be established or that the Company will be able to negotiate favorable
business arrangements with such partners.
43
<PAGE>
The Company has not previously sold, marketed or distributed any of its
products. To market and sell any of its products directly, the Company must
develop a marketing and sales force with technical expertise and supporting
distribution capability. There can be no assurance that the Company will be
able to establish in-house marketing, sales and distribution capabilities or
relationships with third parties, or that it will be successful in gaining
market acceptance for its products. To the extent that the Company enters into
co-promotion or other licensing arrangements, any revenues received by the
Company will depend upon the efforts of third parties, and there can be no
assurance that such efforts will be successful. See "Risk Factors--Limited
Sales and Marketing Experience; Lack of Distribution Capability; Dependence on
Future Collaborators."
GOVERNMENT REGULATION
To obtain approval to market its proposed pharmaceutical products in the
United States, Europe and other jurisdictions, the Company must demonstrate to
government regulators the safety and effectiveness of any proposed products in
adequate and well-controlled clinical trials in humans and must also present
evidence of product safety based on pre-clinical and other laboratory studies.
The steps ordinarily required before a drug or biological product may be
marketed in the United States include: (i) pre-clinical testing and clinical
trials; (ii) the submission to the FDA of an Investigational New Drug ("IND")
application, which must become effective before clinical trials commence;
(iii) adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug candidate; (iv) the submission to the FDA of a Biologics
License Application ("BLA") for pharmaceutical products produced through
biological means or a New Drug Application ("NDA") for small molecules and
other compounds produced through chemical and other non-biological means; and
(v) FDA approval of the application including approval of product labeling
and, in some instances, advertising. Although Trovert is a pharmaceutical
product produced through biological means, it is characterized as an
endocrinological drug and, therefore, its regulatory review for acromegaly has
been assigned to the Division of Metabolic and Endocrine Drug Products of the
FDA's Center for Drug Evaluation and Research, which has historically reviewed
endocrinological drug applications. As a result, an NDA will be filed for
marketing approval of Trovert rather than a BLA.
To market drugs in non-U.S. jurisdictions, the Company must also receive
authorization from the respective regulatory authorities in those
jurisdictions. The requirements governing the conduct of clinical trials,
applications for marketing authorization, pricing and reimbursement vary
widely from jurisdiction to jurisdiction.
In the European Union, pharmaceutical legislation requires that an MAA for a
drug produced through the use of biotechnology, such as Trovert, be submitted
for review in accordance with a centralized procedure administered by the
European Agency for the Evaluation of Medicinal Products (the "EMEA"),
headquartered in London. The EMEA's Committee for Proprietary Medicinal
Products (the "CPMP") is responsible for the scientific review of the MAA. The
CPMP is comprised of members from each of the European Union's Member States.
Based on the preferences of the company submitting an MAA and the availability
and expertise of the CPMP members, CPMP members from two Member States are
chosen to be "rapporteur" and "co-rapporteur", respectively, for the MAA. The
rapporteur and co-rapporteur are responsible for assisting the company
submitting an MAA with the preparation of the MAA and the presentation of the
MAA to the CPMP. Sensus is currently in the process of meeting with CPMP
members from different European nations for the purpose of the selection of a
rapporteur and co-rapporteur for the MAA that Sensus intends to submit for
Trovert for acromegaly. Similar to the requirements of the FDA, the
pharmaceutical legislation of the European Union requires that the safety and
efficacy of a drug be demonstrated in clinical trials prior to approval of an
MAA for that drug. If approved by the EMEA, an MAA is recommended for
acceptance by the European Union. Following approval of an MAA for a drug, the
sponsoring company is required to negotiate with the regulatory agency in each
Member State to establish reimbursement levels and the maximum price at which
the drug may be marketed in that Member State. These reimbursement levels and
maximum prices vary from country to country for the same pharmaceutical. No
assurance can be given that the Company will be able to negotiate acceptable
reimbursement and pricing levels for any of its products.
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<PAGE>
Pre-clinical testing includes laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the safety and
efficacy of each product candidate. Pre-clinical safety tests must be
conducted by laboratories that comply with FDA regulations regarding Good
Laboratory Practice ("GLP"). The results of the pre-clinical tests are
submitted to the FDA as part of an IND and are reviewed by the FDA before the
commencement of clinical trials. Unless the FDA objects to an IND, the IND
will become effective 30 days following its receipt by the FDA. There can be
no assurance that submission of an IND will result in FDA authorization to
commence clinical trials or that the lack of an objection means that the FDA
will ultimately approve an application for marketing approval.
Clinical trials involve the administration of the investigational product to
humans under the supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with Good Clinical Practices ("GCP")
under protocols submitted to the FDA as part of the IND. In addition, each
clinical trial must be approved and conducted under the auspice of an
Institutional Review Board and with the informed consent of subjects. The
Institutional Review Board will consider, among other things, ethical factors,
the safety of human subjects and the possible liability of the institution
conducting the clinical trial.
Phase I clinical trials are generally performed in healthy human subjects.
The goal of Phase I clinical trials is to establish initial data about safety
and tolerance of the drug candidate. Also, data regarding the immune response
to the drug candidate may be obtained. In Phase II clinical trials, evidence
is sought about the desired therapeutic efficacy of a drug or antibody, or the
immune response to a drug, in limited studies with small numbers of carefully
selected subjects. Efforts are made to evaluate the effects of various dosages
and to establish an optimal dosage level and dosage schedule. Additional
safety data are also gathered from these studies. Phase III clinical trial
programs consist of expanded, large-scale, multicenter studies of the drug in
persons for whom the drug would be indicated. The goal of these studies is to
obtain definitive statistical evidence of the efficacy and safety of the
proposed product and dosage regimen.
In some cases, regulators may require additional laboratory studies or
clinical trials before granting approval of an application to market a drug
or, as a condition to granting such approval, require further "Phase IV"
clinical trials following commercial introduction of the drug covered by such
application. For example, the Company, at the request of the FDA, is currently
conducting additional laboratory studies of Trovert. In addition, the Company
may be required by regulators to conduct Phase IV clinical trials of Trovert
to determine long-term safety of the drug. See "--Clinical Development
Regulator Program for Trovert--Trovert Development Program for Acromegaly."
Approval of a marketing application requires the regulator to find on the
basis of the data presented in the application that the pharmaceutical
candidate is safe and effective for the use stated in the product labeling
proposed by the applicant and that its manufacture results in a reliably safe
and pure product. Data obtained from clinical trials and pre-clinical and
other laboratory studies are often susceptible to varying interpretations that
can delay or prevent regulatory approval or limit the proposed labeling.
Regulators can require that the pharmaceutical candidates represent improved
forms of treatment compared to existing therapies. For example, even if
Trovert were to receive regulatory approval for the treatment of acromegaly,
there can be no assurance that regulatory authorities would not require that
the label state that Trovert is considered useful only for those patients who
have inadequate treatment outcomes from surgery, radiation therapy and
approved drugs, including somatostatin analogs. Such labeling restrictions
could have a material adverse effect on the Company's business, financial
condition and results of operations.
45
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During the period that an application is being reviewed, there can be
legislative or administrative changes in regulatory requirements or policies
and there can be newly published medical findings or newly developed
pharmaceuticals or therapeutic approaches that effectively preclude approval
of the application. In addition, a prerequisite and ongoing requirement for
maintaining regulatory approval of a pharmaceutical product is its manufacture
in accordance with regulations designed to assure its safety and purity. In
the United States, these requirements are set forth in the FDA's current Good
Manufacturing Practices. Pharmaceutical manufacturing facilities are subject
to inspection by both the FDA and non-U.S. regulators to assure compliance
with such regulations. Discovery of previously unknown problems with a
pharmaceutical product, manufacturer or facility may result in restrictions on
such product or manufacturer, including costly recalls or even withdrawal of
the product from the market. Noncompliance with applicable regulatory
requirements can result in administrative or judicial sanctions, including,
among others, warning letters, civil penalties, product seizures, injunctions,
total or partial suspension of production, refusal of the government to review
the Company's marketing applications and criminal prosecution. Any such post-
approval actions in respect of any pharmaceutical product initially approved
and introduced into the market by the Company could have a material adverse
effect on the Company's business, financial condition and results of
operations.
As a consequence of the foregoing regulatory factors, there can be no
assurance that any of the Company's pharmaceutical candidates will meet all of
the applicable regulatory requirements needed to receive regulatory marketing
approval, and there can be no assurance that even after the Company expends
substantial resources on research, clinical development and the preparation
and processing of regulatory applications, that any regulatory approval will
be obtained for any of the Company's pharmaceutical candidates. Moreover, no
assurance can be given that regulatory approval for marketing a proposed
pharmaceutical product in any jurisdiction will result in similar approval in
other jurisdictions. Failure of the Company to obtain and maintain regulatory
approvals for its proposed products would have a material adverse effect on
its business, financial condition and results of operations.
In accordance with the U.S. Orphan Drug Act, the FDA may grant "Orphan Drug"
designation to any of certain drugs intended to treat a "rare disease or
condition." To be within this category, a disease or condition must be one
that affects fewer than 200,000 people in the United States or which affects
more than 200,000 people for which the cost of developing and marketing the
drug will not be recovered from sales of drug in the United States. An
approved Orphan Drug application may provide certain benefits, including
exclusive marketing rights against certain other drugs for the approved
indication for seven years following marketing approval and federal income tax
credits for certain clinical trial expenses. Although Trovert has qualified
for Orphan Drug designation with respect to the treatment of acromegaly, no
assurance can be given that the Company will be the first applicant to obtain
FDA approval for the use of a GHA to treat acromegaly. If a competitor obtains
Orphan Drug designation of its GHA product for acromegaly and then is the
first to obtain FDA approval of its NDA for this condition, the competitor
would be entitled to seven years of marketing exclusivity during which the FDA
generally could not approve the Company's NDA. There can also be no assurance
that the potential benefits provided by the Orphan Drug Act will not be
significantly limited by amendment by the United States Congress or
reinterpretation by the FDA.
With respect to the potential use of Trovert to treat diabetes, the Company
hopes to take advantage of current FDA regulations that permit accelerated or
expedited approval or treatment use of, and cost recovery for, certain
experimental drugs ("Subpart E"). Subpart E is limited, among other
requirements, to drug products that are intended to treat either seriously
debilitating or life-threatening diseases by providing meaningful therapeutic
benefit to patients over existing treatments or diseases for which no
satisfactory or alternative therapy exists. There can be no assurance that
Trovert will qualify for expedited or accelerated approvals or for treatment
use and cost recovery.
46
<PAGE>
See "Risk Factors--Government Regulation" and "--Hazardous Materials."
EMPLOYEES AND FACILITIES
The Company has fifteen employees, of which four have a Ph.D., Pharm.D. or
M.D. No Company employee is represented by a labor union, and the Company has
not experienced any work stoppages. The Company's relations with its employees
are good. The Company's headquarters are located at 98 San Jacinto Boulevard,
Suite 430, Austin, Texas 78701, and are comprised of approximately 5,800
square feet of office space. These premises are leased by an affiliate of the
Company, and the lease expires on April 30, 2005. The Company plans to occupy
an additional 5,000 square feet of space in the same building in the second
half of 1998.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings.
47
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers, directors and certain key employees of the Company,
and their ages as of June 30, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard J. Hawkins .... 49 Chairman of the Board and Director
John A. Scarlett,
M.D. ................. 47 President, Chief Executive Officer and Director
Robert J. Davis,
Pharm.D. ............. 47 Executive Vice President
William F. Bennett, Senior Vice President, Research and Chief
Ph.D. ................ 49 Scientific Officer
Edward G. Calamai,
Ph.D. ................ 47 Senior Vice President, Operations
Magnus Precht ......... 44 Senior Vice President, Sales and Marketing
Brian C. Cunningham ... 54 Secretary
Charles L. Cox ........ 53 Treasurer and Assistant Secretary
Stuart Davidson (1) ... 41 Director
E. Martin Gibson (1) .. 60 Director
Lyle Hohnke, Ph.D.
(2) .................. 55 Director
Arthur H. Rubenstein,
M.D. (2) ............. 60 Director
Joseph E. Smith (1)
(2) .................. 69 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
RICHARD J. HAWKINS, a founder of the Company, has served as Chairman of the
Board and a Director since the Company's inception. In February 1995, he co-
founded Corning Bio Inc., now Covance Biotechnology Services, Inc. ("CBSI"), a
contract cGMP manufacturing organization, and has served as a Director of CBSI
since inception. In June 1993, Mr. Hawkins co-founded Innovations in Drug
Development ("id/2/"), a biomedical entrepreneurial incubator, and has served
as its Chairman since inception. From March 1992 until June 1993, Mr. Hawkins
served as President of the Life Sciences Division of Applied Bioscience
International, Inc. ("APBI"). In 1983, he founded Pharmaco Dynamic Research,
Inc. ("Pharmaco") and served as its President and Chief Executive Officer
until March 1992 upon the merger of Pharmaco and APBI. From May 1982 to May
1983, Mr. Hawkins served as Vice President at Biomedical Research Group, a
contract research organization. From January 1975 to January 1982, he held
various positions in clinical research at McNeil Pharmaceuticals, Inc., a
division of Johnson & Johnson. Mr. Hawkins also serves as a director of CRO
One, Inc., a private company.
JOHN A. SCARLETT, M.D., a founder of the Company, has served as Chief
Executive Officer and a Director since the Company's inception and as
President since March 1996. In February 1995, he co-founded CBSI and has
served as a director since inception. In June 1993, Dr. Scarlett co-founded
id/2/ and has served as President and Chief Executive Officer since inception.
Prior to co-founding id/2/, from January 1991 to March 1993 he served as
Senior Vice President of Medical and Scientific Affairs with Novo Nordisk
Pharmaceuticals, Inc. ("Novo Nordisk"), a subsidiary of Novo Nordisk A/S, a
pharmaceutical company, and as head of Novo Nordisk's North American Clinical
Development Center. From 1986 to 1991, Dr. Scarlett served as Vice President
of Clinical Development of Greenwich Pharmaceuticals, Inc., a pharmaceutical
company developing therapeutics for rheumatoid arthritis. From 1989 to 1990,
he served as a director of Health Information Designs Incorporated, a
privately-held company providing drug epidemiology services to the
pharmaceutical industry. From 1982 through 1985, Dr. Scarlett held various
positions in the Medical Department of McNeil Pharmaceuticals, a division of
Johnson & Johnson.
ROBERT J. DAVIS, PHARM.D. joined the Company as Executive Vice President in
February 1997. From January 1996 to December 1996, Dr. Davis served as
President of the U.S. Pharmaceutical Development Services Division of BRI
International ("BRI"), a leading contract research organization. From January
1995 to
48
<PAGE>
December 1995, he served as Vice President of the Project Operations Division
at BRI. From 1990 through 1994, Dr. Davis served in various positions at
Pharmaco-LSR, a contract research organization, including Director, Project
Management, Executive Director, Clinical Development Services and Vice
President, Anti-Infective Drug Development. From 1988 to 1990, he served as
Associate Director and Director of Scientific Affairs at G.D. Searle & Co., a
subsidiary of Monsanto Company, a developer, manufacturer and marketer of
pharmaceutical products. From 1984 to 1988, he served as a Clinical Scientist
with Parke-Davis, the pharmaceutical division of Warner-Lambert Company, a
developer, manufacturer and marketer of pharmaceutical products.
WILLIAM F. BENNETT, PH.D. has served as Senior Vice President, Research and
Chief Scientific Officer of the Company since January 1996. From March 1995 to
January 1996, he served as Vice President, Research of COR Therapeutics, Inc.,
a biotechnology company. From January 1982 to March 1995, Dr. Bennett served
in various capacities at Genentech, a biotechnology company, including Staff
Scientist in Cardiovascular Research and Director of Process Sciences. Dr.
Bennett's groups developed the manufacturing process for Genentech's growth
hormone (GH) product, NUTROPIN(R), and made discoveries leading to the
development of Genentech's t-PA thrombolytic, ACTIVASE(R). He also led the
research and development of the second-generation thrombolytic, TNK-tPA(R).
EDWARD G. CALAMAI, PH.D. has served as Senior Vice President, Operations of
the Company since June 1998. From August 1993 to June 1998, he was an
independent pharmaceutical and technology consultant. From August 1988 to
August 1993, Dr. Calamai served as Vice President of Operations for Seragen,
Inc. ("Seragen"), a biopharmaceutical company. From January 1986 to August
1988, he served as Director of Operations of Seragen. From March 1982 to
January 1986, Dr. Calamai served as Research and Development Manager of the
Clinical Assays Division ("Clinical Assays") of Baxter Travenol Laboratories,
a medical device and hospital supply company.
MAGNUS PRECHT has served as Senior Vice President of Marketing and Sales
since December 1997. From September 1996 to November 1997, he served as
Executive Vice President of Interferon Sciences, Inc., a biopharmaceutical
company. Mr. Precht came to the United States in November 1990 to establish
the Kabi Pharmacia (now Pharmacia & Upjohn) growth hormone business in the
United States and served as Vice President and General Manager, Peptide
Hormones Division until June 1996. From October 1989 to November 1990, Mr.
Precht was subsidiary President of Kabi Austria. From August 1983 to October
1989, Mr. Precht served in various positions at Pharmacia, including Regional
Director, Opthalmic Division, Middle East, Eastern Europe and Africa and as
the Austrian head of the Pharmacia Therapeutic Division.
BRIAN C. CUNNINGHAM, ESQ. has served as Secretary of the Company since its
inception. Since 1989, he has been a partner and head of the life sciences
group in the law firm of Cooley Godward LLP. From 1982 to 1989, Mr. Cunningham
was Vice President, Secretary and General Counsel of Genentech, a
biotechnology company.
CHARLES L. COX has served as Treasurer and Assistant Secretary of the
Company since January 1996. He has been the owner of a private accounting
practice in Austin, Texas since December 1990.
STUART DAVIDSON has served as a Director of the Company since September
1995. He has served as Managing Director of Labrador Ventures, a venture
capital firm, since August 1995. He founded the Echelon Group and has served
as President since November 1990. Mr. Davidson also serves on the advisory
board of UTAH Ventures, and as the Managing Director of Lysander LLC. From
1988 to 1990, Mr. Davidson served as President of Alkermes, Inc., a
biotechnology company.
E. MARTIN GIBSON has served as a Director of the Company since July 1995. He
retired from Corning Incorporated ("Corning") in December 1994, a company he
first joined in June 1962. From 1990 to 1995, Mr. Gibson served as Chairman of
Corning Life Sciences, Inc., which included Corning Clinical Labs and Corning
Pharmaceutical Services, and which provided contract services ranging from
manufacturing and toxicology to
49
<PAGE>
clinical testing and regulatory services to the pharmaceutical industry
through its member companies (Corning Bio, Corning Hazleton, Corning
Besselaar, Corning SciCor and Corning National Packaging). Mr. Gibson
currently serves as a director of the following public companies: Hardinge
Inc., NovaCare Inc. and International Technology Corp.
ARTHUR H. RUBENSTEIN, M.D. has served as a Director of the Company since May
1995. Since October 1997, Dr. Rubenstein has served as Dean and Executive Vice
President of The Mount Sinai School of Medicine and Medical Center in New York
City. Between April 1981 and October 1997, Dr. Rubenstein served as Chairman
of the Department of Medicine and the Lowell T. Coggeshall Distinguished
Service Professor of Medical Sciences at the University of Chicago.
LYLE A. HOHNKE, PH.D. has served as a Director of the Company since August
1996. Since October 1994, Dr. Hohnke has also served as a General Partner of
Javelin Capital Fund, L.P., a partnership engaged in venture capital
investments. From January 1994 until its merger with Heska Corporation in
April 1996, he served as Chairman and Chief Executive Officer of Diamond
Animal Health, Inc., an agricultural biotechnology company. From January 1991
to October 1993, he served as a General Partner of Heart Land Seed Capital
Fund, L.P., a venture capital fund. Dr. Hohnke currently serves as a director
of Heska Corporation, Vaxcel Inc. and Cytrx, Inc., publicly-held biotechnology
companies, and several privately-held biotechnology companies.
JOSEPH E. SMITH has served as a Director of the Company since December 1997.
He retired from Warner-Lambert Company in September 1997. From March 1989 to
September 1997, he served as Corporate Vice President of Warner-Lambert
Company. Mr. Smith serves as a director of Vivus, Inc., a public biotechnology
company, Penederm, Inc., a public biotechnology company, Lidak, Inc., a
public biotechnology company, and Boren, Lepore and Associates, a
pharmaceutical marketing communications company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee consists of independent directors Mr. Smith and Drs.
Rubenstein and Hohnke. The Audit Committee meets with the Company's
independent auditors at least annually to review the results of the annual
audit and to discuss the financial statements; recommends to the Board of
Directors the independent auditors to be retained; reviews the results, scope
and procedures of the audit and other services provided by the Company's
independent auditors, and reviews and evaluates the Company's independent
audit and control functions.
The Compensation Committee consists of Messrs. Gibson, Davidson and Smith.
The Compensation Committee establishes salaries, incentive compensation and
otherwise determines compensation levels for the Company's officers and other
key employees and performs such other functions regarding compensation as the
Board may delegate. The Compensation Committee administers the Company's
various incentive compensation and benefit plans, including the 1998 Equity
Incentive Plan and the 1998 Employee Stock Purchase Plan.
DIRECTOR COMPENSATION
Each non-employee director of the Company receives a fee of $1,500 per
meeting and is reimbursed for out-of-pocket expenses in connection with his
attendance at meetings of the Board of Directors, Audit Committee and
Compensation Committee. In the fiscal year ended December 31, 1997, the total
amount paid to non-employee directors for meeting fees and out-of-pocket
expenses was $27,497. During the fiscal year, Dr. Rubenstein received $10,000
for consulting services provided to the Company and $3,863 as an honorarium
for attending scientific meetings and as reimbursement for related expenses.
1998 Non-Employee Directors' Stock Option Plan. In July 1998, the Board of
Directors adopted, subject to stockholder approval, the 1998 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan") to provide for the
automatic grant of options to purchase shares of Common Stock to non-employee
directors of the Company. The Directors' Plan is administered by the Board of
Directors, unless the Board of Directors delegates administration to a
committee comprised of one or more members of the Board of Directors. The
aggregate number of shares of Common Stock that may be issued pursuant to
options granted under the Directors' Plan is 500,000.
50
<PAGE>
Pursuant to the terms of the Directors' Plan, each director of the Company
who is not an employee of the Company (a "Non-Employee Director") and who is
serving as a Non-Employee Director on the effective date of the Offerings (the
"IPO Date") or who is first elected or appointed to the Board of Directors as
a Non-Employee Director after the IPO Date will automatically receive a
nonstatutory stock option to purchase shares of Common Stock (an "Initial
Grant"). In addition, thereafter, beginning with the annual meeting of the
stockholders of the Company (the "Annual Meeting") held in 1999, each person
who is serving as a Non-Employee Director as of the date of the Annual Meeting
will automatically be granted a nonstatutory stock option to purchase shares
of Common Stock as of the date of such Annual Meeting (an "Annual Grant").
Specifically, on the IPO Date each person who is then serving as a Non-
Employee Director and who, on the IPO Date, holds 20,000 or more previously
acquired unvested shares (including both shares actually issued and shares
subject to options) of Common Stock will automatically receive an Initial
Grant to purchase 10,000 shares of Common Stock. On the IPO Date, each person
who is then a Non-Employee Director and who, on the IPO Date, holds less than
20,000 previously acquired unvested shares of Common Stock will automatically
receive an Initial Grant to purchase 30,000 shares of Common Stock, minus the
number of previously acquired unvested shares held by such person. On or after
the IPO Date, each person who is elected or appointed for the first time to be
a Non-Employee Director will automatically receive an Initial Grant to
purchase 30,000 shares of Common Stock, minus any previously acquired unvested
shares (if any) held by such person. Beginning with the 1999 Annual Meeting,
each person serving as a Non-Employee Director as of the date of the Annual
Meeting will automatically receive an Annual Grant to purchase 10,000 shares
of Common Stock as of the date of such Annual Meeting, reduced (but not below
zero) by 1,000 shares for each month fewer than ten months that has elapsed
since the most recent grant of Company options received by such Non-Employee
Director. Each Initial Grant and Annual Grant will vest in three equal annual
installments over a 3-year period measured from the grant date. The exercise
price of Initial Grants and Annual Grants will equal the fair market value of
the Common Stock on the date of grant.
Further, the Directors' Plan provides that each Non-Employee Director may
elect to defer all or part of the directors' fees earned by such Non-Employee
Director in exchange for a discounted stock option (a "Deferred Fee Option").
Such election will generally cover directors' fees not yet earned (and will be
irrevocable) through the next Annual Meeting. Generally, each Deferred Fee
Option will vest in installments on each date that directors' fees would have
been payable had no deferral election been made. The exercise price of
Deferred Fee Options will be 33 1/3% of the fair market value of the Common
Stock on the date of grant.
An optionholder whose relationship with the Company or any affiliate ceases
for any reason (other than by death or permanent and total disability) may
exercise vested options in the 12-month period following such cessation
(unless such options terminate or expire sooner by their terms). If an
optionholder's relationship with the Company or its affiliates ceases due to
disability or death, all options held by such optionholder shall become fully
vested and immediately exercisable and may be exercised up to 18 months
following such cessation (unless such options terminate or expire sooner by
their terms). Moreover, except in the case of Deferred Fee Options, in the
event an optionholder's service terminates due to retirement from the Board of
Directors with at least five years of service on or after attaining the age of
65, then options held by such optionholder will automatically become fully
vested and immediately exercisable. No option granted under the Directors'
Plan may be exercised after the expiration of ten years from the date it was
granted.
If there is any change in the stock subject to the Directors' Plan or
subject to any option granted under the Directors' Plan without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Directors' Plan and the options
outstanding thereunder will be appropriately adjusted as to the class(es) and
maximum number of shares subject to the Directors' Plan and the class(es),
number of shares and price per share of Common Stock subject to outstanding
options.
In the event of certain specified types of merger or other corporate
reorganizations, to the extent permitted by law, the shares covered by options
granted pursuant to the Directors' Plan and held by Non-Employee
51
<PAGE>
Directors whose service to the Company has not terminated will automatically
become fully vested and immediately exercisable. Such options will terminate
if not exercised prior to such transaction unless such options are assumed or
similar options are substituted for the options by the surviving corporation.
The Board of Directors has the power to amend the Directors' Plan, provided
however that no amendment will be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
applicable Nasdaq or securities exchange listing requirement. The Board of
Directors may, from time to time, amend the terms of any options granted
pursuant to the Directors' Plan, provided that an optionholder's rights may
not be impaired unless such optionholder consents in writing to such
amendment. The Board of Directors may suspend or terminate the Directors' Plan
at any time.
As of July 25, 1998, no options to purchase Common Stock had been granted
pursuant to the Directors' Plan.
52
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the two other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose salary and bonus
for the fiscal year ended December 31, 1997 were in excess of $100,000 for
services rendered in all capacities to the Company for that fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#)
- --------------------------- ---------- --------- ------------
<S> <C> <C> <C>
John A. Scarlett, M.D. .................... $ 280,000 $ -- 400,000
President, Chief Executive Officer and
Director
Robert J. Davis, Pharm.D. ................. 206,250 10,000 150,000
Executive Vice President
William F. Bennett, Ph.D. ................. 201,000 -- --
Senior Vice President, Research and Chief
Scientific Officer
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1997, to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------- ANNUAL RATES
NUMBER OF PERCENTAGE OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED IN OPTION TERM($)(3)
OPTIONS FISCAL EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(1) 1997(%)(2) ($/SHARES) DATE 5% 10%
- ---- ---------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John A. Scarlett, M.D. . 400,000 48.48% $0.20 8/11/07 $ $
Robert J. Davis,
Pharm.D. .............. 150,000 18.18 0.20 3/6/07
William F. Bennett,
Ph.D. ................. -- -- -- -- -- --
</TABLE>
- --------
(1) Options generally vest at a rate of 20% on the first anniversary of the
date of grant and the remaining options vest on a monthly basis over a
four year period thereafter. These options have a term of 10 years.
(2) Based on an aggregate of 825,000 shares subject to options granted to
employees of the Company under the 1996 Stock Option Plan in fiscal 1997,
including the Named Executive Officers. See "--Employee Benefit Plans--
1998 Equity Incentive Plan."
(3) The potential realizable value is calculated based on the term of the
option at the time of grant (10 years). Stock price appreciation of 5% and
10% is assumed pursuant to rules promulgated by the Securities and
Exchange Commission and does not represent the Company's prediction of its
stock price performance. The potential realizable value at 5% and 10%
appreciation is calculated by assuming that the assumed initial public
offering price appreciates at the indicated rate for the entire term of
the option and that the option is exercised at the exercise price and sold
on the last day of its term at the appreciated price.
53
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Executive Officers,
the shares acquired and the value realized, if any, on each exercise of stock
options during the year ended December 31, 1997 and the number and value of
securities underlying unexercised options held by the Named Executive Officers
at December 31, 1997:
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS(#)(1) OPTIONS($)(2)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John A. Scarlett, M.D. . -- -- 100,000 300,000 $ $
Robert J. Davis,
Pharm.D. .............. -- -- -- 150,000
William F. Bennett,
Ph.D. ................. -- -- 52,500 97,500
</TABLE>
- --------
(1) Options generally vest at a rate of 20% on the first anniversary of the
date of grant and the remaining options vest on a monthly basis over a
four-year period thereafter. The options have a term of ten years.
(2) Value of unexercised in-the-money options is based on the assumed initial
public offering price of the Company's Common Stock. Amounts reflected are
based on the assumed value minus the exercise price and do not indicate
that the optionee sold such stock.
EMPLOYEE BENEFIT PLANS
1998 Equity Incentive Plan. In 1996, the Company adopted the 1996 Stock
Option Plan which was subsequently amended and restated by the Company in
December 1997. In July 1998, the Company again amended and restated the 1996
Stock Option Plan and renamed it the 1998 Equity Incentive Plan (the
"Incentive Plan"). The Incentive Plan is subject to stockholder approval and
is effective as of the closing of the Offerings. The Company has reserved a
total of 5,000,000 shares for issuance under the Incentive Plan, which
includes 1,415,000 shares subject to outstanding options. The Incentive Plan
provides for grants of incentive stock options that qualify under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), to employees
(including officers and employee directors) of the Company or any affiliate of
the Company and for the grant of nonstatutory stock options, restricted stock
purchase awards, stock bonuses and stock appreciation rights to employees,
directors of and consultants to the Company or any of its affiliates. The
Incentive Plan is administered by the Board of Directors or a committee
appointed by the Board of Directors (references herein to the Board of
Directors shall include any such committee). The Board of Directors has the
authority to determine who will receive awards and what types of awards are to
be granted, including the exercise price, number of shares subject to the
award and the exercisability thereof.
The term of a stock option granted under the Incentive Plan generally may
not exceed ten years. The exercise price of options granted under the
Incentive Plan is determined by the Board of Directors, but in the case of an
incentive stock option cannot be less than 100% of the fair market value of
the Common Stock on the date of grant, and in the case of a nonstatutory stock
option cannot be less than 85% of the fair market value of the Common Stock on
the date of grant. Options granted under the Incentive Plan vest at the rate
specified in the option agreement. Unless expressly provided by the terms of a
nonstatutory stock option agreement, no option may be transferred by the
optionholder other than by will or the laws of descent or distribution,
provided that an optionholder may designate a beneficiary who may exercise the
option following the optionholder's death. Unless otherwise set forth in the
option agreement, an optionholder whose relationship with the Company or any
related corporation ceases for any reason (other than by death or permanent
and total disability) may exercise vested options in the 3 month period
following such cessation (unless such options terminate or expire sooner by
their terms). Vested options may generally be exercised for up to 12 months
after an optionholder's relationship with the Company or its affiliates ceases
due to disability and for up to 18 months after such relationship with the
Company or its affiliates ceases due to death.
54
<PAGE>
No incentive stock option may be granted to any person who, at the time of
the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of the Company or any affiliate of the Company,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant and the term of the
option does not exceed five years from the date of grant. In addition, the
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which incentive stock options are exercisable for
the first time by an optionholder during any calendar year (under the
Incentive Plan and all other stock plans of the Company and its affiliates)
may not exceed $100,000. The options, or portions thereof, which exceed this
limit are treated as nonstatutory options.
When the Company becomes subject to Section 162(m) of the Code (which denies
a deduction to publicly-held corporations for certain compensation paid to
specific employees in a taxable year to the extent that the compensation
exceeds $1,000,000), no person may be granted options, stock appreciation
rights or restricted stock purchase rights under the Incentive Plan covering
an aggregate of more than 2,000,000 shares of Common Stock in any calendar
year.
Shares subject to stock awards which have expired or terminated, without
having been exercised in full, and any shares repurchased by the Company
pursuant to a repurchase option provided under the Incentive Plan may again
become available for the grant of awards under the Incentive Plan. Shares
subject to stock appreciation rights exercised in accordance with the
Incentive Plan may not again become available for the grant of awards under
the Incentive Plan.
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a vesting schedule determined by the Board of Directors. The purchase
price of such awards will be at least 85% of the fair market value of the
Common Stock on the date of grant or at the time the purchase is consummated.
Stock bonuses may be awarded in consideration for past services. Rights under
a stock bonus or restricted stock purchase agreement shall be transferable
only upon such terms and conditions as are determined by the Board of
Directors and set forth in the respective agreement. Stock appreciation rights
authorized for issuance under the Incentive Plan may be tandem stock
appreciation rights, concurrent stock appreciation rights or independent stock
appreciation rights.
If there is any change in the stock subject to the Incentive Plan or subject
to any stock award granted under the Directors' Plan without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Incentive Plan and the stock awards
outstanding thereunder will be appropriately adjusted as to the class(es) and
maximum number of shares subject to the Incentive Plan and the class(es),
number of shares and price per share of Common Stock subject to outstanding
stock awards.
Upon certain changes in control of the Company, all outstanding stock awards
under the Incentive Plan will either be assumed or substituted by the
surviving entity. If the surviving entity determines not to assume or
substitute such awards, then with respect to persons whose service with the
Company or an affiliate has not terminated prior to such change in control,
the time during which such awards may be exercised shall be accelerated and
the awards terminated if not exercised prior to such change in control and any
Company repurchase option or reacquisition right with respect to such person
shall lapse.
The Board has the power to amend the Incentive Plan, provided, however, that
no amendment will be effective unless approved by the stockholders of the
Company to the extent that stockholder approval is necessary to satisfy the
requirements of Section 422 of the Code, Rule 16b-3 promulgated under Section
16 of the Exchange Act or any Nasdaq or securities exchange listing
requirement. The Board of Directors may, from time to time, amend the terms of
any stock awards granted pursuant to the Incentive Plan, provided that an
award holder's rights may not be impaired unless such award holder consents in
writing to such amendment. The Plan will terminate in July 2008, unless
terminated sooner by the Board of Directors.
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<PAGE>
1998 Employee Stock Purchase Plan. In July 1998, the Board of Directors
adopted, subject to stockholder approval, the Employee Stock Purchase Plan
(the "Purchase Plan") covering an aggregate of 350,000 shares of Common Stock.
The Purchase Plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Code. Under the Purchase Plan, the
Board of Directors may authorize participation by eligible employees,
including officers, in periodic offerings following the adoption of the
Purchase Plan. The offering period for any offering will be no more than 27
months.
Employees are eligible to participate if they are employed by the Company,
or an affiliate of the Company designated by the Board of Directors (an
"Affiliate"), for at least 20 hours per week, for at least five months per
calendar year and for such continuous period preceding the grant as the Board
of Directors may require. Additionally, no rights may be granted to any
employee under the Purchase Plan if, following such grant, such employee would
own 5% or more of the combined voting power of the Company or an Affiliate.
Employees who participate in an offering can have up to 15% of their earnings
withheld pursuant to the Purchase Plan. The amount withheld will then be used
to purchase shares of the Common Stock on specified dates determined by the
Board of Directors in an offering. The price of Common Stock purchased under
the Purchase Plan will be equal to 85% of the lower of the fair market value
of the Common Stock on the commencement date of each offering period or on the
specified purchase date. Employees may end their participation in the offering
at any time during the offering period. Participation ends automatically on
termination of employment with the Company.
In the event of certain changes of control of the Company, the Board of
Directors has discretion to provide that (i) each right to purchase Common
Stock will be assumed or an equivalent right substituted by the successor
corporation, (ii) such rights will continue in full force and effect, or (iii)
the Board of Directors may shorten the offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock
immediately prior to the change in control. The Purchase Plan will terminate
at the Board of Directors' discretion. The Board of Directors has the
authority to amend or terminate the Purchase Plan, provided, however, that no
amendment will be effective unless approved by the stockholders of the Company
to the extent that stockholder approval is necessary to satisfy the
requirements of Section 423 of the Code or Rule 166-3 promulgated under
Section 16 of the Exchange Act, and no amendment may adversely affect any
outstanding rights to purchase Common Stock.
SIMPLE-IRA Plan. Effective in April 1998, the Company adopted a Savings
Incentive Match Plan for Employees of Small Employers (the "SIMPLE-IRA Plan")
pursuant to Section 408(p) of the Code covering the Company's employees whose
annual earnings are at least $5,000. Pursuant to the SIMPLE-IRA Plan, eligible
employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit ($6,000 in 1998) and have the amount of
such salary reduction contributed to individual SIMPLE-IRA accounts maintained
for each eligible employee by a financial institution acting as trustee or
custodian for such accounts. Pursuant to the SIMPLE-IRA Plan, the Company
generally will make matching contributions to the SIMPLE-IRA accounts of
eligible employees equal to the amount of such employee's salary reduction
contributions, up to a maximum contribution equal to 3% of such employee's
compensation, provided that the Company may periodically elect other
contribution amounts under criteria set forth in the Code. Employees are at
all times fully vested in both their elective salary reduction contributions
and the Company's matching contributions.
In accordance with the Code, contributions by employees and by the Company
under the SIMPLE-IRA Plan, and income earned on the SIMPLE-IRA Plan
contributions, are not taxable to employees until withdrawn from the SIMPLE-
IRA Plan, and contributions by the Company are deductible when made. The
financial institution acting as trustee or custodian of a participating
employee's SIMPLE-IRA account, invests, at the direction of such employee,
amounts in such employee's SIMPLE-IRA account in selected investment options.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information with respect to the
beneficial ownership of the Company's outstanding Common Stock as of June 30,
1998 and as adjusted to reflect the sale of the Common Stock being offered
hereby by (i) each person (or group of affiliated persons) who is known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each of the
Company's directors, (iii) each of the Named Executive Officers, and (iv) all
directors and officers of the Company as a group. The table assumes the
conversion of all outstanding Preferred Stock into Common Stock upon the
completion of the Offerings.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
SHARES -----------------------
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING(2)(3)
- ------------------------------------ ------------ -------- --------------
<S> <C> <C> <C>
Ross Financial Corporation ............... 8,000,000 34.8%
P.O. Box 31363
Seven Mile Beach
Grand Cayman B.W.I.
Richard J. Hawkins (4) ................... 2,978,801 12.9
c/o Sensus Drug Development Corporation
98 San Jacinto Boulevard, Suite 430
Austin, TX 78701
Nona F. Niland, M.D. (5) ................. 2,978,801 12.9
324 Eanes School Road
Austin, TX 78746
Genentech, Inc. .......................... 1,658,035 7.2
One DNA Way
South San Francisco, CA 94080
John A. Scarlett, M.D. (6) ............... 1,384,400 6.0
c/o Sensus Drug Development Corporation
98 San Jacinto Boulevard, Suite 430
Austin, TX 78701
The Goldman Sachs Group, L.P. ............ 1,191,800 5.2
85 Broad Street
New York, NY 10004
Lyle A. Hohnke, Ph.D. (7) ................ 922,381 4.0
Stuart Davidson (8) ...................... 234,761 1.0
Arthur H. Rubenstein, M.D. (9) ........... 46,666 *
E. Martin Gibson (10) .................... 20,000 *
Joseph E. Smith .......................... -0- *
Robert J. Davis, Pharm.D. (11) ........... 45,000 *
William F. Bennett, Ph.D. (12) ........... 136,599 *
All directors and officers as a group (12
persons) (13) ........................... 5,773,941 24.7%
</TABLE>
- --------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them. Percentage of beneficial ownership prior to
the Offerings is based on 23,012,993 shares of Common Stock outstanding
as of June 30, 1998, and shares of Common Stock outstanding
after completion of the Offerings.
(2) In accordance with the rules of the Commission, each beneficial owner's
percentage ownership assumes the exercise or conversion of all options,
warrants and other convertible securities held by such person and that
are exercisable or convertible 60 days after June 30, 1998.
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<PAGE>
(3) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting." If the Underwriters' over-allotment option is exercised
in full, the Company will sell up to shares of Common Stock,
and shares of Common Stock will be outstanding after the
completion of the Offerings.
(4) Includes 1,000,000 shares held by RJH Partners, Ltd., a Texas limited
partnership of which Mr. Hawkins is general partner.
(5) Includes 1,250,000 shares held by Niland Partners, Ltd., a Texas limited
partnership of which Dr. Niland is general partner and 100,000 shares
held by Dr. Niland as trustee of the Niland Family 1998 Trust.
(6) Includes 100,000 shares held by Dr. Scarlett and his wife as trustees of
their daughters' trusts and 200,000 shares subject to stock options
exercisable within 60 days of June 30, 1998.
(7) Includes 915,714 shares held by Javelin Capital Fund, L.P. ("Javelin") of
which Dr. Hohnke is a general partner. Dr. Hohnke disclaims beneficial
ownership of the shares held by Javelin except to the extent of his pro
rata partnership interest therein. Includes 6,667 shares subject to stock
options exercisable within 60 days of June 30, 1998.
(8) Includes 221,429 shares held by Lysander, LLC of which Mr. Davidson is
managing director. Mr. Davidson disclaims beneficial ownership of the
shares held by Lysander, LLC except to the extent of his pro rata
interest therein. Includes 13,332 shares subject to stock options
exercisable within 60 days of June 30, 1998.
(9) Represents 46,666 shares subject to stock options exercisable within 60
days of June 30, 1998.
(10) Represents 20,000 shares subject to stock options exercisable within 60
days of June 30, 1998.
(11) Represents 45,000 shares subject to stock options exercisable within 60
days of June 30, 1998.
(12) Includes 64,099 shares held jointly with his wife and 72,500 shares
subject to stock options exercisable within 60 days of June 30, 1998.
(13) Includes 409,498 shares issuable pursuant to options exercisable within
60 days.
58
<PAGE>
CERTAIN TRANSACTIONS
In June 1994, the Company issued to certain founders, including individuals
who are officers and directors of the Company, an aggregate of 107,110 shares
of Common Stock at a price per share of $0.001. In May 1995, each then
outstanding share of the Company's Common Stock was split and converted into
59.22 shares of Common Stock. Between July 14, 1995 and January 21, 1997, the
Company issued an aggregate of 5,840,753 shares of Series A Preferred Stock at
a price per share of $1.75. Between March 20, 1997 and March 27, 1997, the
Company issued an aggregate of 1,083,651 shares of Series B Preferred Stock at
a price per share of $2.00. On October 10, 1997, the Company issued an
aggregate of 9,360,200 shares of Series C Preferred Stock at a price per share
of $2.50. All of the Series A, Series B and Series C Preferred Stock issued by
the Company will convert into Common Stock on a one-for-one basis upon the
closing of the Offerings.
Listed below are the directors, executive officers and 5% stockholders who
have made equity investments in the Company to purchase shares of the
Company's Preferred Stock or Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING PRE-OFFERING
-----------------------------------------------------
SERIES A SERIES B SERIES C AGGREGATE
COMMON PREFERRED PREFERRED PREFERRED CONSIDERATION
INVESTOR STOCK STOCK STOCK STOCK ($)
- -------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Richard J. Hawkins ...... 2,468,800 521,429 $ 912,901
John A. Scarlett ........ 1,184,400 200
William F. Bennett ...... 57,143 6,956 113,912
Genentech, Inc. ......... 1,658,035 2,901,562
The Goldman Sachs Group,
L.P. ................... 625,000 566,800 2,667,000
Nona F. Niland .......... 2,468,800 521,429 912,901
Javelin Capital Fund,
L.P. (1) ............... 685,714 230,000 1,775,000
Ross Financial
Corporation ............ 8,000,000 20,000,000
</TABLE>
- --------
(1) Dr. Hohnke, a director of the Company, is a general partner of Javelin.
See "Management--Directors, Executive Officers and Key Employees" and
"Principal Stockholders."
Upon completion of the Offerings, the holders of 16,284,604 shares of Common
Stock (consisting of shares to be issued upon the conversion of all
outstanding shares of Preferred Stock upon completion of the Offerings) and a
warrant to purchase 230,000 shares of Common Stock will be entitled to certain
rights with respect to the registration of such shares under the Securities
Act. Registration of such shares under the Securities Act would result in such
shares becoming freely tradable without restriction under the Securities Act
(except for shares purchased by affiliates of the Company) immediately upon
the effectiveness of such registration. See "Description of Capital Stock--
Registration Rights."
In connection with the sale of 685,714 shares of Series A Preferred Stock to
Javelin Capital Fund, L.P. ("Javelin"), on July 30, 1996, Sensus, Javelin and
certain stockholders of the Company entered into an agreement which grants
Javelin the right to designate one board member so long as Javelin continues
to hold at least 50% of such shares (including Common Stock issued upon
conversion of such shares originally purchased by Javelin). The agreement
shall terminate upon the consummation of the Offerings.
In July 1994, the Company and Genentech entered into the Genentech
Agreement. In consideration for the license granted to Sensus pursuant to the
Genentech Agreement, Genentech received an aggregate of 1,372,321 shares
(971,598 in 1995 and 400,723 in 1996) of Series A Preferred Stock. Based upon
the fair value of the Series A Preferred Stock issued ($1.75 per share), the
Genentech license was valued at $2,401,562. Genentech also purchased 285,714
shares of Series A Preferred Stock for $500,000 on the same terms as other
investors in July 1995. See "Business--Strategic Licensing Agreements" and
"Notes to Financial Statements."
In connection with the sale of 625,000 shares of Series B Preferred Stock to
The Goldman Sachs Group, L.P. ("Goldman Sachs"), on March 20, 1997, Sensus and
Goldman Sachs entered into a Board Observer and Visitation Rights Agreement
which, among other things, grants Goldman Sachs certain inspection and board
visitation rights. Furthermore, the agreement restricts the Company from
granting registration rights to the holders of Common Stock without obtaining
the consent of the holders of 58% of the then outstanding
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<PAGE>
Registrable Securities (as defined in that certain Amended and Restated
Investor Rights Agreement, dated October 10, 1997, by and among the Company
and certain investors) so long as Goldman Sachs continues to hold at least
300,000 shares of Series B Preferred Stock (or Common Stock issued upon
conversion of such shares). Except with respect to the covenant described in
the preceding sentence, the agreement shall terminate upon the consummation of
the Offerings.
In connection with the sale of 8,000,000 shares of Series C Preferred Stock
("the Series C Shares") to Ross Financial Corporation ("Ross") on October 10,
1997, Sensus and Ross entered into a Board Observer, Right of First Refusal
and Standstill Agreement which, among other things, grants Ross: (i) certain
board visitation rights, which terminate on the date that Ross holds fewer
than 50% of the Series C Shares, and (ii) certain rights of first refusal for
a three-year period following the consummation of the Offerings. The agreement
gives Ross the right to purchase its pro-rata share of certain equity
securities that the Company may propose to sell following the consummation of
the Offerings, so long as Ross owns at least 50% of the Series C Shares. The
standstill provision of the agreement prohibits Ross from acquiring or
proposing to acquire shares of the Company's stock which would cause it to
hold in excess of 49% of the Company's then outstanding voting securities.
As of December 31, 1997, the Company had drawn down $3,492,000 pursuant to a
line of credit between id/2/ an affiliate of the Company, and a commercial
bank, which line of credit was guaranteed by Richard J. Hawkins, Chairman of
the Company's Board of Directors. In January 1998, the Company paid down the
line of credit and issued 200,000 shares of Common Stock to Mr. Hawkins for
guarantying the line of credit.
On September 17, 1996, the Company and CBSI entered into an agreement with
respect to the development of a manufacturing process for, and the
manufacturing of, the Company's GHAs (the "CBSI Agreement"). Mr. Hawkins and
Dr. Scarlett are co-founders of CBSI and collectively own approximately 13% of
CBSI's capital stock. Dr. Scarlett has served as a director of CBSI since
1995. Costs related to the CBSI Agreement were $66,000 and $7,172,000 for 1996
and 1997, respectively.
Since its inception, the Company has occupied premises leased by id/2/-I,
L.P., an affiliate of the Company, and has made lease payments to the owner of
such premises.
From time to time, Company personnel have used for Company purposes a
private airplane furnished by a company controlled by Richard J. Hawkins,
Chairman of the Board of Directors. In 1997, the Company reimbursed such
company an aggregate amount of approximately $133,000 for such use.
On January 18, 1993, OU/EBI and Drug Development Investment Corp., an
affiliate of the Company, entered into a Biotechnology Licensing and Transfer
Agreement (the "OU/EBI Agreement") and a Sponsored Research Agreement ("SRA"),
both of which were subsequently assigned to id/2/-I, L.P., an affiliate of the
Company, which in turn sublicensed to the Company exclusive, worldwide rights
to make, use and sell products based on growth hormone antagonists and related
technologies that have been discovered or are discovered at OU/EBI during the
term of the SRA. See "Business--Strategic Licensing Agreements."
Pursuant to authority granted by the Bylaws, the Company intends to enter
into indemnification agreements (the "Indemnification Agreements") with each
of its directors and executive officers. Subject to the provisions of the
Indemnification Agreements, the Company shall indemnify and advance expenses
to such directors and executive officers in connection with their involvement
in any event or occurrence which arises in their capacity as, or as a result
of, their position with the Company. See "Description of Capital Stock--
Limitation of Liability and Indemnification."
The Company believes that all of the transactions set forth above were in
its best interest and were made on terms no less favorable to the Company than
could have been otherwise obtained from unaffiliated third parties. All future
transactions between the Company and any of its officers, directors or
principal stockholders will be approved by a majority of the independent and
disinterested members of the Board of Directors, will be on terms no less
favorable to the Company that could be obtained from unaffiliated third
parties and will be in connection with bona fide business purposes of the
Company.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The following description of the capital stock of the Company and certain
provisions of the Company's Restated Certificate and Bylaws is a summary and
is qualified in its entirety by the provisions of the Restated Certificate and
Bylaws, which have been filed as exhibits to the Company's Registration
Statement, of which this Prospectus is a part.
Upon the closing of the Offerings, and, after giving effect to the
conversion of all outstanding Preferred Stock into Common Stock, and the
amendment of the Company's Certificate of Incorporation, the authorized
capital stock of the Company will consist of 30,000,000 shares of Common
Stock, $0.001 par value, and 5,000,000 shares of Preferred Stock, $0.001 par
value. As of June 30, 1998, there were 61 holders of record of the Company's
Common and Preferred Stock.
COMMON STOCK
Upon completion of the Offerings, there will be shares of
Common Stock outstanding. The holders of Common Stock are entitled to one vote
for each share held of record on all matters submitted to a vote of the
stockholders. The holders of Common Stock are not entitled to cumulative
voting rights with respect to the election of directors, and, as a
consequence, minority stockholders will not be able to elect directors on the
basis of their votes alone.
Subject to preferences that may be applicable to any then outstanding shares
of Preferred Stock, holders of Common Stock are entitled to receive ratably
such dividends as may be declared by the Board of Directors out of funds
legally available therefor. See "Dividend Policy." In the event of
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding shares of
Preferred Stock. Holders of Common Stock have no preemptive rights and no
right to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon completion of the Offerings will be, fully paid and
nonassessable.
PREFERRED STOCK
Upon the closing of the Offerings, all outstanding Preferred Stock of the
Company will be converted into Common Stock. The Board of Directors will have
the authority, without further action by the stockholders, to issue up to
5,000,000 shares of Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any
series or the designation of such series, without any further vote or action
by the stockholders. The issuance of Preferred Stock could adversely affect
the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation may have
the effect of delaying, deferring or preventing a change in control of the
Company, which could have a depressive effect on the market price of the
Company's Common Stock. The Company has no present plan to issue any shares of
Preferred Stock.
WARRANT
In connection with the Company's October 1997 private placement of Series C
Preferred Stock, the Company issued to the placement agent, NationsBanc
Montgomery Securities LLC, a warrant to purchase 230,000 shares of its Series
C Preferred Stock at an exercise price of $3.00 per share, exercisable at any
time through October 10, 2002. Upon the consummation of the Offerings, and
conversion of all outstanding shares of Preferred Stock into Common Stock, the
warrant shall become a warrant to purchase shares of Common Stock. The warrant
is exercisable on a net issuance basis, and the holder is entitled to certain
registration rights with respect to the Common Stock issuable upon exercise of
the warrant. See "--Registration Rights."
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<PAGE>
REGISTRATION RIGHTS
The holders of an aggregate of 16,284,604 shares of Common Stock (consisting
of shares to be issued upon the conversion of all outstanding shares of
Preferred Stock upon completion of the Offerings) and a holder of a warrant
which is exercisable for 230,000 shares of Common Stock (collectively, the
"Holders") will be entitled to certain rights with respect to the registration
of such shares under the Securities Act upon the consummation of the
Offerings. If the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of other
security holders, the Holders are entitled to notice of the registration and
are entitled to include, at the Company's expense, such shares therein. In
addition, certain of the Holders may require the Company at its expense on not
more than two occasions at any time beginning 180 days from the effective date
of the Offerings to file a Registration Statement under the Securities Act,
with respect to their shares of Common Stock, and the Company is required to
use its best efforts to effect the registration, subject to certain conditions
and limitations. Further, the Holders may require the Company at its expense
to register their shares on Form S-3 when such form becomes available to the
Company, subject to certain conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. In
general, the statute prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. A "business combination" includes a merger, asset sale
or other transaction resulting in a financial benefit to the stockholder. For
purposes of Section 203, an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior, did own)
15% or more of the corporation's voting stock.
The Restated Certificate provides that each director will serve for a three-
year term, with approximately one-third of the directors to be elected
annually. Candidates for election as directors may be nominated only by the
Board of Directors or by a stockholder who gives written notice to the Company
no later than 60 days prior nor earlier than 90 days prior to the first
anniversary of the last annual meeting of stockholders. The Company may have
the number of directors as determined from time to time pursuant to a
resolution of the Board of Directors, which currently consists of seven
members. Between stockholder meetings, the Board of Directors may appoint new
directors to fill vacancies or newly created directorships. The Restated
Certificate will not provide for cumulative voting at stockholder meetings for
election of directors. As a result, stockholders controlling more than 50% of
the outstanding Common Stock can elect the entire Board of Directors. A
director may be removed from office only for cause by the affirmative vote of
a majority of the combined voting power of the then outstanding shares of
stock entitled to vote generally in the election of directors.
The Restated Certificate requires that any action required or permitted to
be taken by stockholders of the Company must be effected at a duly called
annual or special meeting of stockholders and may not be effected by a consent
in writing. The Restated Certificate also provides that the authorized number
of directors may be changed only by resolution of the Board of Directors.
Delaware Law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control or management of the Company,
which could have a depressive effect on the market price of the Company's
Common Stock. See "Management--Directors, Executive Officers and Key
Employees."
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Restated Certificate contains certain provisions permitted
under Delaware Law relating to the liability of directors. These provisions
eliminate a director's personal liability for monetary damages resulting from
a breach of fiduciary duty, except in certain circumstances involving certain
wrongful acts, such as (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in
62
<PAGE>
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware Law, or (iv) for any transaction
from which the director derives an improper personal benefit. These provisions
do not limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief, such as an injunction or rescission, in the event of a
breach of director's fiduciary duty. These provisions will not alter a
directors liability under federal securities laws. The Restated Certificate
also contains provisions indemnifying the directors and executive officers of
the Company to the fullest extent permitted by Delaware Law. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors and executive officers.
TRANSFER AGENT
The transfer agent for the Common Stock of the Company is American
Securities Transfer & Trust, Inc.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time.
Furthermore, since only a limited number of shares will be available for sale
shortly after the Offerings because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of Common
Stock of the Company in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.
Upon completion of the Offerings, the Company will have outstanding an
aggregate of shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options and
warrants and based upon the number of shares outstanding as of June 30, 1998.
Of these shares, all of the shares sold in the Offerings will be freely
tradable without restriction or further registration under the Securities Act,
unless such shares are purchased by "affiliates" of the Company, as that term
is defined in Rule 144 under the Securities Act ("Affiliates"). The remaining
23,012,993 shares of Common Stock held by existing stockholders were issued
and sold by the Company in reliance on exemptions from the registration
requirements of the Securities Act and are "restricted securities" as that
term is defined in Rule 144 under the Securities Act (the "Restricted
Shares"). 5,364,443 of the Restricted Shares are held by Affiliates.
Approximately of these shares will be available for sale upon the
effective date of the Registration Statement of which this Prospectus is a
part (the "Effective Date"). Beginning 180 days after the Effective Date, an
additional approximately of these shares will become eligible for sale
subject to the provisions of Rule 144, Rule 144(k) or Rule 701 promulgated
under the Securities Act, upon the expiration of agreements not to sell such
shares (the "Lock-Up Agreements").
Pursuant to the Lock-Up Agreements, the Company, the executive officers and
directors and substantially all of the stockholders of the Company, which hold
substantially all of the Restricted Shares, have agreed that they will not,
without the prior written consent of Merrill Lynch, directly or indirectly,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for shares of Common Stock whether now owned or thereafter acquired by them;
or (ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, where any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise, during the 180-day period commencing on the date of this
Prospectus. The Company may, however, issue shares of Common Stock upon the
exercise of stock options that are currently outstanding, and may grant
additional options under its stock option plans, provided that, without the
prior written consent of Merrill Lynch, the shares of Common Stock issuable
upon exercise of such additional options shall not be sold during such period.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company, or person (or
persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year, will be entitled to sell in any three-month
period a number of shares that does not exceed the greater of (i) one percent
of the then outstanding shares of the Company's Common Stock approximately
shares immediately following the Offerings or (ii) the average weekly trading
volume of the Company's Common Stock in the Nasdaq National Market during the
four calendar weeks immediately preceding the date on which notice of the sale
is filed with the Securities and Exchange Commission. Sales pursuant to Rule
144 are subject to certain requirements relating to manner of sale, notice and
availability of current public information about the Company. A person (or
person whose shares are aggregated) who is not deemed to have been an
Affiliate of the Company at any time during the 90 days immediately preceding
the sale and who has beneficially owned Restricted Shares for at least two
years is entitled to sell such shares pursuant to Rule 144(k) without regard
to the limitations described above.
An employee, officer or director of, or consultant to, the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
64
<PAGE>
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with
Rule 144's holding period restrictions, in each case commencing 90 days after
the date of this Prospectus. In addition, non-Affiliates may sell Rule 701
shares without complying with the public information, volume and notice
provisions of Rule 144.
The Company intends to file a registration statement under the Securities
Act covering shares of Common Stock reserved for issuance under the Incentive
Plan, Purchase Plan, Directors' Plan and options granted outside of the
Company's stock plans, based on the number of options outstanding and options
and shares reserved for issuance at June 30, 1998, such registration statement
will cover approximately 6,010,000 shares. Such registration statement is
expected to be filed and to become effective as soon as practicable after the
date hereof. Shares registered under such registration statement will, subject
to Rule 144 volume limitations applicable to Affiliates, be available for sale
in the open market, unless such shares are subject to vesting restrictions
with the Company or the Lock-Up Agreements described above.
Upon completion of the Offerings, the holders of 16,284,604 shares of Common
Stock (consisting of shares to be issued upon the conversion of all
outstanding shares of Preferred Stock upon completion of the Offerings) and a
warrant to purchase 230,000 shares of Common Stock will be entitled to certain
rights with respect to the registration of such shares under the Securities
Act. Registration of such shares under the Securities Act would result in such
shares becoming freely tradable without restriction under the Securities Act
(except for shares purchased by Affiliates) immediately upon the effectiveness
of such registration. See "Description of Capital Stock--Registration Rights."
65
<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated, NationsBanc Montgomery
Securities LLC and BancAmerica Robertson Stephens are acting as
representatives (the "U.S. Representatives") of each of the U.S. Underwriters
named below (the "U.S. Underwriters"). Subject to the terms and conditions set
forth in a U.S. purchase agreement (the "U.S. Purchase Agreement") among the
Company and the U.S. Underwriters, and concurrently with the sale of
shares of Common Stock to the International Managers (as defined below), the
Company has agreed to sell to the U.S. Underwriters, and each of the U.S.
Underwriters severally and not jointly has agreed to purchase from the
Company, the number of shares of Common Stock set forth opposite its name
below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
---------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................................
NationsBanc Montgomery Securities LLC...............................
BancAmerica Robertson Stephens......................................
---------
Total..........................................................
=========
</TABLE>
The Company has also entered into an international purchase agreement (the
"International Purchase Agreement") with certain underwriters outside the
United States and Canada (the "International Managers" and, together with the
U.S. Underwriters, the "Underwriters"). Subject to the terms and conditions
set forth in the International Purchase Agreement, and concurrently with the
sale of shares of Common Stock to the U.S. Underwriters pursuant to
the U.S. Purchase Agreement, the Company has agreed to sell to the
International Managers, and the International Managers severally have agreed
to purchase from the Company, an aggregate of shares of Common Stock.
The initial public offering price per share and the total underwriting
discount per share of Common Stock are identical under the U.S. Purchase
Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. Under certain circumstances, under the U.S.
Purchase Agreement and the International Purchase Agreement, the commitments
of non-defaulting Underwriters may be increased. The closings with respect to
the sale of shares of Common Stock to be purchased by the U.S. Underwriters
and the International Managers are conditioned upon one another.
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the U.S. Underwriters and the International Managers are permitted
to sell shares of Common Stock to each other for purposes of resale at the
initial public offering price, less an amount not greater than the selling
concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons
who are non-U.S. or non-Canadian persons, and the International Managers and
any dealer to whom they sell shares of Common Stock will not offer to sell or
sell shares of Common Stock to persons who are U.S. or Canadian persons or to
persons they believe intend to resell to persons who are U.S. or Canadian
persons, except in each case for transactions pursuant to the Intersyndicate
Agreement.
66
<PAGE>
The U.S. Representatives have advised the Company that the U.S. Underwriters
propose initially to offer the shares of Common Stock to the public at the
initial public offering price set forth on the cover page of this Prospectus,
and to certain dealers at such price less a concession not in excess of
$ per share of Common Stock. The U.S. Underwriters may allow, and such
dealers may reallow, a discount not in excess of $ per share of Common
Stock on sales to certain other dealers. After the initial public offering,
the public offering price, concession and discount may be changed.
The Company has granted an option to the U.S. Underwriters, exercisable for
30 days after the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less the underwriting
discount. The U.S. Underwriters may exercise this option solely to cover over-
allotments, if any, made on the sale of the Common Stock offered hereby. To
the extent that the U.S. Underwriters exercise this option, each U.S.
Underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares of Common Stock proportionate to such U.S.
Underwriter's initial amount reflected in the foregoing table. The Company
also has granted an option to the International Managers, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock to cover over-allotments, if any, on
terms similar to those granted to the U.S. Underwriters.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to % of the shares offered hereby to
be sold to certain directors, officers, employees and business associates of
the Company and related persons. The number of shares of Common Stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not
orally confirmed for purchase within one day of the pricing of the Offerings
will be offered by the Underwriters to the general public on the same terms as
the other shares offered hereby.
The Company, its officers, directors and certain stockholders have agreed,
subject to certain exceptions, not to directly or indirectly (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
for the sale of or otherwise dispose of or transfer any shares of Common Stock
or securities convertible into or exchangeable or exercisable for Common
Stock, whether now owned or thereafter acquired by the person executing the
agreement or with respect to which the person executing the agreement
thereafter acquires the power of disposition, or file a registration statement
under the Securities Act with respect to the foregoing or (ii) enter into any
swap or other agreement that transfers, in whole or in part, the economic
consequence of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise, without the prior written consent of Merrill Lynch on
behalf of the Underwriters for a period of 180 days after the date of this
Prospectus. See "Shares Eligible for Future Sale."
The Underwriters do not expect sales of the Common Stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered hereby.
Prior to the Offerings, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations between the Company, the U.S. Representatives and the
International Managers. The factors considered in determining the initial
public offering price, in addition to prevailing market conditions, are price-
earnings ratios of publicly traded companies that the U.S. Representatives
believe to be comparable to the Company, certain financial information of the
Company, the history of, and the prospects for, the Company and the industry
in which it competes, and an assessment of the Company's management, its past
and present operations, the prospects for, and timing of, future revenues of
the Company, the present state of the Company's development, and the above
factors in relation to market values and various valuation measures of other
companies engaged in activities similar to the Company. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the
Offerings at or above the initial public offering price.
67
<PAGE>
The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including certain
liabilities under the Securities Act and other applicable securities laws, or
to contribute to payments the Underwriters may be required to make in respect
thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the U.S. Representatives are permitted to engage
in certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.
If the Underwriters create a short position in Common Stock in connection
with the Offerings, i.e., if they sell more shares of Common Stock than are
set forth on the cover page of this Prospectus, the U.S. Representatives may
reduce that short position by purchasing Common Stock in the open market. The
U.S. Representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the shares of
Common Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the Common Stock to the extent
that it discourages resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the U.S. Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
In connection with the Company's October 1997 private placement of Series C
Preferred Stock, one of the U.S. Representatives, NationsBanc Montgomery
Securities LLC, acted as a placement agent, and, as consideration for its
services, received a warrant to purchase 230,000 shares of the Company's
Series C Preferred Stock at an exercise price of $3.00 per share, exercisable
at any time through October 10, 2002. Upon the consummation of the Offerings
and conversion of all outstanding shares of Preferred Stock into Common Stock,
the warrant shall become a warrant to purchase shares of Common Stock. The
warrant is exercisable on a net issuance basis, and the holder is entitled to
certain registration rights with respect to the Common Stock issuable upon
exercise of the warrant. See "Description of Capital Stock--Warrant," "--
Registration Rights" and "Certain Transactions."
68
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Cooley Godward
LLP, Palo Alto, California. Certain legal matters relating to the Offerings
will be passed upon for the Underwriters by Brown & Wood LLP, New York, New
York. Certain legal matters with respect to information contained in this
Prospectus under the captions "Risk Factors--No Assurance of Marketing
Approval; Government Regulation" and "Business--Government Regulation" will be
passed upon by Hyman, Phelps & McNamara, P.C.
EXPERTS
The financial statements of Sensus Drug Development Corporation at December
31, 1996 and 1997, and for each of the three years in the period ended
December 31, 1997, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent accountants, as set forth
in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain portions of which are omitted as permitted by the rules and
regulations of the Commission. For further information pertaining to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. Statements contained
in this Prospectus regarding the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, each
such statement being qualified in all respects by such reference.
Upon completion of the Offerings, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, will file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information, as well as the Registration Statement and the exhibits and
schedules thereto, may be inspected, without charge, at the public reference
facility maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates or accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors and will
make available copies of quarterly reports for the first three quarters of
each fiscal year containing unaudited financial information.
69
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Audited Financial Statements
Report of Independent Auditors............................................. F-2
Balance Sheets as of December 31, 1996 and 1997 and June 30, 1998
(unaudited)............................................................... F-3
Statements of Operations for the years ended December 31, 1995, 1996 and
1997, the six months ended June 30, 1997 (unaudited) and 1998 (unaudited),
and the period from June 23, 1994 (inception) to June 30, 1998
(unaudited)............................................................... F-4
Statements of Stockholders' Equity (Deficit) for the period from June 23,
1994 (inception) to December 31, 1994, years ended December 31, 1995, 1996
and 1997, and six months ended June 30, 1998 (unaudited).................. F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997, the six months ended June 30, 1997 (unaudited) and 1998 (unaudited),
and the period from June 23, 1994 (inception) to June 30, 1998
(unaudited)............................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Sensus Drug Development Corporation
We have audited the accompanying balance sheets of Sensus Drug Development
Corporation (a development stage company) as of December 31, 1997 and 1996,
and the related statements of operations, stockholders' equity (deficit) and
cash flows for each of the three years in the period ended December 31, 1997
and the cumulative period from June 23, 1994 (inception) to December 31, 1997
(not separately presented herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sensus Drug Development
Corporation (a development stage company) at December 31, 1997 and 1996, and
the results of its operations and cash flows for each of the three years in
the period ended December 31, 1997 and the cumulative period from June 23,
1994 (inception) to December 31, 1997 (not separately presented herein), in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Austin, Texas
February 23, 1998, except for Note 7,
as to which the date is July 20, 1998
F-2
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 44,519 $ 17,242,579 $ 3,773,568
Receivables from related parties.... 17,136 12,901 82,000
Restricted cash equivalent.......... -- -- 1,640,676
Other............................... 4,989 97,520 3,530
------------ ------------ ------------
Total current assets.............. 66,644 17,353,000 5,499,774
Property and equipment, net........... 142,260 227,383 380,810
Refundable deposits................... 4,515 4,515
Deferred offering costs............... -- -- 162,875
------------ ------------ ------------
Total assets...................... $ 208,904 $ 17,584,898 $ 6,047,974
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable--trade............. $ 1,464,550 $ 1,348,803 $ 471,853
Payables to related parties......... 1,409,557 5,108,025 1,838,067
Accrued expenses and other.......... 311,139 334,905 168,409
Note payable........................ -- -- 1,600,000
------------ ------------ ------------
Total current liabilities......... 3,185,246 6,791,733 4,078,329
Stockholders' equity (deficit):
Preferred Stock--$.001 par value,
21,000,000 shares authorized:
Series A--6,000,000 convertible
shares designated and 4,697,895,
5,840,753 and 5,840,753 shares
issued and outstanding in 1996,
1997 and 1998, respectively...... 4,699 5,841 5,841
Series B--2,000,000 convertible
shares designated and 1,083,651
shares issued and outstanding in
1997 and 1998.................... -- 1,084 1,084
Series C--13,000,000 convertible
shares designated and 9,360,200
shares issued and outstanding in
1997 and 1998.................... -- 9,360 9,360
Common Stock--$.001 par value,
32,000,000 shares authorized:
6,483,389, 6,528,389 and 6,728,389
shares issued and outstanding in
1996, 1997 and 1998, respectively.. 6,484 6,529 6,729
Additional paid-in capital.......... 8,214,142 34,460,818 34,510,618
Deficit accumulated during the
development stage.................. (11,201,667) (23,690,467) (32,563,987)
------------ ------------ ------------
Total stockholders' equity
(deficit)........................ (2,976,342) 10,793,165 1,969,645
------------ ------------ ------------
Total liabilities and
stockholders' equity (deficit). $ 208,904 $ 17,584,898 $ 6,047,974
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, INCEPTION
-------------------------------------- -------------------------- (JUNE 23, 1994)
1995 1996 1997 1997 1998 TO JUNE 30, 1998
----------- ----------- ------------ ------------ ------------ ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Research and
development........... 3,322,090 5,021,256 10,965,057 2,774,844 7,493,075 26,910,964
General and
administrative........ 1,127,321 1,096,790 1,597,233 761,000 1,556,605 5,767,988
----------- ----------- ------------ ------------ ------------ ------------
Total expenses......... 4,449,411 6,118,046 12,562,290 3,535,844 9,049,680 32,678,952
----------- ----------- ------------ ------------ ------------ ------------
(4,449,411) (6,118,046) (12,562,290) (3,535,844) (9,049,680) (32,678,952)
Interest expense........ (122,007) (66,274) (189,537) (32,913) (106,422) (501,605)
Interest and other
income................. 39,365 31,596 263,027 -- 282,582 616,570
----------- ----------- ------------ ------------ ------------ ------------
Net loss from
development stage
activities............. $(4,532,053) $(6,152,724) $(12,488,800) $ (3,568,757) $ (8,873,520) $(32,563,987)
=========== =========== ============ ============ ============ ============
Diluted net loss per
share.................. $ (0.68) $ (0.93) $ (1.92) $ (0.55) $ (1.32)
=========== =========== ============ ============ ============
Shares used in computing
diluted net loss per
share.................. 6,656,752 6,626,354 6,514,800 6,501,842 6,707,395
=========== =========== ============ ============ ============
Pro forma diluted net
loss per share......... $ (0.82) $ (0.39)
============ ============
Shares used in computing
pro forma diluted net
loss per share......... 15,238,185 22,991,999
============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C DEFICIT
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK ACCUMULATED
------------------- ------------------- ------------------- -------------------- ADDITIONAL DURING THE
NUMBER OF PAR VALUE NUMBER OF PAR VALUE NUMBER OF PAR VALUE NUMBER OF PAR VALUE PAID-IN DEVELOPMENT
SHARES $.001 SHARES $.001 SHARES $.001 SHARES $.001 CAPITAL STAGE
--------- --------- --------- --------- --------- --------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock sold in
1994 for cash at
$.01 per share.. -- $ -- -- $ -- -- $ -- 6,656,752 $6,657 $ (5,525) $ --
Net loss from
development
stage
activities...... -- -- -- -- -- -- -- -- -- (516,890)
--------- ------ --------- ------ --------- ------ --------- ------ ----------- ------------
Balance at
December 31,
1994............. -- -- -- -- -- -- 6,656,752 6,657 (5,525) (516,890)
Stock sold in
June 1995 for
cash at $1.75
per share....... 2,205,573 2,206 -- -- -- -- -- -- 3,857,549 --
Stock issued in
August 1995 for
technology at
$1.75 per share. 971,598 972 -- -- -- -- -- -- 1,699,028 --
Net loss from
development
stage
activities...... -- -- -- -- -- -- -- -- -- (4,532,053)
--------- ------ --------- ------ --------- ------ --------- ------ ----------- ------------
Balance at
December 31,
1995............. 3,177,171 3,178 -- -- -- -- 6,656,752 6,657 5,551,052 (5,048,943)
Stock sold for
cash at $1.75
per share....... 1,120,001 1,120 -- -- -- -- -- -- 1,958,882 --
Stock issued for
technology at
$1.75 per share. 400,723 401 -- -- -- -- -- -- 700,865 --
Stock options
issued for
services........ -- -- -- -- -- -- -- 3,200 --
Common stock
reacquired and
retired......... -- -- -- -- -- -- (173,363) (173) 143 --
Net loss from
development
stage
activities...... -- -- -- -- -- -- -- -- -- (6,152,724)
--------- ------ --------- ------ --------- ------ --------- ------ ----------- ------------
Balance at
December 31,
1996............. 4,697,895 4,699 -- -- -- -- 6,483,389 6,484 8,214,142 (11,201,667)
Stock issued for
cash at $1.75
per share....... 1,142,858 1,142 -- -- -- -- -- -- 1,998,860 --
Stock options
exercised....... -- -- -- -- -- -- 45,000 45 8,205 --
Stock options
issued for
services........ -- -- -- -- -- -- -- -- 2,363 --
Stock issued for
cash at $2.00
per share....... -- -- 1,083,651 1,084 -- -- -- -- 2,166,218 --
Stock issued for
cash at $2.50
per share....... -- -- -- -- 9,360,200 9,360 -- -- 23,391,140 --
Series C
Preferred Stock
issuance costs.. -- -- -- -- -- -- -- -- (1,320,110) --
Net loss from
development
stage
activities...... -- -- -- -- -- -- -- -- -- (12,488,800)
--------- ------ --------- ------ --------- ------ --------- ------ ----------- ------------
Balance at
December 31,
1997............. 5,840,753 5,841 1,083,651 1,084 9,360,200 9,360 6,528,389 6,529 34,460,818 (23,690,467)
Stock issued for
services........ -- -- -- -- -- -- 200,000 200 49,800 --
Net loss from
development
stage
activities...... -- -- -- -- -- -- -- -- -- (8,873,520)
--------- ------ --------- ------ --------- ------ --------- ------ ----------- ------------
Balance at June
30, 1998
(unaudited)...... 5,840,753 $5,841 1,083,651 $1,084 9,360,200 $9,360 6,728,389 $6,729 $34,510,618 $(32,563,987)
========= ====== ========= ====== ========= ====== ========= ====== =========== ============
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
<S> <C>
Stock sold in
1994 for cash at
$.01 per share.. $ 1,132
Net loss from
development
stage
activities...... (516,890)
----------------
Balance at
December 31,
1994............. (515,758)
Stock sold in
June 1995 for
cash at $1.75
per share....... 3,859,755
Stock issued in
August 1995 for
technology at
$1.75 per share. 1,700,000
Net loss from
development
stage
activities...... (4,532,053)
----------------
Balance at
December 31,
1995............. 511,944
Stock sold for
cash at $1.75
per share....... 1,960,002
Stock issued for
technology at
$1.75 per share. 701,266
Stock options
issued for
services........ 3,200
Common stock
reacquired and
retired......... (30)
Net loss from
development
stage
activities...... (6,152,724)
----------------
Balance at
December 31,
1996............. (2,976,342)
Stock issued for
cash at $1.75
per share....... 2,000,002
Stock options
exercised....... 8,250
Stock options
issued for
services........ 2,363
Stock issued for
cash at $2.00
per share....... 2,167,302
Stock issued for
cash at $2.50
per share....... 23,400,500
Series C
Preferred Stock
issuance costs.. (1,320,110)
Net loss from
development
stage
activities...... (12,488,800)
----------------
Balance at
December 31,
1997............. 10,793,165
Stock issued for
services........ 50,000
Net loss from
development
stage
activities...... (8,873,520)
----------------
Balance at June
30, 1998
(unaudited)...... $ 1,969,645
================
</TABLE>
See accompanying notes.
F-5
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, INCEPTION
-------------------------------------- -------------------------- (JUNE 23, 1994)
1995 1996 1997 1997 1998 TO JUNE 30, 1998
----------- ----------- ------------ ------------ ------------ ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss from
development stage
activities............. $(4,532,053) $(6,152,724) $(12,488,800) $ (3,568,757) $ (8,873,520) $(32,563,987)
Adjustment to reconcile
net loss to cash used
in operating
activities:
Depreciation expense... 41,851 54,681 60,177 29,069 42,177 216,392
Stock issued for
technology............ 1,700,000 701,266 -- -- -- 2,401,266
Stock options and
common stock issued
for services.......... -- 3,200 2,363 -- 50,000 55,563
Decrease (increase) in
receivables from
related parties....... 58,712 71,561 4,235 (15,871) (69,099) (82,000)
Decrease (increase) in
other assets.......... -- (4,989) (97,046) 4,989 93,990 (8,045)
Increase (decrease) in
accounts payable--
trade................. 176,507 1,281,228 (115,747) (883,533) (876,950) 471,853
Increase (decrease) in
payables to related
parties............... 260,932 440,553 3,698,468 439,246 (3,269,958) 1,838,067
Increase (decrease) in
accrued expenses and
other................. 157 277,306 23,766 (182,886) (166,496) 168,409
----------- ----------- ------------ ------------ ------------ ------------
Net cash used in
operating activities... (2,293,894) (3,327,918) (8,912,584) (4,177,743) (13,069,856) (27,502,482)
INVESTING ACTIVITIES
Purchase of property and
equipment.............. (79,149) (34,560) (145,300) (13,551) (195,604) (597,202)
Restricted cash
equivalent............. -- -- (1,640,676) (1,640,676)
----------- ----------- ------------ ------------ ------------ ------------
Net cash used in
investing activities... (79,149) (34,560) (145,300) (13,551) (1,836,280) (2,237,878)
FINANCING ACTIVITIES
Proceeds from sale of
Common Stock........... -- -- 8,250 7,400 -- 9,382
Proceeds from sale of
Series A Preferred
Stock.................. 3,859,755 1,960,002 2,000,002 2,000,000 -- 7,819,759
Proceeds from sale of
Series B Preferred
Stock.................. -- -- 2,167,302 2,167,302 -- 2,167,302
Proceeds from sale of
Series C Preferred
Stock, net of stock
issuance costs......... -- -- 22,080,390 -- -- 22,080,390
Repurchase of Common
Stock.................. (30) -- -- -- (30)
Deferred offering costs. -- -- -- -- (162,875) (162,875)
Proceeds from note
payable................ -- -- -- 2,861,000 2,861,000
Payments on note
payable................ -- -- -- -- (1,261,000) (1,261,000)
----------- ----------- ------------ ------------ ------------ ------------
Net cash provided by
financing activities... 3,859,755 1,959,972 26,255,944 4,174,702 1,437,125 33,513,928
Increase (decrease) in
cash and cash
equivalents............ 1,486,712 (1,402,506) 17,198,060 (16,592) (13,469,011) 3,773,568
Cash and cash
equivalents, beginning
of year or period...... (39,687) 1,447,025 44,519 44,519 17,242,579 --
----------- ----------- ------------ ------------ ------------ ------------
Cash and cash
equivalents, end of
year or period......... $ 1,447,025 $ 44,519 $ 17,242,579 $ 27,927 $ 3,773,568 $ 3,773,568
=========== =========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS
UNAUDITED.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Sensus Drug Development Corporation (a development stage company) (the
"Company") was incorporated under the laws of the state of Delaware on June
23, 1994. Sensus is an emerging pharmaceutical company that is developing
drugs to treat endocrine and metabolic diseases and disorders. The Company's
first drug candidate, Trovert, is initially targeted for the treatment of
acromegaly, a disease caused by excess growth hormone, and certain
complications associated with diabetes.
The Company's activities since incorporation have primarily consisted of
establishing its facilities, recruiting personnel, conducting research and
development, performing clinical trials, performing marketing studies,
developing business and financial plans and raising capital. As a result, the
Company is considered a "development stage company."
INTERIM FINANCIAL INFORMATION
The financial information at June 30, 1998 and for the six-month periods
ended June 30, 1997 and 1998 is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the financial position at such date and
the operating results and cash flows for those periods. Results for the six
months ended June 30, 1998 are not necessarily indicative of the results for
the entire year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
Investments with a maturity of three months or less when purchased are
considered to be cash equivalents and are stated at cost.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation.
Depreciation of property and equipment is computed using the straight-line
method over the useful lives of the assets (generally three to seven years).
REVENUE RECOGNITION
From inception through June 30, 1998, the Company has been engaged in
research and development activities, and has not recognized any revenues.
RESEARCH AND DEVELOPMENT
All costs for research and development activities, including costs
associated with the manufacture of Trovert for clinical trials and the
purchase of growth hormone technology, are expensed as incurred.
F-7
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 109, Accounting for Income
Taxes. This statement prescribes the use of the liability method whereby
deferred tax asset and liability account balances are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. SFAS
No. 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Net loss per share is computed in
accordance with SFAS No. 128 by dividing the net loss allocable to holders of
Common Stock by the weighted average number of shares of Common Stock
outstanding. As of December 31, 1997, the Company has certain options,
warrants and Preferred Stock which have not been used in the calculation of
diluted net loss per share because to do so would be anti-dilutive. As such,
the numerator and the denominator used in computing both basic and diluted net
loss per share allocable to holders of Common Stock are equal.
Pursuant to Securities and Exchange Commission ("SEC") Staff Accounting
Bulletin No. 98 and SEC staff policy, all Common Stock issued for nominal
consideration during the periods presented herein and through the filing of
the registration statement for the offering described in Note 7 are to be
reflected in a manner similar to a stock split or stock dividend for which
retroactive treatment is required in the calculation of pro-forma basic net
loss per share. The Company has not made any such issuances. Similarly, Common
Stock and Common Stock equivalents issued for nominal consideration during the
periods presented herein and through the filing of the registration statement
for the offering described in Note 7 are to be reflected in a manner similar
to a stock split or stock dividend for which retroactive treatment is required
in the calculation of pro forma diluted net loss per share, even if anti-
dilutive. The Company has not made any such issuances.
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
The Company's historical capital structure is not indicative of its
prospective structure due to the automatic conversion of all shares of
Preferred Stock into Common Stock concurrent with the closing of the Company's
anticipated initial public offering. Therefore, a pro forma calculation
assuming the conversion of all outstanding shares of Preferred Stock into
Common Stock upon the Company's initial public offering using the if-converted
method is presented.
The pro forma net loss per share allocable to holders of Common Stock and
shares used in computing pro forma net loss per share allocable to holders of
Common Stock have been presented reflecting the automatic conversion into
shares of Common Stock of the Preferred Stock upon completion of the offering
described in Note 7 (see Note 3) using the if-converted method from their
respective dates of issuance.
The Company has certain stock options which have not been used in the
calculation of diluted net loss per share because to do so would be anti-
dilutive. As such, the numerator and denominator used in computing both basic
and diluted pro forma net loss per share allocable to holders of Common Stock
are equal.
F-8
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
This statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements. This statement requires
that all items that are required to be recognized under accounting standards
as components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial statements. The
statement is effective for fiscal years beginning after December 15, 1997. The
Company believes that the adoption of SFAS 130 will not have a material effect
on its financial statements.
In June 1997, the Financial Accounting Standards Board also issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 establishes the standards for the manner in which public
enterprises are required to report financial and descriptive information about
their operating segments. The statement defines operating segments as
components of an enterprise for which separate financial information is
available and evaluated regularly as a means for assessing segment performance
and allocating resources to segments. A measure of profit or loss, total
assets and other related information are required to be disclosed for each
operating segment. In addition, this statement requires the annual disclosure
of information concerning revenues derived from the enterprise's products or
services, countries in which it earns revenue or holds assets, and major
customers. The statement is also effective for fiscal years beginning after
December 15, 1997. The adoption of SFAS No. 131 will not affect the Company's
results of operations or financial position, but may affect the disclosure of
segment information in the future.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996 and
1997:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Office equipment..................................... $ 139,117 $ 159,512
Leasehold improvements............................... 68,776 152,521
Office furniture and fixtures........................ 48,405 89,565
--------- ---------
256,298 401,598
Accumulated depreciation............................. (114,038) (174,215)
--------- ---------
$ 142,260 $ 227,383
========= =========
</TABLE>
3. STOCKHOLDERS' EQUITY
STOCK SPLIT
In May 1995, the Company effected a stock split of Common Stock, exchanging
59.22 shares for each share then outstanding. All Common Stock information has
been adjusted to reflect the stock split as if such split had taken place at
June 23, 1994 (inception of the Company).
CHANGE IN PAR VALUE
In May 1995, the Company changed the par value of Common Stock and Preferred
Stock to $.001 per share. All stock information has been adjusted to reflect
the change in par value as if such change had taken place at June 23, 1994
(inception of the Company).
F-9
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. STOCKHOLDERS' EQUITY (CONTINUED)
PREFERRED STOCK
In the period from June 1995 through January 1997, the Company issued a
total of 5,840,753 shares of Series A Preferred Stock at $1.75 per share. In
March 1997, the Company issued 1,083,651 shares of Series B Preferred Stock at
$2.00 per share. In October 1997, the Company issued 9,360,200 shares of
Series C Preferred Stock at $2.50 per share. The Preferred Stock is
convertible into Common Stock at the option of the holder thereof at any time
based upon the conversion price defined in the Company's Amended and Restated
Certificate of Incorporation. However, each share of Preferred Stock shall be
automatically converted into Common Stock, at the then applicable conversion
rate, upon the affirmative vote of at least a majority of the outstanding
shares of Preferred or in the event of an underwritten public offering of the
shares of the Company at a per share public offering price (prior to
underwriter commission and expense) of not less than $3.50 per share and for a
total offering of more than $10,000,000.
The holders of Series A, B and C Preferred Stock are entitled to voting
rights equal to holders of Common Stock and are to receive 8% noncumulative
dividends when and as declared by the Company's Board of Directors (the "Board
of Directors" or the "Board"). No redemption rights exist for the Series A, B
or C Preferred Stock. The Company has reserved approximately 16,500,000 shares
of Common Stock for issuance upon conversion of the Preferred Stock.
In connection with the issuance of the Series C Preferred Stock, the Company
issued to the placement agent a warrant to purchase 230,000 shares of Series C
Preferred Stock at $3.00 per share, exercisable at any time through October
10, 2002.
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan provides for the grant of incentive
options to employees. The exercise price of each currently outstanding option
is the fair value of a share of the Company's Common Stock on the date of
grant as determined by the Board of Directors. The vesting schedule and term
of each grant is determined by the Board, although no option grant may have a
term exceeding ten years from the date of grant. In July 1998, the 1996 Stock
Option Plan was amended and restated (see Note 7).
The Company has elected to follow the Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting method provided for
under FASB Statement No. 123, Accounting for Stock-Based Compensation ("FAS
123"), requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APB 25, because the exercise price of
the Company's employee stock options equals the estimated market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income (loss) is required by FAS 123,
which also requires that the information be determined as if the Company had
accounted for its employee stock options granted subsequent to December 31,
1994 under the fair value method prescribed by FAS 123. The fair value for
these options was estimated at the date of grant using a minimum value option
pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate............................ 6.0% 6.1% 6.0%
Dividend yield..................................... 0% 0% 0%
Weighted-average expected life of the options...... 5 years 5 years 5 years
</TABLE>
F-10
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. STOCKHOLDERS' EQUITY (CONTINUED)
Option valuation models require the input of highly subjective assumptions.
Because changes in the subjective input assumptions can materially affect the
fair value estimate, the existing models do not necessarily provide a reliable
single measure of the fair value of the Company's stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is expensed over the options' vesting periods. The Company's pro forma
information follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Pro forma stock-based compensation
expense........................... $ -- $ 1,237 $ 5,566
Pro forma net loss................. (4,532,053) (6,153,961) (12,494,366)
Pro forma basic net loss per share. (0.68) (0.93) (1.92)
Pro forma diluted net loss per
share............................. (0.68) (0.93) (1.92)
</TABLE>
The effects of applying FAS 123 for pro forma disclosures are not likely to
be representative of the effects on reported net income (loss) for future
years.
A summary of changes in common stock options is as follows:
<TABLE>
<CAPTION>
WEIGHTED
RANGE OF AVERAGE
EXERCISE EXERCISE
SHARES PRICES PRICES
--------- ---------- --------
<S> <C> <C> <C>
Options outstanding, December 31, 1994........ -- -- --
Granted..................................... 80,000 $.01-$.17 $ --
Exercised................................... -- -- --
Surrendered................................. -- -- --
--------- ---------- -----
Options outstanding, December 31, 1995........ 80,000 $.01-$.17 .09
Granted..................................... 360,000 .17 .17
Exercised................................... -- -- --
Surrendered................................. (125,000) .17 .17
--------- ---------- -----
Options outstanding, December 31, 1996........ 315,000 .01-.175 .16
Granted..................................... 825,000 .20-.25 .21
Exercised................................... (45,000) .17-.20 .18
Surrendered................................. (10,000) .17 .17
--------- ---------- -----
Options outstanding, December 31, 1997........ 1,085,000 .01-.25 .20
Granted..................................... 490,000 .25-3.00 1.65
Exercised................................... -- -- --
Surrendered................................. -- -- --
--------- ---------- -----
Options outstanding, June 30, 1998............ 1,575,000 $.01-$3.00 $ .65
========= ========== =====
Exercisable at December 31, 1997.............. 209,999 $.01-$ .20 $ .17
========= ========== =====
</TABLE>
F-11
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. STOCKHOLDERS' EQUITY (CONTINUED)
Options outstanding at December 31, 1997 are comprised of the following:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
RANGE OF WEIGHTED AVERAGE REMAINING
OPTIONS EXERCISE PRICES EXERCISE PRICE CONTRACTUAL LIFE
------- --------------- ---------------- ----------------
<S> <C> <C> <C>
80,000 $.01--$.175 $.09 7.5 years
200,000 .17 .17 8.2 years
805,000 .20 .20 9.6 years
</TABLE>
At December 31, 1997, the Company had reserved 1,495,000 shares of common
stock for issuance in connection with the exercise of stock options under the
1996 Stock Option Plan and had reserved 160,000 shares of common stock in
connection with the exercise of stock options issued outside the 1996 Stock
Option Plan.
The weighted-average remaining contractual life of the options outstanding
at December 31, 1997 is 9.2 years.
4. LICENSE AGREEMENTS
OU/EBI AGREEMENT.
Pursuant to a Biotechnology Licensing and Transfer Agreement (the "OU/EBI
License Agreement") between OU/EBI and an affiliate of the Company, Sensus has
acquired an exclusive, worldwide license to make, use and sell products based
on GHAs and related technologies discovered at OU/EBI during the term of a
Sponsored Research Agreement ("SRA") with OU/EBI. Several U.S. and foreign
patent applications and issued patents are included in this license. During
the term of the SRA, Sensus is obligated to reimburse OU/EBI for research
being conducted by OU/EBI in the field of technologies relating to GHAs.
Sensus is obligated to make payments to OU/EBI for each product derived from
licensed technology upon attainment of certain development milestones. In
addition, Sensus is obligated to pay a royalty to OU/EBI, subject to
adjustment, on net sales for any products commercialized using the licensed
technology. The OU/EBI License Agreement expires on January 18, 2001, unless
extended by mutual agreement of the parties, and may be terminated by OU/EBI
prior to the expiration of its term upon Sensus' breach of the agreement. Upon
expiration of the OU/EBI License Agreement, Sensus will retain all rights to
the licensed technology provided that it has not breached the agreement.
GENENTECH AGREEMENT.
In July 1994, Sensus and Genentech entered into a license agreement (the
"Genentech Agreement") which grants to Sensus the exclusive (even as to
Genentech), worldwide license for treating, diagnosing or preventing GH-
related diseases in humans, to make, have made, use and sell products
containing certain specified GHAs as well as certain related compounds
identified by Genentech during the three-year period following the effective
date of the agreement (July 11, 1994). The Company has granted to Genentech a
right of first offer whereby the Company must notify Genentech if the Company
wishes to sublicense certain GHAs to third parties to use and sell in certain
geographic regions. Genentech shall then be entitled to negotiate exclusively
with Sensus with respect to such rights for a limited period of time. If an
agreement between the parties is not reached, Sensus may grant such rights to
a third party on terms no more favorable than those last offered to Genentech.
Genentech has licensed to Sensus specific know-how that includes all
information, technology and materials which constitute proprietary methods,
processes, techniques, assay methodology, inventions, formulations or
biologically active materials useful for the development, use or sale of those
GHAs. Furthermore, Sensus has acquired know-how related to the development of
long-acting forms of GHAs from Genentech, as well as assay methodologies,
formulations and other methods useful for the development, use or sale of
certain GHAs. Sensus
F-12
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. LICENSE AGREEMENTS (CONTINUED)
has met all milestones in the Genentech Agreement required to be met to date,
and the final milestone is the filing of the NDA for a product candidate
containing a GHA licensed from Genentech on or before January 1, 2002. If
Sensus does not reach the final milestone or breaches the agreement, Genentech
may terminate the license. Under the terms of the Genentech Agreement,
Genentech is entitled to receive a royalty on net sales for any GHA sold by
Sensus that is within the scope of a licensed Genentech patent or patent
application, or a reduced royalty on net sales for other licensed products.
In consideration for the license, Genentech received an aggregate of
1,372,321 shares (971,598 in 1995 and 400,723 in 1996) of Series A Preferred
Stock pursuant to the Genentech Agreement. Based upon the fair value of the
Series A Preferred Stock issued ($1.75 per share), the Genentech license was
valued at $2,401,562 and was charged to research and development expense.
Genentech also purchased 285,714 shares of Series A Preferred Stock on the
same terms as other investors in 1995.
5. INCOME TAXES
As of December 31, 1997, the Company had net operating loss carryforwards of
approximately $20,888,000 and research and orphan drug credit carryforwards
("tax credit carryforwards") of approximately $1,880,000 for federal tax
reporting purposes. The net operating loss carryforwards will expire beginning
in 2009, if not utilized, and the tax credit carryforwards will expire
beginning in 2012, if not utilized. A significant portion of the net operating
loss and tax credit carryforwards are subject to an annual limitation on
utilization due to certain changes in ownership of the Company which have
occurred since inception. The annual limitation could result in the expiration
of net operating loss and tax credit carryforwards before utilization.
Significant components of the Company's deferred tax liabilities and assets
as of December 31, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
----------- ------------
<S> <C> <C>
Deferred tax assets:
Purchased technology.......................... $ 774,000 $ 717,000
Net operating loss carryforwards.............. 3,243,000 7,520,000
Tax credit carryforwards...................... -- 1,880,000
Book over tax depreciation.................... 7,000 15,000
----------- ------------
Total deferred tax assets....................... 4,024,000 10,132,000
Valuation allowance for deferred tax assets... (4,024,000) (10,132,000)
----------- ------------
Net deferred taxes.............................. $ -- $ --
=========== ============
</TABLE>
Given the Company's limited operating history, losses incurred to date, and
the difficulty in accurately forecasting the Company's future results,
management does not believe that it is more likely than not that the related
deferred tax assets will be realized and, accordingly, a full valuation
allowance has been recorded. The valuation allowance increased by $2,090,000
in 1996 and $6,108,000 in 1997.
F-13
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES (CONTINUED)
The difference between the provision for income taxes and the amount that
would result from applying the U.S. statutory tax rate to loss before
provision for income taxes is primarily due to the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Tax benefit at 34% statutory rate.. $(1,540,898) $(2,092,000) $(4,246,000)
Research and orphan drug credit ... -- -- (1,880,000)
Other (net)........................ -- 2,000 18,000
Benefits not currently recognized
due to valuation allowance........ 1,540,898 2,090,000 6,108,000
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
</TABLE>
6. RELATED PARTY TRANSACTIONS
Receivables from related parties consist of amounts borrowed by related
parties and employee advances. Payables to related parties consist of amounts
borrowed from related parties and accounts payable to related parties for
services provided.
Amounts borrowed by related parties were $17,136 and $12,901 at December 31,
1996 and 1997, respectively, and $0 at June 30, 1998. Amounts borrowed from
related parties were $1,323,646 and $3,846,689 at December 31, 1996 and 1997,
respectively, and $0 at June 30, 1998. Interest income and expense was accrued
on the amounts borrowed by/from related parties at 8%, 8% and 8.5% annually in
1995, 1996 and 1997, respectively. Net interest expense (income) recorded on
amounts borrowed by/from related parties was approximately $61,000 in 1995,
$66,000 in 1996 and $189,000 in 1997. Accounts payable to related parties was
$85,911 and $1,261,336 at December 31, 1996 and 1997, respectively, and
$1,990,005 at June 30, 1998.
Included in amounts borrowed from related parties at December 31, 1997 is
$3,492,000 borrowed from a bank under a related party's line of credit with
the bank. The line of credit between the bank and the related party is
personally guaranteed by the Chairman of the Company. In January 1998, the
Board of Directors approved the issuance of 200,000 shares of Common Stock to
the Company's Chairman in consideration for his personal guarantee of the
related party's line of credit to the extent the line of credit was utilized
by the Company.
The Company subleases its office facility from a related party and incurred
rent expense of approximately $56,000 in 1995, $60,000 in 1996 and $60,000 in
1997.
In September 1996, the Company entered into a Manufacturing Services
Agreement ("CBSI Agreement") with Covance Biotechnology Services, Inc.
("CBSI"). Certain stockholders and members of management of the Company are
also stockholders in CBSI. CBSI has been contracted to perform services
related to the manufacture and production of the Company's growth hormone
antagonists. Costs related to the CBSI Agreement were $66,000 and $7,172,000
for 1996 and 1997, respectively.
F-14
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. SUBSEQUENT EVENTS
In January 1998, the Company borrowed $2,861,000 from a bank. The loan
proceeds of $2,861,000 plus additional cash of $631,000 were used to repay the
$3,492,000 borrowed from a bank via a related party's line of credit (see Note
6). Pursuant to the loan agreement, principal is due in six quarterly
installments as follows: $631,000 on March 31, 1998, $630,000 on June 30, 1998
and $400,000 for each quarter thereafter until all principal has been repaid.
The loan bears interest at 7.6% and interest is payable quarterly.
Effective May 1, 1998, the Company adopted a SIMPLE--IRA Plan (the "Plan")
covering certain of the Company's employees. Eligible employees may contribute
up to the lesser of 15% of their compensation or the statutorily prescribed
annual limit ($6,000 in 1998). The Company may make matching contributions at
a discretionary percentage, up to a maximum contribution equal to 3% of each
participating employees' compensation. No matching contributions have been
made to the Plan as of June 30, 1998.
On July 20, 1998, the Board of Directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its Common Stock to the
public. If the offering is consummated under the terms presently anticipated,
all of the currently outstanding shares of Preferred Stock will convert to
16,284,604 shares of Common Stock.
In July 1998, the Board adopted, subject to stockholder approval, the 1998
Equity Incentive Plan (the "Incentive Plan") as an amendment and restatement
of the Company's 1996 Stock Option Plan. The Company has reserved a total of
5,000,000 shares for issuance under the Incentive Plan. The Incentive Plan
provides for grants of incentive stock options to employees of the Company or
any affiliate and nonstatutory stock options, restricted stock purchase
awards, stock bonuses and stock appreciation rights to employees, directors of
and consultants to the Company or any affiliate. The term of a stock option
granted under the Incentive Plan generally may not exceed 10 years. The
exercise price of options granted under the Incentive Plan is determined by
the Board, but, in the case of an incentive stock option, cannot be less than
100% of the fair market value of the Common Stock on the date of grant and, in
the case of a nonstatutory stock option, cannot be less than 85% of the fair
market value of the Common Stock on the date of grant. The Incentive Plan will
terminate in June 2008, unless terminated sooner by the Board.
In July 1998, the Board adopted, subject to stockholder approval, the
Employee Stock Purchase Plan (the "Purchase Plan") covering an aggregate of
350,000 shares of Common Stock. Employees are eligible to participate if they
are employed by the Company, or an affiliate of the Company designated by the
Board, for at least 20 hours per week and are employed by the Company, or an
affiliate of the Company designated by the Board, for at least five months per
calendar year. Employees who participate in an offering can have up to 15% of
their earnings withheld to be used to purchase shares of Common Stock of the
Company on specified dates determined by the Board. The price of Common Stock
purchased under the Purchase Plan will be equal to 85% of the lower of the
fair market value of the Common Stock on the commencement date of each
offering period or on the specified purchase date.
In July 1998, the Board adopted, subject to stockholder approval, the 1998
Non-Employee Directors' Stock Option Plan (the "Directors' Plan") to provide
for automatic grant of options to purchase shares of Common Stock to non-
employee directors of the Company. The aggregate number of shares of Common
Stock that may be issued pursuant to options granted under the Directors' Plan
is 500,000 and options issued have a 10-year life. Pursuant to the terms of
the Directors' Plan, each non-employee director of the Company who is first
elected or appointed to be a non-employee director after the closing of the
Company's initial public offering and who is not holding an outstanding option
to purchase Common Stock on the date of such election or appointment shall
automatically be granted an option to purchase 30,000 shares of Common Stock
or 30,000 shares less the shares
F-15
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
7. SUBSEQUENT EVENTS (CONTINUED)
subject to any outstanding option held by such director at the date of such
election or appointment. In addition, each non-employee director who continues
to serve as a non-employee director of the Company will automatically be
granted an option to purchase 10,000 shares of Common Stock immediately
following the annual meeting of stockholders of the Company, which amount
shall be pro-rated for any non-employee director who has not continuously
served as a director for the 10-month period prior to the date of such annual
meeting of stockholders. Each initial grant and annual grant shall vest in
three equal annual installments over a 3-year period measured from the grant
date. The exercise price of initial grants and annual grants will equal the
fair market value of the Common Stock on the date of grant. The Directors'
Plan will terminate in June 2008, unless earlier terminated by the Board.
F-16
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary ....................................................... 3
Risk Factors ............................................................. 8
Special Note Regarding Forward-Looking Statements ........................ 18
The Company .............................................................. 19
Use of Proceeds .......................................................... 20
Dividend Policy .......................................................... 20
Capitalization ........................................................... 21
Dilution ................................................................. 22
Selected Financial Data .................................................. 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations .............................................................. 24
Business ................................................................. 28
Management ............................................................... 48
Principal Stockholders ................................................... 57
Certain Transactions ..................................................... 59
Description of Capital Stock ............................................. 61
Shares Eligible for Future Sale .......................................... 64
Underwriting ............................................................. 66
Legal Matters ............................................................ 69
Experts .................................................................. 69
Available Information .................................................... 69
Index to Financial Statements ............................................ F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
[LOGO OF SENSUS]
COMMON STOCK
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
BANCAMERICA ROBERTSON STEPHENS
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 28, 1998
PROSPECTUS
SHARES
[LOGO OF SENSUS]
SENSUS DRUG DEVELOPMENT CORPORATION
COMMON STOCK
----------
All of the shares of Common Stock, par value $0.001 per share
("Common Stock"), offered hereby are being offered by Sensus Drug Development
Corporation, a Delaware corporation ("Sensus" or the "Company"). Of the
shares of Common Stock offered hereby, shares are being offered for
sale initially outside the United States and Canada by the International
Managers (the "International Offering") and shares are being offered in
the United States and Canada by the U.S. Underwriters (the "U.S. Offering" and,
together with the International Offering, the "Offerings"). The initial public
offering price and the underwriting discount per share will be identical for
both offerings.
Prior to the Offerings, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for information related
to the factors to be considered in determining the initial public offering
price of the Common Stock. The Company has applied to have the Common Stock
approved for inclusion on the Nasdaq National Market under the symbol "SENS."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO PUBLIC DISCOUNT(1) TO COMPANY(2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.......... $ $ $
- -------------------------------------------------------------------------------
Total(3)........... $ $ $
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the International Managers and the U.S.
Underwriters options to purchase up to an additional shares and
shares of Common Stock, respectively, in each case exercisable
within 30 days after the date hereof, solely to cover over-allotments, if
any. If such options are exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about , 1998.
----------
MERRILL LYNCH INTERNATIONAL
NATIONSBANC MONTGOMERY SECURITIES LLC
BA ROBERTSON STEPHENS INTERNATIONAL LIMITED
----------
The date of this Prospectus is , 1998.
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
GENERAL
The following is a general discussion of certain material United States
federal income and estate tax consequences of the ownership and disposition of
Common Stock by a holder who is not a United States person or entity (a "Non-
U.S. Holder"). As used in this discussion, the term "Non-U.S. Holder" means
any person or entity that is, for United States federal income tax purposes, a
foreign corporation, a non-resident alien individual, a non-resident fiduciary
of a foreign estate or trust, or a foreign partnership. An individual may,
subject to certain exceptions, be deemed to be a resident alien (as opposed to
a non-resident alien) by virtue of being present in the United States on at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year (counting for
such purposes all of the days present in the current year, one-third of the
days present in the immediately preceding year, and one-sixth of the days
present in the second preceding year). Resident aliens are subject to United
States federal tax as if they were United States citizens and residents.
This discussion does not address all aspects of United States federal income
and estate taxes or consider any specific facts or circumstances that may
apply to a particular Non-U.S. Holder's tax position such as a dealer in
securities, an insurance company or a tax-exempt entity. Nor does it deal with
foreign, state and local consequences that may be relevant to Non-U.S.
Holders. Furthermore, this discussion is based on current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
regulations promulgated thereunder and public administrative and judicial
interpretations thereof, all of which are subject to changes which could be
applied retroactively. EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED
TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY US, FEDERAL, STATE, MUNICIPAL OR
OTHER TAXING JURISDICTION OF ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK.
DIVIDENDS
The Company does not currently intend to pay cash dividends on shares of
Common Stock. See "Dividend Policy". In the event that such dividends are paid
on shares of Common Stock, except as described below, dividends paid to a Non-
U.S. Holder of Common Stock will be subject to withholding of United States
federal income tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividends are effectively connected
with the conduct of a trade or business by the Non-U.S. Holder within the
United States. If the dividends are effectively connected with the conduct of
a trade or business by the Non-U.S. Holder within the United States and, if a
tax treaty applies, are attributable to a United States permanent
establishment of the Non-U.S. Holder, the dividends will be subject to United
States federal income tax on a net income basis at applicable graduated
individual or corporate rates and will be exempt from the 30% withholding tax
described above (assuming the necessary certification and disclosure
requirements are met). Any such effectively connected dividends received by a
foreign corporation may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
Dividends paid to an address outside the United States are presumed to be
paid to a resident of such country for purposes of the withholding discussed
above (unless the payor has knowledge to the contrary), and, under currently
applicable United States Treasury regulations, for purposes of determining the
applicability of a tax treaty rate. Under recently promulgated United States
Treasury regulations generally effective with respect to payments made after
December 31, 1999, however, a Non-U.S. Holder of Common Stock who wishes to
claim the benefit of an applicable treaty rate (and avoid backup withholding
as discussed below) will be required to satisfy specified certification and
other requirements, which will include filing a Form W-8 containing the Non-
U.S. Holder's name, address and a certification that such Holder is eligible
for the benefits of the treaty under its
66
<PAGE>
Limitations in Benefits Article. In addition, certain certification and
disclosure requirements must be met to be exempt from withholding under the
effectively connected income exemption discussed above.
A Non-U.S. Holder of Common Stock who is eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts currently withheld by filing an appropriate,
timely claim for refund with the United States Internal Revenue Service (the
"Service").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax on any gain recognized on a disposition of a share of Common Stock
unless (i) subject to the exception discussed below, the Company is or has
been a "United States real property holding corporation" (a "USRPHC") within
the meaning of section 897(c)(2) of the Code at any time within the shorter of
the five-year period preceding such disposition or such Non-U.S. Holder's
holding period (the "Required Holding Period"), (ii) the gain is effectively
connected with the conduct of a trade or business within the United States of
the Non-U.S. Holder and, if a tax treaty applies, is attributable to a
permanent establishment maintained by the Non-U.S. Holder, (iii) the Non-U.S.
Holder is an individual who holds the share of Common Stock as a capital asset
and is present in the United States for 183 days or more in the taxable year
of the disposition and either (a) such individual has a "tax home" (as defined
for United States federal income tax purposes) in the United States or (b) the
gain is attributable to an office or other fixed place of business maintained
in the United States by such individual, or (iv) the Non-U.S. Holder is
subject to tax pursuant to the Code provisions applicable to certain United
States expatriates. If an individual Non-U.S. Holder falls under clause (ii)
or (iv) above, he or she will be taxed on his or her net gain derived from the
sale under regular United States federal income tax rates. If the individual
Non-U.S. Holder falls under clause (iii) above, he or she will be subject to a
flat 30% tax on the gain derived from the sale which may be offset by United
States source capital losses (notwithstanding the fact that he or she is not
considered a resident of the United States). If a Non-U.S. Holder that is a
foreign corporation falls under clause (ii) above, it will be taxed on its
gain under regular graduated United States federal income tax rates and, in
addition, will under certain circumstances be subject to the branch profits
tax equal to 30% of its "effectively connected earnings and profits" within
the meaning of the Code for the taxable year, as adjusted for certain items,
unless it qualifies for a lower rate under an applicable income tax treaty.
A corporation is generally a USRPHC if the fair market value of its United
States real property interests equals or exceeds 50% of the sum of the fair
market value of its worldwide real property interest plus its other assets
used or held for use in a trade or business. The Company believes that it is
not currently a USRPHC. However, a Non-U.S. Holder would generally not be
subject to tax, or withholding in respect of such tax, on gain from a sale or
other disposition of Common Stock by reason of the Company's USRPHC status if
the Common Stock is regularly traded on an established securities market
("regularly traded") during the calendar year in which such sale or
disposition occurs, provided that such holder does not own, actually or
constructively, Common Stock with a fair market value in excess of 5% of the
fair market value of all Common Stock outstanding at any time during the
Required Holding Period. The Company believes that the Common Stock will be
treated as regularly traded.
If the Company is or has been a USRPHC within the Required Holding Period,
and if a Non-U.S. Holder owns in excess of 5% of the fair market value of
Common Stock (as described in the preceding paragraph), such Non-U.S. Holder
of Common Stock will be subject to United States federal income tax at regular
graduated rates under certain rules ("FIRPTA tax") on gain recognized on a
sale or other disposition of such Common Stock. In addition, if the Company is
or has been a USRPHC within the Required Holding Period and if the Common
Stock were not treated as regularly traded, a Non-U.S. Holder (without regard
to its ownership percentage) would be subject to withholding in respect of
FIRPTA tax at a rate of 10% of the amount realized on a sale or other
disposition of Common Stock and could be further subject to FIRPTA tax in
excess of the amounts withheld. Any amount withheld pursuant to such
withholding tax would be creditable against such Non-U.S. Holder's United
States federal income tax liability. Non-U.S. Holders are urged to consult
their tax advisors concerning the potential applicability of these provisions.
67
<PAGE>
FEDERAL ESTATE TAXES
An individual Non-U.S. Holder who (i) is neither a citizen nor resident of
the United States (as specifically defined for United States federal estate
tax purposes) at the time of his or her death and (ii) owns, or is treated as
owning Common Stock at the time of his or her death, or has made certain
lifetime transfers of an interest in Common Stock, will be required to include
the value of such Common Stock in his or her gross estate for federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the Service and to each Non-U.S. Holder
the amount of dividends paid to such holder and the tax withheld with respect
to such dividends. These information reporting requirements apply regardless
of whether withholding is required. Copies of the information returns
reporting such dividends and withholding may also be made available to the tax
authorities in the country in which the Non-U.S. Holder resides under the
provisions of an applicable income tax treaty or other agreement with the tax
authorities in that country.
United States backup withholding tax (which, in general, is a withholding
tax imposed at the rate of 31% on certain payments to persons that fail to
furnish certain information under the United States information reporting
requirements) generally will not apply to (a) the payment of dividends paid on
Common Stock to a Non-U.S. Holder that is either subject to the 30%
withholding discussed above or that is not so subject because an income tax &
treaty applies that reduces or eliminates the withholding, at an address
outside the United States (unless the payor has knowledge that the payee is a
United States person) or (b) the payment of the proceeds of the sale of Common
Stock to or through the foreign office of a broker. In the case of the payment
of proceeds from such a sale of Common Stock through a foreign office of a
broker that is a United States person or a "U.S. related person", however,
information reporting (but not backup withholding) is required with respect to
the payment unless the broker has documentary evidence in its files that the
owner is a Non-U.S. holder (and has no actual knowledge to the contrary) and
certain other requirements are met or the holder otherwise establishes an
exemption. For this purpose, a "U.S. related person" is (i) a "controlled
foreign corporation" for United States federal income tax purposes under
current regulations, or (ii) a foreign person 50% or more of whose gross
income from all sources for the three-year period ending with the close of its
taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are effectively
connected with the conduct of a United States trade or business. The payment
of the proceeds of a sale of shares of Common Stock to or through a United
States office of a broker is subject to information reporting and possible
backup withholding unless the owner certifies its non-United States status
under penalties of perjury or otherwise establishes an exemption. Any amount
withheld under the backup withholding rules from a payment to a Non-U.S.
Holder will be allowed as a refund or a credit against such Non-U.S. Holder's
United States federal income tax liability, provided that the required
information is furnished to the Service.
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. In addition, the final
regulations permit the shifting of primary responsibility for withholding to
certain financial intermediaries acting on behalf of beneficial owners. The
final regulations are generally effective for payments made after December 31,
1999, subject to certain transition rules. Non-U.S. Holders should consult
their own tax advisor with respect to the impact, if any, of the final
regulations.
68
<PAGE>
UNDERWRITING
Merrill Lynch International, NationsBanc Montgomery Securities LLC and BA
Robertson Stephens International Limited are acting as managers (the
"International Managers"). Subject to the terms and conditions set forth in an
international purchase agreement (the "International Purchase Agreement")
among the Company and the International Managers, and concurrently with the
sale of shares of Common Stock to the U.S. Underwriters (as defined
below), the Company has agreed to sell to the International Managers, and each
of the International Managers severally and not jointly has agreed to purchase
from the Company, the number of shares of Common Stock set forth opposite its
name below.
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGER SHARES
--------------------- ---------
<S> <C>
Merrill Lynch International.......................................
NationsBanc Montgomery Securities LLC.............................
BA Robertson Stephens International Limited.......................
---------
Total........................................................
=========
</TABLE>
The Company has also entered into a U.S. purchase agreement (the "U.S.
Purchase Agreement") with certain underwriters in the United States and Canada
(the "U.S. Underwriters" and, together with the International Managers, the
"Underwriters"). Subject to the terms and conditions set forth in the U.S.
Purchase Agreement, and concurrently with the sale of shares of Common
Stock to the International Managers pursuant to the International Purchase
Agreement, the Company has agreed to sell to the U.S. Underwriters, and the
U.S. Underwriters severally have agreed to purchase from the Company, an
aggregate of shares of Common Stock. The initial public offering price
per share and the total underwriting discount per share of Common Stock are
identical under the International Purchase Agreement and the U.S. Purchase
Agreement.
In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. Under certain circumstances, under the
International Purchase Agreement and the U.S. Purchase Agreement, the
commitments of non-defaulting Underwriters may be increased. The closings with
respect to the sale of shares of Common Stock to be purchased by the
International Managers and the U.S. Underwriters are conditioned upon one
another.
The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the International Managers and the U.S. Underwriters are permitted
to sell shares of Common Stock to each other for purposes of resale at the
initial public offering price, less an amount not greater than the selling
concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons
who are non-U.S. or non-Canadian persons, and the International Managers and
any dealer to whom they sell shares of Common Stock will not offer to sell or
sell shares of Common Stock to persons who are U.S. or Canadian persons or to
persons they believe intend to resell to persons who are U.S. or Canadian
persons, except in each case for transactions pursuant to the Intersyndicate
Agreement.
The International Managers have advised the Company that the International
Managers propose initially to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in
excess of $ per share of Common Stock. The International Managers may
allow, and such dealers may reallow, a discount not in excess of $ per
share of Common Stock on sales to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
69
<PAGE>
The Company has granted an option to the International Managers, exercisable
for 30 days after the date of this Prospectus, to purchase up to an aggregate
of additional shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The International Managers may exercise this option solely to cover
over-allotments, if any, made on the sale of the Common Stock offered hereby.
To the extent that the International Managers exercise this option, each
International Manager will be obligated, subject to certain conditions, to
purchase a number of additional shares of Common Stock proportionate to such
International Manager's initial amount reflected in the foregoing table. The
Company also has granted an option to the U.S. Underwriters, exercisable for
30 days after the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock to cover over-allotments, if any, on
terms similar to those granted to the International Managers.
At the request of the Company, the Underwriters have reserved for sale at
the initial public offering price up to % of the shares offered hereby to be
sold to certain directors, officers, employees and business associates of the
Company and related persons. The number of shares available for sale to the
general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not orally confirmed for
purchase within one day of pricing of the Offerings will be offered by the
Underwriters to the general public on the same terms as the other shares
offered hereby.
The Company, its officers, directors and certain stockholders have agreed,
subject to certain exceptions, not to directly or indirectly (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
for the sale of or otherwise dispose of or transfer any shares of Common Stock
or securities convertible into or exchangeable or exercisable for Common
Stock, whether now owned or thereafter acquired by the person executing the
agreement or with respect to which the person executing the agreement
thereafter acquires the power of disposition, or file a registration statement
under the Securities Act with respect to the foregoing or (ii) enter into any
swap or other agreement that transfers, in whole or in part, the economic
consequence of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise, without the prior written consent of Merrill Lynch on
behalf of the Underwriters for a period of 180 days after the date of this
Prospectus. See "Shares Eligible for Future Sale."
The Underwriters do not expect sales of the Common Stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered hereby.
Prior to the Offerings, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations between the Company, the U.S. Representatives and the
International Managers. The factors considered in determining the initial
public offering price, in addition to prevailing market conditions, are price-
earnings ratios of publicly traded companies that the U.S. Representatives
believe to be comparable to the Company, certain financial information of the
Company, the history of, and the prospects for, the Company and the industry
in which it competes, and an assessment of the Company's management, its past
and present operations, the prospects for, and timing of, future revenues of
the Company, the present state of the Company's development, and the above
factors in relation to market values and various valuation measures of other
companies engaged in activities similar to the Company. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the
Offerings at or above the initial public offering price.
The Company has agreed to indemnify the International Managers and the U.S.
Underwriters against certain liabilities, including certain liabilities under
the Securities Act and other applicable securities laws, or to contribute to
payments the Underwriters may be required to make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the U.S. Representatives are permitted to engage
in certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.
70
<PAGE>
If the Underwriters create a short position Common Stock in connection with
the Offerings, i.e., if they sell more shares of Common Stock than are set
forth on the cover page of this Prospectus, the U.S. Representatives may
reduce that short position by purchasing Common Stock in the open market. The
U.S. Representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the shares of
Common Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the Common Stock to the extent
that it discourages resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the shares of Common
Stock. In addition, neither the Company nor any of the Underwriters makes any
representation that the U.S. Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
Each International Manager has agreed that (i) it has not offered or sold
and, prior to the expiration of the period of six months from the Closing
Date, will not offer or sell any shares of Common Stock to persons in the
United Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which do not constitute an offer to the public in the United Kingdom within
the meaning of the Public Offers of Securities Regulations 1995; (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Common Stock in, from or otherwise involving the United Kingdom; and (iii) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of Common
Stock to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom such document may otherwise lawfully be issued or passed on.
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or
any other material relating to the Company or shares of Common Stock in any
jurisdiction where action for that purpose is required. Accordingly, the
shares of Common Stock may not be offered or sold, directly or indirectly, and
neither this Prospectus nor any other offering material or advertisements in
connection with the shares of Common Stock may be distributed or published, in
or from any country or jurisdiction except in compliance with any applicable
rules and regulations of any such country or jurisdiction.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
In connection with the Company's October 1997 private placement of Series C
Preferred Stock, one of the U.S. Representatives, NationsBanc Montgomery
Securities LLC, acted as a placement agent, and, as consideration for its
services, received a warrant to purchase 230,000 shares of the Company's
Series C Preferred Stock at an exercise price of $3.00 per share, exercisable
at any time through October 10, 2002. Upon the consummation of the Offerings
and conversion of all outstanding shares of Preferred Stock into Common Stock,
the warrant shall become a warrant to purchase shares of Common Stock. The
warrant is exercisable on a net issuance basis, and the holder is entitled to
certain registration rights with respect to the Common Stock issuable upon
exercise of the warrant. See "Description of Capital Stock--Warrant," "--
Registration Rights" and "Certain Transactions."
71
<PAGE>
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
IN THE PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary ....................................................... 3
Risk Factors ............................................................. 8
Special Note Regarding Forward-Looking Statements ........................ 18
The Company .............................................................. 19
Use of Proceeds .......................................................... 20
Dividend Policy .......................................................... 20
Capitalization ........................................................... 21
Dilution ................................................................. 22
Selected Financial Data .................................................. 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations .............................................................. 24
Business ................................................................. 28
Management ............................................................... 48
Principal Stockholders ................................................... 57
Certain Transactions ..................................................... 59
Description of Capital Stock ............................................. 61
Shares Eligible for Future Sale .......................................... 64
Certain United States Federal Tax Considerations for Non-United States
Holders ................................................................. 66
Underwriting.............................................................. 69
Legal Matters ............................................................ 72
Experts................................................................... 72
Additional Information.................................................... 72
Index to Financial Statements ............................................ F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO OF SENSUS]
COMMON STOCK
---------------
PROSPECTUS
---------------
MERRILL LYNCH INTERNATIONAL
NATIONSBANC MONTGOMERY SECURITIES LLC
BA ROBERTSON STEPHENS
INTERNATIONAL LIMITED
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the Common Stock being registered. All the amounts shown are estimates
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee................................................... $ 13,570
NASD filing fee.................................................... 5,100
Nasdaq application fee............................................. 10,000
Blue sky qualification fee and expenses............................ 5,000
Printing and engraving expenses.................................... 150,000
Legal fees and expenses............................................ 400,000
Accounting fees and expenses....................................... 125,000
Directors and officers' insurance.................................. 23,100
Transfer agent and registrar fees.................................. 1,000
Miscellaneous...................................................... 2,230
--------
Total............................................................ $735,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The Registrant's Certificate of Incorporation, as amended and restated,
provides for the elimination of liability for monetary damages for breach of
the directors' fiduciary duty of care to the Registrant and its stockholders.
These provisions do not eliminate the directors' duty of care and, in
appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
The Registrant expects to enter into agreements with its directors and
officers that require the Registrant to indemnify such persons against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person
may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
The U.S. Underwriting Agreement and International Underwriting Agent, filed
as Exhibit 1.1 and Exhibit 1.2, respectively, to this Registration Statement
provides for indemnification by the Underwriters of the Registrant and its
officers and directors for certain liabilities arising under the Securities
Act or otherwise.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since August 1, 1995, the Registrant has sold and issued the following
unregistered securities:
(1) In October 1995, the Company sold an aggregate of 200,000 shares of
its Series A Preferred Stock to accredited investors for cash in the
aggregate amount of $350,000.
(2) In December 1995, the Company sold an aggregate of 476,844 shares of
its Series A Preferred Stock to accredited investors for cash in the
aggregate amount of $834,477.
(3) In January 1996, the Company sold an aggregate of 14,286 shares of
its Series A Preferred Stock to an accredited investor for cash in the
aggregate amount of $25,000.50.
(4) In February 1996, the Company sold an aggregate of 242,858 shares of
its Series A Preferred Stock to accredited investors for cash in the
aggregate amount of $425,001.50.
(5) In July 1996, the Company sold an aggregate of 842,857 shares of its
Series A Preferred Stock to accredited investors for cash in the aggregate
amount of $1,475,000.25. The Company also issued 400,723 shares of its
Series A Preferred Stock for technology valued at $701,266.
(6) In August 1996, the Company sold an aggregate of 20,000 shares of its
Series A Preferred Stock to an accredited investor for cash in the
aggregate amount of $35,000.
(7) In January 1997, the Company sold an aggregate of 1,142,858 shares of
its Series A Preferred Stock to accredited investors for cash in the
aggregate amount of $2,000,001.50.
(8) In March 1997, the Company sold an aggregate of 1,083,651 shares of
its Series B Preferred Stock to accredited investors for cash in the
aggregate amount of $2,167,302.
(9) In October 1997, the Company sold an aggregate of 9,360,200 shares of
its Series C Preferred Stock to accredited investors for cash in the
aggregate amount of $23,400,500.
(10) In October 1997, the Company issued a warrant to purchase 230,000
shares of its Series C Preferred Stock at an exercise price of $3.00 per
share to an accredited investor. The warrant expires in October 2002.
(11) In January 1998, the Company issued 200,000 shares of Common Stock
to Richard J. Hawkins in consideration for his past services in acting as
guarantor for loans granted to the Company by various financial
institutions.
(12) Since inception, the Registrant has granted incentive stock options
to employees, directors and consultants under its 1996 Stock Option Plan
covering an aggregate of 1,535,000 shares of the Company's Common Stock, at
an average exercise price of $0.21 per share, and non-statutory stock
options to its outside directors covering an aggregate of 20,000 shares of
the Company's Common Stock, at an average exercise price of $0.25 per
share. The Registrant has granted non-statutory stock options outside of
the plan to its outside directors covering an aggregate of 200,000 shares
of the Company's Common Stock, at an average exercise price of $0.16 per
share. The Company sold an aggregate of 25,000 shares of its Common Stock
to employees, directors and consultants of the Registrant for consideration
in the aggregate amount of approximately $4,850 pursuant to the exercise of
stock options under the 1996 Stock Option Plan. The Company sold an
aggregate of 20,000 shares of its Common Stock to employees, directors and
consultants of the Registrant for consideration in the aggregate amount of
approximately $3,400 pursuant to the exercise of stock options outside of
the 1996 Stock Option Plan.
The sales and issuances of securities in the transactions described in
paragraphs (1) through (11) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Regulation D
promulgated under the Securities Act. The purchasers in each case represented
their intention to acquire the securities for investment only and not with a
view to the distribution thereof. Appropriate legends are affixed to the stock
certificates issued in such transactions. Similar legends were imposed in
connection with any subsequent sales of any such securities. All recipients
either received adequate information about the Registrant or had access,
through employment or other relationships, to such information.
II-2
<PAGE>
The sales and issuance of securities in the transaction described in
paragraph (12) above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 promulgated thereunder in that they were
offered and sold either pursuant to written compensatory benefit plans or
pursuant to a written contract relating to compensation, as provided by Rule
701.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of U.S. Underwriting Agreement.
1.2* Form of International Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Registrant as
currently in effect.
3.2* Amended and Restated Certificate of Incorporation of the Registrant to
be in effect immediately following the closing of the Offering.
3.3 Bylaws of the Registrant as currently in effect.
3.4 Amended and Restated Bylaws of the Registrant to be in effect
immediately following the closing of the Offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2 Amended and Restated Investors' Rights Agreement between the
Registrant and certain investors, dated October 10, 1997.
5.1* Opinion of Cooley Godward LLP.
10.1 Registrant's 1998 Equity Incentive Plan and related documents.
10.2 Registrant's 1998 Employee Stock Purchase Plan and related documents.
10.3 Registrant's 1998 Non-Employee Directors' Stock Option Plan and
related documents.
10.4 Form of Indemnification Agreement to be entered into between the
Registrant and its officers and directors.
10.5** Manufacturing Services Agreement between the Registrant and Corning
Bio Inc., dated September 17, 1996; Amendment No. 1 to Manufacturing
Services Agreement between the Registrant and Covance Biotechnology
Systems, Inc. ("CBSI") dated July 3, 1997; Amendment No. 2 to
Manufacturing Services Agreement between the Registrant and CBSI,
dated October 3, 1997; Amendment No. 3 to Manufacturing Services
Agreement between the Registrant and CBSI, dated October 24, 1997;
Amendment No. 4 to Manufacturing Services Agreement between the
Registrant and CBSI, dated December 29, 1997; Amendment No. 5 to
Manufacturing Services Agreement between the Registrant and CBSI,
dated May 1, 1998.
10.6** Letter of Intent between the Registrant and CBSI, dated April 8, 1998.
10.7** License Agreement between the Registrant and Genentech, Inc., dated
July 11, 1994; Amendment of License Agreement between the Registrant
and Genentech, Inc., dated December 21, 1994; Amendment of License
Agreement between the Registrant and Genentech, Inc., dated February
3, 1995; Amendment of License Agreement between the Registrant and
Genentech, Inc., dated March 31, 1995; Fourth Amendment to License
Agreement between the Registrant and Genentech, Inc., dated February
9, 1998; Fifth Amendment to License Agreement between the Registrant
and Genentech, Inc., dated May 19, 1998
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.8** Biotechnology Licensing and Transfer Agreement between Drug
Development Investment Corporation and Ohio University Edison Animal
Biotechnology Center, dated January 18, 1993.
10.9 Clarification, dated July 14, 1994, to Biotechnology Licensing and
Transfer Agreement between id/2/-I, L.P. and Ohio University Edison
Animal Biotechnology Center, dated January 18, 1993.
10.10** Sublicense Agreement, dated July 14, 1994, between id/2/-I, L.P. and
Registrant concerning Biotechnology Licensing and Transfer Agreement,
dated January 18, 1993.
10.11** First Amendment, dated March 18, 1997, to Sublicense Agreement, dated
July 14, 1994, between id/2/-I, L.P. and Registrant.
10.12 Assignment and Assumption Agreement, dated March 26, 1993, between
Drug Development Investment Corporation and id/2/-I, L.P. concerning
Biotechnology Licensing and Transfer Agreement, dated January 18,
1993.
10.13 Amended Assignment and Assumption Agreement, dated March 26, 1993,
concerning Biotechnology Licensing and Transfer Agreement, dated
January 18, 1993 between Drug Development Investment Corporation and
id/2/-I, L.P.
10.14** Sponsored Research Agreement between the Drug Development Investment
Corporation and Ohio University Edison Animal Biotechnology Center,
dated January 18, 1993; First Amendment, dated September 14, 1993, to
Sponsored Research Agreement between the id/2/-I, L.P. and Ohio
University Edison Animal Biotechnology Center, dated January 18, 1993;
Second Amendment, dated May 12, 1995, to Sponsored Research Agreement
between the id/2/-I, L.P. and Ohio University Edison Animal
Biotechnology Center, dated January 18, 1993
10.15 Agreement between Registrant and Javelin Capital Fund, L.D., effective
July 30, 1996; Amendment, dated March 19, 1997, to Agreement between
Registrant and Javelin Capital Fund, L.D., effective July 30, 1996.
10.16 Board Observer and Visitation Rights Agreement between Registrant and
Goldman Sachs Group, L.P., dated March 20, 1997.
10.17 Board Observer, Right of First Refusal and Standstill Agreement
between Registrant and Ross Financial Corporation, dated October 10,
1997.
23.1 Form of Consent of Ernst & Young LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to the signature page.
27 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Confidential treatment requested.
II-4
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted from this Registration Statement because they
are not required or the required information is included in the financial
statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the U.S. Underwriting Agreement and the
International Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that: (i) for purposes of determining any
liability under the Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time the Commission declared it
effective, and (ii) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF AUSTIN, STATE OF TEXAS,
ON THE 28TH DAY OF JULY, 1998.
Sensus Drug Development Corporation
/s/ John A. Scarlett, M.D.
By: _________________________________
Name: John A. Scarlett, M.D.
Title: President, Chief Executive
Officer and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints John A.
Scarlett, M.D. and Richard J. Hawkins, his true and lawful attorney-in-fact
and agent, each acting alone, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments) to the Registration Statement on Form S-1, and to any registration
statement filed under Securities and Exchange Commission Rule 462, and to file
the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard J. Hawkins Chairman of the Board July 28, 1998
____________________________________
Richard J. Hawkins
/s/ John A. Scarlett, M.D. President, Chief Executive July 28, 1998
____________________________________ Officer and Director
John A. Scarlett, M.D. (Principal Executive
Officer)
/s/ Charles L. Cox Treasurer and Assistant July 28, 1998
____________________________________ Secretary (Principal
Charles L. Cox Financial and Accounting
Officer)
/s/ Stuart Davidson Director July 28, 1998
____________________________________
Stuart Davidson
/s/ E. Martin Gibson Director July 28, 1998
____________________________________
E. Martin Gibson
/s/ Lyle A. Hohnke Director July 28, 1998
____________________________________
Lyle A. Hohnke
/s/ Arthur H. Rubenstein, M.D. Director July 28, 1998
____________________________________
Arthur H. Rubenstein, M.D.
/s/ Joseph E. Smith Director July 28, 1998
____________________________________
Joseph E. Smith
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of U.S. Underwriting Agreement.
1.2* Form of International Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Registrant as
currently in effect.
3.2* Amended and Restated Certificate of Incorporation of the Registrant to
be in effect immediately following the closing of the Offering.
3.3 Bylaws of the Registrant as currently in effect.
3.4 Amended and Restated Bylaws of the Registrant to be in effect
immediately following the closing of the Offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2 Amended and Restated Investors' Rights Agreement between the
Registrant and certain investors, dated October 10, 1997.
5.1* Opinion of Cooley Godward LLP.
10.1 Registrant's 1998 Equity Incentive Plan and related documents.
10.2 Registrant's 1998 Employee Stock Purchase Plan and related documents.
10.3 Registrant's 1998 Non-Employee Directors' Stock Option Plan and
related documents.
10.4 Form of Indemnification Agreement to be entered into between the
Registrant and its officers and directors.
10.5** Manufacturing Services Agreement between the Registrant and Corning
Bio Inc., dated September 17, 1996; Amendment No. 1 to Manufacturing
Services Agreement between the Registrant and Covance Biotechnology
Systems, Inc. ("CBSI") dated July 3, 1997; Amendment No. 2 to
Manufacturing Services Agreement between the Registrant and CBSI,
dated October 3, 1997; Amendment No. 3 to Manufacturing Services
Agreement between the Registrant and CBSI, dated October 24, 1997;
Amendment No. 4 to Manufacturing Services Agreement between the
Registrant and CBSI, dated December 29, 1997; Amendment No. 5 to
Manufacturing Services Agreement between the Registrant and CBSI,
dated May 1, 1998.
10.6** Letter of Intent between the Registrant and CBSI, dated April 8, 1998.
10.7** License Agreement between the Registrant and Genentech, Inc., dated
July 11, 1994; Amendment of License Agreement between the Registrant
and Genentech, Inc., dated December 21, 1994; Amendment of License
Agreement between the Registrant and Genentech, Inc., dated February
3, 1995; Amendment of License Agreement between the Registrant and
Genentech, Inc., dated March 31, 1995; Fourth Amendment to License
Agreement between the Registrant and Genentech, Inc., dated February
9, 1998; Fifth Amendment to License Agreement between the Registrant
and Genentech, Inc., dated May 19, 1998
10.8** Biotechnology Licensing and Transfer Agreement between Drug
Development Investment Corporation and Ohio University Edison Animal
Biotechnology Center, dated January 18, 1993.
10.9 Clarification, dated July 14, 1994, to Biotechnology Licensing and
Transfer Agreement between id/2/-I, L.P. and Ohio University Edison
Animal Biotechnology Center, dated January 18, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.10** Sublicense Agreement, dated July 14, 1994, between id/2/-I, L.P. and
Registrant concerning Biotechnology Licensing and Transfer Agreement,
dated January 18, 1993.
10.11** First Amendment, dated March 18, 1997, to Sublicense Agreement, dated
July 14, 1994, between id/2/-I, L.P. and Registrant.
10.12 Assignment and Assumption Agreement, dated March 26, 1993, between
Drug Development Investment Corporation and id/2/-I, L.P. concerning
Biotechnology Licensing and Transfer Agreement, dated January 18,
1993.
10.13 Amended Assignment and Assumption Agreement, dated March 26, 1993,
concerning Biotechnology Licensing and Transfer Agreement, dated
January 18, 1993 between Drug Development Investment Corporation and
id/2/-I, L.P.
10.14** Sponsored Research Agreement between the Drug Development Investment
Corporation and Ohio University Edison Animal Biotechnology Center,
dated January 18, 1993; First Amendment, dated September 14, 1993, to
Sponsored Research Agreement between the id/2/-I, L.P. and Ohio
University Edison Animal Biotechnology Center, dated January 18, 1993;
Second Amendment, dated May 12, 1995, to Sponsored Research Agreement
between the id/2/-I, L.P. and Ohio University Edison Animal
Biotechnology Center, dated January 18, 1993
10.15 Agreement between Registrant and Javelin Capital Fund, L.D., effective
July 30, 1996; Amendment, dated March 19, 1997, to Agreement between
Registrant and Javelin Capital Fund, L.D., effective July 30, 1996.
10.16 Board Observer and Visitation Rights Agreement between Registrant and
Goldman Sachs Group, L.P., dated March 20, 1997.
10.17 Board Observer, Right of First Refusal and Standstill Agreement
between Registrant and Ross Financial Corporation, dated October 10,
1997.
23.1 Form of Consent of Ernst & Young LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to the signature page.
27 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Confidential treatment requested.
<PAGE>
EXHIBIT 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
_______________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"SENSUS DRUG DEVELOPMENT CORPORATION", FILED IN THIS OFFICE ON THE TENTH DAY OF
OCTOBER, A.D. 1997, AT 9 O' CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
_________________________________________
Edward J. Freel, Secretary of State
AUTHENTICATION:
DATE:
1.
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
__________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"SENSUS DRUG DEVELOPMENT CORPORATION", FILED IN THIS OFFICE ON THE TENTH DAY OF
OCTOBER, A.D. 1997, AT 9 O' CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL APPEARS HERE] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8697187
DATE: 10-10-97
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
SENSUS DRUG DEVELOPMENT CORPORATION
John A. Scarlett and Brian C. Cunningham hereby certify that:
ONE: They are the duly elected and acting President and Chief
Executive Officer and Secretary, respectively, of Sensus Drug Development
Corporation, a Delaware corporation (the "Corporation" or the "Company"). The
original date of Incorporation was June 23, 1994.
TWO: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
"I.
The name of the Corporation is Sensus Drug Development Corporation
II.
The address of the registered office of the Corporation in the State
of Delaware is:
1209 Orange Street
Wilmington, DE 19801
County of Newcastle
The name of the Corporation's registered agent at said address is The
Corporation Trust Company.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is fifty-three million
(53,000,000) shares, thirty-two million (32,000,000) shares of which shall be
Common Stock (the "Common Stock") and twenty-one million (21,000,000) shares of
which shall be Preferred Stock (the "Preferred Stock"). The Preferred Stock
shall have a par value of one-tenth of one cent ($.001) per share and the Common
Stock shall have a par value of one-tenth of one cent ($.001) per share.
B. Six million (6,000,000) of the authorized shares of Preferred
Stock are hereby designated "Series A Preferred Stock" (the "Series A
Preferred").
1.
<PAGE>
C. Two million (2,000,000) of the authorized shares of Preferred
Stock are hereby designated "Series B Preferred Stock" (the "Series B
Preferred").
D. Thirteen million (13,000,000) of the authorized shares of
Preferred Stock are hereby designated "Series C Preferred Stock" (the "Series C
Preferred").
E. The rights, preferences, privileges, restrictions and other
matters relating to the Series A Preferred, Series B Preferred and Series C
Preferred are as follows:
1. DIVIDEND RIGHTS.
(A) Holders of Preferred Stock prior and in preference to any
dividends or distributions to the holders of the Common Stock, shall be entitled
to receive, when and as declared by the Board of Directors, but only out of
funds that are legally available therefor, cash dividends at the rate of eight
percent (8%) of the "Original Issue Price" per annum on each outstanding share
of Preferred Stock (as adjusted for any stock dividends, combinations or splits
with respect to such shares) payable out of funds legally available therefor.
The Original Issue Price of the Series A Preferred shall be One Dollar Seventy-
Five Cents ($1.75). The Original Issue Price of the Series B Preferred shall be
Two Dollars ($2.00). The Original Issue Price of the Series C Preferred shall be
Two Dollars Fifty Cents ($2.50). Such dividends shall be payable to the holders
of the Series A Preferred, Series B Preferred and Series C Preferred only when,
as and if declared by the Board of Directors and shall be non-cumulative from
the "Series A Preferred Original Issue Date," "Series B Preferred Original Issue
Date" and "Series C Preferred Original Issue Date," respectively. The Series A
Preferred Original Issue Date shall be the date that the first share of Series A
Preferred is issued. The Series B Preferred Original Issue Date shall be the
date that the first share of Series B Preferred is issued. The Series C
Preferred Original Issue Date shall be the date that the first share of Series C
Preferred is issued.
(B) So long as any shares of Preferred Stock shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Common Stock, nor
shall any shares of any Common Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer)
unless a similar dividend or distribution (treating the Preferred Stock on an-as
converted basis) shall have been paid or declared and set apart on the Preferred
Stock as set forth in Section 1(a), above. The provisions of this Section 1(b)
shall not, however, apply to (i) a dividend payable solely in Common Stock, or
(ii) the acquisition of shares of any Common Stock in exchange for shares of any
other Common Stock.
2. VOTING RIGHTS. Except as otherwise provided herein or as required
by law, the Preferred Stock shall be voted equally with the shares of the Common
Stock of the Company and not as a separate class, at any annual or special
meeting of stockholders of the Company, and may act by written consent in the
same manner as the Common Stock, in either case upon the following basis: each
holder of shares of Preferred Stock shall be entitled to such number
2.
<PAGE>
of votes as shall be equal to the whole number of shares of Common Stock into
which such holder's aggregate number of shares of Preferred Stock are
convertible (pursuant to Section 4 hereof) immediately after the close of
business on the record date fixed for such meeting or the effective date of such
written consent.
3. LIQUIDATION RIGHTS.
(A) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Common Stock, the holders of Preferred Stock
shall be entitled to be paid out of the assets of the Company an amount per
share of Preferred Stock equal to the Original Issue Price of such share plus
all declared and unpaid dividends on shares of Preferred Stock (as adjusted for
any stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares) for each share of Preferred Stock held by them.
(B) After the payment of the full liquidation preference of the
Preferred Stock as set forth in Section 3(a) above, the assets of the Company
legally available for distribution, if any, shall be distributed ratably to the
holders of the Common Stock.
(C) The following events shall be considered a liquidation under
Section 3(a):
(I) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the surviving
entity's voting power immediately after such consolidation, merger or
reorganization, or any transaction or series of related transactions in which in
excess of fifty percent (50%) of the Company's voting power is transferred (an
"Acquisition"); or
(II) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(D) If, upon any liquidation, distribution, or winding up, the
assets of the Company allocable to the holders of Preferred Stock shall be
insufficient to make payment in full to all holders of Preferred Stock, then
such assets shall be distributed among the holders of Preferred Stock at the
time outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
4. CONVERSION RIGHTS.
The holders of the Preferred Stock shall have the following
rights with respect to the conversion of the Preferred Stock into shares of
Common Stock (the "Conversion Rights"):
(A) OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Preferred Stock may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series A Preferred shall be entitled upon conversion shall
3.
<PAGE>
be the product obtained by multiplying the "Series A Conversion Rate" then in
effect (determined as provided in Section 4(b)) by the number of shares of
Series A Preferred being converted. The number of shares of Common Stock to
which a holder of Series B Preferred shall be entitled upon conversion shall be
the product obtained by multiplying the "Series B Conversion Rate" then in
effect (determined as provided in Section 4(b)) by the number of shares of
Series B Preferred being converted. The number of shares of Common Stock to
which a holder of Series C Preferred shall be entitled upon conversion shall be
the product obtained by multiplying the "Series C Conversion Rate" then in
effect (determined as provided in Section 4(b)) by the number of shares of
Series C Preferred being converted.
(B) CONVERSION RATES. The conversion rate in effect at any time for
conversion of the Series A Preferred (the "Series A Conversion Rate") shall be
the quotient obtained by dividing the Original Issue Price of the Series A
Preferred by the "Series A Conversion Price," calculated as provided in Section
4(c). The conversion rate in effect at any time for conversion of the Series B
Preferred (the "Series B Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of the Series B Preferred by the "Series B
Conversion Price," calculated as provided in Section 4(c). The conversion rate
in effect at any time for conversion of the Series C Preferred (the "Series C
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series C Preferred by the "Series C Conversion Price," calculated
as provided in Section 4(c).
(C) CONVERSION PRICES. The "Conversion Price" for the Series A
Preferred, Series B Preferred and Series C Preferred shall initially be equal to
the Original Issue Price of the Series A Preferred (the "Series A Conversion
Price"), the Original Issue Price of the Series B Preferred (the "Series B
Conversion Price") and the Original Issue Price of the Series C Preferred (the
"Series C Conversion Price"), respectively. Such initial Series A Conversion
Price, Series B Conversion Price and Series C Conversion Price shall be adjusted
from time to time in accordance with this Section 4. All references to the
Series A Conversion Price herein shall mean the Series A Conversion Price as so
adjusted. All references to the Series B Conversion Price herein shall mean the
Series B Conversion Price as so adjusted. All references to the Series C
Conversion Price herein shall mean the Series C Conversion Price as so adjusted.
(D) AUTOMATIC CONVERSION.
(1) Each share of Series A Preferred, Series B Preferred and
Series C Preferred shall automatically be converted into shares of Common Stock,
based on the then-effective Series A Conversion Price, Series B Conversion Price
and Series C Conversion Price, respectively, (a) at any time upon the
affirmative vote of the holders of at least a majority of the outstanding shares
of the Series A Preferred, Series B Preferred and Series C Preferred, or (b)
immediately upon the closing of a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Company in which (i)
the per share price is at least $3.50 (as adjusted for stock splits,
recapitalizations and the like), and (ii) the gross cash proceeds to the Company
are at least $10,000,000. Upon such automatic conversion, any accumulated and
unpaid dividends shall be treated in accordance with the provisions of Section
4(e).
4.
<PAGE>
(2) Upon the occurrence of the events specified in paragraph
(1)(a) or (b) of this Section 4(d), the outstanding shares of Preferred Stock
shall be converted automatically without further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Preferred Stock are either delivered to the Company or its
transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of Preferred Stock, the holders of
Preferred Stock shall surrender the certificates representing such shares at the
office of the Company or any transfer agent for the Preferred Stock. Thereupon,
there shall be issued and delivered to such holder promptly at such office and
in its name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
the shares of Preferred Stock surrendered were convertible on the date on which
such automatic conversion occurred, and the Company shall promptly pay in cash
or, at the option of the Company, Common Stock (at the Common Stock's fair
market value determined by the Board as of the date of such conversion), or, at
the option of the Company, both, all declared and unpaid dividends on the shares
of Preferred Stock being converted, to and including the date of such
conversion.
(E) MECHANICS OF CONVERSION. Each holder of Preferred Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Preferred Stock, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Preferred
Stock being converted. Thereupon, the Company shall promptly issue and deliver
at such office to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled and shall promptly pay
in cash or, to the extent sufficient funds are not then legally available
therefor, in Common Stock (at the Common Stock's fair market value as of the
date of such conversion determined in good faith by the Board of Directors and
confirmed by an independent third party appraiser) any declared and unpaid
dividends on the shares of Preferred Stock being converted. Such conversion
shall be deemed to have been made at the close of business on the date of such
surrender of the certificates representing the shares of Preferred Stock to be
converted, and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
(F) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time effect a subdivision of the outstanding
Common Stock, the Conversion Price for each series of Preferred Stock in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time combine the
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price for each series of Preferred Stock in effect immediately before
the combination
5.
<PAGE>
shall be proportionately increased. Any adjustment under this Section 4(f) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(G) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, in each such
event the Conversion Price for each series of Preferred Stock that is then in
effect shall be decreased as of the time of such issuance or, in the event such
record date is fixed, as of the close of business on such record date, by
multiplying the Conversion Price for each series of Preferred Stock then in
effect by a fraction (1) the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and (2) the denominator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Price for each series of
Preferred Stock shall be recomputed accordingly as of the close of business on
such record date and thereafter the Conversion Price for each series of
Preferred Stock shall be adjusted pursuant to this Section 4(g) to reflect the
actual payment of such dividend or distribution.
(H) ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the Company
at any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Company other than shares of
Common Stock, in each such event provision shall be made so that the holders of
the Preferred Stock shall receive upon conversion thereof, in addition to the
number of shares of Common Stock receivable thereupon, the amount of other
securities of the Company which they would have received had their Preferred
Stock been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, subject to all other adjustments called for during such period
under this Section 4 with respect to the rights of the holders of the Preferred
Stock or with respect to such other securities by their terms.
(I) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at
any time or from time to time the Common Stock issuable upon the conversion of
the Preferred Stock is changed into the same or a different number of shares of
any class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than an Acquisition or Asset Transfer as defined in Section
3(c) or a subdivision or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Section 4), in any such event each holder of Preferred Stock shall have
the right thereafter to convert such stock into the kind and amount of stock and
other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Preferred Stock could have been converted
immediately prior to such recapitalization, reclassification or change, all
subject to further
6.
<PAGE>
adjustment as provided herein or with respect to such other securities or
property by the terms thereof.
(J) ADJUSTMENT FOR CERTAIN DILUTING ISSUES.
(I) If at any time or from time to time after the Series C
Preferred Original Issue Date, the Company issues or sells, or is deemed by the
express provisions of this subsection (j) to have issued or sold, Additional
Shares of Common Stock (as defined in subsection (j)(iv) below), other than a
subdivision or combination of shares of Common Stock as provided in Section 4(f)
above, and other than as a dividend or other distribution on any class of stock
as provided in Section 4(g) above, for an Effective Price (as defined in
subsection (j)(iv) below) less than the effective Conversion Price with respect
to any series of Preferred Stock, then and in each such case the then existing
Conversion Price for such series of Preferred Stock shall be reduced, as of the
opening of business on the date of such issue or sale, to a price determined by
multiplying such Conversion Price by a fraction (i) the numerator of which shall
be (A) the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale, plus (B) the number of shares of
Common Stock which the aggregate consideration received (as defined in
subsection (j)(ii)) by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at such Conversion Price, and (ii) the
denominator of which shall be the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale plus the
total number of Additional Shares of Common Stock so issued. For the purposes of
the preceding sentence, the number of shares of Common Stock deemed to be
outstanding as of a given date shall be the sum of (A) the number of shares of
Common Stock actually outstanding, (B) the number of shares of Common Stock into
which the then outstanding shares of Preferred Stock could be converted if fully
converted on the day immediately preceding the given date, and (C) the number of
shares of Common Stock which could be obtained through the exercise or
conversion of all other rights, options and convertible securities on the day
immediately preceding the given date.
(II) For the purpose of making any adjustment required
under this Section 4(j), the consideration received by the Company for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, be computed at the fair market value of that property as
determined in good faith by the Board of Directors and confirmed by an
independent third party appraiser, and (C) if Additional Shares of Common Stock,
Convertible Securities (as defined in subsection (j)(iii)) or rights or options
to purchase either Additional Shares of Common Stock or Convertible Securities
are issued or sold together with other stock or securities or other assets of
the Company for a consideration which covers both, be computed as the portion of
the consideration so received that may be reasonably determined in good faith by
the Board of Directors to be allocable to such Additional Shares of Common
Stock, Convertible Securities or rights or options.
7.
<PAGE>
(III) For the purpose of the adjustment required under this
Section 4(j), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Conversion Price with respect to any series of
Preferred Stock, in each case the Company shall be deemed to have issued at the
time of the issuance of such rights or options or Convertible Securities the
maximum number of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares an amount equal to the total amount of the consideration, if any,
received by the Company for the issuance of such rights or options or
Convertible Securities, plus, in the case of such rights or options, the minimum
amounts of consideration, if any, payable to the Company upon the exercise of
such rights or options, plus, in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof; provided that if in the case of
Convertible Securities the minimum amounts of such consideration cannot be
ascertained, but are a function of antidilution or similar protective clauses,
the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Company upon
the exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Conversion Price with respect to any series of
Preferred Stock, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Conversion Price with
respect to each series of Preferred Stock as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Conversion
Price of such series of Preferred Stock which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by the
Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Preferred Stock.
8.
<PAGE>
(IV) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued by the Company or deemed to be issued pursuant to this
Section 4(j), whether or not subsequently reacquired or retired by the Company
other than (1) shares of Common Stock issued upon conversion of Preferred Stock
or upon conversion or exercise of other convertible securities, options or
warrants; (2) shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary pursuant to stock purchase or stock
option plans or other arrangements that are approved by a majority of the Board;
(3) shares of Common Stock issued in connection with any stock split, stock
dividend or recapitalization by the Company; (4) any Equity Securities (as
defined below) issued for consideration other than cash pursuant to a merger,
consolidation, acquisition or similar business combination; (5) any Equity
Securities (as defined below) issued by the Company as part of an underwritten
public offering; and (6) any Equity Securities (as defined below) issued in
connection with any corporate partnering transaction, licensing transaction,
commercial transaction or lease financing. The term "Equity Securities" shall
mean (1) any stock or similar security of the Company, or (2) any security
convertible, with or without consideration, into any stock or similar security
(including any option to purchase such a Convertible Security). The "Effective
Price" of Additional Shares of Common Stock shall mean the quotient determined
by dividing the total number of Additional Shares of Common Stock issued or
sold, or deemed to have been issued or sold by the Company under this Section
4(j), into the aggregate consideration received, or deemed to have been received
by the Company for such issue under this Section 4(j), for such Additional
Shares of Common Stock.
(K) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If
at any time or from time to time after the Series C Preferred Original Issue
Date, there is a capital reorganization of the Common Stock (other than an
Acquisition or Asset Transfer as defined in Section 3(c) or as recapitalization,
subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 4), as a part of such capital
reorganization, provision shall be made so that the holders of Preferred Stock
shall thereafter be entitled to receive upon conversion of Preferred Stock the
number of shares of stock or other securities or property of the Company to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of
Preferred Stock after the capital reorganization to the end that the provisions
of this Section 4 (including adjustment of the Conversion Price for each series
of Preferred Stock then in effect), and the number of shares issuable upon
conversion of the Preferred Stock shall be applicable after that event and be as
nearly equivalent as practicable.
(L) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Conversion Price, Series B Conversion Price or
Series C Conversion Price or the number of shares of Common Stock or other
securities issuable upon conversion of the Series A Preferred, Series B
Preferred or Series C Preferred, the Company, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
9.
<PAGE>
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by registered or certified mail, return receipt requested, postage
prepaid, to each registered holder of such series of Preferred Stock at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (1) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (2) the Series A Conversion Price, Series B Conversion Price or Series
C Conversion Price at the time in effect, (3) the number of Additional Shares of
Common Stock and (4) the type and amount, if any, of other property which at the
time would be received upon conversion of the Series A Preferred, Series B
Preferred or Series C Preferred.
(M) NOTICES OF RECORD DATE. Upon (i) any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any Asset Transfer (as defined in Section
3(c)), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Preferred Stock at least
twenty (20) days prior to the record date specified therein a notice specifying
(1) the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution, (2)
the date on which any such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up is expected to become effective, and (3) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(N) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Preferred Stock. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of Preferred
Stock by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by
the Common Stock's fair market value (as determined by the Board) on the date of
conversion.
(O) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Company will take such corporate
10.
<PAGE>
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(P) NOTICES. Any notice required by the provisions of this Section 4
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
(Q) PAYMENT OF TAXES. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Preferred Stock so
converted were registered.
(R) NO DILUTION OR IMPAIRMENT. The Company shall not amend its
Amended and Restated Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but shall at all times in good
faith assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred, Series B Preferred or Series C Preferred against dilution or
other impairment.
5. NO REISSUANCE OF SERIES A PREFERRED, SERIES B PREFERRED OR SERIES C
PREFERRED. No share or shares of Series A Preferred, Series B Preferred or
Series C Preferred acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued.
V.
A. A director of the corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
11.
<PAGE>
B. Any repeal or modification of this Article V shall be prospective
and shall not affect the rights under this Article V in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VI.
For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
1. The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed by
the Board of Directors in the manner provided in the Bylaws.
2. The Board of Directors may from time to time make, amend,
supplement or repeal the Bylaws; provided, however, that the stockholders may
change or repeal any Bylaw adopted by the Board of Directors by the affirmative
vote of the holders of a majority of the voting power of all of the then
outstanding shares of the capital stock of the Corporation; and, provided
further, that no amendment or supplement to the Bylaws adopted by the Board of
Directors shall vary or conflict with any amendment or supplement thus adopted
by the stockholders.
3. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
VII.
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon the stockholders herein are granted subject to this
right."
THREE: This Amended and Restated Certificate of Incorporation has
been duly approved by the Board of Directors of this Corporation.
FOUR: This Amended and Restated Certificate of Incorporation, herein
certified, has been duly adopted in accordance with the provisions of Sections
228, 242 and 245 of the General Corporation Law of the State of Delaware.
12.
<PAGE>
IN WITNESS WHEREOF, Sensus Drug Development Corporation has caused
this Amended and Restated Certificate of Incorporation to be signed by its
President and its Secretary in Palo Alto, California this ________ day of
___________ 1997.
SENSUS DRUG DEVELOPMENT CORPORATION
By:_______________________________________
John A. Scarlett, President
and Chief Executive Officer
ATTEST:
By:___________________________
Brian C. Cunningham
Secretary
13.
<PAGE>
EXHIBIT 3.3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Article I
Offices................................................................... 1
Section 1. Registered Office.................................... 1
Section 2. Other Offices........................................ 1
Article II
Corporate Seal............................................................ 1
Section 3. Corporate Seal....................................... 1
Article III
Stockholders' Meetings.................................................... 1
Section 4. Place of Meetings.................................... 1
Section 5. Annual Meeting....................................... 2
Section 6. Special Meetings..................................... 3
Section 7. Notice of Meetings................................... 4
Section 8. Quorum............................................... 4
Section 9. Adjournment and Notice of Adjourned Meetings......... 5
Section 10. Voting Rights........................................ 5
Section 11. Beneficial Owners of Stock........................... 6
Section 12. List of Stockholders................................. 6
Section 13. Action without Meeting............................... 6
Section 14. Organization......................................... 7
Article IV
Directors................................................................. 8
Section 15. Number and Term of office............................ 8
Section 16. Powers............................................... 8
Section 17. Vacancies............................................ 8
Section 18. Resignation.......................................... 8
Section 19. Removal.............................................. 9
Section 20. Meetings............................................. 9
(a) Annual Meetings...................................... 9
(b) Regular Meetings..................................... 9
(c) Special Meetings..................................... 9
(d) Telephone Meetings................................... 9
(e) Notice of Meetings................................... 9
(f) Waiver of Notice..................................... 9
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
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(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 21. Quorum and Voting.................................... 10
Section 22. Action without Meeting............................... 10
Section 23. Fees and Compensation................................ 10
Section 24. Committees........................................... 10
(a) Executive Committee.................................. 10
(b) Other Committees..................................... 11
(c) Term................................................. 11
(d) Meetings............................................. 11
Section 25. Organization......................................... 12
Article V
Officers.................................................................. 12
Section 26. Officers Designated.................................. 12
Section 27. Tenure and Duties of Officers........................ 12
(a) General.............................................. 12
(b) Duties of Chairman of the Board of Directors......... 12
(c) Duties of Chief Executive Officer.................... 12
(d) Duties of President.................................. 13
(e) Duties of Vice Presidents............................ 13
(f) Duties of Secretary.................................. 13
(g) Duties of Chief Financial Officer or Treasurer....... 13
Section 28. Delegation of Authority.............................. 13
Section 29. Resignations......................................... 14
Section 30. Removal.............................................. 14
Article VI
Execution Of Corporate Instruments And
Voting Of Securities Owned By The Corporation............................. 14
Section 31. Execution of Corporate Instruments................... 14
Section 32. Voting of Securities Owned by the Corporation........ 15
Article VII
Shares Of Stock........................................................... 15
Section 33. Form and Execution of Certificates................... 15
Section 34. Lost Certificates.................................... 15
Section 35. Transfers............................................ 15
</TABLE>
ii.
<PAGE>
TABLE OF CONTENTS
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(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
Section 36. Fixing Record Dates.................................. 16
Section 37. Registered Stockholders.............................. 17
Article VIII
Other Securities Of The Corporation....................................... 17
Section 38. Execution of Other Securities........................ 17
Article IX
Dividends................................................................. 17
Section 39. Declaration of Dividends............................. 17
Section 40. Dividend Reserve..................................... 18
Article X
Fiscal Year............................................................... 18
Section 41. Fiscal Year.......................................... 18
Article XI
Indemnification........................................................... 18
Section 42. Indemnification of Directors, Officers, Employees
and Other Agents..................................... 18
(a) Directors and Executive Officers..................... 18
(b) Other Officers, Employees and Other Agents........... 18
(c) Good Faith........................................... 18
(d) Expenses............................................. 19
(e) Enforcement.......................................... 19
(f) Non-Exclusivity of Rights............................ 20
(g) Survival of Rights................................... 20
(h) Insurance............................................ 20
(i) Amendments........................................... 20
(j) Saving Clause........................................ 20
(k) Certain Definitions.................................. 21
Article XII
Notices................................................................... 22
</TABLE>
iii.
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TABLE OF CONTENTS
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(CONTINUED)
<TABLE>
<CAPTION>
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Section 43. Notices.............................................. 22
(a) Notice to Stockholders............................... 22
(b) Notice to Directors.................................. 22
(c) Address Unknown...................................... 22
(d) Affidavit of Mailing................................. 22
(e) Time Notices Deemed Given............................ 22
(f) Methods of Notice.................................... 22
(g) Failure to Receive Notice............................ 22
(h) Notice to Person with Whom Communication Is Unlawful. 23
(i) Notice to Person with Undeliverable Address.......... 23
Article XIII
AMENDMENTS................................................................ 23
Section 44. Amendments........................................... 23
Article XIV
Right Of First Refusal.................................................... 24
Section 45. Right of First Refusal............................... 24
Article XV
Loans To Officers......................................................... 26
Section 46. Loans to Officers.................................... 26
</TABLE>
iv.
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
CERTIFICATE OF SECRETARY
I, Brian C. Cunningham, do hereby certify that:
1. I am the duly elected and acting Secretary of Sensus Drug Development
Corporation, a Delaware corporation (the "Company").
2. Effective September 1, 1995, the Board of Directors of the Company
adopted the following resolution regarding the number of authorized directors
pursuant to Article IV, Section 15 of the Company's Bylaws:
"NOW, THEREFORE, BE IT RESOLVED, that the authorized number of
directors of the Company be, and hereby is, increased from six (6) to
seven (7)."
IN WITNESS WHEREOF, I have set my hand and caused this Certificate to be
delivered this 2nd day of September, 1995.
_____________________________________________
Brian C. Cunningham, Secretary
<PAGE>
BYLAWS
OF
SENSUS DRUG DEVELOPMENT CORPORATION
A DELAWARE CORPORATION
<PAGE>
BYLAWS
OF
SENSUS DRUG DEVELOPMENT CORPORATION
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business in Austin, Texas, at such place as may be
fixed by the Board of Directors, and may also have offices at such other places,
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
1.
<PAGE>
SECTION 5. ANNUAL MEETING.
(A) The annual meeting of the stockholders of the corporation, for
the purpose of election of Directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(B) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than one hundred twenty
(120) calendar days in advance of the date of the corporation's proxy statement
released to stockholders in connection with the previous year's annual meeting
of stockholders; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received a reasonable time before the solicitation is made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include
information with respect to a stockholder proposal in the proxy statement and
form of proxy for a stockholder's meeting, stockholders must provide notice as
required by the regulations promulgated under the Securities and Exchange Act of
1934, as amended. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
(C) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the
2.
<PAGE>
notice procedures set forth in this paragraph (c). Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the corporation in
accordance with the provisions of paragraph (b) of this Section 5. Timely
notice shall also be given of any stockholder's intention to cumulate votes in
the election of directors at a meeting. Such stockholder's notice shall set
forth (i) as to each person, if any, whom the stockholder proposes to nominate
for election or re-election as a Director: (A) the name, age, business address
and residence address of such person, (B) the principal occupation or employment
of such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a Director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 5 and whether such stockholder intends to
request cumulative voting in the election of Directors at the meeting. At the
request of the Board of Directors, any person nominated by a stockholder for
election as a Director shall furnish to the Secretary of the corporation that
information required to be set forth in the stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the corporation unless nominated in accordance with the procedures
set forth in this paragraph (c). The chairman of the meeting shall, if the
facts warrant, determine and declare at the meeting that a nomination was not
made in accordance with the procedures prescribed by these Bylaws, and if he
should so determine, he shall so declare at the meeting and the defective
nomination shall be disregarded.
SECTION 6. SPECIAL MEETINGS.
(A) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board, (ii) the
President, (iii) the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption)or (iv) by the holders of
shares entitled to cast not less than ten percent (10%) of the votes at the
meeting, and shall be held at such place, on such date, and at such time as they
or he shall fix; provided, however, that following registration of any of the
classes of equity securities of the corporation pursuant to the provisions of
the Securities Exchange Act of 1934, as amended, special meetings of the
stockholders may only be called by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized Directors.
(B) If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
time of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by
3.
<PAGE>
registered mail or by telegraphic or other facsimile transmission to the
Chairman of the Board, the President, any Vice President, or the Secretary of
the corporation. No business may be transacted at such special meeting
otherwise than specified in such notice. The officer receiving the request
shall cause notice to be promptly given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws, that a meeting will
be held not less than thirty-five (35) nor more than sixty (60) days after the
receipt of the request. If the notice is not given within twenty (20) days
after the receipt of the request, the person or persons requesting the meeting
may give the notice. Nothing contained in this paragraph (b) shall be construed
as limiting, fixing, or affecting the time when a meeting of stockholders called
by action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Any shares, the voting of
which at said meeting has been enjoined, or which for any reason cannot be
lawfully voted at such meeting, shall not be counted to determine a quorum at
such meeting. In the absence of a quorum any meeting of stockholders may be
adjourned, from time to time, either by the chairman of the meeting or by vote
of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. The stockholders present at a
duly called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the voting power represented at any meeting at which a
quorum is present shall be valid and binding upon the corporation; provided,
however, that Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of Directors. Where a separate vote by a class or classes
is required, a majority of the outstanding shares of such class or classes,
present in person or represented by proxy, shall constitute a quorum entitled to
take action with respect to that vote on that matter and the affirmative vote of
the majority (plurality, in the case of the election of Directors) of shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class.
4.
<PAGE>
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
represented thereat. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS.
(A) For the purpose of determining those stockholders entitled to
vote at any meeting of the stockholders, except as otherwise provided by law,
only persons in whose names shares stand on the stock records of the corporation
on the record date, as provided in Section 12 of these Bylaws, shall be entitled
to vote at any meeting of stockholders. Except as may be otherwise provided in
the Certificate of Incorporation or these Bylaws, each stockholder shall be
entitled to one vote for each share of capital stock held by such stockholder.
Every person entitled to vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by a written proxy executed
by such person or his duly authorized agent, which proxy shall be filed with the
Secretary at or before the meeting at which it is to be used. An agent so
appointed need not be a stockholder. No proxy shall be voted after three (3)
years from its date of creation unless the proxy provides for a longer period.
All elections of Directors shall be by written ballot, unless otherwise provided
in the Certificate of Incorporation.
(B) Every stockholder entitled to vote in any election of
Directors of this corporation may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of Directors to be elected
multiplied by the number of votes to which the stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit. No stockholder,
however, may cumulate such stockholder's votes for one or more candidates unless
(i) the names of such candidates have been properly placed in nomination, in
accordance with these Bylaws, prior to the voting, (ii) the stockholder has
given advance notice to the corporation of the intention to cumulate votes
pursuant to paragraph (c) of Section 5 of these Bylaws, and (iii) the
stockholder has given proper notice to the other stockholders at the meeting,
prior to voting, of such stockholder's intention to cumulate such stockholder's
votes. If any stockholder has given proper notice, all stockholders may cumulate
their votes for any candidates who have been properly placed in nomination. The
candidates receiving the highest number of votes of the shares entitled to be
voted for them up to the number of Directors to be elected by such shares shall
be declared elected.
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SECTION 11. BENEFICIAL OWNERS OF STOCK.
(A) If shares or other securities having voting power stand of
record in the names of two (2) or more persons, whether fiduciaries, members of
a partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect: (a) if only one (1) votes, his act
binds all; (b) if more than one (1) votes, the act of the majority so voting
binds all; (c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in the General Corporation Law of Delaware, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of this subsection
(c) shall be a majority or even-split in interest.
(B) Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
corporation he has expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his proxy, may represent such stock and vote thereon.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(A) Any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, are signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
(B) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action
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referred to therein unless, within sixty (60) days of the earliest dated consent
delivered to the Corporation in the manner herein required, written consents
signed by a sufficient number of stockholders to take action are delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
(C) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
SECTION 14. ORGANIZATION.
(A) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, the most senior Vice President present, or in
the absence of any such officer, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(B) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless, and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
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ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of one or more members, the number thereof to be determined from time to
time by resolution of the Board of Directors. The number of authorized
Directors may be modified from time to time by amendment of this Section 15 in
accordance with the provisions of Section 44 hereof. Except as provided in
Section 17, the Directors shall be elected by the stockholders at their annual
meeting in each year and shall hold office until the next annual meeting and
until their successors shall be duly elected and qualified. Directors need not
be stockholders unless so required by the Certificate of Incorporation. If for
any cause, the Directors shall not have been elected at an annual meeting, they
may be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws. No
reduction of the authorized number of Directors shall have the effect of
removing any Director before the Director's term of office expires, unless such
removal is made pursuant to the provisions of Section 19 hereof.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office for the
unexpired portion of the term of the Director whose place shall be vacant and
until his successor shall have been duly elected and qualified. A vacancy in
the Board of Directors shall be deemed to exist under this Section 17 in the
case of the death, removal or resignation of any Director, or if the
stockholders fail at any meeting of stockholders at which Directors are to be
elected (including any meeting referred to in Section 19 below) to elect the
number of Directors then constituting the whole Board of Directors.
SECTION 18. RESIGNATION. Any Director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When
one or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
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SECTION 19. REMOVAL. At a special meeting of stockholders called for the
purpose in the manner hereinabove provided, subject to any limitations imposed
by law or the Certificate of Incorporation, the Board of Directors, or any
individual Director, may be removed from office, with or without cause, and a
new Director or Directors elected by a vote of stockholders holding a majority
of the outstanding shares entitled to vote at an election of Directors.
SECTION 20. MEETINGS.
(A) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately after the annual meeting of stockholders and at the
place where such meeting is held. No notice of an annual meeting of the Board of
Directors shall be necessary and such meeting shall be held for the purpose of
electing officers and transacting such other business as may lawfully come
before it.
(B) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been determined by the Board of Directors.
(C) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the President or a majority of the Directors.
(D) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(E) NOTICE OF MEETINGS. Written notice of the time and place of
all special meetings of the Board of Directors shall be given at least one (1)
day before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
Director by attendance thereat, except when the Director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(F) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the Directors not present shall sign a written
waiver of notice, or a consent to holding such meeting, or an approval of the
minutes thereof. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be specified in
any written waiver of notice or consent
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unless so required by the Certificate of Incorporation or these Bylaws. All
such waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 21. QUORUM AND VOTING.
(A) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
Directors fixed from time to time in accordance with Section 15 hereof, but not
less than one (1), a quorum of the Board of Directors shall consist of a
majority of the exact number of Directors fixed from time to time in accordance
with Section 15 of these Bylaws, but not less than one (1); provided, however,
at any meeting whether a quorum be present or otherwise, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
(B) At each meeting of the Board of Directors at which a quorum is
present all questions and business shall be determined by a vote of a majority
of the Directors present, unless a different vote be required by law, the
Certificate of Incorporation or these Bylaws.
SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 24. COMMITTEES.
(A) EXECUTIVE COMMITTEE. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors, appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and specifically granted by
the Board of Directors, shall have and may exercise when the Board of Directors
is not in session all powers of the Board of Directors in the management of the
business and affairs of the corporation, including, without limitation, the
power and authority to declare a dividend or to authorize the issuance of stock,
except such committee shall not have the power or authority to amend the
Certificate of Incorporation, to
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adopt an agreement of merger or consolidation, to recommend to the stockholders
the sale, lease or exchange of all or substantially all of the corporation's
property and assets, to recommend to the stockholders of the corporation a
dissolution of the corporation or a revocation of a dissolution or to amend
these Bylaws.
(B) OTHER COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the whole Board of Directors, from time to time appoint such other
committees as may be permitted by law. Such other committees appointed by the
Board of Directors shall consist of one (1) or more members of the Board of
Directors, and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(C) TERM. The members of all committees of the Board of Directors shall
serve a term coexistent with that of the Board of Directors which shall have
appointed such committee. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Section 24, may at any time increase or decrease
the number of members of a committee or terminate the existence of a committee.
The membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(D) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 24 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any Director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of
any committee may be waived in writing at any time before or after the meeting
and will be waived by any Director by attendance thereat, except when the
Director attends such special meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. A majority of the authorized number
of members of any such committee shall
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constitute a quorum for the transaction of business, and the act of a majority
of those present at any meeting at which a quorum is present shall be the act of
such committee.
SECTION 25. ORGANIZATION. At every meeting of the Directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the Directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall be
the Chairman of the Board of Directors, the Chief Executive Officer, the
President, one or more Vice Presidents, the Secretary and the Chief Financial
Officer or Treasurer, all of whom shall be elected at the annual organizational
meeting of the Board of Directors. The order of the seniority of the Vice
Presidents shall be in the order of their nomination, unless otherwise
determined by the Board of Directors. The Board of Directors may also appoint
one or more Assistant Secretaries, Assistant Treasurers, and such other officers
and agents with such powers and duties as it shall deem necessary. The Board of
Directors may assign such additional titles to one or more of the officers as it
shall deem appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law.
The salaries and other compensation of the officers of the corporation shall be
fixed by or in the manner designated by the Board of Directors.
SECTION 27. TENURE AND DUTIES OF OFFICERS.
(A) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(B) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
(C) DUTIES OF CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall, subject to the control of the Board of Directors, have general
supervision, direction and control of the business and officers of the
corporation; and he shall preside at all meetings of the
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stockholders and at all meetings of the Board of Directors, unless the Chairman
of the Board of Directors has been appointed and is present. The Chief
Executive Officer shall perform other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(D) DUTIES OF PRESIDENT. The President shall perform the duties
commonly incident to his office and shall also perform such other duties and
have such other powers as the Board of Directors shall designate from time to
time.
(E) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the order
of their seniority, may assume and perform the duties of the President in the
absence or disability of the President or whenever the office of President is
vacant. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.
(F) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors, and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders,
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(G) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief
Financial Officer or Treasurer shall keep or cause to be kept the books of
account of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form and as often
as required by the Board of Directors or the President. The Chief Financial
Officer or Treasurer, subject to the order of the Board of Directors, shall have
the custody of all funds and securities of the corporation. The Chief Financial
Officer or Treasurer shall perform other duties commonly incident to his office
and shall also perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time. The President
may direct any Assistant Treasurer to assume and perform the duties of the Chief
Financial Officer or Treasurer in the absence or disability of the Chief
Financial Officer or Treasurer, and each Assistant Treasurer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
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SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the vote or written consent of a majority of
the Directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board of
Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Chief Financial Officer or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the
corporate signature, but not requiring the corporate seal, may be executed as
aforesaid or in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
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SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Where such certificate is countersigned by a transfer agent
other than the corporation or its employee, or by a registrar other than the
corporation or its employee, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the designations,
preferences, limitations, restrictions on transfer and relative rights of the
shares authorized to be issued.
SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 35. TRANSFERS.
(A) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(B) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to
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restrict the transfer of shares of stock of the corporation of any one or more
classes owned by such stockholders in any manner not prohibited by the General
Corporation Law of Delaware.
SECTION 36. FIXING RECORD DATES.
(A) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(B) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix, in advance, a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(C) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
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SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed
or attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.
ARTICLE IX
DIVIDENDS
SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
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SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(A) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its Directors and executive officers to the fullest extent not
prohibited by the Delaware General Corporation Law; provided, however, that the
corporation may limit the extent of such indemnification by individual contracts
with its Directors and executive officers; and, provided, further, that the
corporation shall not be required to indemnify any Director or executive officer
in connection with any proceeding (or part thereof) initiated by such person or
any proceeding by such person against the corporation or its Directors,
officers, employees or other agents unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation or (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law.
(B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law.
(C) GOOD FAITH.
(1) For purposes of any determination under this Bylaw, a
Director or executive officer shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe that his conduct was
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unlawful, if his action is based on information, opinions, reports and
statements, including financial statements and other financial data, in each
case prepared or presented by:
(I) one or more officers or employees of the
corporation whom the Director or executive officer believed to be reliable and
competent in the matters presented;
(II) counsel, independent accountants or other
persons as to matters which the Director or executive officer believed to be
within such person's professional competence; and
(III) with respect to a Director, a committee of the
Board upon which such Director does not serve, as to matters within such
Committee's designated authority, which committee the Director believes to merit
confidence; so long as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
he had reasonable cause to believe that his conduct was unlawful.
(3) The provisions of this paragraph (c) shall not be deemed to
be exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the Delaware
General Corporation Law.
(D) EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made (1) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to the
proceeding, or (2) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
(E) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to Directors and executive
officers under this Bylaw
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shall be deemed to be contractual rights and be effective to the same extent and
as if provided for in a contract between the corporation and the Director or
executive officer. Any right to indemnification or advances granted by this
Bylaw to a Director or executive officer shall be enforceable by or on behalf of
the person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. The
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
(F) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its Directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law.
(G) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a Director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(H) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(I) AMENDMENTS. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(J) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless
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indemnify each Director and executive officer to the full extent not prohibited
by any applicable portion of this Bylaw that shall not have been invalidated, or
by any other applicable law.
(K) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "PROCEEDING" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "EXPENSES" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "CORPORATION" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "DIRECTOR," "OFFICER," "EMPLOYEE," or
"AGENT" of the corporation shall include, without limitation, situations where
such person is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
(5) References to "OTHER ENTERPRISES" shall include employee
benefit plans; references to "FINES" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "SERVING AT
THE REQUEST OF THE CORPORATION" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "NOT OPPOSED TO THE BEST INTERESTS OF THE
CORPORATION" as referred to in this Bylaw.
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ARTICLE XII
NOTICES
SECTION 43. NOTICES.
(A) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(B) NOTICE TO DIRECTORS. Any notice required to be given to any
Director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such Director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such Director.
(C) ADDRESS UNKNOWN. If no address of a stockholder or Director
be known, notice may be sent to the office of the corporation required to be
maintained pursuant to Section 2 hereof.
(D) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
(E) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by facsimile, telex or telegram shall be deemed to have been
given as of the sending time recorded at time of transmission.
(F) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all Directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(G) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.
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(H) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(I) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 44. AMENDMENTS. Except as otherwise set forth in paragraph (i)
of Section 42 of these Bylaws, these Bylaws may be amended or repealed and new
Bylaws adopted by the stockholders entitled to vote. The Board of Directors
shall also have the power, if such power is conferred upon the Board of
Directors by the Certificate of Incorporation, to adopt, amend or repeal Bylaws
(including, without limitation, the amendment of any Bylaw setting forth the
number of Directors who shall constitute the whole Board of Directors).
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ARTICLE XIV
RIGHT OF FIRST REFUSAL
SECTION 45. RIGHT OF FIRST REFUSAL. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this Bylaw:
(A) If the stockholder receives from anyone a bona fide offer
acceptable to the stockholder to purchase any of his shares of stock, then the
stockholder shall first give written notice thereof to the corporation. The
notice shall name the proposed transferee and state the number of shares to be
transferred, the price per share and all other terms and conditions of the
offer.
(B) For fifteen (15) days following receipt of such notice, the
corporation shall have the option to purchase all or any lesser part of the
shares specified in the notice at the price and upon the terms set forth in such
bona fide offer. In the event the corporation elects to purchase all the shares,
it shall give written notice to the selling stockholder of its election and
settlement for said shares shall be made as provided below in paragraph (d).
(C) In the event the corporation does not elect to acquire all
of the shares specified in the selling stockholder's notice, the Secretary of
the corporation shall, within fifteen (15) days of receipt of said selling
stockholder's notice, give written notice thereof to the stockholders of the
corporation other than the selling stockholder. Said written notice shall state
the number of shares that the corporation has elected to purchase and the number
of shares remaining available for purchase (which shall be the same as the
number contained in said selling stockholder's notice, less any such shares that
the corporation has elected to purchase). Each of the other stockholders shall
have the option to purchase that proportion of the shares available for purchase
as the number of shares owned by each of said other stockholders bears to the
total issued and outstanding shares of the corporation, excepting those shares
owned by the selling stockholder. A stockholder electing to exercise such option
shall, within ten (10) days after mailing of the corporation's notice, give
notice to the corporation specifying the number of shares such stockholder will
purchase. Within such ten-day period, each of said other stockholders shall give
written notice stating how many additional shares such stockholder will purchase
if additional shares are made available. Failure to respond in writing within
said ten-day period to the notice given by the Secretary of the corporation
shall be deemed a rejection of such stockholder's right to acquire a
proportionate part of the shares of the selling stockholder. In the event one or
more stockholders do not elect to acquire the shares available to them, said
shares shall be allocated on a pro rata basis to the stockholders who requested
shares in addition to their pro rata allotment.
(D) In the event the corporation and/or stockholders, other than
the selling stockholder, elect to acquire any of the shares of the selling
stockholder as specified in said selling stockholder's notice, the Secretary of
the corporation shall so notify the selling
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stockholder and settlement thereof shall be made in cash within thirty (30) days
after the Secretary of the corporation receives said selling stockholder's
notice; provided that if the terms of payment set forth in said selling
stockholder's notice were other than cash against delivery, the corporation
and/or its other stockholders shall pay for said shares on the same terms and
conditions set forth in said selling stockholder's notice.
(E) In the event the corporation and/or its other stockholders do not
elect to acquire all of the shares specified in the selling stockholder's
notice, said selling stockholder may, within the sixty-day period following the
expiration of the option rights granted to the corporation and other
stockholders herein, sell elsewhere the shares specified in said selling
stockholder's notice which were not acquired by the corporation and/or its other
stockholders, in accordance with the provisions of paragraph (d) of this bylaw,
provided that said sale shall not be on terms and conditions more favorable to
the purchaser than those contained in the bona fide offer set forth in said
selling stockholder's notice. All shares so sold by said selling stockholder
shall continue to be subject to the provisions of this Bylaw in the same manner
as before said transfer.
(F) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this Bylaw:
(1) A stockholder's transfer of any or all shares held either
during such stockholder's lifetime or on death by will or intestacy to such
stockholder's immediate family. "Immediate family" as used herein shall mean
spouse, lineal descendant, father, mother, brother, or sister of the stockholder
making such transfer and shall include any trust established primarily for the
benefit of the stockholder or his immediate family.
(2) A stockholder's bona fide pledge or mortgage of any shares
with a commercial lending institution, provided that any subsequent transfer of
said shares by said institution shall be conducted in the manner set forth in
this Section 45.
(3) A stockholder's transfer of any or all of such stockholder's
shares to the corporation or to any other stockholder of the corporation.
(4) A stockholder's transfer of any or all of such stockholder's
shares to a person who, at the time of such transfer, is an officer or director
of the corporation.
(5) A corporate stockholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate stockholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.
(6) A corporate stockholder's transfer of any or all of its
shares to any or all of its stockholders.
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(7) A transfer by a stockholder which is a limited or general
partnership to any or all of its partners.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this Bylaw, and there
shall be no further transfer of such stock except in accordance with this Bylaw.
(G) The provisions of this Section 45 may be waived with respect to
any transfer either by the corporation, upon duly authorized action of its Board
of Directors, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be sold by the selling stockholder). This Section
45 may be amended or repealed either by a duly authorized action of the Board of
Directors or by the stockholders, upon the express vote or written consent of
the owners of a majority of the voting power of the corporation.
(H) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this Bylaw are strictly observed and followed.
(I) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On December 31, 2004; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(J) The certificates representing shares of stock of the
corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:
"The shares represented by this certificate are subject to a right of
first refusal option in favor of the corporation and its other
stockholders, as provided in the bylaws of the corporation."
ARTICLE XV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other
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assistance may be with or without interest and may be unsecured, or secured in
such manner as the Board of Directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation. Nothing in this
Section 46 shall be deemed to deny, limit or restrict the powers of guaranty or
warranty of the corporation at common law or under any statute.
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EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
SENSUS DRUG DEVELOPMENT CORPORATION
(A DELAWARE CORPORATION)
(AMENDED BY THE BOARD OF DIRECTORS ON JULY 20, 1998)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I Offices........................................... 1
Section 1. Registered Office................................. 1
Section 2. Other Offices..................................... 1
ARTICLE II Corporate Seal.................................... 1
Section 3. Corporate Seal.................................... 1
ARTICLE III Stockholders' Meetings............................ 1
Section 4. Place Of Meetings................................. 1
Section 5. Annual Meetings................................... 2
Section 6. Special Meetings.................................. 3
Section 7. Notice Of Meetings................................ 4
Section 8. Quorum............................................ 4
Section 9. Adjournment And Notice Of Adjourned Meetings...... 5
Section 10. Voting Rights..................................... 5
Section 11. Joint Owners Of Stock............................. 5
Section 12. List Of Stockholders.............................. 6
Section 13. Action Without Meeting............................ 6
Section 14. Organization...................................... 7
ARTICLE IV Directors......................................... 7
Section 15. Number And Term Of Office......................... 7
Section 16. Powers............................................ 7
Section 17. Classes of Directors.............................. 8
Section 18. Vacancies......................................... 8
Section 19. Resignation....................................... 8
Section 20. Removal........................................... 9
Section 21. Meetings.......................................... 9
Section 22. Quorum And Voting................................. 10
Section 23. Action Without Meeting............................ 10
Section 24. Fees And Compensation............................. 10
Section 25. Committees........................................ 10
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 26. Organization........................................ 12
ARTICLE V Officers............................................ 12
Section 27. Officers Designated................................. 12
Section 28. Tenure And Duties Of Officers....................... 12
Section 29. Delegation Of Authority............................. 14
Section 30. Resignations........................................ 14
Section 31. Removal............................................. 14
ARTICLE VI Execution Of Corporate Instruments And Voting Of
Securities Owned By The Corporation................. 14
Section 32. Execution Of Corporate Instruments.................. 14
Section 33. Voting Of Securities Owned By The Corporation....... 14
ARTICLE VII Shares Of Stock..................................... 15
Section 34. Form And Execution Of Certificates.................. 15
Section 35. Lost Certificates................................... 15
Section 36. Transfers........................................... 16
Section 37. Fixing Record Dates................................. 16
Section 38. Registered Stockholders............................. 17
ARTICLE VIII Other Securities Of The Corporation................. 17
Section 39. Execution Of Other Securities....................... 17
ARTICLE IX Dividends........................................... 18
Section 40. Declaration Of Dividends............................ 18
Section 41. Dividend Reserve.................................... 18
ARTICLE X Fiscal Year......................................... 18
Section 42. Fiscal Year......................................... 18
ARTICLE XI Indemnification..................................... 18
Section 43. Indemnification Of Directors, Executive Officers,
Other Officers, Employees And Other Agents ......... 18
ARTICLE XII Notices............................................. 22
Section 44. Notices............................................. 22
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE XIII Amendments.................................. 23
Section 45. Amendments.................................. 23
ARTICLE XIV Loans To Officers........................... 24
Section 46. Loans To Officers........................... 24
</TABLE>
iii
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AMENDED AND RESTATED
BYLAWS
OF
SENSUS DRUG DEVELOPMENT CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
(Del. Code Ann., tit. 8, (S) 131)
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require. (Del. Code Ann., tit.
8, (S) 122(8))
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. (Del. Code Ann., tit. 8, (S)
122(3))
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, (S) 211(a))
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SECTION 5. ANNUAL MEETINGS.
(A) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. (Del. Code Ann., tit. 8, (S)
211(b))
(B) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he
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shall so declare at the meeting that any such business not properly brought
before the meeting shall not be transacted. (Del. Code Ann., tit. 8: (S) 211(b))
(C) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded. (Del. Code Ann., tit. 8, (S)(S)
212, 214).
(D) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(A) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
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directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors, shall fix.
(B) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons properly requesting the meeting may set the time and place of the
meeting and give the notice. Nothing contained in this paragraph (b) shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law
or the Certificate of Incorporation, written notice of each meeting of
stockholders shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting to each stockholder entitled to vote at such
meeting, such notice to specify the place, date and hour and purpose or purposes
of the meeting. Notice of the time, place and purpose of any meeting of
stockholders may be waived in writing, signed by the person entitled to notice
thereof, either before or after such meeting, and will be waived by any
stockholder by his attendance thereat in person or by proxy, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Any stockholder so waiving notice of such
meeting shall be bound by the proceedings of any such meeting in all respects as
if due notice thereof had been given. (Del. Code Ann., tit. 8, (S)(S) 222, 229)
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of
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shares present in person or represented by proxy at the meeting and entitled to
vote on the subject matter shall be the act of the stockholders. Except as set
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors. Where a separate vote by a class or classes or series is
required, except where otherwise provided by the statute or by the Certificate
of Incorporation or these Bylaws, a majority of the outstanding shares of such
class or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and, except where otherwise provided by the statute or by the Certificate
of Incorporation or these Bylaws, the affirmative vote of the majority
(plurality, in the case of the election of directors) of the votes cast by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series. (Del. Code Ann., tit. 8, (S) 216)
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. (Del. Code Ann., tit. 8,
(S) 222(c))
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period. (Del. Code Ann., tit. 8, (S)(S) 211(e), 212(b))
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided
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in the Delaware General Corporation Law, Section 217(b). If the instrument filed
with the Secretary shows that any such tenancy is held in unequal interests, a
majority or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest. (Del. Code Ann., tit. 8, (S) 217(b))
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present. (Del. Code Ann., tit. 8,
(S) 219(a))
SECTION 13. ACTION WITHOUT MEETING.
(A) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(B) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(Del. Code Ann., tit. 8, (S) 228)
(C) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given in accordance with
Section 228 of the Delaware General Corporation Law.
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(D) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
SECTION 14. ORGANIZATION .
(A) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(B) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws. (Del. Code Ann., tit. 8, (S)(S) 141(b),
211(b), (c))
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
(Del. Code Ann., tit. 8, (S) 141(a))
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SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the
second annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class II directors shall expire and
Class II directors shall be elected for a full term of three years. At the
third annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class III directors shall expire and Class
III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
SECTION 18. VACANCIES.
(A) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Bylaw in the case of the death,
removal or resignation of any director. (Del. Code Ann., tit. 8, (S) 223(a),
(b))
SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified. (Del. Code Ann., tit. 8, (S)(S) 141(b), 223(d))
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SECTION 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, no director shall be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual director
may be removed from office at any time with cause by the affirmative vote of the
holders or a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock").
SECTION 21. MEETINGS.
(A) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(B) REGULAR MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors. No
formal notice shall be required for regular meetings of the Board of Directors.
(Del. Code Ann., tit. 8, (S) 141(g))
(C) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors (Del. Code
Ann., tit. 8, (S) 141(g))
(D) TELEPHONE MEETINGS. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting. (Del. Code
Ann., tit. 8, (S) 141(I))
(E) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, charges prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. (Del. Code
Ann., tit. 8, (S) 229)
(F) WAIVER OF NOTICE. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall
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be as valid as though had at a meeting duly held after regular call and notice,
if a quorum be present and if, either before or after the meeting, each of the
directors not present shall sign a written waiver of notice. All such waivers
shall be filed with the corporate records or made a part of the minutes of the
meeting. (Del. Code Ann., tit. 8, (S) 229)
SECTION 22. QUORUM AND VOTING.
(A) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting. (Del. Code Ann., tit. 8, (S) 141(b))
(B) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8,
(S) 141(b))
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee. (Del. Code Ann., tit. 8, (S) 141(f))
SECTION 24. FEES AND COMPENSATION . Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor. (Del. Code
Ann., tit. 8, (S) 141(h))
SECTION 25. COMMITTEES.
(A) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the
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power or authority in reference to (i) approving or adopting, or recommending to
the stockholders, any action or matter expressly required by the Delaware
General Corporation Law to be submitted to stockholders for approval, or (ii)
adopting, amending or repealing any bylaw of the corporation. (Del. Code Ann.,
tit. 8, (S) 141(c))
(B) OTHER COMMITTEES. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws. (Del. Code Ann., tit. 8, (S) 141(c))
(C) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. (Del. Code Ann.,
tit. 8, (S)141(c))
(D) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall
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constitute a quorum for the transaction of business, and the act of a majority
of those present at any meeting at which a quorum is present shall be the act of
such committee. (Del. Code Ann., tit. 8, (S)(S) 141(c), 229)
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors. (Del. Code Ann., tit. 8, (S)(S) 122(5), 142(a), (b))
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(A) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors. (Del. Code Ann., tit. 8, (S) 141(b), (e))
(B) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28. (Del. Code Ann., tit. 8, (S) 142(a))
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(C) DUTIES OF PRESIDENT. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time. (Del. Code Ann., tit. 8, (S)
142(a))
(D) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time. (Del. Code Ann., tit. 8, (S)
142(a))
(E) DUTIES OF SECRETARY. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. (Del. Code Ann., tit. 8, (S) 142(a))
(F) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time. (Del. Code Ann., tit. 8, (S) 142(a))
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SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer. (Del. Code Ann., tit. 8, (S) 142(b))
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation. (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158)
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount. (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158).
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such
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authorization, by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, or any Vice President. (Del. Code Ann., tit. 8, (S) 123)
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical. (Del. Code Ann., tit. 8, (S) 158)
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed. (Del. Code Ann., tit. 8, (S) 167)
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SECTION 36. TRANSFERS.
(A) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares. (Del. Code Ann., tit.
8, (S) 201, tit. 6, (S) 8- 401(1))
(B) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law. (Del. Code Ann., tit. 8, (S)
160 (a))
SECTION 37. FIXING RECORD DATES.
(A) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(B) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's
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registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by law, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(C) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. (Del. Code Ann., tit. 8, (S) 213)
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
(Del. Code Ann., tit. 8, (S)(S) 213(a), 219)
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER. All bonds, debentures and other corporate
securities of the corporation, other than stock certificates (covered in Section
34), may be signed by the Chairman of the Board of Directors, the President or
any Vice President, or such other person as may be authorized by the Board of
Directors, and the corporate seal impressed thereon or a facsimile of such seal
imprinted thereon and attested by the signature of the Secretary or an Assistant
Secretary, or the Chief Financial Officer or Treasurer or an Assistant
Treasurer; provided, however, that where any such bond, debenture or other
corporate security shall be authenticated by the manual signature, or where
permissible facsimile signature, of a trustee under an indenture pursuant to
which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have
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been delivered, such bond, debenture or other corporate security nevertheless
may be adopted by the corporation and issued and delivered as though the person
who signed the same or whose facsimile signature shall have been used thereon
had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law. (Del. Code Ann., tit. 8,
(S)(S) 170, 173)
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created. (Del.
Code Ann., tit. 8, (S) 171)
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
Indemnification
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(A) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law or any other applicable law; provided, however, that the
corporation may modify the extent of such indemnification by individual
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contracts with its directors and executive officers; and, provided, further,
that the corporation shall not be required to indemnify any director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person unless (i) such indemnification is expressly required to be made
by law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law or any other applicable law.
The Board of Directors shall have the power to delegate the determination of
whether indemnification shall be given to any such person or other persons as
the Board of Directors shall determine.
(C) EXPENSES. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(D) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The
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claimant in such enforcement action, if successful in whole or in part, shall be
entitled to be paid also the expense of prosecuting his claim. In connection
with any claim for indemnification, the corporation shall be entitled to raise
as a defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law or
any other applicable law for the corporation to indemnify the claimant for the
amount claimed. In connection with any claim by an executive officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such executive
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his conduct was lawful. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law or any other applicable law, nor an actual determination
by the corporation (including its Board of Directors, independent legal counsel
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct. In any suit brought by a
director or executive officer to enforce a right to indemnification or to an
advancement of expenses hereunder, the burden of proving that the director or
executive officer is not entitled to be indemnified, or to such advancement of
expenses, under this Article XI or otherwise shall be on the corporation.
(E) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(F) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(G) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law or any other applicable law, the corporation, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Bylaw.
(H) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged
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occurrence of any action or omission to act that is the cause of any proceeding
against any agent of the corporation.
(I) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full to the full extent under any other applicable law.
(J) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on,
21
<PAGE>
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(A) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent. (Del. Code Ann., tit. 8,
(S) 222)
(B) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(C) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained. (Del. Code Ann., tit. 8, (S) 222)
(D) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(E) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(F) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any
22
<PAGE>
privilege, pursuant to any notice sent him in the manner above provided, shall
not be affected or extended in any manner by the failure of such stockholder or
such director to receive such notice.
(G) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(H) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph. (Del. Code Ann, tit. 8, (S) 230)
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS . Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
23
<PAGE>
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute. (Del. Code Ann., tit. 8, (S)143)
24
<PAGE>
EXHIBIT 4.2
SENSUS DRUG DEVELOPMENT CORPORATION
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. General......................................... 1
1.1 Definitions..................................... 1
Section 2. Registration; Restrictions on Transfer.......... 3
2.1 Restrictions on Transfer........................ 3
2.2 Demand Registration............................. 4
2.3 Piggyback Registrations......................... 5
2.4 Form S-3 Registration........................... 6
2.5 Expenses of Registration........................ 8
2.6 Obligations of the Company...................... 8
2.7 Expiration of Registration Rights............... 10
2.8 Delay of Registration; Furnishing Information... 10
2.9 Indemnification................................. 10
2.10 Assignment of Registration Rights............... 13
2.11 Amendment of Registration Rights................ 13
2.12 Limitation on Subsequent Registration Rights.... 14
2.13 "Market Stand-Off" Agreement.................... 14
2.14 Rule 144 Reporting.............................. 14
Section 3. Covenants of the Company........................ 15
3.1 Basic Financial Information and Reporting....... 15
3.2 Reservation of Common Stock..................... 15
3.3 Termination of Covenants........................ 15
Section 4. Rights of First Refusal......................... 15
4.1 Subsequent Offerings............................ 15
4.2 Exercise of Rights.............................. 16
4.3 Issuance of Equity Securities to Other Persons.. 16
4.4 Termination of Rights of First Refusal.......... 16
4.5 Transfer of Rights of First Refusal............. 16
4.6 Excluded Securities............................. 16
Section 5. Miscellaneous................................... 17
5.1 Governing Law................................... 17
5.2 Survival........................................ 17
5.3 Successors and Assigns.......................... 18
5.4 Entire Agreement................................ 18
5.5 Severability.................................... 18
5.6 Amendment and Waiver............................ 18
5.7 Delays or Omissions............................. 18
5.8 Notices......................................... 19
5.9 Attorneys' Fees................................. 19
5.10 Titles and Subtitles............................ 19
5.11 Counterparts.................................... 19
</TABLE>
i.
<PAGE>
SENSUS DRUG DEVELOPMENT CORPORATION
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is
entered into as of the 10th day of October 1997, by and among SENSUS DRUG
DEVELOPMENT CORPORATION, a Delaware corporation (the "Company"), and the
purchasers of the Company's capital stock set forth on Exhibit A hereto
(referred to hereinafter as the "Investors" and each individually as an
"Investor").
RECITALS
WHEREAS, the Company and the purchasers of the Company's Series A Preferred
Stock and Series B Preferred Stock have previously entered into that certain
Amended and Restated Investor Rights Agreement dated as of March 20, 1997 (the
"Prior Agreement"), which provides for, among other things, the grant of certain
registration rights and a right of first refusal to such purchasers;
WHEREAS, concurrently herewith the Company is selling shares of Series C
Preferred Stock to the purchasers set forth on Exhibit A hereto, and it is a
condition to the sale of such shares that the purchasers of Series C Preferred
Stock be extended the registration rights and right of first refusal provisions
contained herein;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
mutually agree that all consents or conditions required to be obtained or
satisfied under the Prior Agreement are hereby given and that the Prior
Agreement is amended and restated to read in full as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"HOLDER" means any person owning of record Registrable Securities or
any assignee of record of such Registrable Securities in accordance with Section
2.10 hereof.
"INITIAL OFFERING" means the Company's first underwritten public
offering of its common stock, $.001 par value ("Common Stock"), registered under
the Securities Act.
1.
<PAGE>
"REGISTER," "REGISTERED," AND "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferror's rights under Section 2 of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incident to the
Company's performance of or compliance with Sections 2.2, 2.3 and 2.4 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, reasonable fees and
disbursements (not to exceed Twenty Thousand Dollars ($20,000) with respect to a
registration effected pursuant to Section 2.3 and Fifteen Thousand Dollars
($15,000) with respect to a registration effected pursuant to Section 2.2 or
2.4) of a single special counsel for the Holders, blue sky fees and expenses,
the expense of any special audits incident to or required by any such
registration and fees and expenses payable to a Qualified Independent
Underwriter (as such term is defined in Schedule E to the National Association
of Securities Dealers, Inc.'s By-Laws).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean (i) the Company's Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock held by the Investors listed on
Exhibit A hereto and their permitted assigns and (ii) the Warrant to Purchase
Shares of Series C Preferred Stock issued to Montgomery Securities on October
10, 1997.
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"SEC" OR "COMMISSION" means the Securities and Exchange Commission.
2.
<PAGE>
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(A) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(I) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(II) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144.
(III) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder; provided that in each
case the transferee will be subject to the terms of this Agreement to the same
extent as if he were an original Holder hereunder.
(B) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
(C) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without
3.
<PAGE>
registration, qualification or legend; provided, that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144.
(D) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(A) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders (the "Initiating Holders") that
the Company file a registration statement under the Securities Act covering more
than forty-two percent (42%) of the Registrable Securities then outstanding, or
any lesser percentage if the aggregate offering price to the public would exceed
$5,000,000 (a "Qualified Public Offering"), then the Company shall, within
thirty (30) days of the receipt thereof, give written notice of such request to
all Holders, and subject to the limitations of this Section 2.2, use all
reasonable efforts to cause the prompt registration under the Securities Act of
all Registrable Securities that the Holders request to be registered.
(B) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Holders participating in such registration) to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Holders participating in such
registration (which underwriter or underwriters shall be reasonably acceptable
to the Company). Notwithstanding any other provision of this Section 2.2 or
Section 2.4, if the underwriter advises the Company that the number of
securities requested to be included in the offering exceeds the largest number
of securities that can be sold in such offering within a price range acceptable
to a majority of the Holders participating in such registration then the Company
shall so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares that may be included in
the underwriting shall be allocated, first, to the Holders of such Registrable
Securities on a pro rata basis based on the number of Registrable Securities
held by all such Holders (including the Initiating Holders) and, second, to the
Company. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(C) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
4.
<PAGE>
(I) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective; or
(II) prior to the Initial Offering or during the period
starting with the date of filing of, and ending on the date one hundred eighty
(180) days following the effective date of the registration statement pertaining
to the Initial Offering; provided that the Company makes reasonable good faith
efforts to cause such registration statement to become effective; or
(III) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period. If the Company
shall give any notice of postponement of a registration statement pursuant to
this Section 2.2(c)(iii), the Company shall, at such time as the reason that
caused such withdrawal or postponement no longer exists (but in no event later
than the time period specified in the first clause of this Section 2.2(c)(iii)),
use its best efforts to effect the registration under the Securities Act of the
Registrable Securities covered by the postponed registration statement in
accordance with this Section 2.2 (unless the Holders initiating such
registration shall have withdrawn such request, in which case the Company shall
not be considered to have effected an effective registration for the purposes of
this Section 2.2).
(D) A registration requested pursuant to this Section 2.2 shall not
be deemed to have been effected (i) unless a registration statement with respect
thereto has become effective and has been kept continuously effective for a
period of at least 90 days (or such shorter period which shall terminate when
all the Registrable Securities covered by such registration statement have been
sold pursuant thereto), (ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason not attributable to the Holders participating in such registration and
has not thereafter become effective, or (iii) if the conditions to closing
specified in the underwriting agreement, if any, entered into in connection with
such registration are not satisfied or waived, other than by reason or an act or
failure to act on the part of the Holders participating in such registration.
2.3 PIGGYBACK REGISTRATIONS. If the Company proposes to file a
registration statement relating to the offering of any of its capital stock
under the Securities Act (other than (i) a registration statement required to be
filed in respect of employee benefit plans of the Company on Form S-8 or any
similar form from time to time in effect, or (ii) any registration statement
relating to a corporate reorganization or other transaction under Rule 145)
whether or not for its own account, the Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to such filing
and will afford each such Holder an opportunity to include in such registration
statement all or part of the Registrable Securities held by such Holder. Each
Holder desiring to include in any such registration statement all or any part of
the Registrable Securities held by it shall, within twenty (20) days after the
above-described
5.
<PAGE>
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(A) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall reduce the amount of securities of the selling
Holders included in the registration below twenty-five percent (25%) of the
total amount of securities included in such registration, unless such offering
is the Initial Offering, in which event any or all of the Registrable Securities
of the Holders may be excluded in accordance with the immediately preceding
sentence. In no event will shares of any other selling shareholder be included
in such registration which would reduce the number of shares which may be
included by Holders without the written consent of Holders of not less than a
majority of the Registrable Securities proposed to be sold in the offering.
(B) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses
of such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 or any similar short-form
registration statement and any related qualification or compliance with respect
to all or a part of the Registrable Securities owned by such Holder or Holders,
the Company will:
(A) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
6.
<PAGE>
(B) as soon as practicable, effect such registration (including, if
requested, a registration of Registrable Securities which are intended to be
offered on a continuous or delayed basis under Rule 415 of the Securities Act,
such registration a "Shelf Registration") and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within fifteen (15) days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.4:
(I) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(II) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $1,000,000, or
(III) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period. If the Company shall give any notice of postponement of a
registration statement pursuant to this Section 2.4(b)(iii), the Company shall,
at such time as the reason that caused such withdrawal or postponement no longer
exists (but in no event later than the time period specified in the first clause
of this Section 2.4(b)(iii)), use its best efforts to effect the registration
under the Securities Act of the Registrable Securities covered by the postponed
registration statement in accordance with this Section 2.4 (unless the Holders
initiating such registration shall have withdrawn such request, in which case
the Company shall not be considered to have effected an effective registration
for the purposes of this Section 2.4), or
(IV) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
(V) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(C) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All such
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Registration Expenses incurred in connection with a registration requested
pursuant to this Section 2.4 after the first four (4) registrations shall be
paid by the selling Holders pro rata in proportion to the number of shares sold
by each.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by a majority in
interest of the Holders participating in such registration unless (a) the
withdrawal is based upon material adverse information concerning the Company of
which a majority in interest of the Holders participating in such registration
were not aware at the time of such request, (b) the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2 or Section 2.4, as applicable, in which
event such right shall be forfeited by all Holders, (c) the withdrawal is based
upon the Company's material breach of its obligations under this Agreement, (d)
the withdrawal is based upon the failure of the registration statement to be
declared effective within 90 days following the Company's receipt of a request
for registration under Section 2.2 or 2.4 or (e) the withdrawal is based upon
the Company's invocation of Section 2.2(c)(iii) or 2.4(b)(iii). If the Holders
are required to pay the Registration Expenses, such expenses shall be borne by
the holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(A) (I) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective and to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
for a period of one hundred twenty (120) days or until the Holder or Holders
have completed the distribution described in the registration statement relating
thereto, whichever first occurs; provided, however, that such 120-day period
shall be extended for a period of time equal to the period the Holder refrains
from selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; or
(II) in the case of any Shelf Registration, prepare and
file with the SEC a Shelf Registration statement with respect to such
Registrable Securities and use all reasonable efforts to cause such registration
statement to become effective and to remain continuously effective in order to
permit the prospectus forming part thereof to be usable by Holders for a period
of two (2) years from the date such registration statement is declared
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effective or such shorter period of time that will terminate upon the earlier of
the following: (A) when all the Registrable Securities covered by the Shelf
Registration statement have been sold pursuant to such registration statement
and (B) when there cease to be any outstanding Registrable Securities; provided,
however, that following the effectiveness of any Shelf Registration statement,
the Company, may, at any time, suspend the effectiveness of such registration
statement for up to ninety (90) days in any twelve-month period (a "Suspension
Period"), by giving notice to the Holders participating in such registration, if
the Company shall have, in good faith, determined that the Company may be
required to disclose any material corporate development which disclosure may
have a material effect on the Company and the Holders agree that, upon receipt
of any notice from the Company of a Suspension Period, the Holders shall
forthwith discontinue disposition of shares covered by such registration
statement until Holders (A) are advised in writing by the Company that the use
of the applicable prospectus may be resumed, (B) have received copies of a
supplemental or amended prospectus, if applicable or (C) have received copies of
any additional supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus. Upon termination of any such
Suspension Period, the Company shall use all reasonable efforts to cause such
registration statement to remain continuously effective in order to permit the
prospectus forming part thereof to be usable by Holders for the remaining
portion of the period described above.
(B) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(C) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(D) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(E) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(F) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
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(G) Furnish, at the request of a majority of the Holders participating
in the registration, on the date that such Registrable Securities are delivered
to the underwriters for sale, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated as of such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and if permitted by applicable accounting
standards, to the Holders requesting registration of Registrable Securities.
2.7 EXPIRATION OF REGISTRATION RIGHTS. A Holder's registration rights
shall expire if all of the following conditions are fulfilled: (i) the Company
has completed its Initial Offering and is subject to the provisions of the
Exchange Act, (ii) such Holder (together with its affiliates) holds less than 1%
of the Company's Common Stock (treating all shares of convertible Preferred
Stock on an as-converted basis) and (iii) all Registrable Securities held by and
issuable to such Holder (and its affiliates, partners and former partners) may
be sold under Rule 144 during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(A) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any registration contemplated by this Section
2 as the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
(B) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 with respect to
any selling Holder that the selling Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of such securities as shall be required to effect
the registration of its Registrable Securities.
(C) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
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(A) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder and the affiliates of each Holder and their respective
directors, officers, employees, general and limited partners, members, agents,
representatives, legal counsel, and any underwriter (as defined in the
Securities Act) and the directors, officers, affiliates and controlling persons
thereof and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act (collectively the
"Indemnified Persons"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the registration
of Holder's Registrable Securities; and the Company will reimburse each
Indemnified Person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 2.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable hereunder in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director, underwriter or
controlling person of such Holder. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Party and shall survive the transfer of such securities by such
Holder. Each Indemnified Party shall furnish such information regarding itself
or the claim in question as the Company may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(B) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers, and legal counsel and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities to which the Company or any such director, officer,
controlling person, underwriter or other such Holder, or partner, director,
officer or controlling person of such other Holder may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in
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reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the gross proceeds from the offering received by such Holder; and,
provided, however, that the obligation to provide indemnification pursuant to
this Section 2.9(b) shall be several and not joint and several among such
indemnifying parties.
(C) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding or if the indemnifying
party fails to take reasonable steps necessary to defend diligently the action
or proceeding within a reasonable period after receiving notice from such
indemnified party that the indemnified party believes it has failed to do so.
The failure to deliver written notice to the indemnifying party within a
reasonable time after the indemnified party first learns of the commencement of
any such action shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.9 to the extent it is materially
prejudiced to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(D) If the indemnification provided for in this Section 2.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact
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relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, that in
no event shall any contribution by a Holder hereunder (including any
indemnification payment made by such Holder pursuant to Section 2.9) exceed the
gross proceeds from the offering received by such Holder.
(E) The foregoing indemnity agreements of the Company and the Holders
are subject to the condition that, insofar as they relate to any Violation made
in a preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreements shall not inure to
the benefit of any person if a copy of the Final Prospectus was furnished to the
indemnified party and the indemnified party was required by the Securities Act
to furnish, and did not furnish, the Final Prospectus to the person asserting
the loss, liability, claim or damage at or prior to the time such action is
required by the Securities Act.
(F) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation or which includes a
statement as to an admission of fault, culpability or a failure to act, by or on
behalf of such Indemnified Party.
(G) The indemnity agreements contained herein shall be in addition to
any other rights to indemnification or contribution which any indemnified party
may have pursuant to law or contract and shall remain operative and in full
force and effect regardless of any investigation made or omitted by or on behalf
of any indemnified party and shall survive any transfer of the Registrable
Securities by any such party made in accordance with the terms hereof.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (i) is a
subsidiary, parent, general partner, limited partner or retired partner of a
Holder, (ii) is a Holder's family member or trust for the benefit of an
individual Holder, or (iii) acquires at least fifty-seven thousand one hundred
forty-three (57,143) shares of Registrable Securities (as adjusted for stock
splits and combinations); provided, however, (A) the transferor shall, within
twenty (20) days after such transfer, furnish to the Company written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned and (B) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the
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Holders of at least a majority of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Article II, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter into
any agreement with any holder or prospective holder of any securities of the
Company that would grant such holder registration rights senior to those granted
to the Holders hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT. Unless the prior written consent of the
underwriters is obtained, each Holder hereby agrees that such Holder shall not
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by such Holder (other than those included in the
registration) for a period specified by the representative of the underwriters
of Common Stock (or other securities) of the Company not to exceed one hundred
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act, provided that all officers and
directors of the Company and each holder of at least one percent (1%) of the
Company's voting securities enters into similar agreements.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 2.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day period.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(A) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(B) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(C) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at
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any time after it has become subject to such reporting requirements); a copy of
the most recent annual or quarterly report of the Company; and such other
reports and documents as a Holder may reasonably request in availing itself of
any rule or regulation of the SEC allowing it to sell any such securities
without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(A) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(B) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, the Company will furnish
each Investor a consolidated balance sheet of the Company, as at the end of such
fiscal year, and a consolidated statement of income and a consolidated statement
of cash flows of the Company, for such year, all prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail. Such financial statements shall be accompanied by a
report and opinion thereon by independent public accountants of national
standing selected by the Company's Board of Directors.
(C) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a consolidated balance sheet of the Company as of the end of each
such quarterly period, and a consolidated statement of income and a consolidated
statement of cash flows of the Company for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.
3.2 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Shares, all Common Stock issuable from time to time upon such conversion.
3.3 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor on
the effective date of the registration statement pertaining to the Initial
Offering.
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. So long as an Investor (with its affiliates)
shall own not less than three hundred thousand (300,000) shares of Registrable
Securities (as adjusted for stock
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splits and combinations (a "Major Investor"), each Major Investor shall have a
right of first refusal to purchase its pro rata share of all Equity Securities,
as defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof. Each Major Investor's pro rata share is equal
to the ratio of (A) the number of shares of the Company's Common Stock
(including all shares of Common Stock issued or issuable upon conversion of the
Shares) which such Investor is deemed to be a holder immediately prior to the
issuance of such Equity Securities to (B) the total number of shares of the
Company's outstanding Common Stock (including all shares of Common Stock issued
or issuable upon conversion of the Shares or upon the exercise of any
outstanding warrants or options) immediately prior to the issuance of the Equity
Securities. The term "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other equity security of the Company, (ii) any security
convertible, with or without consideration, into any Common Stock, Preferred
Stock or other equity security (including any option to purchase such a
convertible security), (iii) any security carrying any warrant or right to
subscribe to or purchase any Common Stock, Preferred Stock or other equity
security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Investor if such offer or sale would cause
the Company to be in violation of applicable federal securities laws.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If any Major Investor
fails to exercise in full its rights of first refusal, the Company shall have
one hundred twenty (120) days thereafter to sell the Equity Securities in
respect of which such Major Investor's rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Major Investors pursuant
to Section 4.2 hereof. If the Company has not sold such Equity Securities
within such one hundred twenty (120) days, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Major Investors in the manner provided above.
4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Section 4 shall not apply to, and shall terminate upon the
effective date of the registration statement pertaining to the Company's Initial
Offering.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Major Investor under this Section 4 may be transferred, subject to the same
restrictions as any transfer of registration rights pursuant to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
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(A) shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or other arrangements that are approved by a majority of the Board
of Directors;
(B) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination, including without limitation, an acquisition whether pursuant to a
preexisting option or otherwise, of the stock or assets of a special purpose
corporation, research and development partnership or similar entity;
(C) any Equity Securities that are issued by the Company as part of an
underwritten public offering;
(D) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(E) shares of Common Stock issued upon conversion of the Shares or
upon conversion or exercise of other convertible securities, options or warrants
of the Company; and
(F) any Equity Securities issued pursuant to corporate partnering
transactions, off balance sheet financing transactions (such as "SWORD" or
Research & Development partnership transactions), commercial lending
transactions or lease financings;
provided, however, that if the aggregate number of Equity Securities issued
pursuant to Section 4.6(f) shall exceed, on a cumulative basis, ten percent
(10%) of the fully-diluted outstanding shares of the Company's capital stock
(calculated at the time of issuance), the provisions of Sections 4.1, 4.2 and
4.3 shall apply subject to the following conditions:
(I) if the Company proposes to issue Equity Securities in
conjunction with the equity securities of another entity ("Joint Equity
Securities"), each Major Investor shall have the right to purchase its pro rata
share of Joint Equity Securities as defined in Section 4.1 above only to the
extent that such participation by the Major Investor will not result in a loss
of desired accounting treatment for the Company; and
(II) if the Joint Equity Securities are issued as units, in
exercising its right of first refusal, each Major Investor must purchase the
full unit, even if the component equity securities of such unit may be
transferred separately.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York without regard to the conflict law rules
thereof.
5.2 SURVIVAL. Notwithstanding any investigation conducted by or on
behalf of any party hereto, each representation and warranty in this Agreement
and each agreement or
17.
<PAGE>
covenant in this Agreement which does not by its own terms expire on or prior to
the Closing shall survive the Closing without limitations as to time, except as
specifically referred to herein. All statements as to factual matters contained
in any certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 ENTIRE AGREEMENT. This Agreement and any Exhibits and Schedules
attached hereto constitute the full and entire understanding and agreement and
supersedes all of the prior agreements and undertakings, both written and oral,
among the parties, or any of them with respect to the subject matter hereof.
5.5 SEVERABILITY. If any provision or any portion of any provision of
this Agreement or the application of any such provision or any portion thereof
to any person or circumstance, shall be held invalid, illegal, or unenforceable,
to the extent permitted by law, the remaining portion of such provision and the
remaining provisions of this Agreement shall not in any way be affected or
impaired.
5.6 AMENDMENT AND WAIVER.
(A) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the prior written consent of the Company and the
holders of at least a majority of the Registrable Securities.
(B) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
upon the prior written consent of the holders of at least a majority of the
Registrable Securities.
5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be
18.
<PAGE>
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to Holders,
shall be cumulative and not alternative.
5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature pages hereof
or Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
19.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY:
SENSUS DRUG DEVELOPMENT CORPORATION
By:___________________________
John A. Scarlett, Ph.D.
President and Chief Executive Officer
<PAGE>
INVESTOR:
By:___________________________
(Signature)
Name:_________________________
(Print)
Title:________________________
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
INVESTOR NUMBER OF SHARES
- -------- ----------------
<S> <C>
PURCHASERS OF SERIES A PREFERRED STOCK:
William F. Bennett and Charis A. Bennett 57,143
4011 Westlake Drive
Austin, TX 78746
Mr. Robert Herbert Carter, Jr. 5,800
8112 Flashpan Cove
Austin, TX 78729
Mr. James H. Clardy 5,715
6723 Beauford Drive
Austin, TX 78750
Mr. Terrell A. Cobb 20,000
2036 King Stables Road
Birmingham, AL 35242
Walter A. DeRoeck 671,429
Congress International Inc.
1301 Capital of Texas Hwy South
Suite B-125
Austin, TX 78746
Mr. Craig H. Ensley 5,715
1400 Prestwood Place
Austin, TX 78746
Mr. John Fincher 14,286
2606 Pecos
Austin, TX 78703
Frost National Bank, Trustee for the James A. Cox, Jr. IRA 14,286
No. A0405100, Robert L. Hearn, III
Frost Bank Trust Division
816 Congress Avenue, Suite 400
Austin, TX 78701
Genentech, Inc. 1,658,035
Attn: John Wulf
Bldg 24
460 Point San Bruno Blvd.
South San Francisco, CA 94080
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESTOR NUMBER OF SHARES
- -------- ----------------
<S> <C>
Mrs. Ann S. Goldsmith 10,000
3 Stanford Drive
Rancho Mirage, CA 92270
Mr. Jack Goldsmith 10,000
3 Stanford Drive
Rancho Mirage, CA 92270
John J. Gorman 46,500
1110 Blackacre Trail
Austin, TX 78746
John J. Gorman as the Trustee of the Matthew Gorman Trust 4,900
1110 Blackacre Trail
Austin, TX 78746
John J. Gorman as the Trustee of the Ryleigh Gorman Trust 5,900
1110 Blackacre Trail
Austin, TX 78746
Mr. Stephen J. Hasbrouck 18,900
6319 Stow Road
Hudson, OH 44236
Richard J. Hawkins and Nona F. Niland, Joint Tenants 1,020,002
324 Eanes School Road
Austin, TX 78746
Mr. Richard D. Herrington 28,571
4205 Bennedict Lane
Austin, TX 78746
R. Steven Hicks and Donna Stockton Hicks 57,143
1702 Windsor Road
Austin, TX 78703
Hughes Family Partnership, L.P. 57,143
Attn: J. Laine Holman
600 Congress Ave., Suite 3000
Austin, TX 78701
Mr. Irwin Isroff 28,571
19373 Cedar Glen Drive
Boca Raton, FL 33434
Gerald Jacknow, M.D. and Karen B. Jacknow 57,143
4001 Lakeplace Lane
Austin, TX 78746
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESTOR NUMBER OF SHARES
- -------- ----------------
<S> <C>
Javelin Capital Fund, L.P. 685,714
Attn: Lyle A. Hohnke
1075 13th Street South
Birmingham, AL 35205
LIPP Investments 14,286
Attn: Gary Little
c/o Franco Services
2211 Lake Austin Blvd.,
Austin, TX 78703
Lysander, LLC 171,429
c/o Stuart Davidson
Combion
400 Seaport Court, Suite 250
Redwood City, CA 94063
Gregory S. Marchbanks 57,143
Prime Cable
600 Congress, Suite 3000
Austin, TX 78701
Ernest Mario 171,429
900 University Avenue
Palo Alto, CA 94301
Alan T. Moore 57,142
2420 Harris Blvd.
Austin, TX 78703
Mr. Robert L. Myer 57,143
10222 Pinehurst Drive
Austin, TX 78747
Deborah O'Connell, M.D. 28,572
4109 Lakeplace Lane
Austin, TX 78746
Opus Portfolio, Ltd. 200,000
c/o The George Ventures Group
13407 N.W. Military Hwy.
San Antonio, TX 78231
Paycol & Co. 115,000
Attn: William F. Jones, Manager
c/o Keswick Management, Inc.
1330 Avenue of Americas, 27th Floor
New York, NY 10019
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESTOR NUMBER OF SHARES
- -------- ----------------
<S> <C>
Mr. Dwight Rounds Trustee of the Dwight C. Rounds Trust 14,286
UDT 8-16-85
4311 Dunning Lane
Austin, TX 78746
Rodney James Sands 200,000
3750 N. Pan Am Expwy.
San Antonio, TX 78212
Mr. William Scanlan, Jr. Trustee of the Salome McAllen 57,143
Scanlan Family Trust
c/o William Scanlan, Jr.
300 Convent, Suite 1775
San Antonio, TX 78205
Mr. Baker P.L. Scott, III 20,000
405 Graciosa Cove
Austin, TX 78746
Mr. Jerry Shaw 28,571
4740 S. Ocean Blvd., #1616
Highland Beach, FL 33487
William N.L. Stassen, M.D. 28,571
4109 Lakeplace Lane
Austin, TX 78746
Steven A. Fleckman & Texas Commerce Bank National 11,428
Association, Co-Trustees of The Benjamin Richard Hawkins
1992 Trust
c/o Fleckman & McGlynn
1800 Nationsbank Tower
515 Congress Avenue
Austin, TX 78701-3503
Steven A. Fleckman & Texas Commerce Bank National 11,428
Association, Co-Trustees of The Zachary John Hawkins 1992
Trust
c/o Fleckman & McGlynn
1800 Nationsbank Tower
515 Congress Avenue
Austin, TX 78701-3503
WTFO, Inc. 14,286
Attn: Richard Herrington
4205 Bennedict Lane
Austin, TX 78746
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESTOR NUMBER OF SHARES
- -------- ----------------
<S> <C>
Mr. Karl Joseph Zimmermann 100,000
16018 Fontaine Avenue
Austin, TX 78734
PURCHASERS OF SERIES B PREFERRED STOCK:
The Goldman Sachs Group, L.P. 625,000
85 Broad Street
New York, NY 10004
William F. Bennett and Charis A. Bennett 6,956
4011 Westlake Drive
Austin, TX 78746
Frost National Bank, Trustee for the James A. Cox, Jr. IRA 12,500
No. A0405100, Robert L. Hearn III
Frost Bank Trust Division
816 Congress Avenue, Suite 400
Austin, TX 78701
John Fincher 10,000
2606 Pecos
Austin, TX 78703
Richard D. Herrington 21,429
4205 Bennedict Lane
Austin, TX 78746
Hughes Family Partnership, L.P. 26,500
Attn. J. Laine Holman
600 Congress Ave., Suite 3000
Austin, TX 78701
Gerald Jacknow, M.D. & Karen B. Jacknow 17,857
4001 Lakeplace Lane
Austin, TX 78746
LIPP Investments 5,739
Attn: Gary Little
c/o Franco Services
2211 Lake Austin Blvd.
Austin, TX 78703
Lysander, LLC 50,000
c/o Stuart Davidson
Combion
400 Seaport Court, Suite 250
Redwood City, CA 94063
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESTOR NUMBER OF SHARES
- -------- ----------------
<S> <C>
Gregory S. Marchbanks 25,000
Prime Cable
600 Congress, Suite 3000
Austin, TX 78701
Deborah O'Connell, M.D. 12,500
4109 Lakeplace Lane
Austin, TX 78746
Opus Portfolio, Ltd. 100,000
c/o The George Ventures Group
13407 N.W. Military Hwy.
San Antonio, TX 78231
Paycol & Co. 25,000
Attn: William F. Jones, Manager
c/o Keswick Management, Inc.
1330 Avenue of Americas
27th Floor
New York, NY 10019
Dwight C. Rounds, Trustee of the Dwight C. Rounds Trust 8,000
UDT 8-16-85
4311 Dunning Lane
Austin, TX 78746
Rodney James Sands 100,000
3750 N. Pan Am Expwy.
San Antonio, TX 78212
William Scanlan, Jr. 13,956
Trustee of the Salome McAllen Scanlan Family Trust Salome
300 Convent, Suite 1775
San Antonio, TX 78205
William N.L. Stassen, M.D. 12,500
4109 Lakeplace Lane
Austin, TX 78746
WTFO, Inc. 10,714
Attn: Richard D. Herrington
4205 Bennedict Lane
Austin, TX 78746
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESTOR NUMBER OF SHARES
- -------- ----------------
<S> <C>
PURCHASERS OF SERIES C PREFERRED STOCK
The Goldman Sachs Group, L.P. 566,800
Attn: Robert J. Granovsky
V.P. Equity Derivatives
Goldman Sachs & Co.
One New York Plaza
New York, NY 10004
Robert J. Granovsky 20,000
Goldman Sachs & Co.
One New York Plaza
New York, NY 10004
Javelin Capital Fund 230,000
Attn: Lyle A. Hohnke
OADI Technology Center
2800 Milan Court, Suite 213
Birmingham, AL 35211
Opus Portfolio, Ltd. 271,700
c/o The George Ventures Group
13407 N.W. Military Hwy.
San Antonio, TX 78231
Ross Financial Corporation 8,000,000
P.O. Box 31363
Seven Mile Beach
Grand Cayman, Cayman Islands
British West Indies
Rodney James Sands 271,700
Silver Ventures
2121 Broadway
San Antonio, TX 78209
================
Total: 16,284,604
</TABLE>
<PAGE>
EXHIBIT 10.1
SENSUS DRUG DEVELOPMENT CORPORATION
1998 Equity Incentive Plan
Adopted July 20, 1998
APPROVED BY STOCKHOLDERS _______________, 199___
Termination Date: _______________, 2008
1. PURPOSE.
(A) AMENDMENT AND RESTATEMENT. This Plan constitutes an amendment and
restatement of the Company's Amended and Restated 1996 Stock Option Plan (the
"Prior Plan") and shall be effective on the effective date of the initial public
offering of the Common Stock (the "Effective Date"), subject to approval of the
stockholders of the Company as provided in Section 14. In the event an initial
public offering of the Common Stock does not occur this Plan shall not become
effective and the Prior Plan shall continue in full force and effect.
(B) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(C) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock appreciation rights, (iv) stock bonuses and (v) rights to
acquire restricted stock.
(D) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(A) "AFFILIATE" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(B) "BOARD" means the Board of Directors of the Company.
(C) "CODE" means the Internal Revenue Code of 1986, as amended.
(D) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c).
1
<PAGE>
(E) "COMMON STOCK" means the common stock of the Company.
(F) "COMPANY" means Sensus Drug Development Corporation, a Delaware
corporation.
(G) "CONSULTANT" means any person, including an advisor, (1) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (2) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely paid a
director's fee by the Company for their services as Directors.
(H) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(I) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(J) "DIRECTOR" means a member of the Board of Directors of the Company.
(K) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(L) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(M) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(N) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(I) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a
2
<PAGE>
share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market (or
the exchange or market with the greatest volume of trading in the Common Stock)
on the last market trading day prior to the day of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Board deems reliable.
(II) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(O) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(P) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(Q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(R) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(S) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(T) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(U) "OPTIONHOLDER" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(V) "OUTSIDE DIRECTOR" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the
3
<PAGE>
Company or an "affiliated corporation" for services in any capacity other than
as a Director or (ii) is otherwise considered an "outside director" for purposes
of Section 162(m) of the Code.
(W) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(X) "PLAN" means this Sensus Drug Development Corporation 1998 Equity
Incentive Plan.
(Y) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(Z) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(AA) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock appreciation right, a stock bonus and a right to acquire
restricted stock.
(BB) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(CC) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(A) ADMINISTRATION BY BOARD. The Board will administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(B) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(I) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(II) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(III) To amend the Plan or a Stock Award as provided in Section 12.
4
<PAGE>
(IV) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(C) DELEGATION TO COMMITTEE.
(I) GENERAL. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(II) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors, the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or (ii)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(A) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued (or, in the case
of stock appreciation rights, subject to exercise) pursuant to Stock Awards
shall not exceed in the aggregate five million (5,000,000) shares of Common
Stock; provided, however, that the aggregate number of shares that may be issued
pursuant to Stock Awards under the Plan shall be reduced to reflect the number
of shares of Common Stock that have been sold, or may be sold, pursuant to the
Prior Plan, to the same extent as if such sales had been made or options granted
pursuant to this Plan.
(B) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award
(including any option granted under the Prior Plan) shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in
full (or vested in the case of restricted stock), the stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan. Shares subject to stock appreciation rights exercised in accordance
with
5
<PAGE>
the Plan shall not be available for subsequent issuance under the Plan. If any
Common Stock acquired pursuant to the exercise of an Option shall for any reason
be repurchased by the Company under an unvested share repurchase option provided
under the Plan (including under the Prior Plan), the stock repurchased by the
Company under such repurchase option shall not revert to and again become
available for issuance under the Plan.
(C) SOURCE OF SHARES. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(A) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.
(B) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
(C) SECTION 162(M) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Options, restricted stock purchase rights and/or stock appreciation
rights covering more than two million (2,000,000) shares of the Common Stock
during any calendar year. This subsection 5(c) shall not apply until (i) the
earliest of: (1) the first material modification of the Plan (including any
increase in the number of shares reserved for issuance under the Plan in
accordance with Section 4); (2) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or
(4) the first meeting of shareholders at which Directors of the Company are to
be elected that occurs after the close of the third calendar year following the
calendar year in which occurred the Company's initial public offering; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
(A) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
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(B) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(C) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a transaction of the type described in Section 424(a) of the
Code.
(D) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(E) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.
(F) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option granted pursuant to the Prior Plan prior to the Effective Date of this
Plan shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder.. A Nonstatutory Stock Option granted pursuant to this
Plan on or after the Effective date of this Plan shall be transferable to the
extent provided in the Option Agreement. If the Nonstatutory Stock Option does
not provide for transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by
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the laws of descent and distribution and Shall be exercisable during the
lifetime of the Optionholder only by the Optionholder. Notwithstanding the
foregoing provisions of this subsection 6(f), the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionholder,
shall thereafter be entitled to exercise the Option.
(G) VESTING GENERALLY. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(H) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.
(I) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(J) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement) or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(K) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent
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the Optionholder was entitled to exercise the Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement) or (2) the expiration of the term of such Option as set
forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
(L) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to an unvested share repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
(M) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall automatically be granted on the exercise date of
the Option and shall (i) provide for a number of shares equal to the number of
shares surrendered as part or all of the exercise price of such Option; (ii)
have an expiration date which is the same as the expiration date of the Option
the exercise of which gave rise to such Re-Load Option; and (iii) have an
exercise price which is equal to one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Re-Load Option on the date of exercise
of the original Option. Notwithstanding the foregoing, a Re-Load Option shall be
subject to the same exercise price and term provisions heretofore described for
Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to: (i) the availability of sufficient shares under subsection 4(a);
(ii) the "Section 162(m) Limitation" on the grants of Options under subsection
5(c); and (iii) such other terms and conditions as the Board may determine which
are not inconsistent with the express provisions of the Plan regarding the terms
of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(A) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and
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conditions of stock bonus agreements may change from time to time, and the terms
and conditions of separate stock bonus agreements need not be identical, but
each stock bonus agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:
(I) CONSIDERATION. A stock bonus shall be awarded in consideration
for past services actually rendered to the Company for its benefit.
(II) VESTING. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(III) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(IV) TRANSFERABILITY. Rights to acquire shares under the stock
bonus agreement shall be transferable by the Participant only upon such terms
and conditions as are set forth in the stock bonus agreement, as the Board shall
determine in its discretion, so long as stock awarded under the stock bonus
agreement remains subject to the terms of the stock bonus agreement.
(B) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(I) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made or at the time the purchase is consummated.
(II) CONSIDERATION. The purchase price of stock acquired pursuant
to the restricted stock purchase agreement shall be paid either: (i) in cash at
the time of purchase; (ii) at the discretion of the Board, according to a
deferred payment or other arrangement with the Participant; or (iii) in any
other form of legal consideration that may be acceptable to the Board in its
discretion; provided, however, that at any time that the Company is incorporated
in Delaware, payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
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(III) VESTING. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(IV) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(V) TRANSFERABILITY. Rights to acquire shares under the restricted
stock purchase agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as stock
awarded under the restricted stock purchase agreement remains subject to the
terms of the restricted stock purchase agreement.
(C) STOCK APPRECIATION RIGHTS.
(I) AUTHORIZED RIGHTS. The following three types of stock
appreciation rights shall be authorized for issuance under the Plan:
(1) TANDEM RIGHTS. A "Tandem Right" means a stock
appreciation right granted appurtenant to an Option which is subject to the same
terms and conditions applicable to the particular Option grant to which it
pertains with the following exceptions: The Tandem Right shall require the
holder to elect between the exercise of the underlying Option for shares of
Common Stock and the surrender, in whole or in part, of such Option for an
appreciation distribution. The appreciation distribution payable on the
exercised the Tandem Right shall be in cash (or, if so provided, in an
equivalent number of shares of Common Stock based on Fair Market Value on the
date of the Option surrender) in an amount up to the excess of (A) the Fair
Market Value (on the date of the Option surrender) of the number of shares of
Common Stock covered by that portion of the surrendered Option in which the
Optionholder is vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT RIGHTS. A "Concurrent Right" means a stock
appreciation right granted appurtenant to an Option which applies to all or a
portion of the shares of Common Stock subject to the underlying Option and which
is subject to the same terms and conditions applicable to the particular Option
grant to which it pertains with the following exceptions: A Concurrent Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular shares of Common Stock to which the
Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of Common Stock based on Fair Market Value on the
date of the exercise of the Concurrent Right) in an amount equal to such portion
as determined by the Board at the time of the grant of the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the Concurrent
Right) of the vested shares of Common Stock purchased -under the underlying
Option which have Concurrent Rights appurtenant to them over (B) the aggregate
exercise price paid for such shares.
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(3) INDEPENDENT RIGHTS. An "Independent Right" means a stock
appreciation right granted independently of any Option but which is subject to
the same terms and conditions applicable to a Nonstatutory Stock Option with the
following exceptions: An Independent Right shall be denominated in share
equivalents. The appreciation distribution payable on the exercised Independent
Right shall be not greater than an amount equal to the excess of (a) the
aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (b) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of Common Stock based on Fair
Market Value on the date of the exercise of the Independent Right.
(II) RELATIONSHIP TO OPTIONS. Stock appreciation rights appurtenant
to Incentive Stock Options may be granted only to Employees. The "Section
162(m) Limitation" provided in subsection 5(c) and any authority to reprice
Options shall apply as well to the grant of stock appreciation rights.
(III) EXERCISE. To exercise any outstanding stock appreciation
right, the holder shall provide written notice of exercise to the Company in
compliance with the provisions of the Stock Award Agreement evidencing such
right. Subject to the provisions of subsection 4(a) regarding the share
reserve and subsection 5(c) regarding the "Section 162(m) Limitation," no
limitation shall exist on the aggregate amount of cash payments that the Company
may make under the Plan in connection with the exercise of a stock appreciation
right.
8. COVENANTS OF THE COMPANY.
(A) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(B) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.
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9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(A) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(B) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(C) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
(D) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(E) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements,
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shall be inoperative if (iii) the issuance of the shares upon the exercise or
acquisition of stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities Act or (iv) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(F) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(G) CANCELLATION AND RE-GRANT OF OPTIONS.
(I) AUTHORITY TO REPRICE. The Board shall have the authority to
effect, at any time and from time to time, (i) the repricing of any outstanding
Options under the Plan and/or (ii) with the consent of any adversely affected
holders of Options, the cancellation of any outstanding Options under the Plan
and the grant in substitution therefor of new Options under the Plan covering
the same or different numbers of shares of Common Stock. The exercise price per
share shall be not less than that specified under the Plan for newly granted
Stock Awards. Notwithstanding the foregoing, the Board may grant an Option with
an exercise price lower than that set forth above if such Option is granted as
part of a transaction described in Section 424(a) of the Code applies.
(II) EFFECT OF REPRICING UNDER SECTION 162(M) OF THE CODE. Shares
subject to an Option which is amended or canceled in order to set a lower
exercise price per share shall continue to be counted against the maximum award
of Options permitted to be granted pursuant to subsection 5(c). The repricing
of an Option under this subsection 10(g) resulting in a reduction of the
exercise price shall be deemed to be a cancellation of the original Option and
the grant of a substitute Option; in the event of such repricing, both the
original and the substituted Options shall be counted against the maximum awards
of Options permitted to be granted pursuant to subsection 5(c). The provisions
of this subsection 10(g)(ii) shall be applicable only to the extent required by
Section 162(m) of the Code.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend,
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dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
other transaction not involving the receipt of consideration by the Company),
the Plan will be appropriately adjusted in the class(es) and maximum number of
securities subject to the Plan pursuant to subsection 4(a) and the maximum
number of securities subject to award to any person pursuant to subsection 5(c),
and the outstanding Stock Awards will be appropriately adjusted in the class(es)
and number of securities and price per share of stock subject to such
outstanding Stock Awards. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
transaction "without receipt of consideration" by the Company.)
(B) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then outstanding Stock Awards shall be terminated if
not exercised (if applicable) prior to such event.
(C) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (1) a sale of substantially all of the assets of the
Company, (2) a merger or consolidation in which the Company is not the surviving
corporation or (3) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, then any surviving corporation or
acquiring corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 11(c)) for those outstanding under the Plan. In the event any
surviving corporation or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, then with respect to Stock Awards granted pursuant to this Plan on or
after the Effective Date and held by Participants whose Continuous Service has
not terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full,
and the Stock Awards shall terminate if not exercised (if applicable) at or
prior to such event. With respect to any other Stock Awards outstanding under
the Plan, including any Options granted pursuant to the Prior Plan before the
Effective Date, such Stock Awards and such options shall terminate (without
acceleration of vesting) if not exercised (if applicable) prior to such event.
(D) CHANGE IN CONTROL--SECURITIES ACQUISITION. In the event of an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or an Affiliate) of the beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then with
respect to Stock Awards granted pursuant to this Plan on or after the Effective
Date and held by Participants whose Continuous Service has not terminated, the
vesting of such Stock Awards (and, if applicable, the time during which such
Stock Awards may be exercised) shall be accelerated in full. With respect to
any other Stock
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Awards outstanding under the Plan, including any Options granted pursuant to the
Prior Plan before the Effective Date, such Stock Awards and such Options shall
terminate (without acceleration of vesting) if not exercised (if applicable)
prior to such event.
(E) CHANGE IN CONTROL--CHANGE IN INCUMBENT BOARD. In the event that the
individuals who, as of the date of the adoption of this Plan, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least fifty
percent (50%) of the Board, then with respect to Stock Awards granted pursuant
to this Plan on or after the Effective Date and held by persons whose Continuous
Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full. With respect to any other Stock Awards outstanding under
the Plan, including any Options granted pursuant to the Prior Plan before the
Effective Date, such Stock Awards and such Options shall terminate (without
acceleration of vesting) if not exercised (if applicable) prior to such event.
If the election, or nomination for election, by the Company's stockholders of
any new director was approved by a vote of at least fifty percent (50%) of the
Incumbent Board, such new director shall be considered as a member of the
Incumbent Board.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(A) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(B) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(C) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(D) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(E) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
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13. TERMINATION OR SUSPENSION OF THE PLAN.
(A) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(B) NO IMPAIRMENT OF RIGHTS. Rights and obligations under any Stock Award
granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as set forth in subsection 1(a) above, but
no Stock Award shall be exercised (or, in the case of a stock bonus, granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
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EXHIBIT 10.2
SENSUS DRUG DEVELOPMENT CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED JULY 20, 1998
APPROVED BY THE STOCKHOLDERS ON ___________, 1998
1. PURPOSE.
(A) The purpose of this 1998 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of Sensus Drug Development Corporation, a
Delaware corporation (the "Company"), and its Affiliates, as defined in
subparagraph 1(b), which are designated as provided in subparagraph 2(b), may be
given an opportunity to purchase stock of the Company.
(B) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(C) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(D) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(A) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
committee as provided in subparagraph 2(c). Whether or not the Board has
delegated administration the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(B) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(I) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(II) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(III) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
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(IV) To amend the Plan as provided in paragraph 13.
(V) Generally, to exercise such powers and to perform such acts as
the Board or the Committee deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent that the
Plan be treated as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
(C) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate three hundred fifty thousand
(350,000) shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(A) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
(B) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a
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higher exercise price (or a later-granted right, if two rights have identical
exercise prices) will be exercised.
5. ELIGIBILITY.
(A) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(B) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(I) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(II) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(III) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.
(C) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of
this subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(D) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds
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twenty-five thousand dollars ($25,000) of fair market value of such stock
(determined at the time such rights are granted) for each calendar year in which
such rights are outstanding at any time.
(E) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board or
the Committee may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(A) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in by the Board for each Offering within the
parameters of Section 423(b)(5) of the Code and all applicable U.S. federal
treasury regulations) during the period which begins on the Offering Date (or
such later date as the Company determines for a particular Offering) and ends on
the date stated in the Offering, which date shall be no later than the end of
the Offering. The Board or the Committee shall establish one or more dates
during an Offering (a "Purchase Date") on which rights granted under the Plan
shall be exercised and purchases of Common Stock carried out in accordance with
such Offering.
(B) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. If the aggregate purchase
of shares upon exercise of rights granted under the Offering would exceed any
such maximum aggregate number, the Board or the Committee shall make a pro rata
allocation of the shares available in as nearly a uniform manner as shall be
practicable and as it shall deem to be equitable.
(C) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(I) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the first day of the Offering; or
(II) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
For new employees who became eligible during the Offering, fair market
value on the day they first become eligible will be used instead of fair market
value on the first day of such Offering for the purpose of determining purchase
price.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(A) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll
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deductions of up to the maximum percentage specified by the Board or the
Committee of such employee's Earnings (as defined by the Board for each
Offering) during the Offering. The payroll deductions made for each participant
shall be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional payments
into his or her account only if specifically provided for in the Offering and
only if the participant has not had the maximum amount withheld during the
Offering.
(B) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's right
to acquire Common Stock under that Offering shall be automatically terminated.
A participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(C) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of a participant's employment with the Company and
any designated Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire stock
for the terminated employee), under the Offering, without interest.
(D) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.
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8. EXERCISE.
(A) On each date specified therefor in the relevant Offering ("Purchase
Date"), each participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of whole shares of stock of the
Company, up to the maximum number of shares permitted pursuant to the terms of
the Plan and the applicable Offering, at the purchase price specified in the
Offering. Unless otherwise provided for in the applicable Offering, no
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account on the final Purchase Date of
an Offering after the purchase of shares which is equal to the amount required
to purchase whole shares of common stock on the final Purchase Date of an
Offering shall be distributed in full to the participant after such Purchase
Date, without interest.
(B) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(A) During the terms of the rights granted under the Plan, the Company
shall at all times make reasonable efforts to keep available as authorized but
unissued shares that number of shares of stock required to satisfy such rights,
provided that this section shall not require the Company to take any action that
would result in adverse tax, accounting or financial consequences to the
Company.
(B) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be
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required to issue and sell shares of stock upon exercise of the rights granted
under the Plan. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such rights unless and until such authority is
obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock to participants pursuant to rights granted
under the Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shares acquired upon exercise
of rights hereunder are recorded in the books of the Company (or its transfer
agent).
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(B) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) the acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any Affiliate of the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
eighty percent (80%) of the combined voting power entitled to vote in the
election of directors, then, as determined by the Board in its sole discretion
(i) any surviving or acquiring corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
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13. AMENDMENT OF THE PLAN.
(A) The Board or the Committee at any time, and from time to time, may
amend the Plan. However, except as provided in paragraph 12 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment if such amendment requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.
(B) The Board or the Committee may amend the Plan in any respect the Board
or the Committee deems necessary or advisable to provide eligible employees with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(C) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(A) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(B) Such designation of beneficiary may be changed by the participant at
any time by written notice in the form prescribed by the Company. In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its sole discretion, may deliver such shares and/or cash to the spouse or to
any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
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15. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board or the Committee in its discretion, may suspend or terminate
the Plan at any time. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.
(B) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon the effective date of the initial
public offering of the Common Stock of the Company (the "Effective Date"), but
no rights granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board, which date may be
prior to the Effective Date.
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EXHIBIT 10.3
SENSUS DRUG DEVELOPMENT CORPORATION
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED JULY 20, 1998
APPROVED BY STOCKHOLDERS _______________, 199___
EFFECTIVE DATE: JULY ____, 1998
1. PURPOSES.
(A) ELIGIBLE OPTION RECIPIENTS. The only persons eligible to receive
Options are Non-Employee Directors of the Company.
(B) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of nonstatutory
stock options.
(C) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of its Non-Employee Directors, to secure and retain the services of
new Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company.
2. DEFINITIONS.
(A) "AFFILIATE" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(B) "ANNUAL GRANT" means a Nondiscretionary Option granted annually to all
Non-Employee Directors who meet the specified criteria pursuant to subsection
5(b) of the Plan.
(C) "ANNUAL MEETING" means the annual meeting of stockholders of the
Company.
(D) "BOARD" means the Board of Directors of the Company.
(E) "CODE" means the Internal Revenue Code of 1986, as amended.
(F) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(G) "COMMON STOCK" means the common stock of the Company.
(H) "COMPANY" means Sensus Drug Development Corporation, a Delaware
corporation.
1.
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(I) "CONTINUOUS SERVICE" means that the Optionholder's service with the
Company or an Affiliate whether as a Non-Employee Director, an Employee or a
Consultant is not interrupted or terminated. The Optionholder's Continuous
Service shall be deemed to have terminated only if the Optionholder no longer is
a Non-Employee Director, an Employee or a Consultant of the Company or an
Affiliate. The Board, in its sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by the Board, including sick leave, military leave or any other
personal leave.
(J) "DEFERRED FEE OPTION" means a nonstatutory stock option granted
pursuant to Section 7 of the Plan.
(K) "DIRECTOR" means a member of the Board of Directors of the Company.
(L) "DIRECTORS' FEES" means fees payable to a Non-Employee Director for his
or her service on the Board or a Committee, including any retainer or meeting
fees.
(M) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(N) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of Directors' Fees by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(O) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(P) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(I) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(II) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(Q) "INITIAL GRANT" means a Nondiscretionary Option granted to a Non-
Employee Director who meets the specified criteria pursuant to subsection 5(a)
of the Plan.
(R) "IPO DATE" means the effective date of the initial public offering of
the Common Stock.
(S) "NONDISCRETIONARY OPTION" means a nonstatutory stock option granted
pursuant to Section 5 of the Plan whether as an Initial Grant or an Annual
Grant.
2.
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(T) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who is not
otherwise at the time of grant an Employee of the Company or an Affiliate.
(U) "OPTION" means any nonstatutory stock option (including both
Nondiscretionary Options granted pursuant to Section 5 of the Plan and Deferred
Fee Options granted pursuant to Section 6 of the Plan) granted pursuant to the
Plan. Options are not intended to qualify as an incentive stock options within
the meaning of Section 422 of the Code and the regulations promulgated
thereunder.
(V) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(W) "OPTIONHOLDER" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(X) "PLAN" means this Sensus Drug Development Corporation 1998 Non-Employee
Directors' Stock Option Plan.
(Y) "PREVIOUSLY ACQUIRED UNVESTED SHARES" means unvested shares of Common
Stock acquired by a Non-Employee Director prior to an Initial Grant, whether in
the form of unvested shares covered by any outstanding options previously
granted by the Company or unvested shares acquired in a restricted stock
purchase agreement and still subject to a right of repurchase in favor of the
Company.
(Z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
(AA) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(A) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(B) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(I) To determine the provisions of each Option to the extent not
specified in the Plan.
(II) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
3.
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(III) To amend the Plan or an Option as provided in Section 12.
(IV) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company that are not in conflict with the provisions of the Plan.
(C) DELEGATION TO COMMITTEE. The Board may delegate administration of the
Plan to a Committee or Committees of one or more members of the Board, and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(A) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Options shall not exceed in the aggregate five hundred thousand (500,000) shares
of Common Stock.
(B) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Option shall revert to and
again become available for issuance under the Plan. However, if any Common
Stock acquired pursuant to the exercise of an Option shall for any reason be
reacquired by the Company, the reacquired stock (having already been issued)
shall not revert to and again become available for reissuance under the Plan.
(C) SOURCE OF SHARES. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
5. NONDISCRETIONARY OPTIONS.
Non-Employee Directors automatically shall receive the following
Nondiscretionary Options without any further action by the Board:
(A) INITIAL GRANTS.
(I) On the IPO Date, each person who is then a Non-Employee
Director of the Company and on the IPO Date holds twenty thousand (20,000) or
more Previously Acquired Unvested Shares automatically shall be granted an
Initial Grant to purchase ten thousand (10,000) shares of Common Stock on the
terms and conditions set forth herein. On the IPO Date, each person who is then
a Non-Employee Director and on the IPO Date holds less than twenty thousand
(20,000) Previously Acquired Unvested Shares, automatically shall be granted
4.
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an Initial Grant to purchase thirty thousand (30,000) shares of Common Stock,
minus the number of Previously Acquired Unvested Shares held by such person, on
the terms and condition set forth herein.
(II) On or after the IPO Date, each person who is elected or
appointed for the first time to be a Non-Employee Director who does not already
hold Previously Acquired Unvested Shares shall be granted, on the date of such
election or appointment, an Initial Grant to purchase thirty thousand (30,000)
shares of Common Stock, on the terms and conditions set forth herein. On or
after the IPO Date, each person who is elected or appointed for the first time
to be a Non-Employee Director who already holds Previously Acquired Unvested
Shares automatically shall be granted, on the date of such election or
appointment, an Initial Grant to purchase thirty thousand (30,000) shares of
Common Stock, minus the number of Previously Acquired Unvested Shares then held
by such person, on the terms and conditions set forth herein.
(B) ANNUAL GRANTS. Beginning with the 1999 Annual Meeting of the Company,
each person serving as a Non-Employee Director as of the date of the Annual
Meeting shall be granted an Annual Grant to purchase ten thousand (10,000)
shares of Common Stock as of the date of such Annual Meeting, reduced (but not
below zero) by one thousand (1,000) shares for each month fewer than ten (10)
months that has elapsed since the most recent grant of Company options received
by such Non-Employee Director.
(C) EXERCISE PRICE. The exercise price of each Nondiscretionary Option
shall be one hundred percent (100%) of the Fair Market Value of the stock
subject to the Nondiscretionary Option on the date the Nondiscretionary Option
is granted. Notwithstanding the foregoing, a Nondiscretionary Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Nondiscretionary Option is granted pursuant to an assumption or
substitution for another option in a manner that would satisfy the provisions of
Section 424(a) of the Code.
(D) VESTING GENERALLY. One third of the shares covered by Nondiscretionary
Options shall vest and become exercisable upon each successive anniversary of
the date of grant of such Nondiscretionary Options, until fully vested.
Notwithstanding the foregoing, each Nondiscretionary Option shall become fully
vested and immediately exercisable in the event of termination of Continuous
Service due to retirement, Disability or death of the Non-Employee Director as
specified in subsections 5(e), 7(f) and 7(g), respectively, of the Plan, and
upon the occurrence of certain transactions as specified in subsection 11(b) of
the Plan.
(E) RETIREMENT OF OPTIONHOLDER. In the event an Optionholder retires from
the Board with at least five (5) years of service on or after attaining the age
of sixty-five (65), any Options such Optionholder holds shall become fully
vested and immediately exercisable upon the date of such retirement.
6. DEFERRED FEE OPTIONS.
(A) DEFERRAL OF DIRECTORS' FEES. Each Non-Employee Director may elect to
apply all or any portion of his or her Directors' Fees otherwise payable in cash
to the acquisition of a
5.
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Deferred Fee Option. With respect to Directors' Fees from the IPO Date to the
1999 Annual Meeting, each Non-Employee Director who files an election prior to
the IPO date shall automatically be granted a Deferred Fee Option on the IPO
Date. Each individual who is appointed or elected as a Non-Employee Director on
or after the IPO Date and prior to the date of the 1999 Annual Meeting and files
an election for a Deferred Fee Option within thirty (30) days of his or her
appointment or election shall automatically be granted a Deferred Fee Option as
of the date of the filing of such election and covering Directors' Fees earned
from the date of such election to the date of the 1999 Annual Meeting. With
respect to Directors' Fees on or after the 1999 Annual Meeting, each Non-
Employee Director who files an election prior to the date of an Annual Meeting
shall automatically be granted a Deferred Fee Option on the date of such Annual
Meeting covering Directors' Fees earned from the date of such Annual Meeting to
the date of the next Annual Meeting. Each individual who is appointed as a Non-
Employee Director after the date of an Annaul Meeting and files an election for
a Deferred Fee Option within thirty (30) days of his or her appointment or
election shall automatically be granted a Deferred Fee Option as of the date of
the filing of the election and covering Directors' Fees earned from such filing
to the date of the next Annual Meeting. A deferral election (whenever made)
shall be irrevocable until the date of the next Annual Meeting following the
Deferred Fee Option grant date.
Notwithstanding the foregoing, if the number of shares remaining available
for grant of Options under the Plan is not sufficient to cover the grant of
Nondiscretionary Options under Section 5 and Deferred Fee Option under this
Section 6, the available shares shall be first allocated to the Nondiscretionary
Options granted under Section 5 and then ratably among the Non-Employee
Directors who elect to receive a Deferred Fee Option based on the relative
amounts of their deferred fees.
(B) EXERCISE PRICE. The exercise price per share of Common Stock for the
shares to be purchased pursuant to the exercise of any Deferred Fee Option shall
be 33-1/3% of the Fair Market Value of a share of Common Stock on the date of
grant.
(C) NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to a Deferred Fee Option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A /(B x 66-2/3%), where
X is the number of option shares,
A is the maximum amount of the Directors' Fees subject to the Non-
Employee Director's deferral election, and applied to the grant of
the Deferred Fee Option, and
B is the Fair Market Value per share of Common Stock on the Deferred
Fee Option grant date.
(D) VESTING. Each Deferred Fee Option shall vest (become exercisable) in
installments on each date that Directors' Fees would have been payable in cash
had no deferral
6.
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election been in effect under this Section 6 with respect to the number of
shares equal to (1) the aggregate shares subject to the Deferred Fee Option
multiplied by (2) the fraction obtained where the numerator is the cash
Directors' Fees that the Non-Employee Director otherwise would have received on
such date and the denominator is the aggregate Directors' Fees that the Non-
employee Director would have received in cash absent a deferral election on and
following the date of grant through and including any Board and Committee
meetings held up to the time of the next Annual Meeting. Each Deferred Fee
Option shall become fully vested and immediately exercisable in the event of
termination of Continuous Service due to Disability or death of the Non-Employee
Director as specified in subsections 7(f) and 7(g), respectively, of the Plan,
or upon the occurrence of certain transactions as specified in subsection 11(b)
of the Plan.
7. ADDITIONAL OPTION PROVISIONS.
Each Option granted under the Plan (whether pursuant to Section 5 or to
Section 6) shall be subject to the additional following terms and conditions:
(A) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(B) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, (i) in cash at the time the Option is exercised, (ii) by delivery
to the Company of other shares of Common Stock, or (iii) by a cashless exercise
program maintained with a broker in accordance with applicable regulations of
the Federal Reserve Board.
(C) TRANSFERABILITY. An Option shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder. Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(D) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date twelve
(12) months following the termination of the Optionholder's Continuous Service,
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate.
(E) EXTENSION OF TERMINATION DATE. If the exercise of the Option following
the termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 7(a) or (ii) the
7.
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expiration of a period of twelve (12) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(F) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, any Option the
Optionholder holds shall become fully vested and immediately exercisable as of
the date of such termination; provided, however, that such Optionholder may only
exercise such Option within such period of time ending on the earlier of (i) the
date eighteen (18) months following such termination or (ii) the expiration of
the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within the
time specified herein, the Option shall terminate.
(G) DEATH OF OPTIONHOLDER. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's death, then any Option the
Optionholder holds shall become fully vested and immediately exercisable as of
the date of the Optionholder's death by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the Option upon the Optionholder's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death or (2) the expiration of the term of such
Option as set forth in the Option Agreement. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate.
8. COVENANTS OF THE COMPANY.
(A) AVAILABILITY OF SHARES. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.
(B) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority that counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Options
unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
8.
<PAGE>
10. MISCELLANEOUS.
(A) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.
(B) NO SERVICE RIGHTS. Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the subsequent employment
of the Optionholder as an Employee with or without notice and with or without
cause, (ii) the subsequent service of the Optionholder as a Consultant pursuant
to the terms of such Optionholder's agreement with the Company or an Affiliate
or (iii) the service of the Optionholder as a Director pursuant to the Bylaws of
the Company or an Affiliate, and any applicable provisions of the corporate law
of the state in which the Company or the Affiliate is incorporated, as the case
may be.
(C) INVESTMENT ASSURANCES. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if the
issuance of the shares upon the exercise or acquisition of stock under the
Option has been registered under a then currently effective registration
statement under the Securities Act or, as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(D) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of an
Option Agreement, the Optionholder may satisfy U.S. federal, state or local tax
withholding obligations (if any) relating to the exercise or acquisition of
stock under an Option by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Optionholder by
the Company) or by a combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares from the shares of the Common
Stock otherwise issuable to the Optionholder as a result of the exercise or
acquisition of stock under the Option; or (iii) delivering to the Company owned
and unencumbered shares of the Common Stock.
9.
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11. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock subject
to the Plan, or subject to any Option, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and subject to certain defined Options pursuant to Section 5 and
Section 6, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of stock subject to such
outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)
(B) CERTAIN TRANSACTIONS. In the event of (i) a sale of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then with respect to Options held by Optionholders whose Continuous
Service has not terminated, the vesting of such Options shall be accelerated in
full, and the Options shall terminate if not exercised at or prior to such event
unless the Options are assumed or similar options are substituted for the
Options by the surviving corportion. With respect to any other Options
outstanding under the Plan, such Options shall terminate if not exercised prior
to such event.
12. AMENDMENT OF THE PLAN AND OPTIONS.
(A) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(B) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.
(C) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(D) AMENDMENT OF OPTIONS. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
10.
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13. TERMINATION OR SUSPENSION OF THE PLAN.
(A) PLAN TERM. The Board may suspend or terminate the Plan at any time.
No Options may be granted under the Plan while the Plan is suspended or after it
is terminated.
(B) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on IPO Date, provided that the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
11.
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EXHIBIT 10.4
THIS AGREEMENT is made and entered into this [ day of , 19 ] by
and between SENSUS DRUG DEVELOPMENT CORPORATION, a Delaware corporation (the
"Corporation"), and ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as [an/a officer/director] of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors and executive
officers of the Corporation, including persons serving at the request of the
Corporation in such capacities with other corporations or enterprises, as
authorized by the Delaware General Corporation Law, as amended (the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its directors and executive officers with
respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as [A DIRECTOR/AN
EXECUTIVE OFFICER] of the Corporation, the Corporation has determined and agreed
to enter into this Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as [A
DIRECTOR/AN EXECUTIVE OFFICER] after the date hereof, the parties hereto agree
as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as [A
DIRECTOR/AN EXECUTIVE OFFICER] of the Corporation or as a director, officer or
other fiduciary of an affiliate of the Corporation (including any employee
benefit plan of the Corporation) faithfully and to the best of his ability so
long as he is duly elected and qualified in accordance with the provisions of
the Bylaws or other applicable charter documents of the Corporation or such
affiliate; provided, however, that Agent may at any time and for any reason
resign from such position (subject to any contractual obligation that Agent may
have assumed apart from this Agreement) and that the Corporation or any
affiliate shall have no obligation under this Agreement to continue Agent in any
such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the Bylaws and the Code, as the same may be amended from time to time (but,
only to the extent that such
1.
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amendment permits the Corporation to provide broader indemnification rights than
the Bylaws or the Code permitted prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(A) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(B) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 41
of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(A) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(B) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(C) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(D) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(E) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
2.
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(F) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers vested in the
Corporation under the Code, or (iv) the proceeding is initiated pursuant to
Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(A) the Corporation will be entitled to participate therein at its
own expense;
(B) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall
3.
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have reasonably concluded, and so notified the Corporation, that there is an
actual conflict of interest between the Corporation and Agent in the conduct of
the defense of such action or (iii) the Corporation shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of Agent's separate counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Corporation or as to
which Agent shall have made the conclusion provided for in clause (ii) above;
and
(C) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of
Directors or its stockholders) to have made a determination prior to the
commencement of such enforcement action that indemnification of Agent is proper
in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its stockholders) that such indemnification is
improper shall be a defense to the action or create a presumption that Agent is
not entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of
4.
<PAGE>
stockholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(A) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(B) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. HEADINGS. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(A) If to Agent, at the address indicated on the signature page
hereof.
5.
<PAGE>
(B) If to the Corporation, to:
Sensus Drug Development Corporation
San Jacinto Center
98 San Jacinto Boulevard, Suite 430
Austin, TX 78701
or to such other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
SENSUS DRUG DEVELOPMENT CORPORATION
By:__________________________________________
Print Name:__________________________________
Title:_______________________________________
AGENT
_____________________________________________
Print Name:__________________________________
Address:
_____________________________________________
_____________________________________________
6.
<PAGE>
Bracketed information omitted and filed separately with the Securities and
Exchange Commission
Confidential Treatment Requested Under 17 C.F.R. Sections 200.80 (b)(4), 200.83
and 240.24b-2
EXHIBIT 10.5
CORNING BIO INC.
MANUFACTURING SERVICES AGREEMENT
This manufacturing services agreement dated this 17th of September,
1996 (the "Agreement") between Sensus Corporation, a Delaware corporation
("Sponsor") having its principal place of business at 98 San Jacinto Boulevard.
Suite 430, Austin, TX 78701 and Corning Bio Inc., a Delaware Corporation
("CBI"), having its principal place of business at 6051 George Watts Hill,
Research Triangle Park, NC, 27709.
WITNESSETH
WHEREAS, CBI provides a full range of bioprocessing services to the
biopharmaceutical industry, including process development, fermentation, cell
culture, separation/purification, bioanalytical chemistry, quality control,
quality assurance, fill/finish, and regulatory affairs.
WHEREAS, sponsor desires CBI to perform services in accordance with the terms of
this Agreement and the Scope of work (as hereinafter defined) related to the
development of a process for production and the production of the material known
as Somavert/TM/ (the "Product" and also referred to as rh Growth Hormone
Antagonist) and CBI desires to perform such services.
NOW, THEREFORE, in consideration of the above statements and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1.
SCOPE OF WORK
a) Upon CBI's written acceptance of a detailed scope of work document ("Scope")
to be provided by Sponsor or prepared by CBI under Sponsor's direction and
approved by Sponsor, CBI will perform the service or services ("Program")
for Sponsor in accordance with the Scope. The Scope will specify the program
design, information desired, estimated duration of the Program, and all
other matters pertinent to completion of the Program, and will be deemed a
part of this Agreement and is attached hereto as Attachment A and is
incorporated herein by reference.
b) CBI will, at Sponsor's request, consult with Sponsor in developing the
Program design in a manner consistent with current regulatory guidelines.
However, CBI does not warrant that the Program and/or the Program results
will satisfy the requirements of any regulatory agencies at the time of
submission of Program results to such agencies.
1.
<PAGE>
Section 2.
PROGRAM PERFORMANCE
CBI shall use its best efforts to provide facilities, supplies, and staff
necessary to complete the Program as provided in the Scope, as it may be
modified as provided herein, and in accordance with the terms of this Agreement.
In the event of any conflict, the terms of this Agreement shall control.
Section 3
PROGRAM MATERIALS
a) Sponsor will provide CBI with sufficient amounts of all raw materials, or
other substances with which to perform the Program (the "Materials"), as
well as all documentation and such other data as may be necessary, to
apprise CBI of the stability of the Materials, process characteristics,
proper storage, manufacturing and safety requirements. Sponsor will also
provide CBI with all necessary information to effect the reliable transfer
of the process from the Sponsor to CBI.
b) Upon completion of the Program, any remaining samples of the Materials or
other substances provided to CBI will be returned to Sponsor or retained by
CBI in compliance with regulatory requirements. CBI will appoint a CBI
representative (the "Program Director") to be responsible for the completion
of the Program by CBI. The Program Director will coordinate performance of
the Program with a representative designated by Sponsor (the "Sponsor
Representative"), which representative shall have responsibility over all
matters relating to performance of the Program on behalf of Sponsor. Unless
otherwise agreed in the Scope, all communications between CBI and the
Sponsor regarding the conduct of the Program pursuant to the Scope shall be
addressed to or routed through the Program Director and Sponsor
Representative, directly. CBI may, under notification and approval by the
Sponsor, substitute the Program Director during the course of the program.
Section 4.
COMPLIANCE WITH GOVERNMENT REGULATIONS
a) CBI will perform the Program in accordance with the Scope and in accordance
with the current state of the Food and Drug Administration's Good
Manufacturing Practices. Subject to paragraph b. of Section 4 below, CBI
will also comply in all material respects with all applicable government
regulatory requirements concerning current Good Manufacturing Practices
appropriate to the Program.
b) Should such government regulatory requirements be changed, CBI will make
every reasonable effort to satisfy the new requirements. In the event that
2.
<PAGE>
compliance with such new regulatory requirements necessitates a change in
the Scope for the Program, CBI will submit to Sponsor a revised technical
and cost proposal for Sponsor's acceptance prior to making any changes in
the Scope or the Program.
c) In the event of a conflict in government regulations, Sponsor will
designate, in writing, which regulations shall be followed by CBI in its
performance of the Program.
Section 5.
FACILITY VISITS
a) Sponsor's representatives may visit CBI's facility at reasonable times and
with reasonable frequency during normal operation of the Program to observe
the progress of the Program. CBI will assist Sponsor in scheduling such
visits which will be in compliance with CBI's internal policies and standard
operating procedures covering such activities.
Section 6.
COMPENSATION
Estimates for manpower, facility utilization and level of effort for the Program
are outlined in the Scope. Sponsor shall pay CBI the initial payment and will be
invoiced monthly for work performed under the Scope in accordance with the
Payment Schedule attached hereto as Attachment B and in accordance with the
hourly personnel and weekly facility billing rates listed below:
Personnel Hourly Rates
----------------------
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Vice President $ [*] $ [*]
Process Development Scientist [*] [*]
Manager/Engineer [*] [*]
Supervisor [*] [*]
QA Professional [*] [*]
Operator [*] [*]
QA Technician [*] [*]
Clerical [*] [*]
</TABLE>
Facility Weekly Rates
---------------------
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Process Development Area* $[*] $[*]
Fermentation Area, Main Plant $[*] $[*]
</TABLE>
*Assumes using approx. one-fourth of the total process development facility.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
b) Payment for laboratory consumables and other materials used in and for the
Program will be in accordance with the terms and conditions of this
paragraph (b). General laboratory consumables will be billed as used and an
estimate of consumable costs for the program is attached hereto as
Attachment C.
Both parties recognize that CBI will be starting-up a new laboratory to
perform the Program. The consumable fee is meant to cover items actually
used in the performance of the Program. The Sponsor will not be responsible
for stocking general lab supplies as part of the laboratory start-up.
The consumables billing and usage will be reviewed quarterly with the
Sponsor.
'Capital' purchases greater than $[*] that are required for performing the
Program will be approved by the Sponsor prior to purchase. Such purchases
will be invoiced to the Sponsor as part of the normal monthly invoice and
contain a [*] handling fee.
c) Payment is due 30 days after Sponsor's receipt of the invoice. Late payments
are subject to an interest charge of one and one-half percent (1 1/2%) per
month. Any payments that are greater than 90 days past due constitute a
breach of this Agreement. See Section 13 for procedure for resolution of
payment dispute.
Section 7.
CONFIDENTIAL INFORMATION/LEGAL PROCEEDINGS
a) CBI will not disclose, without Sponsor's written permission, any information
pertaining to Sponsor's Program unless such disclosure: 1) is to an
affiliate of CBI who is under a similar obligation to keep such information
confidential; 2) is or becomes publicly available through no fault of CBI;
3) is disclosed by a third party entitled to disclose it; 4) is already
known to CBI as shown by its prior written records; or 5) is required by any
law, rule, regulation, order decision, decree, subpoena or other legal
process to be disclosed. If such disclosure is requested by legal process,
CBI will make all reasonable efforts to notify Sponsor of this request
promptly prior to any disclosure to permit Sponsor to oppose such disclosure
by appropriate legal action.
b) If CBI shall be obliged to provide testimony or records regarding any
Sponsor Program in any legal or administrative proceeding, then Sponsor
shall reimburse CBI its out-of-pocket costs therefore plus an hourly fee for
its employees or representatives equal to the internal fully burdened costs
to CBI of such employee or representative.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
4.
<PAGE>
Section 8
WORK PRODUCT
a) All work outputs (e.g. reports) will be prepared on CBI's standard format
unless otherwise specified in the Scope.
b) Sponsor will have title to all raw data, documentation, records, protocols,
specimens and other reports generated as a result of the Program. All such
written materials will be archived by CBI for a period of five (5) years
following completion of the Program unless otherwise defined by the Program
or required by applicable laws or regulations. Five (5) years after
completion of the Program, all of the aforementioned written materials will
be sent to the Sponsor and a return fee will be charged. The Sponsor may
elect to have the materials retained in the CBI Archives for an additional
period of time at additional costs. If the Sponsor chooses to have CBI
dispose of the materials, a disposal fee will be charged. CBI will continue
to retain such documentation and materials as required by regulations and as
may be required by law, pertaining to such activities as well as for
archival purposes.
Section 9
INVENTIONS AND PATENTS
At Sponsor's request, CBI will assign to Sponsor any patentable product
improvement invention discovered by CBI employees exclusively as a result of
performing the Program under this Agreement; provided Sponsor requests such
--------
assignment, in writing, within one year of notification of such invention;
provided further that CBI shall retain all fights to any inventions relating to
- ----------------
manufacturing methods and processes discovered in connection with the Program
(Process Inventions). For Process Inventions, CBI will grant to Sponsor a
royalty-free license under terms mutually agreeable to the parties for the field
of use required for Sponsor to commercialize the Product developed or produced
under this Agreement, and for so long as CBI is producing [*] of the Sponsor's
annual requirement for Product, CBI shall not license the Process Invention to
any entity other than Sponsor. If Sponsor requests and at Sponsor's expense, CBI
will execute any and all applications, assignments or other instruments and give
testimony which shall be necessary to apply for and obtain Letters of Patent of
the US or of any foreign country and Sponsor shall compensate CBI for the time
devoted to such activities and reimburse it for expenses incurred.
Section 10.
INDEPENDENT CONTRACTOR
CBI shall perform the Program as an independent contractor of Sponsor and shall
have complete and exclusive control over its facilities, equipment, employees
and agents. Nothing in this agreement or other arrangements for which it is made
shall constitute CBI, or anyone furnished or used by CBI in the performance of
the services, as employee, joint venture, partner, or servant of Sponsor.
Section 11.
INSURANCE
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
5.
<PAGE>
CBI shall secure and maintain in full force and effect throughout the
performance of the Program policies of insurance for (a) Workmen's Compensation,
(b) General Liability, (c) Automobile Liability, and (d) Product Liability
having policy limits, deductibles and other terms appropriate to the conduct of
CBI's business in CBI's sole and exclusive judgment. Certificates evidencing
such insurance will be made available for examination upon request of the
Sponsor.
Section 12
DEFAULT
If CBI is in default of its material obligations under this Agreement, then
Sponsor shall promptly notify CBI in writing of any such default. CBI shall have
a period of 45 days from the date of receipt of such notice within which to cure
such default; provided that if such default renders the Program invalid, then
---------
CBI, shall, at its option, either ( 1 ) repeat the Program at its cost within a
time period mutually agreed to by it and Sponsor or (2) refund the contract
price paid by Sponsor. If CBI shall fail to cure such default within the
specified cure period or repeat the Program, as the case may be, then this
Agreement shall, at Sponsor's option, immediately terminate. In the event of
such termination, Sponsor's sole remedy shall be, in the case where such default
has not rendered the Program invalid, a reduction in the total contract price
for the Program in an amount equal to the difference between (1) the total
contract price for the Program and (2) the value of the work properly performed,
and, in the case where such default does render the Program invalid, a refund of
the contract price; provided however that under no circumstances shall CBI be
liable to Sponsor in an amount that, in aggregate exceeds, the contract price
paid for such Program. UNDER NO CIRCUMSTANCES SHALL SPONSOR BE ENTITLED TO
INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES ARISING IN CONNECTION
WITH SUCH DEFAULT OR BREACH OF CBI'S OBLIGATIONS UNDER THIS AGREEMENT, THE SCOPE
OR ANY DOCUMENTS OR ATTACHMENTS RELATED THERETO.
Section 13.
DISPUTE RESOLUTION
In the event any dispute shall arise between the Sponsor and CBI with respect to
any of the terms and conditions of this Agreement or the Protocol; then senior
executives of the Sponsor and CBI shall meet as promptly as practicable after
notice of such dispute to resolve in good faith such dispute. In the event the
parties are unable, despite their good faith efforts, to resolve such dispute
within 30 days after notice of such dispute to their mutual satisfaction, then
such dispute shall be promptly after such 30 day period submitted to non-binding
mediation. The timing, venue, and method of the non-binding mediation, and the
type and identity of the mediator shall be acceptable to both the Sponsor and
CBI. The
6.
<PAGE>
Sponsor and CBI shall share equally the costs of the mediation. If the Sponsor
and CBI are unable, despite their good faith efforts, to agree on a mediator and
the aspects of the non-binding mediation process specified above within 45 days
after the senior executives, as applicable, have unsuccessfully terminated their
discussions or if either party disagrees with the mediator's decision, in the
case where the dispute is submitted to non-binding mediation, then the Sponsor
and CBI shall be entitled to exercise and enforce all of their rights and
remedies, both in law and in equity, with respect to such dispute.
Section 14.
INDEMNIFICATION
a) CBI shall hold harmless, defend and indemnify Sponsor and its parent
company, affiliates, subsidiaries, and their respective directors, officers,
employees, and agents from and against any and all third party claims,
proceedings, damages and losses, including reasonable attorney fees and
court costs, (collectively, "Claims") arising out of: (a) the negligence or
intentional misconduct of CBI, or, (b) any breach of this Agreement by CBI.
b) Sponsor shall hold harmless, defend and indemnify CBI and its parent
company, affiliates, subsidiaries, and their respective directors, officers,
employees, and agents from and against any and all Claims arising out of:
(a) the negligence or intentional misconduct of Sponsor, (b) any breach of
this Agreement by Sponsor, or (c) CBI's involvement with the Program, or the
harmful or otherwise unsafe effects of the Product, the intermediates in the
process, or the Materials supplied by Sponsor that are not commercially
available.
Section 15
REPRESENTATION
Sponsor hereby represents to CBI that to the best of its knowledge Sponsor has
valid licenses to the raw material, expression systems, process patents and the
Product and that CBI's performance of the Program will not violate or infringe
on the patents, trademarks, tradenames, servicemarks or copyrights of any other
party.
Section 16
FORCE MAJEURE
Either party shall be excused from performing its obligations under this
Agreement if its performance is delayed or prevented by any event beyond such
party's reasonable control, including, but not limited to, acts of God, fire,
explosion, weather, disease, war, insurrection, civil strife, riots, government
action, or power failure, provided that such performance shall be excused only
to the extent of and during such disability. Any time specified for completion
of performance in the Scope falling due during or subsequent to the occurrence
of
7.
<PAGE>
any or such events shall be automatically extended for a period of time to
recover from such disability. CBI will promptly notify Sponsor if, by reason of
any of the events referred to herein, CBI is unable to meet any such time for
performance specified in the Scope. If any part of the Program is invalid as a
result of such disability, CBI will, upon written request from Sponsor, but at
Sponsor's sole cost and expense, repeat that part of the Program affected by the
disability.
Section 17.
ALLOCATION OF RESOURCES
If delays in the agreed commencement or performance of the Program occur because
of the Sponsor's inability to supply CBI with the Materials or any information
required to begin or perform the Program within 30 days of such agreed time, CBI
may reallocate resources being held for performance of the Program without
incurring liability to Sponsor.
Section 18.
USE OF NAMES
Neither party shall use the name of the other party or the names of the
employees of the other party in any advertising or sales promotional material or
in any publication without prior written permission of such party.
Section 19.
TERMINATION BY SPONSOR
a) Sponsor may at any time terminate the Program prior to completion by giving
written notice to CBI. In such event CBI shall immediately comply with such
notice to terminate work on the Program and use its best efforts to reduce
cost to Sponsor, and Sponsor shall pay CBI upon receipt of CBI's invoice all
of its costs incurred or irrevocably obligated, plus, as liquidated damages
and not as a penalty, a pro rata portion of applicable profit for the
Program as of the date of termination. The amount of such profit and the
basis for the computation thereof shall be specified in a certificate signed
by the Chief Financial Officer of CBI.
b) The termination of this Agreement for any reason shall not relieve either
party of its obligation to the other for obligations in respect of (i)
confidentiality of information, (ii) consents for advertising purposes and
publications, (iii) indemnification and, (iv) compensation for services
performed.
Section 20.
ASSIGNMENT
a) This Agreement shall not be assigned in whole or in part by either party
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed. Any attempt to assign this Agreement
without such consent shall be void and of no effect.
b) Notwithstanding anything in paragraph a. of this Section 20 to the contrary,
with the approval of the Sponsor, certain tasks specified in the Scope may
be subcontracted by CBI.
8.
<PAGE>
Section 21.
NOTICE
All notices to be given as required in the Agreement shall be in writing and
shall be delivered personally, sent by telecopies, or mailed either by a
reputable overnight carrier or first class mail, postage prepaid to the parties
at the addresses set forth above or such other addresses as the parties may
designate in writing. Such notice shall be effective on the date sent, if
delivered personally or sent by telecopier, the date after delivery if sent by
overnight carrier and on the date received if mailed first class.
Section 22.
CHOICE OF LAW
This Agreement shall be construed and enforced in accordance with the laws of
the State of North Carolina.
Section 23.
WAIVER/SEVERABILITY
No waiver of any provision of this Agreement, whether by conduct or otherwise,
in any one or more instances shall be deemed to be or be construed as a further
or continuing waiver of any such provision, or of any other provision or
condition of this Agreement. If any provisions hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions of
this Agreement shall not be effected thereby.
Section 24.
ENTIRE AGREEMENT; MODIFICATION/COUNTERPARTS
This instrument and the Scope set forth the entire Agreement between the parties
hereto with respect to the performance of the Program by CBI for Sponsor and as
such, supersedes all prior and contemporaneous negotiations, agreements,
representations, understandings, and commitments with respect thereto and shall
take precedence over all terms, conditions and provisions on any purchase order
form or form of order acknowledgment or other document purporting to address the
same subject matter. This Agreement shall not be waived, released, discharged,
changed or modified in any manner except by an instrument signed by the duly
authorized officers of each of the partied hereto, which instrument shall make
specific reference to this Agreement and shall express the plan or intention to
modify same. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
9.
<PAGE>
This Agreement becomes effective and binding on both parties on and as of the
last date that the parties hereto have executed this Agreement. Should terms
contained herein be at variance with the terms and conditions specified in
Sponsor's written acceptance, then the terms and conditions contained herein
take precedence.
Sensus Corporation
/s/ William F. Bennett /s/ Chris Kuebler
By: _____________________________ By: _____________________________
William F. Bennett Chris Kuebler
Name: ____________________________ Name: ____________________________
Sr. VP Manufacturing Chairman
Title: _________________________ Title: _________________________
20 Sept. 96 9-19-86
Date: __________________________ Date: _________________________
10.
<PAGE>
ATTACHMENT A
TO MANUFACTURING SERVICES AGREEMENT BETWEEN
CORNING BIO AND SENSUS DATED 17 SEPTEMBER 1996*
[*]
*Terms not defined herein shall have the meaning set forth in the Manufacturing
Services Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
5) ENGINEERING
-----------
The goal of engineering is to transfer laboratory scale processes to
manufacturing in an economical and properly scaled fashion.
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
4.
<PAGE>
B. BENCHMARKS
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
5.
<PAGE>
D.) INFORMATION TRANSFER:
---------------------
It is Corning Bio's intent to update and transfer pertinent data to Sensus at
regular intervals. The intervals are to be determined by mutual agreement and
will be implemented at the commencement of the Program. Written reports will be
prepared in Corning Bio's standard format. Updates and data transfer can be
accomplished by one or more of the following methods:
Weekly phone calls
Monthly Reports
Quarterly reports
Data Transfer Meetings
E.) COMMENCEMENT OF THE PROJECT:
----------------------------
Development efforts will begin upon a mutually agreeable date. Tentatively, that
date is November 1, 1996.
16.
<PAGE>
ATTACHMENT B
TO MANUFACTURING SERVICES AGREEMENT BETWEEN
CORNING BIO AND SENSUS DATED 17 SEPTEMBER 1996
PAYMENT SCHEDULE
----------------
PAYMENTS AND INVOICES ESTIMATED DATE PAYMENT
- --------------------- -------------- -------
[*]
*Monthly invoices will be issued on or about the first of each month and will
cover activities and purchases through the 24th of the preceding month.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
ATTACHMENT C
TO MANUFACTURING SERVICES AGREEMENT BETWEEN
CORNING BIO AND SENSUS DATED 17 SEPTEMBER 1996
ESTIMATE FOR CONSUMABLES FOR SENSUS PROGRAM
-------------------------------------------
Estimated Estimated
Area Total/month Total for 6 months
- ---- ----------- ------------------
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
18.
<PAGE>
[*] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
AMENDMENT NO. 1
TO
MANUFACTURING SERVICES AGREEMENT
Amendment No. 1 dated as of July 3, 1997 (this "Amendment No. 1") between
Covance Biotechnology Services Inc., (f/k/a Corning Bio Inc.), a Delaware
corporation having its principal place of business at 6051 George Watts Hill
Drive, P.O. Box 13865, Research Triangle Park, NC 27709-3865 ("CBSI") and Sensus
Corporation, a Delaware corporation having its principal place of business at 98
San Jacinto Boulevard, Suite 430, Austin, TX 78701 ("Sponsor").
WITNESSETH:
WHEREAS, CBSI and Sponsor have entered into that certain Manufacturing
Services Agreement dated September 17, 1996 (the "Agreement") wherein CBSI
agreed to perform certain services for Sponsor in connection with the
development of a manufacturing process for a material known as rhGHA, or B2036-
PEG ("Product") in accordance with the Scope; (terms defined in the Agreement
and not otherwise defined herein are used herein as defined therein); and
WHEREAS, CBSI has progressed the development phase of the production process
for Product as defined in the Scope and Sponsor now wishes to amend the
Agreement whereby CBSI will undertake the production phase of the Program for
Product in accordance with the terms of a new scope of work document (as defined
below) and CBSI desires to amend the Agreement to provide said manufacturing
services to Sponsor.
NOW, THEREFORE, for good and valuable consideration the sufficiency and
receipt of which are hereby acknowledged, the parties agree to as follows:
1. SCOPE OF WORK. A detailed scope of work document for the production of
Product (the "Revised Scope") prepared by the parties is attached to this
Amendment No. 1. CBSI will perform the services set forth in the Revised Scope
in accordance with the terms and conditions of the Agreement. Except as
expressly modified herein, all terms and conditions of the Agreement will remain
in full force and affect.
2. AMENDMENT TO SECTION 6 OF THE AGREEMENT. Section 6 of the Agreement is
hereby amended to append subparagraph d) to Section 6 as follows:
d) The Revised Scope attached to this Amendment No. 1 outlines the
activities that will be performed during the manufacturing phase of the
Sponsor's development program for the Product. The Revised Scope also
contains the prices and Payment Schedule associated with performing the
activities outlined in the Revised Scope. CBSI will invoice Sponsor after
achieving the milestones listed in the Payment Schedule. The amount of
the invoices will
1.
<PAGE>
equal the payment associated with the corresponding milestone. The
estimated dates in the Payment Schedule are provided for planning
purposes; invoices will be sent after actually achieving milestones.
Payment is due 30 days after Sponsor's receipt of the invoice. Late
payments are subject to an interest charge of one and one-half percent (1
1/2%) per month. Any payments greater than 90 days past due constitute a
breach of this Agreement.
3. AMENDMENT TO SECTION 14 OF THE AGREEMENT. Section 14 of the Agreement is
hereby amended in full to read as follows:
SECTION 14.
INDEMNIFICATION
(A) CBSI shall indemnify Sponsor and its affiliates and their respective
officers, directors, agents, and employees from any loss, cost, damage or
expense (a "Loss") from any lawsuit, action, claim, demand, assessment or
proceeding (a "Claim") for personal injury to Program participants or
personal injury to any employee or agent of Sponsor or property damage
arising or occurring during the conduct of the Program as a result of
CBSI's negligence, gross negligence or intentional misconduct or
inaction; provided that if such Loss or Claim arises in whole or in part
--------
from Sponsor's negligence, gross negligence or intentional misconduct or
inaction; or CBSI's violation, noncompliance, or nonperformance of any of
the terms of this Agreement then the amount of the Loss that CBSI shall
indemnify Sponsor for pursuant to this Section 14 shall be reduced by an
amount in proportion to the percentage of Sponsor's responsibilities for
such Loss determined by a court of competent jurisdiction in a final and
non-appealable decision or in a binding settlement between the parties.
(B) Sponsor shall indemnify CBSI and its affiliates and their respective
officers, directors, employees and agents (the "CBSI Group") from any
Claim or Loss arising from or related to (i) personal injury to a
participant in the Program or personal injury to any employee of the CBSI
Group directly caused by the Material, Product, intermediates or the
Program, (ii) the harmful or otherwise unsafe effect of the Materials or
Product, including, without limitation, a Claim based upon Sponsor or any
other person's use, consumption, sale, distribution or marketing of any
substance, including the Material or the Product, (iii) the negligence,
gross negligence or intentional misconduct or inaction of Sponsor in the
performance of its obligations under this Agreement or Scope related to
the Program, or (iv) the Sponsor's violation, non-compliance or non-
performance of any of the terms of this Agreement or the Sponsor's breach
of any representation made herein, or (v) any violation or infringement
of any third party's intellectual property rights including, without
limitation, any patent, copyright, trademark, trade secret, license or
other property
2.
<PAGE>
right; provided that if such Loss or Claim (other than a Loss or Claim
--------
described in clause (ii) hereof) arises in whole or in part from
CBSI's negligence, gross negligence or intentional misconduct or
inaction or, with respect to a Loss or Claim described in clause (v)
hereof, from any violation or infringement of any third party's
intellectual property rights arising from CBSI's use of any expression
system or process developed by CBSI under this Agreement to make,
create, or produce the Product (except to the extent that Sponsor is a
contributory infringer) or CBSI's violation, noncompliance, or
nonperformance of any of the terms of this Agreement, then the amount
of such Loss that Sponsor shall indemnify the CBSI Group for pursuant
to this Section 14 shall be reduced by an amount in proportion to the
percentage of CBSI's responsibilities for such Loss as determined by a
court of competent jurisdiction in a final and non-appealable decision
or in a binding settlement between the parties. Sponsor shall not
indemnify the CBSI Group from any Loss from any claim described in
clause (ii) hereof arising solely from the gross negligence,
recklessness, or willful misconduct or inaction of CBSI.
(C) Upon receipt of notice of any Claim which may give rise to a right
of indemnity from the other party hereto, the party seeking
indemnification (the "Indemnified Party") shall give written notice
thereof to the other party, (the "Indemnifying Party") with a Claim
for indemnity. Such Claim for indemnity shall indicate the nature of
the Claim and the basis therefore. Promptly after a claim is made for
which the Indemnified Party seeks indemnity, the Indemnified Party
shall permit the Indemnifying Party, at its option and expense, to
assume the complete defense of such Claim, provided that (i) the
--------
Indemnified Party will have the right to participate in the defense of
any such Claim at its own cost and expense, (ii) the Indemnifying
Party will conduct the defense of any such Claim with due regard for
the business interests and potential related liabilities of the
Indemnified Party and (iii) the Indemnifying Party will, prior to
making any settlement, consult with the Indemnified Party as to the
terms of such settlement. The Indemnified Party shall have the right,
at its election, to release and hold harmless the Indemnifying Party
from its obligations hereunder with respect to such Claim and assume
the complete defense of the same in return for payment by the
Indemnifying Party to the Indemnified Party of the amount of the
Indemnifying Party's settlement offer. The Indemnifying Party will
not, in defense of any such Claim, except with the consent of the
Indemnified Party, consent to the entry of any judgment or enter into
any settlement which does not include, and an unconditional term
thereof, the giving by the claimant or plaintiff to the Indemnified
Party of a release from all liability in respect thereof. After
notice to the Indemnified Party of the Indemnifying Party's election
to assume the defense of such Claim, the Indemnifying Party shall be
liable to the Indemnified Party for such legal or other expenses
subsequently
3.
<PAGE>
incurred by the Indemnified Party in connection with the defense
thereof at the request of the Indemnifying Party. As to those Claims
with respect to which the Indemnifying Party does not elect to assume
control of the defense, the Indemnified Party will afford the
Indemnifying Party an opportunity to participate in such defense at
the Indemnifying Party's own cost and expense, and will not settle or
otherwise dispose of any of the same without the consent of the
Indemnifying Party.
4. AMENDMENT TO SECTION 15 OF THE AGREEMENT. Section 15 of the Agreement
is hereby amended in full to read as follows:
SECTION 15.
REPRESENTATION
The Sponsor hereby represents and warrants that CBSI's performance of its
obligations under this Agreement, including, without limitation, the
making, production or creation of the Product or the use of the Materials
and the expression systems and processes used to make, create or produce
the Product, does not violate or infringe on the issued patents,
trademarks, tradenames, servicemarks or copyrights or other intellectual
property rights of any other party; provided that the foregoing shall not
--------
apply to the extent that any such expression systems or process used to
make, create or produce the Product were developed by CBSI.
5. AMENDMENT. No amendments or modifications to this Amendment No. 1 and
no further amendments or modifications the Agreement may be made without the
written agreement of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed or caused this Amendment
No. 1 to be executed by their respective officers or other representatives
hereunder duly authorized as of the date first written above.
COVANCE BIOTECHNOLOGY SERVICES, INC. SENSUS CORPORATION
/s/ Christopher A Kuebler /s/ William F. Bennett
By:_______________________________ By:_______________________________
Christopher A Kuebler William F. Bennett
Name:_____________________________ Name:_____________________________
Chairman Sr. V.P.
Title:____________________________ Title:____________________________
7/3/97 3 July 97
Date:_____________________________ Date:_____________________________
4.
<PAGE>
REVISED SCOPE OF WORK FOR
AMENDMENT NO. 1 TO
MANUFACTURING SERVICES AGREEMENT
WITH SENSUS CORPORATION
(CONTAINING PRICES AND PAYMENT SCHEDULE)
SCOPE CONTENTS
Section Page
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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1.
<PAGE>
OVERALL PROGRAM OBJECTIVES
OBJECTIVES
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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2.
<PAGE>
SECTION 1.
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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3.
<PAGE>
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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4.
<PAGE>
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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5.
<PAGE>
SECTION 2.
TECHNOLOGY TRANSFER/PREPRODUCTION ACTIVITIES
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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6.
<PAGE>
TECHNOLOGY TRANSFER/PREPRODUCTION ACTIVITIES
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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7.
<PAGE>
SECTION 3.
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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7.
<PAGE>
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
9.
<PAGE>
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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10.
<PAGE>
SECTION 4.
CGMP PRODUCTION FOR PHASE III CLINICAL TRIALS AND
ESTABLISHMENT OF A REFERENCE STANDARD
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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11.
<PAGE>
CGMP PRODUCTION FOR PHASE III CLINICAL TRIALS AND
ESTABLISHMENT OF A REFERENCE STANDARD
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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12.
<PAGE>
SECTION 5.
FORMULATION AND FILL/FINISH ACTIVITIES
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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13.
<PAGE>
FORMULATION AND FILL/FINISH ACTIVITIES
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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14.
<PAGE>
SECTION 6.
REGULATORY SUPPORT SERVICES
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
15.
<PAGE>
REGULATORY SUPPORT
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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16.
<PAGE>
SECTION 7
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
17.
<PAGE>
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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18.
<PAGE>
SECTION 8.
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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19.
<PAGE>
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
20.
<PAGE>
STABILITY STUDIES
ESTIMATES FOR
KEY MILESTONES AND PRICE
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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21.
<PAGE>
SECTION 9.
PRICE SUMMARY
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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22.
<PAGE>
PAYMENT SCHEDULE
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
23.
<PAGE>
[*] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
AMENDMENT NO. 2
TO
MANUFACTURING SERVICES AGREEMENT
Amendment No. 2 dated as of October 3, 1997 (this "Amendment No. 2") between
Covance Biotechnology Services Inc., (f/k/a Corning Bio Inc.), a Delaware
corporation having its principal place of business at 6051 George Watts Hill
Drive, P.O. Box 13865, Research Triangle Park, NC 27709-3865 ("CBSI") and Sensus
Corporation, a Delaware corporation having its principal place of business at 98
San Jacinto Boulevard, Suite 430, Austin, TX 78701 ("Sponsor").
WITNESSETH:
WHEREAS, CBSI and Sponsor have entered into that certain Manufacturing
Services Agreement dated September 17, 1996 (the "Agreement") wherein CBSI
agreed to perform certain services for Sponsor in connection with the
development of a process for a material known as rhGHA, or B2036-PEG ("Product")
in accordance with the Scope; (terms defined in the Agreement and not otherwise
defined herein are used herein as defined therein); and
WHEREAS, the Sponsor now wishes to amend the Agreement based upon certain
development results whereby CBSI will undertake further development and
refinement of the manufacturing process and analytical techniques related to the
Product in accordance with the terms of a new scope of work (as defined below)
and CBSI desires to amend the Agreement to provide said process development
services to Sponsor.
NOW, THEREFORE, for good and valuable consideration the sufficiency and
receipt of which are hereby acknowledged, the parties hereto agree as follows:
1. SCOPE OF WORK. A detailed scope of work document for the development
activities related to the Product (the "Scope") prepared by the parties is
attached to this Amendment No. 2. CBSI will perform the services as set forth
in the Scope in accordance with the terms and conditions of the Agreement.
Except as expressly modified herein, all terms and conditions of the Agreement
will remain in full force and affect.
2. AMENDMENT TO SECTION 6 OF THE AGREEMENT. Section 6 paragraphs a) and b)
are revised as follows and now read:
Section 6.
COMPENSATION
a) CBSI will invoice Sponsor on a monthly basis. Invoices will be based
on
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
b) For any materials needed for the Program that [*]
3. AMENDMENT. No amendments or modifications to this Amendment No. 2 and no
further amendments or modifications to the Agreement may be made without the
written agreement of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed or caused this Amendment
No. 2 to be executed by their respective officers or other representatives
hereunder duly authorized, as of the date first above written.
COVANCE BIOTECHNOLOGY SERVICES INC.: SENSUS CORPORATION:
By: /s/ V. Byran Lawlis By: /s/ William F. Bennett
----------------------------------- --------------------------------
Name: V. Bryan Lawlis Name: William F. Bennett
--------------------------------- ------------------------------
Title: President & CEO Title: Sr. V.P.
-------------------------------- -----------------------------
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
SCOPE OF WORK FOR
AMENDMENT NO. 2 TO
MANUFACTURING SERVICES AGREEMENT
WITH SENSUS CORPORATION
(CONTAINING ESTIMATED PRICING)
SCOPE CONTENTS SECTION PAGE
- -------------- ------- ----
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
OVERALL PROGRAM OBJECTIVES
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
SECTION 1
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
SECTION 3
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
4.
<PAGE>
SECTION 5
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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5.
<PAGE>
SECTION 7
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
6.
<PAGE>
SECTION 9
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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7.
<PAGE>
[*] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
AMENDMENT NO. 3
TO
MANUFACTURING SERVICES AGREEMENT
Amendment No. 3 dated as of October 24, 1997 (this "Amendment No. 3") between
Covance Biotechnology Services Inc., (f/k/a Corning Bio Inc.), a Delaware
corporation having its principal place of business at 6051 George Watts Hill
Drive, P.O. Box 13865, Research Triangle Park, NC 27709-3865 ("CBSI") and Sensus
Corporation, a Delaware corporation having its principal place of business at 98
San Jacinto Boulevard, Suite 430, Austin, TX 78701 ("Sponsor").
WITNESSETH:
WHEREAS, CBSI and Sponsor have entered into that certain Manufacturing
Services Agreement dated September 17, 1996 (the "Agreement") wherein CBSI
agreed to perform certain services for Sponsor in connection with the
development of a process for a material known as rhGHA, or B2036-PEG ("Product")
in accordance with the Scope; (terms defined in the Agreement and not otherwise
defined herein are used herein as defined therein); and
WHEREAS, the Sponsor now wishes to amend the Agreement based upon certain
manufacturing results whereby CBSI will undertake two additional manufacturing
runs of the Product at the 1500-L scale in accordance with the terms of a new
scope of work (as defined below) and CBSI desires to amend the Agreement to
provide said manufacturing services to Sponsor.
NOW, THEREFORE, for good and valuable consideration the sufficiency and
receipt of which are hereby acknowledged, the parties hereto agree as follows:
1. SCOPE OF WORK. A detailed scope of work document for the manufacturing
activities related to the Product (the "Scope") prepared by the parties is
attached to this Amendment No. 3. CBSI will perform the services as set forth in
the Scope in accordance with the terms and conditions of the Agreement. Except
as expressly modified herein, all terms and conditions of the Agreement will
remain in full force and affect.
2. AMENDMENT TO SECTION 6 OF THE AGREEMENT. Section 6 paragraphs a) and b)
are revised as follows and now read:
Section 6.
COMPENSATION
e) The activities specified in the scope attached to this Amendment
No. 3 will be performed for [*]. The client will be invoiced
approximately 30 days prior to shipment of the bulk product to the
fill/finish subcontractor and payment is due prior to shipment of the
bulk from Covance facilities.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
3. AMENDMENT. No amendments or modifications to this Amendment No. 3 and no
further amendments or modifications to the Agreement may be made without the
written agreement of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed or caused this Amendment
No. 3 to be executed by their respective officers or other representatives
hereunder duly authorized, as of the date first above written.
COVANCE BIOTECHNOLOGY SENSUS CORPORATION
SERVICES INC.
By: /s/ V. Bryan Lawlis By: /s/ William Bennett
---------------------------- --------------------------------
Name: V. Bryan Lawlis Name: William Bennett
-------------------------- ------------------------------
Title: President & CEO Title: Sr. VP Mfg.
------------------------- -----------------------------
- --------------------------------------------------------------------------------
2.
<PAGE>
SCOPE OF WORK FOR AMENDMENT NO. 3
TO MANUFACTURING SERVICES AGREEMENT
WITH SENSUS CORPORATION
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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<PAGE>
CHANGE ORDER TO AMENDMENT #3 (DATED 24 OCTOBER 1997) OF THE
MANUFACTURING SERVICES AGREEMENT (DATED 17 SEPTEMBER 1996)
This Change Order to the Sensus Manufacturing Agreement will cover the
activities associated with a fifth (5th) manufacturing run (runs #3 and 4 are
covered in Amendment #3) to produce PEGylated human Growth Hormone Antagonist
(GHA). The activities are as follows:
[*]
The cost for the work described above is [*] excluding reimbursable materials
and project incidentals as defined in the Agreement and subsequent Amendments
and Scopes. This price does not include the costs for performing the fill/finish
activities at the subcontractor or final vial QA/QC release activities. This
price is based upon a significant discount of actual cost for one run.
Approved by:
/s/ Kirk Hayenga 11/14/97 /s/ William F. Bennett, Ph.D. 20 Nov 97
_______________________________ _______________________________________
Kirk Hayenga William F. Bennett, Ph.D.
Program Director - Sensus V.P. Research and Development
Covance Biotechnology Services Sensus Corporation
/s/ Charles T. White, Ph.D. 11/14/97
_______________________________________
Charles T. White, Ph.D.
V.P. Business Development
Covance Biotechnology Services
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<PAGE>
[*] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
AMENDMENT NO. 4
TO
MANUFACTURING SERVICES AGREEMENT
Amendment No. 4 dated as of December 29, 1997 (this "Amendment No. 4")
between Covance Biotechnology Services Inc., a Delaware corporation having its
principal place of business at 6051 George Watts Hill Drive, P.O. Box 13865,
Research Triangle Park, NC 27709-3865 ("CBSI") and Sensus Corporation, a
Delaware corporation having its principal place of business at 98 San Jacinto
Boulevard, Suite 430, Austin, TX 78701 ("Sponsor").
WITNESSETH:
-----------
WHEREAS, CBSI and Sponsor have entered into that certain Manufacturing
Services Agreement dated September 17, 1996 (the "Agreement") wherein CBSI
agreed to perform certain services for Sponsor in connection with the
development of a manufacturing process for a material known as rhGHA, or B2036-
PEG ("Product") in accordance with the Scope; (terms defined in the Agreement
and not otherwise defined herein are used herein as defined therein); and
WHEREAS, CBSI has progressed the development phase of the production process
for Product as defined in the Scope and Sponsor now wishes to amend the
Agreement whereby CBSI will undertake additional manufacturing runs to generate
additional Product in accordance with the terms of a new Scope of Work document
(as defined below) and CBSI desires to amend the Agreement to provide said
manufacturing services to Sponsor.
NOW, THEREFORE, for good and valuable consideration the sufficiency and
receipt of which are hereby acknowledged, the parties agree to as follows:
1. Scope of Work. A Scope of Work document for the production of Product
--------------
(the "Scope") prepared by the parties is attached to this Amendment No. 4. CBSI
will perform the services set forth in the Scope in accordance with the terms
and conditions of the Agreement. Except as expressly modified herein, all terms
and conditions of the Agreement will remain in full force and effect.
2. Amendment to Section 6 of the Agreement. Section 6 of the Agreement is
----------------------------------------
hereby amended as follows:
1.
<PAGE>
Section 6.
COMPENSATION
------------
f) The activities specified in the scope attached to this Amendment
No. 4 will be performed for [*]
3. Amendment. No amendments or modifications to this Amendment No. 4
----------
and no further amendments or modifications to the Agreement may be made without
the written agreement of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed or caused this Amendment
No. 4 to be executed by their respective officers or other representatives
hereunder duly authorized as of the date first written above.
COVANCE BIOTECHNOLOGY SERVICES INC. SENSUS CORPORATION
By: /s/ Roy Dagnall By: /s/ William F. Bennett
-------------------------------- ------------------------
Name: Roy Dagnall Name: William F. Bennett
------------------------------ ----------------------
Title: COO Title: Sr. V.P.
----------------------------- ---------------------
Date: 12/30/97 Date: 31 Dec 97
------------------------------ ----------------------
- --------------------------------------------------------------------------------
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
SCOPE OF WORK FOR AMENDMENT NO. 4 TO
------------------------------------
MANUFACTURING SERVICES AGREEMENT
--------------------------------
WITH SENSUS CORPORATION
-----------------------
BACKGROUND AND PROGRAM OBJECTIVES
- ---------------------------------
[*]
MANUFACTURING PROGRAM FOR AMENDMENT NO. 4
- -----------------------------------------
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
Filling is scheduled with the subcontractor on the following dates
January 30, 1998
February 27, 1998
March 27, 1998
Additional fill dates will be scheduled as needed.
PRICE
- -----
THE PRICE FOR THIS PROGRAM IS [*] AND IS INCLUSIVE OF MATERIALS.
THE ABOVE PRICE DOES NOT INCLUDE THE FOLLOWING: PROJECT INCIDENTALS AS DEFINED
---
IN THE AGREEMENT, THE COSTS FOR PERFORMING THE FILL/FINISH ACTIVITIES AT THE
SUBCONTRACTOR OR THE COSTS FOR FINAL VIAL QA/QC RELEASE ACTIVITIES. THESE ITEMS
WILL BE INVOICED SEPARATELY.
COVANCE BIOTECHNOLOGY SERVICES SENSUS CORPORATION
Initials: [INITIALS] Initials: [INITIALS]
----------- -----------
Date: 12/30/97 Date: 31 Dec 97
--------------- ---------------
- -----------------------------------------------------------------
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
CHANGE ORDER NO. 1 TO AMENDMENT NO. 4 (DATED 29 DECEMBER 1997)
OF THE MANUFACTURING SERVICES AGREEMENT (DATED 17 SEPTEMBER 1996)
[*]
Approved by:
/s/ Kirk Hayenga 2/6/98 /s/ William F. Bennett, Ph.D.
------------------------- -------------------------------
Kirk Hayenga William F. Bennett, Ph.D.
Program Director - Sensus Sr. V.P. Research and Manufacturing
Covance Biotechnology Services Sensus Corporation
/s/ V. Bryan Lawlis
------------------------
V. Bryan Lawlis
President & CEO
Covance Biotechnology Services
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
5.
<PAGE>
[*] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
AMENDMENT NO. 5
TO
MANUFACTURING SERVICES AGREEMENT
Amendment No. 5 dated as of May 1, 1998 (this "Amendment No. 5") between
Covance Biotechnology Services Inc., a Delaware corporation having its principal
place of business at 6051 George Watts Hill Drive, P.O. Box 13865, Research
Triangle Park, NC 27709-3865 ("CBSI") and Sensus Corporation, a Delaware
corporation having its principal place of business at 98 San Jacinto Boulevard,
Suite 430, Austin, TX 78701 ("Sponsor").
WITNESSETH:
WHEREAS, CBSI and Sponsor have entered into that certain Manufacturing
Services Agreement dated September 17, 1996 (the "Agreement") wherein CBSI
agreed to perform certain services for Sponsor in connection with the
development of a manufacturing process for a material known as rhGHA, or B2036-
PEG ("Product") in accordance with the Scope; (terms defined in the Agreement
and not otherwise defined herein are used herein as defined therein); and
WHEREAS, the Agreement and the Scope were amended according to the provisions
of Amendment No. 1 dated July 3, 1997 to include initial production runs of the
Product using Process 1 and were amended according to the provisions of
Amendment No. 2 dated October 3, 1997 to provide for the development of a new
manufacturing process ("Process 2") for the manufacture of the Product and were
further amended according to Amendment No. 3 dated October 24, 1997 and
Amendment No. 4 dated December 29, 1997, to provide for and additional
production runs of the Product utilizing Process 1; and
WHEREAS, Sponsor now wishes to amend the Agreement and Scope whereby CBSI
will perform manufacturing runs to generate additional Product via Process 2 in
accordance with the terms of a new Scope of Work document (as defined below) and
CBSI and Sponsor desire to amend the Agreement to provide said manufacturing and
services.
NOW, THEREFORE, for good and valuable consideration the sufficiency and
receipt of which are hereby acknowledged, the parties agree to as follows:
1. SCOPE OF WORK. A Scope of Work document for the manufacture of Product
(the "Scope") prepared by the parties and dated May 1, 1998 is attached to this
Amendment No. 5 and incorporated herein by reference. CBSI will perform the
services set forth in the Scope in accordance with the terms and conditions of
the Agreement. Except as expressly modified herein, all terms and conditions of
the Agreement will remain in full force and effect.
1.
<PAGE>
2. AMENDMENT TO SECTION 6 OF THE AGREEMENT. Section 6 of the Agreement is
hereby amended to add Section 6 paragraph g) as follows:
Section 6.
COMPENSATION
g) The activities specified in the scope attached to this Amendment No. 5
will be performed for the prices detailed in each section of the Scope
and summarized in the Scope, Section 7. CBSI will invoice Sponsor upon
completion of a priced unit of activity, such as completion of a lot of
frozen cell paste or completion of a lot of prePEGylated bulk, but not
more frequently than monthly. Payments are due 30 days from the date of
invoice. [*] Subcontractor charges, such as for cell line testing, will
be invoiced in the month that CBSI is invoiced by the subcontractor.
Late payments are subject to an interest charge of one percent (1%) per
month.
3. CHANGE ORDERS. The Agreement is hereby amended to incorporate an
additional section, Section 25, as follows:
Section 25.
CHANGE ORDERS
a) The estimated budget for the Program specified in the Scope and the
individual budget components and time estimates specified in the Scope
are subject to a number of general and program specific assumptions.
The program specific assumptions relate to the Program design and
objectives, manpower requirements, timing, capital expenditure
requirements, if any, and other matters relating to the completion of
the Program as set forth in the Scope (the "Program Assumptions"). CBSI
also assumes that the Sponsor will cooperate and perform its
obligations under the Agreement and Scope in a timely manner, that no
event outside the control of CBSI will occur, including, without
limitation, the events described in Section 16, Force Majeure, and that
there are no changes to any applicable laws, rules or regulations which
effect the Program (the foregoing assumptions together with the Program
Assumptions, collectively, the "Assumptions"). In the event that any of
the Assumptions require modification or the Program objectives cannot
be achieved based on the Assumptions (each being, a "Modification")
then the Scope may be amended as provided in paragraph b) of this
Section 25.
b) In the event a Modification is identified by the Sponsor or by CBSI,
the identifying party shall notify the other party as soon as is
reasonably possible. CBSI shall provide Sponsor with a Change Order
containing an estimate of the required Modifications to the Program
budget and timeline specified in the Scope within 20 business days of
receiving such notice. Sponsor shall use best efforts to respond in
writing to such Change Order promptly. If Sponsor
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
does not approve such Change Order and has not terminated the Program
but wants the Program to be modified to take into account the
Modification, then Sponsor and CBSI shall use best efforts to agree on
a Change Order that is mutually acceptable. If practicable, CBSI
shall continue work on the Program during any such negotiations, but
shall not commence work with respect to the Change Order unless
authorized in writing.
4. AMENDMENT. No amendments or modifications to this Amendment No. 5 and
no further amendments or modifications to the Agreement may be made without the
written agreement of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed or caused this Amendment
No. 5 to be executed by their respective officers or other representatives
hereunder duly authorized as of the date first written above.
COVANCE BIOTECHNOLOGY SERVICES INC. SENSUS CORPORATION
By: /s/ V. Bryan Lawlis By: /s/ William F. Bennett
-------------------------------------- --------------------------------
Name: V. Bryan Lawlis Name: William F. Bennett
------------------------------------ ------------------------------
Title: President & CEO Title: Sr. VP
----------------------------------- -----------------------------
Date: 5/11/98 Date: 13 May 98
------------------------------------ ------------------------------
3.
<PAGE>
SENSUS SCOPE
Amendment No. 5
SCOPE OF WORK FOR AMENDMENTS NO. 5
TO MANUFACTURING SERVICES AGREEMENT
WITH SENSUS CORPORATION
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
SENSUS SCOPE
Amendment No. 5
SECTION 1: TECHNOLOGY TRANSFER
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
SENSUS SCOPE
Amendment No. 5
SECTION 2: PERFORMANCE OF SHAKEDOWN RUNS
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
SENSUS SCOPE
Amendment No. 5
SECTION 3: PROCESS 2 PRODUCTION RUNS
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
4.
<PAGE>
SENSUS SCOPE
Amendment No. 5
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
5.
<PAGE>
SENSUS SCOPE
Amendment No. 5
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
6.
<PAGE>
SENSUS SCOPE
Amendment No. 5
SECTION 4: FILL FINISH ACTIVITIES
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
7.
<PAGE>
SENSUS SCOPE
Amendment No. 5
SECTION 5: QA AND QC TESTING AND FINAL RELEASE ACTIVITIES
Covance will utilize QA and QC resources as necessary to support production and
release PEGylated rhGHA:
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
8.
<PAGE>
SENSUS SCOPE
Amendment No. 5
SECTION 6: VALIDATION/QUALIFICATION ACTIVITIES
A proposal for validation activities leading to NDA filing is being prepared and
will be forwarded to Sensus, however, there is a certain amount of
validation/qualification that needs to be performed for the upcoming Process 2
campaign.
The objectives for the limited process validation/qualification for Process 2
are:
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
9.
<PAGE>
SENSUS SCOPE
Amendment No. 5
SECTION 7: PRICE AND PAYMENT SCHEDULES
Overall Scope Price
[*]
[*]
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
10.
<PAGE>
SENSUS SCOPE
Amendment No. 5
ANTICIPATED INVOICE SCHEDULE
----------------------------
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
11.
<PAGE>
SENSUS SCOPE
Amendment No. 5
REPLACEMENT LOTS AND MANUFACTURING SUCCESS RATES
[*]
COVANCE BIOTECHNOLOGY SERVICES SENSUS CORPORATION
Initials: [INITIALS] Initials: [INITIALS]
----------- -----------
Date: 5-11-98 Date: 13 May 98
--------------- ---------------
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
12.
<PAGE>
SENSUS SCOPE
Amendment No. 5
ATTACHMENT TO
SCOPE OF WORK FOR AMENDMENT NO. 5
TESTING SUMMARY
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
13.
<PAGE>
SENSUS SCOPE
Amendment No. 5
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
14.
<PAGE>
SENSUS SCOPE
Amendment No. 5
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
15.
<PAGE>
Bracketed information omitted and filed separately with the Securities and
Exchange Commission
Confidential Treatment Requested Under 17 C.F.R. Sections 200,80(b)(4), 200.83
and 240.24b-2
EXHIBIT 10.6
COVANCE
THE DEVELOPMENT SERVICES COMPANY
COVANCE BIOTECHNOLOGY SERVICES
6051 GEORGE WATTS HILL DRIVE
P.O. BOX 13885
RESEARCH TRIANGLE PARK, NC 27709-3865
TEL: 919-489-9400
FAX: 919-489-9070
8 April 1998
William Bennett, Ph.D.
Senior Vice President
Sensus Corporation
98 San Jacinto Boulevard
Suite 430
Austin, TX 78701
LETTER OF INTENT
This letter constitutes formal notification of Sensus' intent to retain Covance
Biotechnology Services Inc. ("Covance") to perform production of Phase II/III
clinical material for Sensus' recombinant human growth hormone antagonist
(rhGHA) product.
Sensus and Covance recognize that this Letter of Intent is necessary to reserve
manufacturing space in Covance facilities and to allow for the initiation of
pre-production activities, including the purchase of long lead time items
required for the production, prior to negotiating and signing an agreement. The
initiation of pre-production activities is to facilitate the production of rhGHA
and release the first lot of filled final vial product within the time-frame
requested by Sensus [*]. Upon execution of the Letter of Intent, Sensus and
Covance will continue negotiations in good faith to execute a signed contract
covering the anticipated term and scope of the program. It is anticipated that
such contract will be signed by both parties prior to 8 May 1998. If the
timeframe is exceeded, a new or revised Letter of Intent defining the revised
terms will be necessary.
The production campaign contemplated by the parties to take place approximately
during the [*] will build upon the process experience gained from the multiple
lots of rhGHA produced to date and the incorporation of certain improvements
identified during ongoing process development activities. A summary of the key
changes that are anticipated to be incorporated in this next campaign are:
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
The production campaign is expected to have from [*] fermentations runs. The
actual number of runs, or a method for determining the length of the campaign
based on quantity, will be negotiated in the agreement. The [*] fermentations
include 2 shake-down runs.
There are several long lead time items that must be purchased in the near term
in order to begin the production activities. A summary of the long lead time
items that need to be purchased prior to contract signing are:
[*]
It is the intent of the parties to not take advantage of either parties' working
capital as the long lead time items are being procured. Based on the timetable
for ordering the items, estimated delivery dates and payment dates, Sensus
agrees to make payments to Covance according to the payment schedule below.
[*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
If the parties fail to reach an agreement, Sensus will pay Covance for all costs
incurred to the point the parties decide not to enter into an agreement, all
costs irrevocably obligated at that point, and Sensus will own all equipment and
materials purchased under this LOI.
Signature below indicates acceptance of the above-mentioned terms.
/s/ Charles T. White, Ph.D. /s/ William Bennett, Ph.D.
- -------------------------------------- -----------------------------
Charles T. White, Ph.D. William Bennett, Ph.D.
Vice President, Business Development Senior Vice President
Covance Biotechnology Services Inc. Sensus Corp.
Date: 8 April 1998 Date: 9 April 1998
------------- -------------
<PAGE>
Bracketed information omitted and filed separately with the Securities and
Exchange Commission
Confidential Treatment Requested Under 17 C.F.R. Sections 200.80(b)(4), 200.83
and 240.24b-2
EXHIBIT 10.7
LICENSE AGREEMENT
This Agreement is entered into effective as of July 11, 1994 (the "Effective
Date"), between GENENTECH, INC., a Delaware corporation ("Genentech"), and
SENSUS DRUG DEVELOPMENT CORPORATION, a Delaware corporation ("Sensus").
WHEREAS:
Genentech is the sole owner or exclusive licensee of the Patent Rights and
Knowhow; and
Sensus wishes to obtain an exclusive license or sublicense to the Patent Rights
and Knowhow, and Genentech is willing to grant such a license or sublicense, on
the terms set forth in this Agreement.
Now, Therefore, in consideration of the mutual promises contained herein, the
parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "AFFILIATE" shall mean, with respect to either Party, a legal entity
that directly or indirectly controls, is controlled by or is under common
control with, such Party. For purposes of this definition, "control" shall mean
the power, whether or not normally exercised, to direct the management and
affairs of a legal entity, directly and indirectly. In the case of a
corporation, the direct or indirect ownership of 50 percent or more of its
outstanding voting equity shall be deemed to confer "control".
1.2 "COMBINATION PRODUCT" shall mean a product consisting of a Licensed
Product and at least one other component which is biologically active.
1.3 "GROWTH HORMONE ANTAGONISTS" shall mean compounds which act as
antagonists of the human growth hormone receptor and which are either: (i)
compounds claimed or described in the patents and patent applications listed on
Exhibit "A" attached hereto; (ii) other compounds first identified by Genentech
during the three year period following the Effective Date; or (iii) homologs,
analogs and amino acid fragments of any of the foregoing compounds. "Growth
Hormone Antagonists" shall not, however, include orally available
peptidomimetics of any of the foregoing compounds, nor shall such defined term
include human growth hormone or any growth hormone agonist whose maximal
response is greater than 1 percent of that of human growth hormone in
Genentech's growth hormone receptor cell based assay, or whose EC50 is less than
3 nM in Genentech's growth hormone receptor cell based assay.
1.
<PAGE>
1.4 "FIELD" shall mean the treatment of disease in humans whereby the
mechanism of action of such treatment is directed at blocking the interaction
between growth hormone and the growth hormone receptor or binding protein in
order to block the action of growth hormone, and shall further include the
diagnosis or prevention of any disease where such treatment is utilized.
1.5 "KNOWHOW" shall mean: (i) all information, technology or materials in
the possession or control of Genentech, including that which is described on
Exhibit "B" attached hereto, which constitute proprietary methods, processes,
techniques, assay methodology, data, inventions, formulations or biologically
active materials useful for the development, use or sale of Growth Hormone
Antagonists, excluding clinical data, marketing and sale data and regulatory
filings, except insofar as any of the foregoing relate to the pegylation of
growth hormone or Growth Hormone Antagonists; and (ii) that information
concerning the manufacture of Growth Hormone Antagonists which is identified on
Exhibit "C" attached hereto.
1.6 "LICENSED PRODUCT" shall mean a product useful in the Field which: (i)
contains a Growth Hormone Antagonist as an active ingredient, and (ii) could not
be manufactured, used or sold without the license from Genentech granted herein.
1.7 "NET SALES" shall mean the gross invoiced sales price charged for all
Licensed Products and Combination Products sold by Sensus and its sublicensees
to third parties, after deduction of the following items, provided and to the
extent such items are incurred, are included in the price charged and do not
exceed reasonable and customary amounts in the market in which such sales
occurred:
(I) trade and quantity discounts or rebates actually allowed and
taken to the extent, customary in the trade;
(II) credits or allowances given or made for rejection or return of
previously sold Licensed Products or Combination Products;
(III) any tax or governmental charge (other than an income tax)
levied on the sale, transportation or delivery of a Licensed Product or
Combination Product and borne by the seller thereof; and
(IV) any charges for freight or insurance borne by the seller.
1.8 "PARTY" shall mean Genentech or Sensus, and, when used in the plural,
shall mean both of them.
2.
<PAGE>
1.9 "PATENT RIGHTS" shall mean all patent applications and patents in the
possession or control of Genentech as of the Effective Date to the extent they
claim or relate to the manufacture, use or sale of a Growth Hormone Antagonist
or a Licensed Product or Combination Product in the Field, as well as
substitutions, extensions, reissues, renewals, divisions, continuations,
continuations-in-part and foreign counterparts thereof or therefor. Exhibit "A"
attached hereto contains a partial list of patents and patent applications which
are part of Patent Rights existing as of the Effective Date.
ARTICLE 2
LICENSE GRANT
2.1 LICENSE GRANT.
2.1.1 Genentech hereby grants to Sensus the exclusive (even as to
Genentech), worldwide, royalty-bearing right and license under the Patent Rights
and Knowhow to make, have made, use and sell Licensed Products within the Field.
Notwithstanding the foregoing, Genentech shall retain the right to make, have
made, use and sell Licensed Products within the Field for research and other
non-commercial purposes.
2.1.2 Sensus may grant sublicenses [ * ]; provided, however, that
Sensus's right to sub-license the right to use or sell a Licensed Product [ * ]
shall be subject to Article V. In the event of a sublicense by Sensus, Sensus
guarantees to Genentech the performance by Sensus' sublicensee of Sensus'
obligations hereunder.
2.2 DUE DILIGENCE.
2.2.1 Sensus shall use its best efforts expeditiously to develop,
seek regulatory approval of and commercialize Licensed Products within the
Field.
2.2.2 Without limiting subsection 2.2.1, Sensus shall attain or
perform the milestones shown on Exhibit "D" attached hereto (the "Milestones")
by the dates shown. Sensus shall notify Genentech in writing when it achieves
each of the Milestones.
2.2.3 In the event that Sensus determines that it will be unable to
meet a Milestone due to an event beyond Sensus' control but within Genentech's
control, including, without limitation, delay in the performance by Genentech of
any of its obligations hereunder (e.g. the transfer of technology or materials),
Sensus will give prompt notice to Genentech of such inability and shall specify
the amount of delay Sensus believes
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
resulted from events within Genentech's control. If Genentech agrees with the
amount of such delay specified by Sensus, the milestone dates will automatically
be extended by the extent of the delay in Sensus's ability to meet the Milestone
which results from such event. If Genentech disagrees with the amount of such
delay specified by Sensus, the matter shall be resolved by arbitration pursuant
to Section 2.2.4, below.
2.2.4 In the event that Sensus determines that it will be unable to
meet a Milestone date due to issues beyond either Party's control (e.g. the need
to change clinical endpoints or occurrence of a serious and unexpected adverse
experience as defined in 21 C.F.R. Section 312.32), Sensus shall notify
Genentech of such inability, identifying the nature of the inability with
reasonable specificity and may ask for an extension of time in which to complete
such Milestone. If the Parties cannot agree on the need for such an extension or
the duration of the extension due to issues beyond Sensus's or Genentech's
control, the matter will be referred to a committee of three individuals
experienced in the issue in dispute (e.g. scientist or clinical researcher) for
resolution pursuant to the then-current Commercial Rules of the American
Arbitration Association (the "Rules"), pending which resolution this Agreement
shall remain in full force and effect. Such committee shall consist of an
individual selected by each of the Parties who shall not be an employee of
either, with at least five years relevant experience. The two individuals so
selected shall promptly select a third mutually agreeable arbitrator with like
qualifications. If the individuals chosen by the Parties are unable to agree on
the third member within 30 days after arbitration proceedings are initiated, the
third member shall be identified pursuant to the Rules. The committee shall
render a written opinion as to whether the inability to meet a Milestone date is
beyond either Party's control to the Parties within 30 days after selection of
the third arbitrator. If the committee finds that such inability was outside of
the control of Sensus, the opinion shall also set forth the duration of the
extension to which Sensus is entitled. Genentech and Sensus shall be bound by
such written opinion.
2.2.5 Except as set forth in Section 2.2.3 or 2.2.4, failure of
Sensus timely to achieve any one of the Milestones shall be considered a
material breach of this Agreement and Genentech shall have the rights set forth
in Section 7.2.3.
2.2.6 Beginning on the first anniversary of the Effective Date and every
six months thereafter until the first sale of a Licensed Product, Sensus shall
submit to Genentech a progress report covering Sensus's activities related to
the development of and securing of the requisite approvals to market Licensed
Products within [ * ] (each, a "Major Market"). Sensus shall advise Genentech of
the date of the first sale of the first Licensed Products in each Major Market
and, thereafter, of
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
4.
<PAGE>
the filing of a marketing application for each subsequent Licensed Product in
each Major Market.
ARTICLE 3
PATENTS AND KNOWHOW
3.1 OWNERSHIP. Genentech shall retain title to the Patent Rights and
Knowhow, and to any patent rights and knowhow related to Licensed Products
developed solely by Genentech in the future. Except as expressly provided
herein, each Party shall own and shall have the exclusive right to exploit all
intellectual property rights owned or acquired by such Party.
3.2 PATENT PROSECUTION.
3.2.1 Genentech shall be responsible for the prosecution and
maintenance of the Patent Rights, at Genentech's expense, in consultation with
Sensus. Genentech shall keep the other informed of the status of prosecution of
Patent Rights, in each country, on a timely basis.
3.2.2 Sensus shall assist Genentech in prosecuting and maintaining
the Patent Rights as contemplated by Section 3.2.1.
3.3 INFRINGEMENT.
3.3.1 If either Party learns that a third party is infringing the
Patent Rights, it shall promptly notify the other in writing. The Parties shall
use reasonable efforts in cooperation with each other to stop such infringement
without litigation.
3.3.2 Sensus will be given the first opportunity to take the
appropriate steps to remove the infringement of the Patent Rights which claim
specifically a Growth Hormone Antagonist or its manufacture, use or sale
including, without limitation, initiating suit. If Sensus decides not to take
such steps within 180 days of discovering or being notified of the infringement,
Genentech may do so. Each of the Parties agrees to provide reasonable assistance
to the other in taking such steps. Any legal action taken under this Section
3.3.2 will be at the expense of the Party by whom suit is filed and will be
controlled by the Party bringing suit. The Party not bringing suit may choose to
be represented in any such action by counsel of its own choice at its own
expense. Any damages or costs recovered shall be retained by the Party bringing
suit. If both Parties bring suit, equitable apportionment of the costs and
damages to be recovered shall be agreed upon before the filing of the suit.
5.
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3.4 THIRD PARTY PATENT RIGHTS. If a notice of infringement is received by,
or a suit is initiated against, either of Sensus or Genentech with respect to
Licensed Products, the Parties will in good faith discuss the best way to
respond.
3.5 DISCLOSURE OF KNOWHOW. A goal of the Parties is to effect a prompt and
effective transfer of Knowhow from Genentech to Sensus to assist Sensus in the
satisfaction of its "due diligence" obligations hereunder. To this end, and
subject to Article VIII, below, within 90 days following the Effective Date,
Genentech shall disclose and transfer to Sensus all Knowhow and data
constituting or evidencing Knowhow, at no cost to Sensus. To facilitate such
disclosure and transfer of Knowhow, each Party shall appoint one or more
appropriate individuals to act on its behalf as the primary liaison(s) with the
other. Not withstanding the foregoing, Genentech's obligations with respect to
the disclosure and transfer of Knowhow related to the manufacture of Growth
Hormone Antagonists shall be limited to the scale and method of manufacture most
recently practiced by Genentech.
ARTICLE 4
EQUITY AND PAYMENTS
4.1 EQUITY AS CONSIDERATION FOR LICENSE.
4.1.1 (A) In consideration of the license granted to Sensus herein,
Genentech shall be compensated through equity participation in Sensus, [ * ]. In
each case, [ * ]. All shares to which Genentech is entitled shall be delivered
to Genentech at the time of the relevant closing(s).
(B) The total number of shares to which Genentech is entitled
under this Section 4.1.1 shall be equal to [ * ]. At each relevant closing,
Genentech shall be issued [ * ]
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of the type of capital stock and/or other equity so issued. To the extent
necessary, at the time of the final closing which results in Sensus receiving
[ * ]. The provisions of this Section 4.1.1 shall survive any termination of
this Agreement pursuant to Section 7.0 except for a termination by Sensus
pursuant to Section 7.2.1 or 7.2.2.
4.1.2 It shall be a condition to the continued effectiveness of this
Agreement that Sensus close an equity financing of at least [ * ] within four
months of the Effective Date, and that Sensus close further equity financings
totaling in the aggregate at least an additional [*], in accordance with the
following schedule:
MONTHS AFTER EFFECTIVE DATE
WITHIN WHICH SECOND
AMOUNT RAISED IN FIRST CLOSING CLOSING TO OCCUR
[ * ] [ * ]
4.2 ROYALTIES.
4.2.1 Sensus shall pay Genentech a royalty in the amount of [ * ] of
Net Sales of each Licensed Product in each country wherein the manufacture, use
or sale of the Growth Hormone Antagonist component of such Licensed Product is
within the scope of a valid claim of a Patent Rights in such country, and [ * ]
of Net Sales in all other instances. As used herein, "valid claim" shall mean a
claim included in a pending patent application or issued patent included within
the Patent Rights, which claim has not expired or been declared invalid in a
final decision by a court of competent jurisdiction.
4.2.2 The above royalty payments shall be made in U.S. dollars by
wire transfer to such accounts as Genentech may from time to time designate and
shall be made within 90 days at the end of each calendar quarter for Net Sales
made during such quarter. At the time of making such royalty payment, Sensus
shall also provide Genentech with a statement showing the gross sales of
Licensed Product in each country and the corresponding Net Sales and a
calculation of the royalties payable hereunder with respect to all Net Sales
including documentation of applicable currency conversions. Sensus shall also
provide Genentech notice that a wire transfer is being made at least five days
before its initiation including a brief statement that such transfer is in
payment of royalties due under this Agreement. Such notice shall be directed to
the attention of the Treasurer at the address set
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forth for Genentech in Section 9.10. Any royalty payment not paid on or before
the payment date due shall bear interest, to the extent permitted by applicable
law, at the then current LIBOR rate, plus [ * ] percent, calculated on the
number of days the payment is delinquent.
4.2.3 Net Sales shall first be calculated in the currency in which
the sales were made and then converted into U.S. Dollars at the spot exchange
rate reported in the U.S. Edition of the Wall Street Journal (or other
publication chosen by the Parties by mutual consent from time to time) for the
last business day of the quarterly period for which such payment is due.
4.2.4 Royalty payments shall be made without set off and free and
clear of any taxes, duties, levies fees or charges, except for withholding taxes
(to the extent applicable). Sensus shall take all reasonable steps (including
applicable implementation of competent authority procedures) as may be required
by Genentech to (i) avoid or minimize any such withholding; (ii) take advantage
of such international taxation treaties or other double taxation agreements as
may be available; or (iii) take advantage of any tax credit with respect to such
withholding; provided that Sensus shall not be required to incur any material
costs or expenses in so doing.
4.2.5 Sensus and its sublicensees shall keep complete and accurate
records of the latest four calendar years of Net Sales with respect to which a
royalty is payable under this Agreement. Genentech shall have the right, at its
sole expense, to have an independent, certified public accountant, reasonably
acceptable to Sensus, review Sensus's (and its sublicensees') records upon
reasonable notice and during reasonable business hours for the purposes of
verifying the royalty payments made pursuant to this Agreement. If an error in
favor of Genentech of more than [ * ] percent of the total royalty amount due
hereunder for the fiscal year being reviewed is discovered, then the reasonable
fees and expenses of the accountant shall be borne by Sensus. Any amounts found
due as a result of such review shall be promptly paid to the Party entitled
thereto, together with interest thereon at the then-current LIBOR rate plus [ *
] percent. This provision shall survive any termination of this Agreement.
4.2.6 In determining the Net Sales of Combination Products, Net Sales
shall first be calculated in accordance with the definition of Net Sales and
then multiplied by the percentage value of Licensed Product contained in the
Combination Product, such percentage value being the quotient obtained by
dividing the current market value of the Licensed Product by the sum of the
separate current market values of the Licensed Product and other biologically
active ingredients contained in the Combination Product. When no current market
value is available for such an ingredient, Sensus shall calculate a hypothetical
market value for such ingredient, allocating the same proportions of costs,
overhead
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and profit as are then allocated to similar substances saving an ascertainable
market price.
4.2.7 If Sensus is required (pursuant to court order, settlement or
contract) to pay royalties or other consideration to a third party for the
license or other acquisition of a patent right which is necessary in order to
manufacture, use or sell a Licensed Product within the Field, Sensus shall have
the right to offset [ * ] with respect to such Licensed Product; provided,
however, that the royalties payable to Genentech hereunder shall not thereby be
decreased or offset to a rate below [ * ] percent of Net Sales of each Licensed
Product per annum.
ARTICLE 5
RIGHT OF FIRST OFFER
Sensus grants to Genentech a "right of first offer" whereby Sensus shall first
notify Genentech in writing if it wishes to sublicense to any non-Affiliate
third party the right to use and sell a Licensed product in [ * ]. Along with
such notice to Genentech, Sensus shall provide Genentech with reasonable access
to all Sensus data related to the subject matter of the proposed sublicense, to
assist Genentech in making an informed decision regarding the exercise of its
rights under this Article V. Genentech shall notify Sensus within 45 days after
receiving such notice whether it wishes to exercise this right. If Genentech
does not so notify Sensus, Sensus may grant the rights specified in the original
notice to a third party. If Genentech does so notify Sensus, Sensus shall
negotiate exclusively with Genentech with respect to such rights for a period
not to exceed 45 days. If an agreement is not reached within such period,
Sensus may grant such rights to a third party on terms no more favorable to the
third party than those last offered to Genentech. However, if Sensus cannot
reach agreement with any third party within nine months after concluding
negotiations with Genentech, it shall again offer Genentech such rights before
offering such rights to a third party.
ARTICLE 6
CONFIDENTIALITY
6.1 NON-DISCLOSURE.
The Parties acknowledge that during the term of this Agreement they
will each receive from the other information which is proprietary, confidential
and of significant commercial value to the disclosing Party. Except to the
extent expressly authorized by this Agreement, for the term of this Agreement
and for five years thereafter, the receiving Party shall keep confidential and
shall not publish or
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otherwise disclose and shall not use for any purpose (except those related to or
permitted by this Agreement) any information furnished to it by the other Party
pursuant to this Agreement, including knowhow, except to the extent that it can
be established by the receiving Party by competent proof that such information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(B) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(C) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement;
(D) was subsequently lawfully disclosed to the receiving Party by a
third party; or
(E) was independently developed by the receiving Party as can be
established by written records.
Each Party may disclose the other's information to Affiliates, and to third
parties to the extent such disclosure is reasonably necessary in prosecuting or
defending litigation, filing patent applications, complying with applicable
governmental regulations or conducting clinical trials; provided, however, that
if a Party is required to make any disclosure of the other Party's confidential
information it will give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its best efforts to secure confidential treatment
of the information to be disclosed. The disclosure of one Party's confidential
information by the other in connection with the filing or prosecution of a
patent application may be made only with the consent of the other Party, which
consent may not be unreasonably withheld. Sensus may further disclose
confidential information to the extent reasonably required to secure financing,
in the course of merger or acquisition negotiations, or to negotiate a
sublicense permitted hereunder; provided, however, that the entity to receive
such confidential information shall first execute a binding confidentiality
agreement of term and scope at least coextensive with the terms of this Section
6.1, and which confidentiality agreement shall expressly provide that Genentech
is intended to be a third-party beneficiary thereof.
10.
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6.2 PUBLICATION.
Sensus may publish the results of activities related to this Agreement
to the extent it will not result in the disclosure of confidential information,
but Sensus may not publish Knowhow without the prior written consent of
Genentech. Sensus shall provide a copy of any proposed manuscript or summary of
any proposed presentation containing Knowhow to Genentech at least 30 days prior
to the proposed date of submission to a publisher or presentation. Sensus shall
incorporate all reasonable changes suggested by Genentech and to delete any
confidential information at Genentech's request.
ARTICLE 7
TERM AND TERMINATION
7.1 TERM. Unless otherwise terminated earlier, the licenses and the
royalty obligations under this Agreement will automatically expire on a country-
by-country basis on the later of either: (i) 12 years from the first commercial
sale of a Licensed Product in the country, or (ii) the expiration (or
revocation) of the last to expire (or to be revoked) of the Patent Rights in
each country. After the expiration of the term of the license in each country,
Sensus shall have a fully paid, non-revocable, non-exclusive license under the
Knowhow in that country.
7.2 TERMINATION.
7.2.1 Failure by either Party to comply with any of the material
obligations contained in this Agreement (including Section 2.2 hereof) shall
entitle the other Party to give to the Party in default notice specifying the
nature of the default and requiring it to make good such default. If such
default is not cured within 60 days after the receipt of such notice, the
notifying Party shall be entitled, without prejudice to any of its rights
hereunder or at law or equity, to terminate this Agreement by giving notice to
take effect within 30 days after such notice, unless the defaulting Party shall
cure within such further 30 day period.
7.2.2 Either Party may terminate this Agreement by notice to the
other in the event that the latter Party shall have become insolvent or
bankrupt, or shall have made an assignment for the benefit of creditors, or
there shall have been appointed a trustee or receiver of the latter Party for
all or a substantial part of its property, or any case or proceeding shall have
been commenced or other action taken by or against the latter Party in
bankruptcy or seeking reorganization, liquidation, dissolution, winding-up,
arrangement, composition or readjustment of its debts or any other similar
relief, and any such event shall have continued for more than 180 days
undismissed, unbonded and undischarged.
11.
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7.2.3 (A) If Sensus fails to achieve any one of the Milestones set
forth in Exhibit "D" attached hereto within the applicable time specified in
Exhibit "D", as adjusted pursuant to Section 2.2, Genentech shall have the
option to terminate this Agreement and the license granted to Sensus herein (the
"Termination Option"), on notice to Sensus at any time within 90 days following
the date on which the Milestone in question was to have been attained. If
Genentech exercises the Termination Option, or otherwise terminates this
Agreement pursuant to section 7.2.1 or 7.2.2, Genentech shall automatically be
granted a non-exclusive, worldwide, sublicenseable license to the results of the
efforts made by Sensus and its sublicensees between the Effective Date and the
date on which the Termination Option was exercised, with respect to the
development of Growth Hormone Antagonists and Licensed Products in the Field.
Such license shall include all regulatory submissions made by Sensus and its
sublicensees for Licensed Products ("Submissions") and all patent rights and
knowhow of Sensus and its sublicensees related to Growth Hormone Antagonists or
Licensed Products and developed by Sensus or its sublicensees as part of the
development of a Licensed Product hereunder, but only to the extent that such
license can be granted by Sensus (or its sublicensee) without: (i) violating
contractual obligations to third parties (other than sublicensees hereunder), or
(ii) making payment to third parties (other than sublicensees hereunder), unless
Genentech agrees to make all such payments which are contractually required of
Sensus or its sublicensees.
(B) Such license to Genentech shall bear a commercially
reasonable royalty, taking into account the value of the rights so licensed to
Genentech on a non-exclusive basis, the amounts expended by Sensus and its
sublicensees in the development or acquisition of such rights, and the ability
of Sensus to license such rights to others. However, in no case shall the
royalty due to Sensus be greater than
(I) [ * ] percent of net sales of Growth Hormone Antagonist
products by Genentech or its sublicensees if, at the time the license is
granted, Sensus has a Growth Hormone Antagonist that has at least been the
subject of clinical trials, or
(II) [ * ] percent of net sales of such products by
Genentech or its sublicensees otherwise.
If the parties are unable to agree upon a commercially reasonable royalty, the
determination of such royalty may be referred to arbitration in the manner
provided in Section 2.2.4.
(C) Upon Genentech's exercise of the Termination Option, or
other termination of this Agreement by Genentech pursuant to Section 7.2.1 or
7.2.2, Sensus and its sublicensees shall promptly provide Genentech with all
documentation and materials to which Genentech is entitled pursuant to this
Section 7.2.3 including, without limitation, copies of all Submissions. Such
transfer shall be made in a timely and orderly fashion and in a manner such that
the value
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of what is being transferred is preserved in all material respects. Sensus and
its sublicensees shall, further, promptly take all appropriate and necessary
actions, including actions before involved regulatory agencies, to confirm
Genentech's rights with respect to the Submissions, including the right to
reference such Submissions. Upon such transfer and the completion of all such
appropriate and necessary actions, Genentech shall reimburse Sensus and its
sublicensees for their actual out-of-pocket expenses incurred as a result
thereof.
7.2.4 Sensus may terminate this Agreement, effective on 90 days prior
notice to Genentech.
ARTICLE 8
SUPPLY OF MATERIALS
Within 30 days following the Effective Date, Genentech shall supply to
Sensus, at no cost to Sensus, those materials described on Exhibit "E" attached
hereto.
ARTICLE 9
MISCELLANEOUS
9.1 SOLICITATION OF EMPLOYEES. For a period of [ * ] after the Effective
Date, Sensus will not solicit any of Genentech's then-current employees to leave
their employment without the prior written consent of Genentech.
9.2 ASSIGNMENTS. Except as otherwise provided herein, neither this
Agreement or any interest hereunder shall be assignable by either Party by
operation of law or otherwise without the prior written consent of the other;
provided, however, that either Party may assign this Agreement to an Affiliate
or to any successor by merger or sale of all or substantially all of its assets
in a manner such that the assignee becomes liable and responsible for the
performance and observance of all duties and obligations hereunder. This
Agreement shall be binding upon the successors and permitted assigns of the
Parties and the name of a Party appearing herein shall be deemed to include the
names of such Party's successor's and permitted assigns to the extent necessary
to carry out the intent of this Agreement. Any assignment not in accordance with
this Section 9.2 shall be void.
9.3 REPRESENTATIONS AND WARRANTIES. (A) Each Party represents and warrants
to the other that, to the best of its knowledge; (i) it is free to enter into
this Agreement and (ii) in so doing it will not violate any other agreement to
which it is a party.
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THE OMITTED PORTIONS.
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Genentech represents and warrants to Sensus that: (i) it currently has the
right to grant the licenses granted hereunder and is unaware of any pending or
threatened litigation or alleging the invalidity of any of the Patent Rights or
misappropriation by Genentech of any of the Knowhow, and (ii) that none of the
Growth Hormone Antagonists licensed to Sensus hereunder has been developed in
violation of the patent rights of any third party including, without limitation,
patent rights related to so-called [ * ].
9.4 FORCE MAJEURE. Neither Party shall be liable to the other for loss or
damages or shall have any right to terminate this Agreement for any default or
delay attributable to any act of God, flood, fire, explosion, strike, lockout,
labor dispute, casualty or accident, war, revolution, civil commotion, act of
public enemies, blockage or embargo, injunction, law, order, proclamation,
regulation, ordinance, demand or requirement of any government or subdivision,
authority or representative of any such government, or any other cause beyond
the reasonable control of such Party, if the Party affected shall give prompt
notice of any such cause to the other Parties. The Party given such notice shall
thereupon be excused from such of its obligations hereunder as it is so disabled
and for 30 days thereafter.
9.5 NO TRADEMARK RIGHTS. No right, express or implied, is granted by this
Agreement to use in any manner any trade name or trademark of Genentech in
connection with the performance of this Agreement or the exploitation of any
license granted hereunder.
9.6 PUBLIC ANNOUNCEMENTS. Except as required by law, Sensus shall obtain
Genentech's consent (which consent shall not be unreasonably withheld) before
making any public announcement concerning the terms of this Agreement or
Sensus's relationship with Genentech.
9.7 ENTIRE AGREEMENT AND AMENDMENT. Except for that certain letter
agreement attached hereto as Exhibit "F", this Agreement contains and
constitutes the entire understanding and agreement of the Parties and cancels
and supersedes any and all prior negotiations, correspondence, understandings
and agreements, whether verbal or written, between the Parties respecting the
subject matter hereof. No waiver, modification or amendment of any provision of
this Agreement shall be valid or effective unless made in writing and signed by
a duly authorized officer of each of the Parties.
9.8 SEVERABILITY. In the event any one or more of the provisions of this
Agreement should for any reason be held by any court or authority having
jurisdiction over this Agreement or either of the Parties to be invalid, illegal
or unenforceable, such provision or provisions shall be validly reformed by
addition or deletion of wording as appropriate to avoid such result and as
nearly as possible approximate the intent of the Parties and, if
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unreformable, shall be divisible and deleted in such jurisdiction; elsewhere,
this Agreement shall not be affected.
9.9 CAPTIONS. The captions to this Agreement are for convenience only,
and are to be of no force or effect in construing or interpreting any of the
provisions of this Agreement.
9.10 NOTICE AND DELIVERY. Any notice, requests, delivery, approval or
consent required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been sufficiently given if delivered in
person, transmitted by telegraph or telecopier (with confirmed answer-back) or
sent by registered air mail letter to the Party to whom it is directed at its
address shown below or such other address as such party shall have last given by
notice to the other Party.
If to Sensus, addressed to:
Sensus Drug Development Corporation
San Jacinto Center Suite 430
98 San Jacinto Blvd.
Austin, TX 78701
Attn: President
If to Genentech, addressed to:
Genentech, Inc.
460 Point San Bruno Boulevard
South San Francisco, CA 94080
Attention: Corporate Secretary
9.11 INDEMNIFICATION.
9.11.1 Sensus shall indemnify and hold Genentech harmless from any
and all damages, costs and liabilities resulting or alleged to result from any
negligent or willful act or omission of Sensus in connection with researching,
developing, selling, using or manufacturing a Licensed Product or sublicensing
another to do so (including, without limitation, reasonable attorney's fees),
except to the extent that such damages, costs or liabilities result or are
alleged to result from any negligent or willful act or omission on the part of
Genentech or any employee or agent of Genentech. In the event that suit is
brought or claim made against Genentech which might give rise to a claim of
indemnification hereunder, Genentech shall promptly notify Sensus. At its own
expense, Sensus shall have the right to participate fully in the resolution of
such suit or claim, by intervention or otherwise. No settlement of any suit or
claim which may give rise to a claim for indemnification hereunder shall be made
without the prior consent of Sensus.
15.
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9.11.2 Genentech shall indemnify and hold Sensus harmless from any
and all damages, costs and liabilities resulting or alleged to result from: (i)
any negligence or willful misconduct on the part of Genentech or its
sublicensees, or (ii) any act or omission of Genentech or any sublicensee of
Genentech in the use or sale of any Licensed Product, except to the extent that
such damages, costs or liabilities result or are alleged to result from any
negligence or willful act or omission on the part of Sensus or any employee or
agent of Sensus. If suit is brought or claim made against Sensus which give rise
to a claim of indemnification hereunder, Sensus shall promptly notify Genentech.
At its own expense, Genentech shall have the right to participate fully in the
resolution of such suit or claim, by intervention or otherwise. No settlement of
any suit or claim which may give rise to a claim for indemnification hereunder
shall be made without the prior consent of Genentech.
9.12 APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of California, without regard to its conflicts of laws principles.
9.13 ACCESS TO GENENTECH EMPLOYEES. (A) Genentech shall use its best
efforts to assure that for two years following the Effective Date James A.
Wells, Ph.D. ("Wells") and Michael J. Cronin, Ph.D. ("Cronin") shall at Sensus'
request serve as a member of Sensus' Scientific Advisory Board ("SAB"). Neither
Wells nor Cronin shall receive compensation or any other payment directly or
indirectly from Sensus for the services he provides Sensus while he is a
Genentech employee. Such obligation of Genentech as to each of Wells and Cronin
shall terminate upon the termination of the employment of each with Genentech.
If so requested, Wells and Cronin shall serve on the SAB pursuant to Sensus'
standard confidentiality and non-use agreement, a copy of which is attached
hereto as Exhibit "G", except that such confidentiality agreement such have no
effect to the extent that either Wells or Cronin are acting in their capacity as
either employees of or consultants to Genentech. For one year from the Effective
Date, Genentech shall also allow Sensus reasonable access to other Genentech
employees for up to eight hours per month, to the limited extent necessary to
achieve the transfer of Knowhow contemplated hereunder.
(B) Genentech will have no objection to Sensus retaining Armen Ramel as
a consultant to Sensus and using knowledge and expertise which he obtained as a
Genentech employee solely to the extent required to scale up Licensed Products
from the scale disclosed by Genentech to the commercial scale reasonably
required by Sensus.
9.14 SURVIVAL. Except as otherwise provided herein, Sections 4.1.1, 4.2,
6.1, 9.10, 9.11 and 9.12 shall survive the termination or expiration of the term
of this Agreement.
16.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written, each copy of which shall for all purposes be deemed to be
an original.
SENSUS DRUG DEVELOPMENT CORPORATION
By [SIGNATURE]
-----------------------------------
Title CEO
--------------------------------
GENENTECH, INC.
By [SIGNATURE]
-----------------------------------
Title Senior V.P.
--------------------------------
17.
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EXHIBIT A
[ * ]
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[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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EXHIBIT B
NON-MANUFACTURING KNOWHOW
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
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EXHIBIT C
MANUFACTURING KNOWHOW
. Manufacturing processes and procedures as available for producing licensed
products, including but not limited to details of the following operations:
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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EXHIBIT "D"
MILESTONES
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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EXHIBIT "E"
MATERIALS LIST
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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EXHIBIT F
ID/2/
Innovations in Drug Development
San Jacinto Center
98 San Jacinto Boulevard Suite 430
Austin, Texas 78701
Tel 512-476-4279
FAX 512-476-3227
John A. Scarlett, M.D.
President / CEO
July 1, 1994
Mr. John Wulf
Genentech Inc.
Building 24
460 Point San Bruno Boulevard
South San Francisco, CA 94080
Dear John:
I am writing with respect to Genentech's concerns regarding the transfer of
certain rights currently held by id/2/-I, L.P. pursuant to a Biotechnology
Licensing and Transfer Agreement dated January 18, 1993 between Drug Development
Investment Corporation ("DDIC") and Ohio University (the "DDIC Agreement" and a
subsequent Assignment Agreement between DDIC and id/2/-I, L.P. dated March 26,
1993. By way of clarification, DDIC is the Managing (and sole) General Partner
of id/2/-I, L.P., and directs its management and business affairs.
Within four weeks following the effective date of the contemplated license
agreement between Sensus Drug Development Corporation ("Sensus") and Genentech
regarding Growth Hormone Antagonists (as defined therein), Sensus will secure
from id/2/-I, L.P. all of the rights of id/2/-I, L.P. and/or DDIC which relate
to the manufacture, use or sale of Growth Hormone Antagonists. Within one week
following the end of such four week period, Sensus will provide Genentech with
reasonable documentation evidencing the foregoing. No payment will be due
id/2/-I, L.P. or DDIC from Sensus for the transfer of these rights. However,
Sensus will be required to assume all responsibilities related to the
transferred technology as a sublicensee under the DDIC Agreement.
In the event that Sensus has not secured the foregoing rights and provided
reasonable documentation thereof to Genentech within the time period provided
above, the license agreement between Genentech and Sensus shall be immediately
voidable by Genentech on notice to Sensus, but Genentech shall be entitled to
retain all rights thereunder to which Genentech would otherwise be entitled in
the event of termination of such license agreement by virtue of breach on the
part of Sensus.
Please let me know immediately if the foregoing is not consistent with your
understanding.
Sincerely,
John A Scarlett, M.D.
President/CEO
JAS/km
cc: P. De Stefano
S. Juelsgaard
<PAGE>
EXHIBIT "G"
CONFIDENTIALITY AGREEMENT
THIS CONFIDENTIALITY AGREEMENT, effective ______________________, 19__,
("Effective Date"), by and between _______________________________, having an
address at ________________________, ("_____________________") and
________________________, having an address at __________________________
("____________________"), shall govern the conditions of disclosure by
__________________ to ___________________ of confidential technical and business
information, whether written or oral, ("Information") during or relative to the
performance of services by ___________________ on behalf of ___________________.
With regard to Information, _______________________ hereby agrees (i) not
to use any Information except for the purpose of _____________________'s
performance of services for _________________________, and (ii) not to disclose
Information to others without the express written permission of
__________________________, except that ________________________ shall not be
prevented from using or disclosing Information:
(A) which is approved in writing by ____________________________________
for release by _______________________ without restrictions; or
(B) which ________________________________ can demonstrate by written
records was previously known to _______________________; or
(C) which is now public knowledge, or becomes public knowledge in the
future, other than through acts or omissions of
_____________________________ in violation of this Confidentiality
Agreement; or
(D) which is lawfully obtained by ____________________ from sources
independent of ____________________ who have a lawful right to
disclose such Information.
It is further agreed that ____________________________'s furnishing of
Information to _____________________________________ shall not constitute any
grant, option, or license to ___________________________________ under any
patent or other intellectual property rights now or hereinafter held by
____________________________.
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of California, United States of America,
without reference to conflict of laws principles or statutory rules of
arbitration.
This Agreement constitutes the entire and exclusive agreement between
the parties with respect to the subject matter hereof and supersedes and cancels
all previous registrations, agreements, commitments and writings in respect
thereof.
<PAGE>
The obligations of ____________________________ under the terms of this
Agreement shall continue full force and effect for 5 years after the Effective
Date.
____________________________ _________________________________
("______________________") ("__________________________")
By: ________________________ By: _____________________________
____________________________ _________________________________
Print Name Print Name
Title: _____________________ Title: __________________________
<PAGE>
AMENDMENT OF LICENSE AGREEMENT
THIS AMENDMENT OF LICENSE AGREEMENT (the "Amendment") is entered into
effective as of December 21, 1994 (the "Effective Date"), by and between
GENENTECH, INC., Delaware corporation ("Genentech") and SENSUS DRUG DEVELOPMENT
CORPORATION, a Delaware corporation ("Sensus").
RECITALS
A. Genentech and Sensus entered into that certain License Agreement dated as
of July 11, 1994, as amended previously (the "Agreement"), pursuant to
which Genentech granted Sensus licenses under certain patent rights and
know-how of Genentech;
B. Genentech and Sensus wish to amend the Agreement to provide for Genentech
to perform certain manufacturing process development and clinical product
supply services on behalf of Sensus, and to modify the equity investment
and payment terms of the Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. AMENDMENT OF ARTICLE 1. Article I of the Agreement is hereby amended
by adding the following Sections to the Article:
"1.10 "FULLY BURDENED MANUFACTURING COSTS" shall mean the [ * ].
1.11 "MANUFACTURING INFORMATION" shall mean all information,
technology or materials developed by Genentech pursuant to the process
development efforts in Article VIII that constitute proprietary methods,
processes, techniques, data, inventions, formulations or biologically
active materials specifically relating to or useful for the manufacture of
Growth Hormone Antagonists, excluding clinical data, marketing and sales
data and regulatory filings, except insofar as any of the foregoing relate
to the pegylation of growth hormone or Growth Hormone Antagonists.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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1.12 "MANUFACTURING PATENTS" shall mean all patent applications and
patents issuing therefrom to the extent that they claim or relate to any
aspect of the Manufacturing Information.
1.13 "MATERIAL" shall mean Growth Hormone Antagonists described in
Exhibit H that Genentech shall produce and supply to Sensus as contemplated
under Article VIII for pre-clinical and Phase I/Phase II clinical use.
2. AMENDMENT OF EQUITY AND PAYMENT PROVISIONS. The provisions of Article
IV of the Agreement relating to "Equity and Payment" are amended and modified as
follows:
2.1. A new Section 4.1.3 is added to the Agreement, reading in its
entirety as follows:
"4.1.3. Genentech agrees to purchase [ * ] ($[ * ]) in
Sensus capital stock in the next Sensus Private Placement Equity
Financing, on the same terms as the other investors in such financing,
provided that such financing closes by February 28, 1995 and that the
total amount invested in such financing in Sensus (including the
Genentech investment) is at least [ * ] Dollars ($[ * ]). Any equity
investment by Genentech under this Section 4.1.3 shall not count
toward either (i) the $[ * ] or $[ * ] equity financing goals set
forth in Section 4.1.2, or (ii) the [ * ]% equity ownership of
Genentech set forth in Section 4.1.1."
2.2. In consideration of Genentech's effort with respect to the
Project, as set forth in Article VIII of the Agreement (as amended by this
Amendment), including delivery of all Materials required to be supplied to
Sensus thereunder in compliance with the Specifications (as defined in Section
8.4(a) of the Agreement as amended), the royalty provisions in Section 4.2 of
the Agreement are amended and modified as follows:
(A) The first sentence of Section 4.2.1 is amended and restated as
follows:
"Sensus shall pay Genentech a royalty in the amount of [ * ]% of Net
Sales of each Licensed Product in each country wherein the manufacture, use
or sale of the Growth Hormone Antagonist component of such Licensed Product
is within the scope of a valid claim of a Patent Right in such country, and
[ * ]% of such Net Sales of each Licensed Product in all other countries."
(B) In Section 4.2.7 of the Agreement, the phrase "to a rate below
[ * ] percent" is amended to read "to a rate below [ * ]%".
3. PROCESS DEVELOPMENT TERMS. The existing Article VIII in the Agreement
is deleted in its entirety and a new Article VIII, set forth in full below, is
substituted in its place.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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ARTICLE VIII
PROCESS DEVELOPMENT AND SUPPLY OF MATERIALS
8.1 PROCESS DEVELOPMENT PROJECT. Subject to the terms of this
Agreement, Sensus hereby engages Genentech to use its commercially
reasonable best efforts to undertake and perform process development
relating to Growth Hormone Antagonists, with the intent of developing a GMP
process for producing [ * ] bulk quantities of such compounds. Genentech
shall use its commercially reasonable best efforts to perform the specific
process development and Materials supply tasks set forth on the attached
Exhibit H, as such tasks may be more fully described or modified by written
agreement of the parties from time to time during the performance of such
tasks (the "Project"). Genentech and Sensus acknowledge that the services
provided by Genentech under this Article VIII are experimental in nature.
8.2 SENSUS PARTICIPATION IN PROJECT. Genentech shall involve
Sensus on a continuing and active basis during the Project. In particular,
Genentech shall meet and consult regularly with Sensus to discuss the
results of the Project and to agree on further refinement or specification
of the tasks, as set forth on Exhibit H, to be performed under the Project.
8.3 PROJECT TIME LINE. Subject to the terms of this Agreement,
Genentech shall use its commercially reasonable best efforts to complete
the Project, including supply of Materials to be supplied thereunder. The
Parties agree to meet, at an appropriate time but not less than 6 months
prior to the anticipated completion of the Project, to discuss possible
terms for extending the development and supply arrangement to the scaleup
and production of material for phase III clinical trial and commercial use.
Genentech, however, is under no obligation to agree to such an extension.
8.4 MATERIALS SUPPLY.
(A) Genentech shall supply the specific Materials described in
Exhibit H, according to such schedule and in such quantities to be agreed
by the Parties. Sensus shall compensate Genentech for supply of Materials
an amount equal to [ * ] of such Materials. The Materials supplied by
Genentech hereunder shall conform to such specifications, including release
and QA/QC specifications, as will be mutually agreed to by the Parties and
attached hereto as Exhibit I (the "Specifications"). The Parties agree
that, under the Project, Genentech shall develop manufacturing processes
for the Growth Hormone Antagonists sufficient to supply Sensus with batches
of Material [ * ] for pre-clinical and phase I/phase II clinical use. At
the beginning of each calendar quarter, Genentech and Sensus will mutually
agree upon a Material production and delivery schedule for such quarter.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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(B) Upon receipt of each batch of Material to be provided by
Genentech pursuant to Section 8.4(a), Sensus shall confirm that such
product meets the Specifications by performing pertinent analytical tests.
In the event that Sensus determines that such Material does not comply with
the Specifications in Exhibit I, Sensus shall so inform Genentech within
ten business days of receipt of such Material, describing in detail the
failure to meet the Specifications. If Sensus does not so inform Genentech
of any such non-compliance with the Specifications within ten business days
of Sensus's receipt of the Material, the Material shall be deemed to meet
such Specifications. If Genentech agrees that the delivered Material does
not meet the Specifications, Genentech shall thereafter use its
commercially reasonable best efforts, at Sensus's own cost, to produce the
required amount of Material complying with the Specifications in as short a
time as commercially reasonably practicable. If Genentech disputes Sensus's
determination that the product fails to comply with the Specifications, the
parties shall proceed under Section 8.4(c) hereof. If Genentech is unable
to produce any required batch of Material in compliance with the
Specifications within 4 weeks following the date required for delivery of
such batch under the schedule agreed to by the parties under Section
8.4(a), then Sensus may terminate this Agreement, and upon such termination
Sensus shall be responsible for payment of any fees therefor accrued
through the date of termination
(C) In the event that Genentech disputes Sensus's
determination that any batch of Material delivered by Genentech hereunder
fails to meet the Specifications, and Genentech gives Sensus written notice
of such dispute within ten business days of receiving notice from Sensus of
its determination, Sensus shall submit samples of the product delivered by
Genentech that is the subject of the dispute (the "Disputed Product") to an
independent laboratory mutually agreed upon by the parties in good faith,
for testing as to conformity with the Specifications. The determination of
such independent laboratory shall be final with regard to the question of
whether such Disputed Product delivered by Genentech hereunder complies
with the Specifications. In the event that the Disputed Product is
determined not to comply with the Specifications by this procedure, such
product shall be returned to Genentech, Genentech shall pay all costs of
the independent laboratory analysis performed on such Disputed Product, and
Genentech shall provide Sensus conforming Material as soon as reasonable
practicable. In the event that the Disputed Product is determined to comply
with the Specifications by this procedure, such product shall be returned
to Sensus, and Sensus shall pay all costs of the independent laboratory
analysis performed on such Disputed Product.
8.5 PAYMENTS. Upon the closing of Sensus' first financing of at
least $[ * ] (including the financing referred to in Section 4.1.3), Sensus
shall simultaneously pay Genentech $[ * ] in non-refundable consideration
for the performance of the Project. In addition, Sensus shall pay Genentech
$[ * ] annually per each FTE (based upon expending 235 days per year in
performing his or her services) or in proportion for parts of such FTEs
dedicated to and actually conducting work on the Project and other work
related to the Project, payable quarterly, provided that Genentech shall
not be required to dedicate during the term of this Agreement more than a
total of eight FTE's
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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to the Project. Genentech shall provide quarterly invoices thirty (30) days
after the end of such quarter for the cost of the Genentech employees
dedicated to performing the Project in the prior quarter, which invoices
shall include a detail of the person days worked and PARTICULAR aspects of
the Project performed during such time. Sensus will remit such invoiced
amount to Genentech within thirty (30) days of receipt of such invoice.
8.6 TRANSFER OF MANUFACTURING INFORMATION.
(A) Regularly throughout the performance of the Project, but
in no event less frequently than once every calendar quarter, Genentech
shall provide Sensus a written report summarizing the results and
developments of the Project and characterizing the nature of all new
Manufacturing Information developed since the last report hereunder. At
Sensus' reasonable request, Genentech shall provide Sensus copies of
Genentech documents describing or setting forth the Manufacturing
Information.
(B) For use pursuant to Section 8.7, Genentech shall transfer
the Manufacturing Information to Sensus or a third party manufacturer of
Sensus's choice not less than 30 days after the anticipated completion or
termination of the Project if Genentech decides not to extend the Project
to include the scaleup and production of Material for a phase III clinical
trial or commercial use, as provided for in Section 8.3.
8.7 INTELLECTUAL PROPERTY. Genentech hereby grants Sensus a
nonexclusive, worldwide license, with the right to sublicense, during the
term of the Agreement to use the Manufacturing Information and to practice
the Manufacturing Patents solely in connection with the licenses granted
under Section 2.1 of this Agreement and so long as Sensus is meeting its
obligations under the Agreement, as amended. Royalties for this license are
included within the royalties described in Section 4.2.1.
8.8 REGULATORY SUBMISSIONS AND REVIEWS.
(A) Promptly after Sensus's request, Genentech shall,
consistent with appropriate regulatory practices, supply Sensus such
regulatory information specifically relating to the process for
manufacturing Growth Hormone Antagonists developed by Genentech under this
Article VIII as is necessary to file a Investigational New Drug application
for any such Growth Hormone Antagonist (the "IND"), naming Genentech as
supplier for Phase I, II and perhaps Phase III clinical trials of such
compound (the "Trial Material").
(B) After Genentech has completed the Project, Genentech shall
provide Sensus any additional information or data reflecting any changes to
the data and information relating to Trial Material or its manufacture as
provided pursuant to Section 8.8(a) above.
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(C) For any Drug Master File relating to Trial Material
("DMF"), Genentech shall submit to FDA a letter, signed by a duly
authorized representative, authorizing Sensus to reference the DMF. Sensus
shall have a right of reference to all DMFs relevant to Growth Hormone
Antagonists.
(D) Promptly after Sensus's reasonable request, Genentech
shall, consistent with appropriate regulatory practices, supply Sensus such
information in Genentech's possession specifically relating to the Growth
Hormone Antagonists and the process for manufacturing same as is necessary
for Sensus to submit or obtain regulatory applications or approvals
required in a foreign country for Sensus to conduct clinical trials of or
market such compounds. Genentech agrees to provide Sensus access to all
documents and information of Genentech specifically relating to the Growth
Hormone Antagonists and the process for manufacturing same as is necessary
for any regulatory submissions by Sensus covering such Growth Hormone
Antagonists.
(E) All costs of compiling, filing and maintaining DMFs and
any other regulatory documents that Genentech is required to submit to any
regulatory authority shall be at Sensus's expense, and consistent with the
FTE restrictions of Section 8.5.
(F) In the event that FDA or any other national, state, or
local regulatory authority shall make any inquiries or request or require
any information relating to an IND for Growth Hormone Antagonists which
relates to work performed by Genentech under this Article VIII, Genentech,
to the extent possible, shall assist Sensus in responding fully and
completely to such inquiry or request.
(G) At any time that representatives of FDA or of any
national, state or local regulatory authority advise Genentech that there
will be an inspection of Genentech's facility or facilities where a Growth
Hormone Antagonist, is, or will be, manufactured and which inspection
specifically relates to Genentech's manufacture of Growth Hormone
Antagonists, Genentech shall immediately notify Sensus of the date and time
at which such inspection is scheduled to occur.
(H) Genentech shall immediately advise Sensus in writing of
any and all regulatory actions involving its facilities or products or
process that relate or impact in any material manner to the manufacturing
process for a Growth Hormone Antagonist or production thereof, including
without limitation governmental inspection reports, findings and
disciplinary actions against Genentech and all corrective or remedial
actions taken in response thereto. Genentech shall also advise Sensus in
writing immediately upon discovering any material problems at its
facilities relating to the production of Growth Hormone Antagonist,
including contamination or manufacturing errors, and any other action or
omission that did, or could, adversely affect the safety, efficacy, quality
or stability of the Growth Hormone Antagonist, together with a statement of
all corrective or remedial action taken.
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(I) This Section 8.8 shall survive termination or expiration
of this Agreement.
8.9 MANUFACTURING WARRANTY. Genentech hereby represents and
warrants to Sensus that it will manufacture the Materials in accordance
with current Good Manufacturing Practices rules and regulations.
8.10 OBLIGATION UPON FINANCING. Genentech shall have no obligation
to begin the Project until Sensus receives the [ * ] Dollars ($[ * ])
described in Section 4.1.3.
8.11 TERMINATION. Except as otherwise provided, all of Genentech's
obligations under Article VIII shall terminate upon the completion of the
Project. Sensus may terminate its obligations under Article VIII as
provided in Section 8.4(b).
4. AMENDMENT OF SECTION 9.11.2. Section 9.11.2 of the Agreement is
hereby amended by adding to the first sentence of the Section, after the phrase
"sale of any Licensed Product," the following phrase: "or (iii) any negligence
or willful misconduct on the part of Genentech in the manufacture of Growth
Hormone Antagonists".
5. MISCELLANEOUS.
5.1 REPRESENTATIONS AND WARRANTIES. Each Party represents and
warrants to the other that, to the best of its knowledge, (i) it is free to
enter into this Amendment and (ii) in so doing it will not violate any other
agreement to which it is a party.
5.2 ENTIRE AGREEMENT AND AMENDMENT. Except as modified by this
Amendment and for that certain letter agreement attached to the Agreement as
Exhibit "F", the Agreement, as amended, remains in full force and effect and the
Agreement and Amendment contain and constitute the entire understanding and
agreement of the Parties and cancels and supersedes any and all prior
negotiations, correspondence, understanding and agreements, whether verbal or
written, between the parties respecting the subject matter hereof. No waiver,
modification or amendment of any provision of this Amendment shall be valid or
effective unless made in writing and signed by a duly authorized officer of each
of the Parties.
5.3 SEVERABILITY. In the event any one of the provisions of this
Amendment should for any reason be held by any court or authority having
jurisdiction over this Amendment or either of the Parties to be invalid, illegal
or unenforceable, such provision or provisions shall be validly reformed by
addition or deletion of wording as appropriate to avoid such result and as
nearly as possible approximate the intent of the Parties and, if unreformable,
shall be divisible and deleted in such jurisdiction; elsewhere, this Amendment
shall not be affected.
5.4 CAPTIONS. The captions to this Amendment are for convenience
only, and are to be of no force or effect in construing or interpreting any of
the provisions of this Amendment.
5.5 APPLICABLE LAW. This Amendment shall be governed by the laws
of the State of California, without regard to its conflicts of laws principles.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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IN WITNESS THEREOF, the Parties have caused this Amendment to be
executed by their respective duly authorized officers as of the day and year
first above written, each copy of which shall for all purposes be deemed to be
an original
GENENTECH, INC. SENSUS DRUG DEVELOPMENT CORPORATION
By:____________________________ By: [sig.]
--------------------------------
Title:_________________________ Title: President / COO
-----------------------------
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EXHIBIT H
---------
SENSUS CORPORATION - GENENTECH, INC.
PHARMACEUTICAL DEVELOPMENT/MANUFACTURING SERVICES
SCOPE OF WORK
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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V. [ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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IX. [ * ]
X. ESTABLISH & CHARACTERIZE [ * ]
. Coordinate with Sensus' designated QC contractor
XI. OTHER
. Provide samples of [ * ] if available
. Provide Sensus with appropriate documentation/records of above
services
. Meet with Sensus as required to monitor progress
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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EXHIBIT I
SPECIFICATIONS
(To be appended by parties)
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<PAGE>
[*] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
AMENDMENT OF LICENSE AGREEMENT
THIS AMENDMENT OF LICENSE AGREEMENT (the "Amendment") is entered into
effective as of February 03, 1995 (the "Effective Date"), by and between
GENENTECH, INC., Delaware corporation ("Genentech") and SENSUS DRUG DEVELOPMENT
CORPORATION, a Delaware corporation ("Sensus").
RECITALS
A. Genentech and Sensus entered into that certain. License Agreement dated as
of July 11, 1994, as amended previously on November 4, 1994 (the "Agreement"),
pursuant to which Genentech granted Sensus Licenses under certain patent rights
and know-how of Genentech;
B. Genentech and Sensus wish to amend the Agreement to provide for Genentech
to perform certain manufacturing process development and clinical product supply
services on behalf of Sensus, and to modify the equity investment and payment
terms of the Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. AMENDMENT OF ARTICLE I. Article I of the Agreement is hereby amended
by adding the following Sections to the Article:
"1.10 "FULLY BURDENED MANUFACTURING COSTS" shall mean the [ * ].
1.11 "MANUFACTURING INFORMATION" shall mean all information,
technology or materials developed by Genentech pursuant to the process
development efforts in Article 8 that constitute proprietary methods,
processes, techniques, data, inventions, formulations or biologically
active materials specifically relating to or useful for the manufacture of
Growth Hormone Antagonists, excluding clinical data, marketing and sales
data and regulatory filings, except insofar as any of the foregoing relate
to the pegylation of growth hormone or Growth Hormone Antagonists.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
1.12 "MANUFACTURING PATENTS" shall mean all patent applications and
patents issuing therefrom to the extent that they claim or relate to any
aspect of the Manufacturing Information.
1.13 "MATERIAL" shall mean Growth Hormone Antagonists described in
Exhibit H that Genentech shall produce and supply to Sensus as contemplated
under Article 8 for pre-clinical and Phase I/Phase II clinical use."
2. AMENDMENT OF EQUITY AND PAYMENT PROVISIONS. The provisions of Article
4 of the Agreement relating to "Equity and Payment" are amended and modified as
follows:
2.1. Section 4.1.2 of the License Agreement is hereby amended as
follows:
the phrase "by February 28, 1995" in Section 4.1.2 is deleted and
replaced with the phrase "by March 3l, 1995."
2.2. A new Section 4.1.3 is added to the Agreement, reading in its
entirety as follows:
"4.1.3. Genentech agrees to purchase [ * ] Dollars ($[ * ]) in
Sensus [ * ], on the same terms as the other investors in such financing,
provided that such financing closes by March 31, 1995 and that the total
amount invested in such financing in Sensus (including the Genentech
investment) is at least [ * ] Dollars ($[ * ]). Any equity investment by
Genentech under this Section 4.1.3 shall not count toward either (i) the $[
* ] or $[ * ] equity financing goals set Forth in Section 4.1.2, or (ii)
the [ * ]% equity ownership of Genentech set forth in Section 4.1.1."
2.3. In consideration of Genentech's effort with respect to the
Project, as set forth in Article 8 of the Agreement (as amended by this
Amendment), including delivery of all Materials required to be supplied to
Sensus thereunder in compliance with the Specifications (as defined in Section
8.4(a) of the Agreement as amended), the royalty provisions in Section 4.2 of
the Agreement are mended and modified as follows:
(a) The first sentence of Section 4.2.1 is amended and restated as
follows:
"Sensus shall pay Genentech a royalty in the amount of [ * ]% of Net
Sales of each Licensed Product in each country wherein the manufacture, use
or sale of the Growth Hormone Antagonist component of such Licensed Product
is within the scope of a valid claim of a Patent Right or any Manufacturing
Patent in such country, and [ * ]% of such Net Sales of each Licensed
Product in all other countries."
(b) In Section 4.2.7 of the Agreement, the phrase "to a rate below
[ * ] percent" is amended to read "to a rate below [ * ] %".
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
3. PROCESS DEVELOPMENT TERMS. The existing Article 8 in the Agreement is
deleted in its entirety and a new Article 8, set forth in full below, is
substituted in its place.
ARTICLE VIII
PROCESS DEVELOPMENT AND SUPPLY OF MATERIALS
8.1 PROCESS DEVELOPMENT PROJECT. Subject to the terms of this
Agreement. Sensus hereby engages Genentech to use its commercially
reasonable best efforts to undertake and perform process development
relating to Growth Hormone Antagonists, with the intent of developing a GMP
process for producing [ * ] bulk quantities of such compounds. Genentech
shall use its commercially reasonable best efforts to perform the specific
process development and Materials supply tasks set forth on the attached
Exhibit H, as such tasks may be more fully described or modified by written
agreement of the parties from time to time during the performance of such
tasks (the "Project"). Genentech and Sensus acknowledge that the services
provided by Genentech under this Article 8 are experimental in nature and
may not achieve the desired result.
8.2 SENSUS PARTICIPATION IN PROJECT. Genentech shall involve
Sensus on a continuing and active basis during the Project. In particular,
Genentech shall meet and consult regularly with Sensus to discuss the
results of the Project and to agree on further refinement or specification
of the tasks, as set forth on Exhibit H, to be performed under the Project.
8.3 PROJECT TIME LINE. Subject to the terms of this Agreement,
Genentech shall use its commercially reasonable best efforts to complete
the Project, including supply of Materials to be supplied thereunder. The
Parties agree to meet, at an appropriate time prior to the anticipated
completion of the Project, to discuss possible terms for extending the
development and supply arrangement to the scaleup and production of
material for phase III clinical trial and commercial use. Genentech,
however, is under no obligation to agree to such an extension.
8.4 MATERIALS SUPPLY.
(a) Genentech shall use its commercially reasonable best efforts to
supply the specific Materials described in Exhibit H, according to such
schedule and in such quantities to be agreed by the Parties. Sensus shall
pay Genentech for supply of Materials an amount [ * ] of such Materials.
Such payments shall be made within thirty (30) days of receipt of an
invoice from Genentech. The Materials supplied by Genentech hereunder shall
conform to such specifications, including release and QA/QC specifications,
as will be mutually agreed to by the Parties and attached hereto as Exhibit
I (the "Specifications"). The Parties agree that, under the Project,
Genentech shall develop manufacturing processes for the Growth Hormone
Antagonists sufficient to supply Sensus with batches of Material
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
sufficient for pre-clinical and phase I/phase II clinical use. At the
beginning of each calendar quarter, Genentech and Sensus will mutually
agree upon a Material production and delivery schedule for such quarter.
(b) Upon receipt of each batch of Material to be provided by
Genentech pursuant to Section 8.4,(a), Sensus shall confirm that such
product meets the Specifications by performing pertinent analytical tests.
In the event that Sensus determines that such Material does not comply with
the Specifications in Exhibit I. Sensus shall so inform Genentech in
writing within a reasonable period of time not to exceed 90 days from
receipt of such Material, describing in detail the failure to meet the
Specifications. If Sensus does not so inform Genentech of any such non-
compliance with the Specifications within ten business days of Sensus'
receipt of the Material, the Material shall be deemed to meet such
Specifications. If Genentech agrees that the delivered Material does not
meet the Specifications, Genentech shall thereafter use its commercially
reasonable best efforts, at Sensus's cost, to produce the required amount
of Material complying with the Specifications in as short a time as
commercially reasonably practicable. In no event shall Sensus be relieved
of the obligation to pay for the non-complying Material. If Genentech
disputes Sensus's determination that the product fails to comply with the
Specifications, the parties shall proceed under Section 8.4(c) hereof. If
Genentech is unable to produce any required batch of Material in compliance
with the Specifications within a reasonable period of time following the
date required for delivery of such batch under the production and delivery
schedule agreed to by the parties under Section 8.4(a), then Sensus may
terminate this Agreement, and upon such termination Sensus shall be
responsible for payment of all fees and costs accrued through the date of
termination.
(c) In the event that Genentech disputes Sensus' determination that
any batch of Material delivered by Genentech hereunder fails to meet the
Specifications, and Genentech gives Sensus written notice of such dispute
within ten business days of receiving notice from Sensus of its
determination, Sensus shall submit samples of the product delivered by
Genentech that is the subject of the dispute (the "Disputed Product") to an
independent laboratory mutually agreed upon by the parties in good faith,
for testing as to conformity with the Specifications. The determination of
such independent laboratory shall be final with regard to the question of
whether such Disputed Product delivered by Genentech hereunder complies
with the Specifications. In the event that the Disputed Product is
determined not to comply with the Specifications by this procedure, such
product shall be returned to Genentech, Genentech shall pay all costs of
the independent laboratory analysis performed on such Disputed Product, and
Genentech shall provide Sensus conforming Material as soon as reasonably
practicable. In the event that the Disputed Product is determined to comply
with the Specifications by this procedure, such product shall be returned
to Sensus, and Sensus shall pay all costs of the independent laboratory
analysis performed on such Disputed Product. In the event the Disputed
Product does not comply with the Specifications, Sensus shall pay for the
Disputed Product and any replacement Material.
4.
<PAGE>
8.5 PAYMENTS. Upon the closing of Sensus' first financing of at
least $[ * ] (including the financing referred to in Section 4.1.3), Sensus
shall simultaneously pay Genentech $[ * ] in non-refundable consideration
for Genentech agreeing to undertake the Project. In addition, Sensus shall
pay Genentech $[ * ] annually per each FTE (based upon expending 235 days
per year in performing his or her services) or in proportion for parts of
such FTEs dedicated to and actually conducting work on the Project and
other work related to the Project, payable quarterly, provided that
Genentech shall not be required to dedicate during the term of this
Agreement more than a total of twelve FTEs to the Project, excluding
manufacturing personnel. Genentech shall provide quarterly invoices thirty
(30) days after the end of each quarter for the cost of the Genentech
employees dedicated to performing the Project in the prior quarter, which
invoices shall include a detail of the person days worked and particular
aspects of the Project performed during such time. Sensus will remit such
invoiced amount to Genentech within thirty (30) days of receipt of such
invoice.
8.6 TRANSFER OF MANUFACTURING INFORMATION.
(a) Regularly throughout the performance of the Project, but in
no event less frequently than once every calendar quarter, Genentech shall
provide Sensus a written report summarizing the results and developments of
the Project and characterizing the nature of all new Manufacturing
Information developed since the last report hereunder. At Sensus"
reasonable request, Genentech shall provide Sensus copies of Genentech
documents describing or setting forth the Manufacturing Information.
(b) For use pursuant to Section 8.7, Genentech shall transfer the
Manufacturing Information to Sensus or a third party manufacturer of
Sensus' choice (who executes a confidentiality agreement reasonably
satisfactory to Genentech, which agreement shall not prevent such party
from using the Manufacturing Information on Sensus' behalf) not more than
60 days after the anticipated completion or termination of the Project if
Genentech decides not to extend the Project to include the scaleup and
production of Material for a phase III clinical trial or commercial use, as
provided for in Section 8.3.
8.7 INTELLECTUAL PROPERTY. Genentech hereby grants Sensus a
nonexclusive, worldwide license, with the right to sublicense, during the
term of the Agreement to use the Manufacturing Information and to practice
the Manufacturing Parents solely in connection with the licenses granted
under Section 2.1 of this Agreement and so long as Sensus is meeting its
obligations under the Agreement, as amended. Royalties for this license are
included within the royalties described in Section 4.2.1.
8.8 REGULATORY SUBMISSIONS AND REVIEWS.
(a) Promptly after Sensus' request, Genentech shall, consistent
with appropriate regulatory practices, supply Sensus such regulatory
information specifically relating to the process for manufacturing Growth
Hormone Antagonists developed by
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
5.
<PAGE>
Genentech under this Article 8 as is necessary to file an Investigational New
Drug application for any such Growth Hormone Antagonist (the "IND"), naming
Genentech as supplier for Phase I, II and perhaps Phase III clinical trials of
such compound (the "Trial Material").
(b) After Genentech has completed the Project, Genentech shall, consistent
with appropriate regulatory-practices, provide Sensus any additional information
or data reflecting any changes to the data and information relating to Trial
Material as provided pursuant to Section 8.8(a) above.
(c) Promptly after Sensus's reasonable request, Genentech shall consistent
with appropriate regulatory practices, supply Sensus such information in
Genentech's possession specifically relating to the process for manufacturing
Growth Hormone Antagonists developed by Genentech under this Article 8 as is
necessary for Sensus to submit or obtain regulatory applications or approvals
required in a foreign country for Sensus to conduct clinical trials of or market
such compounds. Genentech agrees to provide Sensus access to all documents and
information of Genentech specifically relating to the Growth Hormone Antagonists
and the process for manufacturing same as is necessary for any regulatory
submissions by Sensus covering such Growth Hormone Antagonists.
(d) All costs of compiling, filing and maintaining any regulatory
documents that Genentech is required to submit to any regulatory authority shall
be at Sensus' expense, and consistent with the FTE restrictions of Section 8.5.
(e) In the event that FDA or any other national, state, or local
regulatory authority shall make any inquiries or request or require any
information relating to an IND for Growth Hormone Antagonists which relates to
work performed by Genentech under this Article 8, Genentech, to the extent
possible, shall assist Sensus in responding fully and completely to such inquiry
or request. Any effort expended by Genentech hereunder in assisting Sensus shall
be at Sensus' expense and consistent with the FTE restrictions of Section 8.5.
(f) At any time that representatives of FDA or of any national, state or
local regulatory authority advise Genentech that there will be an inspection of
Genentech's facility or facilities where a Growth Hormone Antagonist, is, or
will be, manufactured and which inspection specifically relates to Genentech's
manufacture of Growth Hormone Antagonists, Genentech shall immediately notify
Sensus of the date and time at which such inspection is scheduled to occur.
(g) Genentech shall immediately advise Sensus in writing of any and all
regulatory actions involving its facilities or products or process that relate
or impact in any material manner to the manufacturing process for a Growth
Hormone Antagonist or production thereof, including without limitation
governmental inspection reports, findings and disciplinary actions against
Genentech and all corrective or remedial actions
6.
<PAGE>
taken in response thereto. Genentech shall also advise Sensus in writing
immediately upon discovering any material problems at its facilities relating to
the production of Growth Hormone Antagonist, including contamination or
manufacturing errors, and any other action or omission that did, or could,
adversely affect the safety, efficacy, quality or stability of the Growth
Hormone Antagonist, together with a statement of all corrective or remedial
action taken.
8.9 MANUFACTURING WARRANTY. Genentech hereby represents and warrants to
Sensus that it will manufacture the Materials for use in Phase I & Phase II
clinical trials in accordance with current Good Manufacturing Practices rules
and regulations.
8.10 OBLIGATION UPON FINANCING. Genentech shall have no obligation to begin
the Project until Sensus receives the [ * ] Dollars ($[ * ]) described in
Section 4.1.3.
8.11 TERMINATION. Except as otherwise provided, all of Genentech's
obligations under Article 8 shall terminate upon the earlier of (i) the
completion of the Project or (ii) the expenditure by Genentech of twelve FTE's,
excluding manufacturing personnel. If Genentech's obligations terminate under
clause (i) of the preceding sentence or Sensus terminates the Agreement pursuant
to Section 8.4(b), Genentech's obligations under Sections 8.6(b), 8.7 and 8.8
shall survive such termination. If Genentech's obligations terminate under
clause (ii) of the preceding sentence, Genentech's obligations under Sections
8.6(b) and 8.7 shall survive such termination. Sensus may terminate its
obligations under Article 8 as provided in Section 8.4(b)."
4. AMENDMENT OF SECTION 9.11.2. Section 9.11.2 of the Agreement is
hereby amended by adding to the first sentence of the Section, after the phrase
"sale of any Licensed Product," the following phrase: "or (iii) any negligence
or willful misconduct on the part of Genentech in the manufacture of Growth
Hormone Antagonists".
5. MISCELLANEOUS
5.1 REPRESENTATIONS AND WARRANTIES. Each Party represents and
warrants to the other that, to the best of its knowledge, (i) it is free to
enter into this Amendment and (ii) in so doing it will not violate any other
agreement to which it is a party.
5.2 ENTIRE AGREEMENT AND AMENDMENT. Except as modified by this
Amendment and for that certain letter agreement attached to the Agreement as
Exhibit "F", the Agreement, as amended, remains in full force and effect and the
Agreement and Amendment contain and constitute the entire understanding and
agreement of the Parties and cancels and supersedes any and all prior
negotiations, correspondence, understanding and agreements, whether verbal or
written, between the parties respecting the subject matter hereof. No waiver,
modification or amendment of any provision of this Amendment shall be valid or
effective unless made in writing and signed by a duly authorized officer of each
of the Parties.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
7.
<PAGE>
5.3 SEVERABILITY. In the event any one of the provisions of this
Amendment should for any reason be held by any court or authority having
jurisdiction over this Amendment or either of the Parties to be invalid, illegal
or unenforceable, such provision or provisions shall be validly reformed by
addition or deletion of wording as appropriate to avoid such result and as
nearly as possible approximate the intent of the Parties and, if unreformable,
shall be divisible and deleted in such jurisdiction; elsewhere, this Amendment
shall not be affected.
5.4 CAPTIONS. The captions to this Amendment are for convenience only,
and are to be of no force or effect in construing or interpreting any of the
provisions of this Amendment.
5.5 APPLICABLE LAW. This Amendment shall be governed by the laws of the
State of California, without regard to its conflicts of laws principles.
IN WITNESS THEREOF, the Parties have caused this Amendment to be executed
by their respective duly authorized officers as of the day and year first above
written, each copy of which shall for all purposes be deemed to be an original.
GENENTECH, INC. SENSUS DRUG DEVELOPMENT CORPORATION
By [SIGNATURE] By: [SIGNATURE]
----------------------------- ---------------------------
Title: Senior Vice President Title: President & COO
-------------------------
8.
<PAGE>
EXHIBIT H
SENSUS CORPORATION - GENENTECH, INC.
PHARMACEUTICAL DEVELOPMENT/MANUFACTURING SERVICES
SCOPE OF WORK
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
[ * ]
X. ESTABLISH & CHARACTERIZE [ * ]
. Coordinate with Sensus' designated QC contractor
XI. OTHER
. Provide samples of [ * ] if available
. Provide Sensus with appropriate documentation/records of above
services
. Meet with Sensus as required to monitor progress
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
AMENDMENT OF LICENSE AGREEMENT
THIS AMENDEMENT OF LICENSE AGREEMENT (the "Amendment") is entered into
effective as of March 31, 1995 (the "Effective Date"), by and between GENENTECH,
INC., a Delaware corporation ("Genentech") and SENSUS DRUG DEVELOPMENT
CORPORATION, a Delaware corporation ("Sensus").
RECITALS
A. Genentech and Sensus entered into that certain License Agreement dated as
of July 11, 1994, as amended previously on November 4, 1994 and February 3,
1995, (the "Agreement") pursuant to which Genentech granted Sensus licenses
under certain patent rights and know-how of Genentech:
B. Genentech and Sensus wish to amend the Agreement to modify the equity
investment and payment terms of the Agreement:
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. AMENDMENT OF EQUITY AND PAYMENT PROVISIONS. The provisions of Article IV
of the Agreement relating to "Equity and Payment" are amended and modified as
follows:
1.1 Section 4.1.1 (b) of the Agreement is hereby amended as follows:
(A) Each reference to "[ * ]" in Section 4.1.1 (b) is hereby
changed to "[ * ]".
1.2 Section 4.1.2 of the Agreement is hereby amended as follows:
(A) The phrase "by March 31, 1995" in Section 4.1.2 is hereby
deleted and replaced with the phrase "by July 15, 1995".
(B) The table in section 4.1.2 is hereby deleted and replaced
with the following schedule
Months After February 3, 1995
Within Which Second
Amount Raised in First Closing Closing to Occur
------------------------------ -----------------------------
[ * ] [ * ]
(C) The phrase "at least $[ * ]" in Section 4.1.2 is hereby
deleted and replaced with the phrase "at least $[ * ]".
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
(D) The phrase "an additional [ * ]" in Section 4.1.2 is hereby
deleted and replaced with the phrase "an additional $[ * ]".
1.3 Section 4.1.3 of the Agreement is hereby amended as follows:
(A) The phrase "by March 31, 1995" is hereby deleted and
replaced by the phrase "by July 15, 1995".
(B) The phrase "at least [ * ] Dollars ($[ * ])" in Section
4.1.3 is hereby deleted and replaced with the phrase "at
least [ * ] Dollars ($[ * ])".
(C) The phrase "the $[ * ]" in section 4.1.3 is hereby deleted
and replaced by the phrase "the $[ * ]".
(D) The reference to "[ * ]" in Section 4.1.3 is changed to
"[ * ]".
2. AMENDMENT OF PROCESS DEVELOPMENT AND MATERIAL SUPPLY PROVISIONS. The
provisions of Article VIII of the Agreement relating to "Process
Development and Supply of Materials" are amended and modified as follow:
2.1 Section 8.5 of the Agreement is hereby amended as follows:
(A) The phrase "at least $[ * ]" in Section 8.5 is hereby
deleted and replaced by the phrase "at least $[ * ]".
2.2 Section 8.10 is hereby amended as follows:
(A) The phrase "[ * ] Dollars ($[ * ])" in Section 8.10 is
hereby deleted and replaced by the phrase "[ * ] dollars
($[ * ])".
IN WITNESS THEREOF, the Parties have caused this Amendment to be
executed by their respective duly authorized officers as of the day and year
first above written, each copy of which shall for all purposes be deemed to be
at original.
GENENTECH, INC. SENSUS DRUG DEVELOPMENT CORPORATION
By: [SIGNATURE] By: [SIGNATURE]
--------------------------- ---------------------------------
Title: SR VP Title: President/CEO
------------------------ ------------------------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
FOURTH AMENDMENT TO LICENSE AGREEMENT
THIS AMENDMENT TO LICENSE AGREEMENT (the "Amendment") is entered into
effective as of __________, 1998 (the "Effective Date"), by and between
GENENTECH, INC., a Delaware corporation ("Genentech") and SENSUS DRUG
DEVELOPMENT CORPORATION, a Delaware corporation ("Sensus").
RECITALS
A. Genentech and Sensus entered into that certain License Agreement dated as
of July 11, 1994, as amended previously on November 4, 1994, February 3,
1995 and March 31, 1995 (the "Agreement") pursuant to which Genentech
granted Sensus licenses under certain patent rights and know-how of
Genentech;
B. Sensus wishes to obtain the [ * ] from Genentech to support their current
studies with the human growth hormone antagonist;
C. Genentech is willing to supply the [ * ] to Sensus on the terms and subject
to conditions set forth below;
D. Genentech and Sensus wish to amend the Agreement to modify the Material
List contained in Exhibit E of the Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. AMENDMENT OF EXHIBIT E. Exhibit E of the Agreement is hereby amended
by adding the following to the Material List:
[ * ]
2. MISCELLANEOUS.
2.1 CONDITIONS. As a condition to adding the above material to
Exhibit E of the Agreement, Sensus agrees that such material will constitute
confidential information under Article VI of the Agreement, and that Sensus will
use such material solely for animal or in vitro studies to further understand
the role of the [ * ].
Notwithstanding the foregoing, Sensus may transfer such material to
third parties for purification or other purposes relating to the processing of
the
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
material, so long as any such third party is bound by confidentiality provisions
no less stringent than those set forth in the Agreement.
2.2 ENTIRE AGREEMENT AND AMENDMENT. Except as modified by this
Amendment, the Agreement, remains in full force and effect and the Agreement and
Amendment contain and constitute the entire understanding and agreement of the
Parties and cancels and supersedes any and all prior negotiations,
correspondence, understanding and agreements, whether verbal or written, between
the parties respecting the subject matter hereof. No waiver, modification or
amendment of any provision of this Amendment shall be valid or effective unless
made in writing and signed by a duly authorized officer of each of the Parties.
IN WITNESS THEREOF, the Parties have caused this Amendment to be executed
by their respective duly authorized officers as of the day and year first above
written, each copy of which shall for all purposes be deemed to be an original.
GENENTECH, INC. SENSUS DRUG DEVELOPMENT CORPORATION
By: [SIGNATURE] By: [SIGNATURE] 2-9-98
--------------------------- -----------------------------
Title: VP Process Sciences Title: Sr. VP Research, Mfg.
------------------------ ------------------------
- --------------------------------------------------------------------------------
2.
<PAGE>
[*] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
FIFTH AMENDMENT TO LICENSE AGREEMENT
THIS AMENDMENT TO LICENSE AGREEMENT (the "Amendment") is entered into
effective as of May 19, 1998 (the "Effective Date"), by and between
GENENTECH, INC., a Delaware corporation ("Genentech") and SENSUS DRUG
DEVELOPMENT CORPORATION, a Delaware corporation ("Sensus").
RECITALS
A. Genentech and Sensus entered into that certain License Agreement dated
as of July 11, 1994, as amended previously on November 4, 1994, February 3,
1995, March 31, 1995, and February 9, 1998 (the "Agreement") pursuant to which
Genentech granted Sensus licenses under certain patent rights and know-how of
Genentech;
B. Sensus wishes to obtain certain [ * ] from Genentech to support their
current studies with the human growth hormone antagonist;
C. Genentech is willing to supply the [ * ] to Sensus on the terms and
subject to conditions set forth below;
D. Genentech and Sensus wish to amend the Agreement to modify the
Material List contained in Exhibit E of the Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. AMENDMENT OF EXHIBIT E. Exhibit E of the Agreement is hereby amended
by adding the following to the Material List:
[ * ] used for gauging the purity of [ * ] products (specifically,
[ * ]) expressed in [ * ]
2. MISCELLANEOUS.
2.1 CONDITIONS. As a condition to adding the above material to
Exhibit E of the Agreement, Sensus agrees that such material will constitute
confidential information under Article VI of the Agreement, and that Sensus will
use such material solely for animal or in vitro studies to further understand
the role of the growth hormone receptor in physiology and disease.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
Notwithstanding the foregoing, Sensus may transfer such material to third
parties for purification or other purposes relating to the processing of the
material, so long as any such third party is bound by confidentiality provisions
no less stringent than those set forth in the Agreement.
2.2 ENTIRE AGREEMENT AND AMENDMENT. Except as modified by this
Amendment, the Agreement, remains in full force and effect and the Agreement and
Amendment contain and constitute the entire understanding and agreement of the
Parties and cancels and supersedes any and all prior negotiations,
correspondence, understanding and agreements, whether verbal or written, between
the parties respecting the subject matter hereof. No waiver, modification or
amendment of any provision of this Amendment shall be valid or effective unless
made in writing and signed by a duly authorized officer of each of the Parties.
IN WITNESS THEREOF, the Parties have caused this Amendment to be executed
by their respective duly authorized officers as of the day and year first above
written, each copy of which shall for all purposes be deemed to be an original.
GENENTECH, INC. SENSUS DRUG DEVELOPMENT CORPORATION
By: [SIGNATURE] By: [SIGNATURE]
------------------------------ ---------------------------------
Title: VP Process Sciences Title: Sr. VP
--------------------------- ------------------------------
2.
<PAGE>
Bracketed information omitted and filed separately with the Securities and
Exchange Commission
Confidential Treatment Requested Under 17 C.F.R. Sections 200.80(b)(4), 200.83
and 240.24b-2
EXHIBIT 10.8
BIOTECHNOLOGY LICENSING AND TRANSFER AGREEMENT
between
OHIO UNIVERSITY EDISON ANIMAL BIOTECHNOLOGY CENTER
AND
DRUG DEVELOPMENT INVESTMENT CORP.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Definitions.................................................... 1
2. License Grant.................................................. 6
3. Technical and Scientific Assistance............................ 9
4. Patent Filing, Maintenance and Extension....................... 10
5. Patent Infringement Action by a Third Party.................... 12
6. Patent Infringement Action Against a Third Party............... 14
7. Compulsory Licensees........................................... 17
8. Payment........................................................ 17
9. Reporting and Record Keeping................................... 21
10. Licensor's Representations and Warranties...................... 22
11. Licensee's Representations and Warranties...................... 23
12. Licensee's Duties.............................................. 24
13. Manufacturing Facility......................................... 25
14. Insurance...................................................... 25
15. Patent Marking................................................. 25
16. Term and Termination........................................... 26
17. Confidential Information....................................... 29
18. New Developments............................................... 32
19. Indemnification................................................ 33
20. Government Requirements and Approvals.......................... 36
21. Force Majeure.................................................. 37
22. Assignments and Affiliates..................................... 37
23. Arbitration.................................................... 38
24. Governing Law.................................................. 38
25. General Provisions............................................. 39
(a) Integrated Agreement...................................... 39
(b) Severability and Reformation.............................. 39
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(c) Notices................................................... 39
(d) Construction.............................................. 41
(e) Captions.................................................. 41
(f) Waiver.................................................... 41
(g) Cumulative Remedies....................................... 41
(h) Litigation Costs.......................................... 41
(i) Further Assurances........................................ 41
(j) No Partnership............................................ 42
(k) Confidentiality Pending Effectiveness of Agreement........ 42
(l) Interest on Delinquent Obligations........................ 42
(m) Signatory Authority....................................... 42
(n) Multiple Counterparts..................................... 42
</TABLE>
Exhibits
- --------
Exhibit A........................................................... 44
Exhibit B........................................................... 45
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BIOTECHNOLOGY LICENSING AND TRANSFER AGREEMENT
THIS AGREEMENT, entered into as of the Effective Date (as hereinafter
defined), between. OHIO UNIVERSITY, a state chartered university and its Edison
Animal Biotechnology Center, a department of OHIO UNIVERSITY, currently located
at 101 University Research and Technology Center, Athens, Ohio 45701
(hereinafter collectively referred to as "OU/Edison" or "Licensor"), and DRUG
DEVELOPMENT INVESTMENT CORP., a corporation organized and existing under the
laws of Texas, having a principal place of business at 570 Penllyn Pike, Blue
Bell, Pennsylvania 19422, including all Affiliates, as herein defined
(hereinafter collectively referred to as "Licensee").
RECITALS:
WHEREAS, Licensor, through the research conducted by John Kopchick and
those supervised by him, has developed technology in the field of growth
hormones that, among other applications, may be effective in the control,
prevention and treatment of disease; and has filed for patent protection
concerning the technology; and
WHEREAS, Licensor desires to promote the development of the technology and
its use for the public benefit, and to this end is granting to Licensee
exclusive rights and licenses in the patents, patent applications, technical
information and know-how related to and constituting the technology, and
Licensee desires to accept such rights and licenses in accordance with the terms
set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties agree as follows:
1. DEFINITIONS.
(A) "AFFILIATE" means, with respect to either party, any legal entity that
directly or indirectly controls, is controlled by, or is under common
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control with, such party. For purposes of this definition, "control" means the
power, whether or not normally exercised, to direct the management and affairs
of a legal entity, directly or indirectly, whether through the ownership of
voting securities, by agreement, custom or law. In the case of a corporation or
partnership, the direct or indirect ownership of fifty percent (50%) or more of
its outstanding voting equity shall in any case be deemed to confer control,
provided that the direct or indirect ownership of a lesser percentage of such
equity shall not necessarily preclude the existence of control where such
control is otherwise shown to exist, particularly with respect to a foreign
entity where legal limitations on the maximum foreign equity ownership may
apply.
(B) "DERIVATIVE PRODUCTS" means all products, including compounds, services
or methods of treatment, derived from the Licensed Technology.
(C) "DOLLARS" and "$" refer to the official currency of the United States
of America.
(D) The "EFFECTIVE DATE" of this Agreement, subject to Section 20(b), shall
be deemed to be January 18 , 1993.
(E) "FDA" means the U.S. Food and Drug Administration, and any successor
agency thereof.
(F) "IND" means an Investigational New Drug application submitted to the
FDA under the regulations set forth in 21 Code of Federal Regulations Part 312
or any successor regulations thereof, providing for studies of the use or
efficacy of the Licensed Technology and/or Derivative Products in the prevention
and/or treatment of disease in humans.
(G) "LICENSED TECHNOLOGY" means: (i) all growth hormone analogs (including
growth hormone agonists and antagonists), growth hormone receptor analogs and/or
other products or targets of intracellular growth hormone action (including
second messengers or other intracellular mediators of growth hormone
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action), and molecules of inorganic, organic or other structure with growth
hormone mimetic (and/or growth hormone antagonistic) effects; (ii) all
transgenic animals and cell lines that express such growth hormone analogs,
growth hormone receptor analogs and/or other products or targets of
intracellular growth hormone action; (iii) all methods of treating human
diseases utilizing such growth hormone analogs, growth hormone receptor analogs
and/or other products or targets of intracellular growth hormone action, that
have been discovered or developed at OU/Edison to date, or that are hereafter
discovered or developed at OU/Edison or in collaboration with OU/Edison (to the
extent of OU/Edison's rights in or with respect to such technology), in either
case (A) through research conducted by John Kopchick and those supervised by
him, or (B) in conjunction with or under the auspices of the Edison Animal
Biotechnology Center, or any facility controlled by the Edison Animal
Biotechnology Center during the term of the Sponsored Research Agreement,
including but not limited to the specific inventions by John J. Kopchick and
those supervised by him relating to growth hormone action; and (iv) all methods,
procedures and uses for assaying growth hormone or growth hormone analog
presence in fluids or other media, and/or growth hormone or growth hormone
mimetic or growth hormone antagonistic biologic action, including methods for
screening compounds for desired biologic activities and methods for the
diagnosis or treatment of disease. In the event growth hormone research is
conducted by an institution or facility that is not sponsored or controlled by
OU/Edison, but OU/Edison or John J. Kopchick (or those supervised by him in
research matters relating to growth hormone action) cooperates in the
performance of the research, or consults with respect to such research, and Ohio
University or OU/Edison acquires patent rights with respect to the discoveries
and inventions thereby developed, such rights shall be deemed a part of the
Licensed Technology. The Licensed Technology shall also be deemed to include the
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Derivative Products, the Patent Rights and the Production Technology, as herein
defined. The only exception to Licensed Technology defined in this section 1(g)
is a previous research contract (unamended) between OU/Edison and American
Cyanamid Company dated June 12, 1992 (the "American Cyanamid Contract").
(H) "LITIGATION COSTS" and "ARBITRATION COSTS" mean all expenses reasonably
and customarily incurred in litigation or arbitration proceedings, respectively,
including court costs, arbitration fees, attorney's fees, consulting and
testifying expert fees and customary copying, telephone, telefax, postage and
similar costs. A reference to Litigation Costs shall mean Arbitration Costs, and
vice versa, where appropriate to the context.
(I) "NET REVENUES" shall mean all revenues actually received by the Seller
(as herein defined) from the Sale (as herein defined) of the Derivative Products
in the marketplace, not including the following: (i) discounts allowed in
amounts customary in the trade; (ii) sales, VAT and use taxes, and tariffs and
custom duties imposed with reference to particular Sales; (iii) outbound
transportation charges prepaid or allowed; (iv) amounts allowed or credited on
returns; and (v) packaging and insurance charges on shipments or deliveries to
customers.
(J) "OPTION AGREEMENT" means that certain agreement between Ohio University
and Licensee of approximately even date granting Licensee option and first
refusal rights with respect to certain ancillary technologies related to the
Licensed Technology.
(K) "PATENT RIGHTS" means (i) those patent applications listed in Exhibit A
attached hereto and made a part hereof, and any other patent applications that
relate to or embody the Licensed Technology (collectively, the "Patent
Applications") and (ii) all letters patent (collectively, the "Licensed
Patents") issuing on any Patent Applications, whether foreign or domestic,
together with
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all registrations, amendments, divisions, continuations, continuations in part,
extensions and renewals, reexaminations, improvements, substitutions, additions,
confirmations and revalidations and reissues thereof.
(L) "PRODUCTION TECHNOLOGY" means the full range of technical information
and know-how, processes, procedures, devices, compositions, methods, formulae,
protocols, techniques, quality control standards, measurements, assays and
studies, software programs and underlying source codes, designs, drawings and
data now or hereafter acquired, controlled by, and/or available to Licensor
relating to the Licensed Technology and Derivative Products that is not
contained within the claims of the Patent Rights, but which is necessary at any
time for practicing the inventions covered by the Patent Rights, or non-patented
inventions covered by the Licensed Technology. Excluded from the definition of
Production Technology are the computer programs used in biomolecular modeling of
the growth hormone created by the Ohio University, College of Engineering. The
biomolecular modeling computer programs are subject to the terms of the
"Software Licensing Agreement" between University and Licensee of approximately
even date herewith.
(M) "REGULATORY APPROVAL" means, with respect to a given country, all
approvals from any Regulatory Authority necessary for Licensee to conduct its
business with respect to the Licensed Technology in such country.
(N) "REGULATORY AUTHORITY" means the governmental authority responsible for
making and/or enforcing applicable public laws and regulations, or granting
Regulatory Approval in a given jurisdiction.
(O) "SALE" means any sale, lease, license, sublicense, distribution,
transfer, assignment in whole or in part, exchange, or other disposition for
value by Licensee, Sublicensee or Licensee's Affiliates to a party other than
Licensor or Licensee, or their respective Affiliates, of any rights held or
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Derivative Products acquired by Licensee hereunder, and shall include without
limitation the use of such term as contemplated by 35 U.S.C. Section 154. The
terms "Sell," "Sold" and "Selling" shall have an analogous meaning to Sale.
"Seller" shall mean a person who Sells a Derivative Product.
(P) "SPONSORED RESEARCH AGREEMENT" means that certain agreement between the
parties by that title of approximately even date herewith.
2. LICENSE GRANT.
(A) Licensor hereby grants to Licensee (including its Affiliates) and
Licensee hereby accepts, upon the terms and conditions herein set forth, an
exclusive worldwide license (the "License") in and to the Licensed Technology,
including, without limitation, the exclusive right under the Licensed
Technology, to make, use, and Sell (directly or through independent
distributors) the Licensed Technology in accordance with this Agreement, and
also including, without limitation, the right to pursue further research,
discoveries and inventions, and construct or acquire any apparatus and
facilities useful in the development of the Licensed Technology. Licensee shall
have the right to transfer, in whole or in part, the rights granted in this
Agreement to any Affiliate as provided in Section 22 below. Subject to the
provisions of Section 17(g) below, Licensor shall not distribute to any third
party any part of the Licensed Technology without Licensee's prior written
consent.
(B) Licensor will not compete directly or indirectly with the commercial
exploitation by Licensee or any sublicensee of the Licensed Technology, or any
portion thereof, during the term of this Agreement, except that Licensor shall
have the unrestricted right to fully utilize and commercially exploit any
portion of the Licensed Technology in which Licensor may hereafter reacquire
rights pursuant to the terms of this Agreement. Licensor shall not assert any
Patent
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Rights against Licensee relating to the Licensed Technology prior to the lawful
termination of the rights granted under this Agreement.
(C) Licensor agrees that it will not intentionally divert research from the
Edison Animal Biotechnology Center in a manner which would operate to circumvent
its commitments under this Agreement.
(D) OU agrees that (i) it will not expand the scope in a manner that would
interfere with, the rights granted herein, or extend the term of the aforesaid
American Cyanamid Contract beyond June 15, 1994 if such extension would in any
manner inhibit or impair the performance of OU/Edison's responsibilities under
this Agreement or the Sponsored Research Agreement, (ii) it will segregate the
funding received on the American Cyanamid Contract so that no such funding is
expended on the activities contemplated under the Sponsored Research Agreement
or this Agreement, (iii) it will maintain separate records with respect to the
research conducted in accordance with the American Cyanamid Contract to assure
that such research is not commingled or confused with the research to be
conducted on behalf of Licensee under the Sponsored Research Agreement, (iv) it
will not assign research responsibilities under the Sponsored Research Agreement
to any individual who is conducting research under the American Cyanamid
Contract, and (v) it will not capitalize on any results obtained through
research activities under the American Cyanamid Contract in pursuing its
responsibilities under the Sponsored Research Agreement. OU/Edison represents
that it has not, and agrees that it will not, enter into any other contractual
commitments or undertake any research activities that would conflict with,
detract from, or give rise to any claim against the rights granted to Licensee
in this Agreement.
(E) Licensor hereby grants to Licensee the right to sublicense any rights
granted hereunder without additional consideration to Licensor, other than the
obligation to make all payments required under this Agreement. Licensee agrees
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that (i) any sublicense agreement shall be consistent with the terms hereof,
(ii) the provisions contained in Sections 8, 9 and 17 hereof shall expressly be
made binding on each sublicensee, (iii) except as may otherwise be agreed in
writing between Licensor and Licensee, Licensee shall remain primarily liable to
Licensor for the performance of the Licensee's obligations under this Agreement,
irrespective of any such sublicense, (iv) Licensee shall furnish a copy of each
sublicense to Licensor, and (v) each sublicense shall terminate as provided in
Section 16 below.
(F) In the event Licensee grants a sublicense or rights to any part of the
Technology to any third party, Licensee shall cause such transferee to execute a
document (a copy of which shall be furnished to Licensor) providing for the
payment to Licensor of any and all royalties due on units of Derivative Product
that may be sold by such transferee in the marketplace, and Licensee hereby
guaranties such payment to Licensor. No duplicate royalty payments shall be made
to Licensor, however, under any circumstances with respect to the sale of any
Derivative Product, irrespective of whether such Derivative Product is covered
by more than one Licensed Patent.
(G) Licensee shall have the right, at any time, and from time to time, to
surrender any portion(s) of the Licensed Technology to Licensor, and from such
date(s) the rights so surrendered shall no longer be deemed part of the Licensed
Technology covered by this Agreement, and in such event Licensee shall give
written notice to Licensor specifying the Licensed Technology so surrendered.
(H) In the event any representative of Licensee develops joint inventions
with Licensor or with John Kopchick, during Kopchick's employment by Licensor,
Licensee shall require that such joint inventions and discoveries (or any patent
applications filed with respect thereto, and any patents issued thereon) be
assigned jointly to Licensee and Licensor; and Licensor's joint interest in such
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joint inventions shall be Licensed to Licensee hereunder; Licensee shall make
Royalty Payments on Net Revenues thereon, and pay other compensation that may
become due, in accordance with this Agreement and Exhibit B; however, Licensee
shall retain all other rights that it may have under statute and common law with
respect to the commercial exploitation of such joint inventions. This paragraph
(h) shall not apply to inventions and discoveries that are developed by Licensee
without Licensor's joint collaboration, however.
3. TECHNICAL AND SCIENTIFIC ASSISTANCE.
(A) Licensor shall disclose and furnish to Licensee as soon as reasonably
practicable after the Effective Date, in English language, or in readily
convertible computer software code, where applicable, and in American units (as
to measurements) all of the Licensed Technology, including any Licensed
Technology that may hereafter come into Licensor's possession during the term of
this license, including information concerning all applications in which the
Licensed Technology has been or may be successfully employed, and details
retained in any format, including electronic media, with a view to enabling
Licensee to fully exploit this license.
(B) Licensor shall assist Licensee by responding to questions concerning
the Licensed Technology. To this end, Licensor agrees, upon request by Licensee
and at Licensee's expense (in accordance with Section 3(c)), to send to any
facility designated by Licensee where Production Technology will be used,
qualified representatives of Licensor selected by mutual agreement of Licensor
and Licensee, at reasonable intervals and for reasonable periods and in a manner
not calculated to disrupt their normal responsibilities, to assist Licensee in
utilizing the Production Technology, and to consult with Licensee with respect
to the development and manufacture of Derivative Products.
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(C) Subject to Licensee's right to approve expenses exceeding $500 in
advance of any such trip, Licensee agrees to pay all reasonable documented
travel expenses and lodging costs of Licensor's personnel incurred under
paragraph (b) above, upon receipt of invoice within thirty (30) days after such
expenses have been incurred.
4. PATENT FILING, MAINTENANCE AND EXTENSION.
(A) During the term of this Agreement, subject to feasibility
determinations made in consultation with expert patent counsel, Licensee shall,
with Licensor's cooperation, (i) prosecute Patent Applications at Licensee's
expense, (ii) keep Licensor informed of the status of such applications, and
(iii) seek the broadest degree of protection in the patent claims that is
consistent with sound patent law practice. In the event Licensor believes that
patent protection should be sought with respect to specific inventions, and
Licensee has not done so, Licensor shall identify the inventions in a written
notice to Licensee requesting Licensee to proceed with the filing and
prosecution of a Patent Application (the "Patent Request").
(B) In the event Licensee receives a Patent Request during the term of
this Agreement and decides, for any reason, not to prosecute the Patent
Application, it shall confer with Licensor about such decision, and shall
communicate its reasons for not pursuing the patent. It shall be deemed a Valid
Reason (herein so called) if Licensee states reasonable and probable grounds for
believing that publication of the patent claims would be detrimental to the
mutual objectives of the parties under this Agreement for reasons of
confidentiality or in order to avoid infringing the patent rights of any third
party. If Licensee has not stated a Valid Reason for failing to pursue the
patent, and has not agreed within sixty (60) days after receipt of the Patent
Request, to file
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the Patent Application, Licensor shall have the right, but not the obligation,
at its expense, to prosecute such Patent Application. If Licensor decides to
prosecute a Patent Application that Licensee has elected not to prosecute, any
patent that issues based on such application shall be the sole property of
Licensor and will not be part of the Licensed Technology under this Agreement;
provided, however, that Licensor shall promptly give Licensee notice of the
issuance of such patent, and copies of the relevant patent and underlying
materials, and Licensee shall thereafter have a period of sixty (60) days in
which to elect to obtain an exclusive license to such patent from Licensor by
paying Licensor an amount equal to the costs incurred by Licensor in obtaining
the patent. Upon affirmative exercise of this election and payment to Licensor,
the subject patent shall thereafter constitute part of the Licensed Technology
and be subject to this Agreement.
(C) During the term of this Agreement, Licensee shall take the steps and
pay all fees reasonably necessary to maintain the Licensed Patents for the full
term thereof; provided that if Licensee decides that it is not cost-effective or
reasonable to maintain a particular Licensed Patent, Licensee shall so inform
Licensor in writing as soon as practicable, and Licensee shall also advise
Licensor in writing whether the technology covered by the patent is presently
embodied in any Derivative Product, and if so, which ones. Licensor shall then
have the right, but not the obligation, to take such steps at its own expense.
If (i) Licensee elects to abandon Licensed Patent(s) for any reason other than
those listed above in Section 4(c) or avoidance of infringement of rights of a
third party, (ii) royalties have not been paid to Licensor with respect to a
Derivative Product embodying the Technology covered by the claims in such
Licensed Patent(s), and (iii) Licensor elects to undertake protection of such
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Licensed Patent(s), such Licensed Patent(s) will from that point on no longer be
considered Licensed Technology under this Agreement.
(D) Licensee shall have the right to file on behalf of and as agent for
Licensor, all applications and to take all actions necessary (i) to obtain the
benefits under the Drug Price Competition and Patent Term Restoration Act of
1984 and any amendments thereof and (ii) to extend the terms of the Licensed
Patents to the extent permitted by any other law through, among other measures,
applications for patent extension certificates, provided that Licensor shall
join in such applications if requested to do so by Licensee.
(E) All Patent Applications shall be prosecuted in the name of the
inventor(s), subject to Ohio law and OU/Edison policies, and Licensor shall
cause the Patent Applications and any Licensed Patents which may be issued
thereon to be assigned to Licensee hereunder, unless otherwise agreed by the
parties. In the event this Agreement is terminated, the rights of the parties in
pending Patent Applications and Licensed Patents shall be controlled by Section
16 below.
5. PATENT INFRINGEMENT ACTION BY A THIRD PARTY.
(A) In the event any third party asserts a claim of patent infringement
with respect to the Licensed Technology against Licensor, Licensee, or any
person acquiring or holding rights in the Licensed Technology through them, the
party who first learns of such claim shall promptly notify the other party of
the claim. Licensee shall have the right and obligation to defend against such
claim, in its own name and/or in the name of Licensor, if necessary to such
defense. The parties (i) shall cooperate in taking all appropriate and
reasonably necessary actions to diligently maintain the defense of such claim,
including litigation and the maintenance of any bona fide appeals therefrom, and
having its representatives and employees testify and make available all relevant
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nonprivileged materials; (ii) subject to any right of indemnity under Section 19
below, shall initially bear their own respective Litigation Costs incurred in
connection with such defense; provided that during the pendency of the dispute,
subject to the provisions of Section 8(f) below, Licensee may [*] due Licensor
under this Agreement and apply same toward reimbursement of Licensee's expenses
(including all Litigation Costs) in connection with the action, until such time
as the litigation is finally resolved, whether through settlement, consent
judgment, or final judgment from which no further appeal may be taken. In the
event the Royalty Payments have been reduced pursuant to any provision contained
in this Agreement, the amount withheld shall be calculated based upon the
reduced Royalty Payment. In the event that the amount of Royalty Payments
withheld exceeds the Licensee's expenses (including Litigation Costs), then
Licensee shall, upon final resolution of the subject litigation, pay Licensor
within sixty (60) days of such final resolution, the balance of any such Royalty
Payments withheld hereunder.
(B) If Licensee does not diligently prosecute such defense, or elects not
to do so, then subject to Licensor's obligations under its indemnity in Section
19 below, Licensor shall have the right, but not the obligation, to assume such
defense at its own expense, in which event Licensee shall cooperate by having
its employees and representatives testify and make available all nonprivileged
materials.
(C) If Licensee is required, by a settlement entered into in good faith
after consultation with Licensor, or by a final court order from which no appeal
can be taken, to pay any sum of money (i) as damages, or (ii) as a compulsory
royalty to obtain a license under any patent (within the field of the Licensed
Technology) not licensed hereunder, in order to exploit the License, and the
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THE OMITTED PORTIONS.
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infringement of such patent cannot reasonably be avoided by Licensee, the
compensation required to be paid to Licensor under the terms of Exhibit B to
this Agreement shall be reduced by the amount so payable by Licensee to the
third party. To the extent not recouped by Licensee pursuant to the foregoing
provisions, Licensor shall reimburse Licensee for any expenses, liabilities and
damages incurred in connection with the defense, settlement, or payment of such
claim if it is determined that (i) any representations made by Licensor under
Section 10 are invalid, and as a result thereof the claim was not reasonably
defensible in whole or in part, or (ii) a material claim adverse to the Patent
Rights has been asserted and such claim results in a judgment against Licensee
(or its Affiliates or sublicensees), or, in the good faith judgment of
independent expert patent counsel, would result in such adverse judgment if not
amicably resolved. Such reimbursement shall be paid to Licensee, however, only
out of compensation thereafter due Licensor under Exhibit B to this Agreement
unless such right to reimbursement results from a breach of Licensor's
affirmative representations or express duties contained herein, or pursuant to
Licensor's indemnity under Section 19 below.
(D) The parties shall confer in good faith in an attempt to reach agreement
before accepting any settlement or entering into any consent judgment in any
proceeding maintained under this Section. Neither party shall settle any claim
concerning the Licensed Technology without the prior written consent of the
other party, which shall not be unreasonably withheld.
6. PATENT INFRINGEMENT ACTION AGAINST A THIRD PARTY.
(A) If any third person shall, in the reasonable opinion of either party,
infringe any of the Licensed Patents, such party shall promptly notify the other
party of the facts pertaining to such infringement. The parties shall initially
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endeavor to amicably resolve the dispute with the third party. Licensee shall
have the sole right in accordance with the terms of this Agreement to sublicense
any alleged infringer for the future use of rights under the Licensed Patents,
in which event any fees so received shall be applied first to defray pro rata
any Litigation Costs incurred by the parties as a result of the infringement and
sublicense so granted; and any balance of such fees shall be treated as
comprising a part of Net Revenues hereunder.
(B) In the event efforts to amicably resolve the dispute are unavailing,
Licensee initially shall have the right to prosecute a legal action against the
infringer, in its own name or in the name of Licensor (or its scientists) if
necessary, together with the right to enforce and collect any judgment thereon.
If Licensee exercises such right, Licensor shall cooperate at its expense in the
prosecution of such action, including consenting to being joined in such action,
if necessary, and providing pertinent nonprivileged testimony and materials.
Licensee initially shall bear its own expenses associated with management of the
action; provided that Licensee may [*] thereafter due Licensor under this
Agreement, subject to provisions of Section 8(f) below, and apply same toward
reimbursement of Licensee's expenses (including Litigation Costs) in connection
with the action, until such time as the litigation is finally resolved, whether
through settlement, consent judgment, or final judgment from which no further
appeal may be taken. In the event the Royalty Payments have been reduced
pursuant to any provision contained in this Agreement, the amount withheld shall
be calculated based upon the reduced Royalty Payment. In the event that the
amount of Royalty Payments withheld exceeds the Licensee's expenses (including
Litigation Costs), then Licensee shall, upon final resolution of the subject
litigation, pay
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Licensor within sixty (60) days of such final resolution, the balance of any
such Royalty Payments withheld hereunder.
(C) In the event Licensee does not diligently exercise its right to
maintain an action against an infringer hereunder, Licensor shall have the
right, but not the obligation, to initiate and manage such action. Licensee
shall cooperate reasonably in the maintenance of such action by furnishing
pertinent nonprivileged evidence, and Licensor shall bear the Litigation Costs
associated with the management of such action.
(D) Any monetary recovery in connection with such infringement action
shall be applied (i) first, to reimburse Licensee (or Licensor, if it has
maintained the action) for its unreimbursed out-of-pocket expenses (including
Litigation Costs) in prosecuting such action; (ii) next, to the unreimbursed
out-of-pocket expenses of the other party incurred in connection with such
action; (iii) next, to any outstanding reimbursement or indemnity obligations
then due Licensee; and (iv) then, in reimbursement to Licensor of any royalty
obligations past due or withheld pursuant to this Section 6. The balance, if
any, shall be treated as comprising a part of Net Revenues hereunder.
(E) During the pendency of any such infringement and ensuing action, if
the quantity of the dosage units of the infringing products sold by the
infringing competitors during a payment period is at least [*] of the sum of the
dosage units of (i) the infringed Derivative Products sold by Licensee in the
same country or countries plus (ii) the dosage units of the infringing products
sold by the infringing competitors in such payment period, then any Royalty
Payments arising under this Agreement on account of the infringed Derivative
Products and attributable to such payment period shall be reduced
(retroactively, if necessary) by the same percentage, subject to the provisions
of Section 8(f) below.
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(F) The parties shall confer in good faith in an attempt to reach agreement
before accepting any settlement or entering into any consent judgment in any
proceeding maintained under this Section. Neither party shall settle any claim
concerning the Licensed Technology without the prior written consent of the
other party, which shall not be unreasonably withheld.
7. COMPULSORY LICENSEES.
If a third party obtains from a Regulatory Authority, a compulsory
license to practice any rights granted under a Licensed Patent in any country or
countries, Licensor (or Licensee, as the case may be) shall give prompt notice
thereof to the other party. If the quantity of the dosage units of the
Derivative Products sold by the compulsory licensee during a payment period is
at least [*] of the sum of the dosage units of (i) the Derivative Products sold
by Licensee in the same country or countries plus (ii) the dosage units of the
Derivative Products sold by the compulsory licensee in such payment period, then
the royalty rate applicable hereunder to Licensee's Net Revenues on account of
the Sale of Derivative Products in the affected country or countries and
attributable to such payment period shall be reduced to such lesser royalty
rate, if any, as may be applicable under the compulsory license to the
compulsory licensee's Sales of the Derivative Products, subject to the
provisions of Section 8(f) below.
8. PAYMENT.
(A) In consideration of the rights granted herein, Licensee agrees to make
the Royalty Payments (herein so called) required on Exhibit B attached hereto to
Licensor. Amounts payable under this Agreement shall be paid in U.S. dollars to
Licensor or in such other currencies as the parties may agree upon in
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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writing. Such Royalty Payments shall be subject to applicable law and
regulations existing at the place of remittance. Net Revenues not denominated in
Dollars shall first be determined in the currency in which such Derivative
Products were sold and shall then be converted into the equivalent number of
Dollars at (i) the official closing institutional buy rate, two days prior to
the date of payment hereunder, established by the official central bank or
exchange control authorities in each such country; or (ii) if no such official
rate is available or if conversion pursuant to such official rate cannot be
effected by Licensee, then at such closing rate, two days prior to the date of
payment hereunder, established by Chase Manhattan Bank, N.A. in New York City.
In the event the compensation received by Licensee, on which Royalty Payments
are otherwise due, is not a cash equivalent, the fair market value of such
compensation in kind will be the basis on which the cash Royalty Payments are
calculated.
(B) All Royalty Payments shall be made to Licensor at its Technology
Transfer Office address furnished for notices in accordance with Section 25
below, and as to funds which cannot be converted from foreign currencies, or
cannot be exported from foreign jurisdictions, then in the manner that Licensor
reasonably requests. Licensor shall have the right, by at least fifteen (15)
days notice to Licensee, to designate an account at a depository bank in the
United States for the wiring of any Royalty Payment that then may be due.
(C) If at any time and for so long as any applicable governmental or fiscal
regulations or policies restrict Licensor's right to receive the fees payable
hereunder in U.S. funds in the United States, Licensee shall be deemed to have
fulfilled its obligations to make the Royalty Payments due hereunder, if it pays
the sums due into a foreign bank account designated by Licensor, or into
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a foreign branch of the Chase Manhattan Bank in the name of Licensor, for wiring
to the account of Licensor in the U.S., with notice to Licensor of such deposit.
(D) The royalties shall be payable during the term of this Agreement (the
"Term") for each Royalty Payment Period (as hereinafter defined) during which
Net Revenues are collected with respect to the Sale of Derivative Products in
the marketplace, subject to the provisions of Sections 5, 6 and 7 above, and
8(f) below; provided that (i) as to Derivative Products that have never been the
subject of patent protection the obligation to pay royalties shall terminate [*]
years after the first commercial sale of such Derivative Product, and (ii) for
[*] years after the expiration of any Licensed Patent covering a Derivative
Product, the royalties payable to Licensor with respect to such Derivative
Product shall be [*], determined on a country by country basis, as [*], and no
Royalty Payments shall be required with respect to such Derivative Product
thereafter.
(E) No royalty shall accrue on any Sale of Derivative Products between
Licensee and its Affiliates or either of them and their respective sublicensees,
except as expressly provided in this Agreement.
(F) In the event Licensee is entitled to withhold against Royalty Payments
pursuant to Sections 5(a), 6(b) or (e) or 7, Licensor shall not be required to
refund any Royalty Payment or any Research/Royalty Payment previously made to
Licensor, and Licensee shall not seek to enforce any such refund.
(G) If it can reasonably be concluded that a sublicensee has acquired
rights to a Derivative Product without a bona fide intent to market same, but
for the purpose of eliminating competition with another product in the
marketplace,
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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and no reasonable effort can be shown to deliver the Derivative Product into the
stream of commerce, and no sale of a material quantity of the Derivative Product
in the marketplace occurs within a period of [*] after the transfer to the
sublicensee, and there are no extenuating regulatory circumstances for such
delay, Licensee shall pay Licensor a royalty on the amount of the fee received
from the sublicensee for the acquisition of the rights to such Derivative
Product, which fee shall be treated as Net Revenues. If a Derivative Product is
thereafter Sold in the marketplace pursuant to the sublicense, however, Licensee
shall be entitled to recoup from the royalties otherwise due Licensor from such
Sales, the amount of the Royalty Payment already paid to Licensor on the fee for
the sublicense transaction, and after such recoupment is complete, Licensor
shall be entitled to receive the stream of Royalty Payments due on Net Revenues
from the Derivative Products.
(H) In the event a sublicensee, having acquired the entire Licensed
Technology, fails to commercially exploit the Licensed Technology within [*]
after the transfer or eight years after the date hereof, whichever is later, and
there are no extenuating regulatory circumstances for such delay, then the
sublicensee will be required [*] to Licensor, for each year that the Licensed
Technology is not commercially exploited from the date of the transfer through
the year in which (i) the term of the last Licensed Patent to expire,
terminates, or (ii) the license to the Licensed Technology is surrendered to
Licensor by the sublicensee, whichever is sooner.
(I) If, for remuneration, Licensee enters into a sublicense specifically
granting rights to an independent third party for the use of an assay or other
testing or diagnostic procedure or instrument constituting a part of the
Licensed
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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Technology, which has financial value separate and apart from the creation of a
Derivative Product, Licensor shall be entitled to receive a Royalty Payment
based on such remuneration.
9. REPORTING AND RECORD KEEPING.
(A) Licensee will render to Licensor, no later than thirty (30) days
following January 1, April 1, July 1 and October 1 of each year, respectively
(the "Royalty Payment Periods"), a written statement summarizing Sales activity
conducted pursuant to this Agreement. The statement will be certified as to its
correctness by an officer of Licensee, and will provide such information
concerning the nature of the business conducted pursuant to this Agreement by
Licensee during the preceding three (3) month period as shall be pertinent to an
accounting hereunder, including at least the following:
(I) number and description of units of Derivative Products
sold;
(II) total Net Revenues, itemizing all deductions;
(III) accounting for all sublicenses granted, including names
and addresses of such sublicensees;
(IV) total Royalty Payments due; and
(V) any special reporting required pursuant to Section 4(c)
above. Each such statement shall be accompanied by the Royalty Payment due to
Licensor as of the last day of that Royalty Payment Period.
(B) Licensee shall keep full and accurate books and records setting forth
all Sales, the computation of Net Revenue (including the licensing fees paid by
sublicensees) and all information that is required to be set forth in the
royalty statements hereunder. Licensee shall permit an independent certified
public accountant selected by Licensor and acceptable to Licensee, to examine
such books and records, upon reasonable notice and during normal working hours,
but not
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later than two (2) years following the payment in question, for the purpose of
verifying the reports, accountings and payments hereunder. The cost of such
examinations shall be borne by Licensor unless a material error resulting in an
underpayment of royalties that exceeds [*] of the royalties due for the period
examined is discovered in the records or in the royalty statements based
thereon, in which event the cost of the examination in which the errors were
discovered will be borne by Licensee. In the event errors are discovered in the
accounting, appropriate adjustments shall be made in the Royalty Payments due.
The independent accountant shall not disclose to Licensor any cost data of
Licensee, but Licensee shall permit Licensor's accountant to make such excerpts
and copies of the financial records as may be necessary to perform the audit.
(C) Licensee shall furnish Licensor with status reports summarizing the
status of its development of Licensed Technology and Derivative Products, on
March 1 of each year. Licensee shall inform Licensor of each Derivative Product
that enters Phase I clinical pharmacology testing conducted under an IND filed
with the FDA or with its counterpart in any foreign country, and of each
clinical proof of concept demonstrated in a human clinical Phase II efficacy and
safety study.
10. LICENSOR'S REPRESENTATIONS AND WARRANTIES.
Licensor represents and warrants as follows:
(A) Licensor is the owner of all right, title and interest in and to the
Licensed Technology, has the right to grant the rights and Licenses herein
conferred upon Licensee, and no interest in the Licensed Technology has been
transferred to any third party by Licensor.
(B) Licensor has disclosed to Licensee all material information relating to
the Patent Applications, and has authorized Licensor's patent counsel to
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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discuss any issues relating to the Patent Rights. Licensor represents that the
pending Patent Applications are accurate, and to the best of Licensor's
knowledge have merit. Licensor is unaware of any potential infringement of the
rights of any third person by the Patent Applications, or any Licensed Patents
that may be issued with respect thereto.
(C) Copies of the pages from the laboratory notebooks of Dr. Kopchick and
those supervised by him have been disclosed to the Licensee describing the
invention covered by the fourth Patent Application described on EXHIBIT A
attached hereto, and Licensor has confirmed that to the best of Licensor's
informed knowledge and belief, after consultation with expert patent counsel,
such invention was reduced to practice by Dr. Wen Y. Chen as early as Fall of
1991.
(D) Licensor has disclosed to Licensee all inventors of the Licensed
Technology who have performed research at Licensor's facilities, or in concert
with Licensor, and it has obtained and recorded assignments from each such
inventor assigning to Licensor all of the rights in inventions, discoveries and
Patent Applications comprising any portion of the Licensed Technology.
(E) Licensor has the authority and capability to execute and perform this
Agreement, and such execution and performance will not violate any restriction
contained in any law, regulation, policy of Ohio University, or agreement with
any third person.
11. LICENSEE'S REPRESENTATIONS AND WARRANTIES.
Licensee represents and warrants as follows:
(A) Licensee has the authority and capability to execute and perform this
Agreement, and such execution and performance will not violate any restriction
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contained in any law or regulation, or in any agreement between Licensee and any
third person.
(B) Licensee has share capital of not less than $100,000 and has employed
a Chief Executive Officer with expertise and managerial experience in the
pharmaceutical industry to direct the activities required under this Agreement.
12. LICENSEE'S DUTIES.
(A) Licensee shall use diligent efforts to commercially exploit the
Licensed Technology through the development of marketable Derivative Products
and shall undertake diligent efforts to Sell any commercially viable Derivative
Products that do not (i) present an unreasonable risk of injury to life or
health or (ii) violate the provisions of applicable laws and regulations of any
Regulatory Authority. Reasonable evidence provided by Licensee that it has an
ongoing and active research, development, manufacturing, marketing, or licensing
program directed toward Sale of Derivative Products shall be deemed satisfactory
proof of diligent efforts to commercially exploit the Licensed Technology and to
Sell the Derivative Products.
(B) Licensee agrees to pay all costs hereafter incurred in applying for
necessary Regulatory Approvals in the clinical trial process with respect to
Derivative Products constituting a part of the Licensed Technology. At the
request of Licensee, Licensor agrees to assist and cooperate reasonably with
Licensee in the preparation and processing of each IND and each application for
Regulatory Approval.
(C) Unless extended by mutual written agreement, Licensee shall [*] (i)
pursue research, development and experimentation of Derivative Products, and
(ii) place a Derivative Product in clinical trials; and assuming Licensee does
so in good faith, it shall be deemed
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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to have complied with its responsibility to exploit commercially the Licensed
Technology.
(D) In the event Licensee fails to perform its duties pursuant to this
Section 12, this Agreement shall terminate in accordance with Section 16.
13. MANUFACTURING FACILITY.
Licensee agrees [*] as may be mutually agreed upon by Licensee and
Licensor.
14. INSURANCE.
(A) Subject to applicable law, each party shall purchase and maintain such
insurance as may, in its discretion, be necessary and appropriate to protect
against risks of loss, damage to property, and injury to person in connection
with the performance of this Agreement.
(B) Each party shall at all times comply with the applicable requirements
of any governmental authority with respect to the maintenance of workers
compensation insurance, or a legally allowable alternative form of employees'
liability insurance, covering all employees engaged in the performance of
activities under this Agreement.
15. PATENT MARKING.
All Derivative Products (or their containers) shipped to or Sold in the
United States or in foreign countries shall be marked in such manner as to
conform with the patent laws and practice of the country of manufacture or Sale,
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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including as appropriate, the patent number or the phrase, "patent pending". The
particulars of such marking shall be determined in Licensee's discretion.
16. TERM AND TERMINATION.
(A) The primary term of this Agreement shall be eight (8) years (the
"Primary Term"), unless extended by mutual written agreement.
(B) Upon the expiration of the Primary Term, provided Licensee is not then
in Default (as defined below) of its obligations under this Agreement, this
License shall continue as to all of the Licensed Technology discovered or
developed prior to the expiration of the Primary Term (excluding any portions of
the Licensed Technology that have reverted to Licensor under other provisions of
this Agreement). In the absence of other written agreement between the parties,
compounds, transgenic animals, and methods of treatment discovered by Licensor
after the Primary Term of this Agreement or after the Licensee's termination of
the Sponsored Research Agreement, whichever is sooner, will become the property
of Licensor.
(C) Licensor shall make full written disclosure to Licensee of all
inventions, discoveries and developments coming within the scope of the Licensed
Technology as of the expiration of the Primary Term. In the event that
inventions within the scope of the Licensed Technology have been discovered as
of the expiration of the Primary Term, but such inventions are still inchoate,
and Licensee determines within a period of two years thereafter that such
inventions are commercially viable, Licensee may declare by written notice to
Licensor that it elects to have such inventions remain part of the Licensed
Technology in which Licensee retains rights, subject to the terms of this
Agreement.
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(D) The term "Default" shall, with respect to either party, mean any of
the following events occurring during the Term:
(I) Any material breach of this Agreement or the Sponsored Research
Agreement consisting of the failure to make a payment required hereunder, which
breach remains uncured after sixty (60) days notice specifying the amount then
due;
(II) Any material non-financial breach of this Agreement or the
Sponsored Research Agreement, which breach remains uncured after ninety (90)
days notice specifying the nature of the breach; or
(III) The failure of a party to continue its business activities.
(E) In the event of a Default by Licensee, Licensor may at its election
(without prejudice to any other legal or equitable remedies that Licensor may
have), exercisable upon notice to Licensee, declare the License immediately
terminated, in which event Licensee shall forfeit entirely all rights and
interest in and to the Licensed Technology (including, without limitation, all
Patent Rights), and this Agreement shall terminate.
(F) In the event of a Default by Licensor, or in the event Licensee has
grounds for termination of this Agreement pursuant to paragraphs (g), (h) or (i)
below, Licensee may at its election (without prejudice to any other legal or
equitable remedies that Licensee may have), exercisable upon notice to Licensor,
either (i) terminate this Agreement, or (ii) continue to exploit commercially
the License, but thereafter the Licensee's obligations under this Agreement
shall be limited solely to those Royalty Payment obligations arising under this
Agreement as set forth in clause (c) of Exhibit B attached, and Licensee shall
continue to make periodic Royalty Period Payment reports in compliance with
Section 9.
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(G) Licensee shall have the right to terminate this Agreement in the event
that the Sponsored Research Agreement is terminated in accordance with its terms
by Licensee.
(H) Licensee shall have the right to terminate this Agreement at any time
upon (i) six (6) months notice to Licensor and (ii) payment of all amounts due
through the effective date of such termination.
(I) Licensee shall have the right to terminate this Agreement if any
Patent Application listed on Exhibit A (i) is determined to be invalid, (ii) a
final decision is made by the Patent and Trademark Office to reject the Patent
Application(s) despite Licensee's diligent effort to prosecute same, or (iii) a
material claim adverse to such Patent Application(s), or any Licensed Patent
issued with respect thereto, is filed against Licensee, and in the good faith
judgment of independent expert patent counsel such claim has a substantial
deleterious impact on the value of the Licensed Technology or a significant
likelihood of resulting in an adverse judicial determination as to the validity
of the Licensed Patent, and a judgment against Licensee with respect thereto.
(J) Upon termination of this Agreement for Default of Licensee,
notwithstanding any other language contained in this Agreement, any and all
sublicenses granted by Licensee prior to such termination shall automatically be
assigned to Licensor, shall continue in effect in accordance with their terms,
and shall thereafter (during the respective terms of such sublicenses) be
subject in all respects to the provisions of this Agreement, in addition to any
provisions contained in such sublicenses.
(K) Licensee and any sublicensee may, after the effective date of any
termination of this Agreement, complete and Sell all Derivative Products on hand
or in the process of manufacture at the time of such termination; provided that
Licensee shall make the Royalty Payments to Licensor required under this
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Agreement in accordance with Exhibit B, clause (c), and shall submit all royalty
reports required hereunder with respect to such Sales.
(L) Upon termination of this Agreement due to Default on the part of
Licensee, except (i) pursuant to paragraphs (f), (j) and (k) above, (ii) as
otherwise necessary to comply with the documentation requirements of any
Regulatory Authority, or (iii) as otherwise may be necessary to exploit or
enforce any rights lawfully retained by Licensee under this Agreement upon
termination, all Licensed Technology, and all materials related thereto,
including copies, excerpts, abstracts or summaries thereof, in whatever form or
media stored, shall be returned to Licensor upon request.
(M) In the event of termination, (i) all rights and obligations of the
parties which are expressly required, or by clear implication contemplated, to
survive termination shall survive such termination, including without limitation
all rights and obligations set forth in Sections 16, 17 and 19 hereof; and (ii)
all rights to receive payment of any financial obligations which have vested
prior to termination shall remain enforceable.
(N) In the event Licensee exercises its right to terminate this Agreement,
and Licensor thereupon elects to continue in effect any existing sublicense
agreements, Licensee shall have no further obligation regarding or under such
sublicense agreements, including but not limited to those obligations set forth
in Sections 2(f) and 8(h) above.
17. CONFIDENTIAL INFORMATION.
(A) Subject to the exceptions contained in paragraph (c) below, Licensor
and Licensee shall maintain in strict confidence all Licensed Technology,
including without limitation the Production Technology, which is disclosed by
one party to another, and any additional information which has been identified
as
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confidential, whether or not so labeled (the "Confidential Information"); and
neither party shall use or disclose the Confidential Information except as
contemplated by this Agreement.
(B) For purposes of paragraph (a), the public availability of certain
information related to the Licensed Technology shall not forfeit the
confidential nature of other Confidential Information, and the disclosure of
specific principles or information shall not justify disclosure of general
principles or information that remain confidential, and vice versa.
(C) Confidential information shall not include information:
(I) already known to the recipient, at the time of disclosure
hereunder, as evidenced by adequate written documentation;
(II) publicly known in the form available hereunder prior to the
Effective Date, or which thereafter becomes publicly known in that form, other
than through acts or omissions attributable to the recipient or its employees,
agents or Affiliates;
(III) disclosed to the recipient by a third party having a lawful
right to do so;
(IV) that is authorized in writing to be publicly disclosed, by the
party who supplied such information; or
(V) that is embodied in an issued patent.
(D) Licensor and Licensee may disclose Confidential Information on a "need
to know" basis, as follows: (i) to their respective employees and agents
performing research concerning the Licensed Technology, (ii) to Licensee's
Affiliates, distributors, sublicensees, contractors, and subcontractors, (iii)
by Licensee to potential lenders and other reliable sources of financing
necessary to perform this Agreement, (iv) by Licensee to potential candidates
for membership on Licensee's board of directors, (v) by Licensee to governmental
agencies and institutional review boards to obtain regulatory approval for
Derivative Products or clinical research studies, (vi) by Licensee to
investigators performing clinical trials, and to (vii) governmental units to
obtain
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funding for research; provided that all such persons shall be instructed as to
their duties of confidentiality in compliance with this Section 17, and shall be
required to agree to preserve such confidentiality.
(E) Each party agrees to store all material embodying Confidential
Information in a secure area where access is restricted and to make duplicates
of the Confidential Information only to the extent reasonably necessary to
perform this Agreement.
(F) Except as required by law or regulation, expressly allowed herein, or
otherwise agreed in writing, no press release or any other written statement
intended for use in the public media that discloses Confidential Information
pertaining to the Licensed Technology shall be made by either party. Licensor
and Licensee shall have the right to issue press releases (and Licensee may
distribute private placement memoranda and securities prospectuses) accurately
describing in general terms, (i) the execution of this Agreement and (ii) the
scope of their respective responsibilities and the nature of their objectives
under this Agreement, but shall make no representations concerning the Licensed
Technology or the Derivative Products, and shall not compromise any duty of
confidentiality concerning the Licensed Technology. However, the specific terms
of this Agreement shall be disclosed solely (i) to those persons who need to
know its contents, in order to facilitate performance of this Agreement by the
parties themselves, or (ii) as may be required by law, regulation or judicial
order. Licensor shall not issue any press release or public statement concerning
the Licensed Technology (i) that identifies Licensee without the latter's prior
written consent, which shall not be unreasonably withheld, or (ii) in violation
of the obligations of confidentiality imposed by this Section 17.
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(G) Licensor shall have the right to publish research and scientific data
only in strict accordance with Article VI of the Sponsored Research Agreement.
(H) In the event disclosure of this Agreement or of other Confidential
Information is required by law, regulation or judicial order, the parties shall
take all reasonable measures available to limit the scope and purposes of
disclosure and to protect the confidentiality of such Confidential Information
upon such disclosure.
(I) Both Licensee and Licensor shall take precautions that no Licensed
Technology, including without limitation Production Technology, and no
Derivative Product, will be disclosed or shipped, directly or indirectly, to any
person or entity, governmental or otherwise, of any foreign nation, if doing so
would violate the laws or regulations of the United States or knowingly violate
the laws of any foreign government.
(J) The obligations imposed by this Section 17 shall survive the
termination of this Agreement for a period of [*].
18. NEW DEVELOPMENTS.
(A) Licensor and Licensee agree to keep each other regularly and fully
informed about new applications and other developments relating to the
manufacture, use and Sale of the Licensed Technology, including Production
Technology. If during the Primary Term of this Agreement, Licensor and/or any of
its employees, agents or subcontractors shall make an invention, discovery,
development or improvement related to the Licensed Technology (collectively, a
"Development"), Licensor shall furnish to Licensee, without additional charge,
technical data and information relating to such Development. In addition, if
Licensee secures patent protection on any such Development, these patents shall
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THE COMMISSION. CONDFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
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be included in the definition of Licensed Patents as such term is defined in
Section 1 above.
(B) Subject to the right of Licensee to receive assignments of Patent
Applications and Licensed Patents as provided in Section 4(e) above, Licensor
shall obtain the assignment to Licensor from its employees, agents,
subcontractors, and other persons under its control who claim an interest in
each Development of all such interest in such Development and any patents issued
with respect thereto, in accordance with Ohio law and the Ohio University Policy
on Intellectual Property Ownership and Disposition, and Employee Involvement in
Research Commercialization Endeavors (Procedure no.17.001, effective November 8,
1992). Copies of such assignments shall be promptly furnished to Licensee.
19. INDEMNIFICATION.
(A) Licensee agrees to indemnify, hold harmless and defend Licensor from
all claims, liability, loss, damage and judgments (collectively, the "Claims")
asserted against or incurred by Licensor (including Litigation and Arbitration
Costs), caused by or arising out of (i) Licensee's use, research, or transfer of
the Licensed Technology, (ii) Licensee's performance of this Agreement, (iii)
work product derived from any independent research conducted by Licensee with
respect to the Licensed Technology that infringes any patent, trademark,
copyright, or any other proprietary right of any third party, (iv) Licensee's
manufacture or Sale of the Derivative Products in accordance with this
Agreement; (v) any actions of Licensee in performance of this Agreement that
violate any law or regulation of any governmental authority, or (vi) any actions
of Licensee in performance of this Agreement that violate any restriction or
agreement applicable to Licensee; provided, however, that (x) such indemnity is
subordinate to any insurance coverage applicable to the Claims and applies only
to the extent
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that the Claims exceed the limits of such insurance coverage, and (y) any such
Claims resulting from the factors identified in Subsection (A), (B ) or (C)
below are excluded from this indemnity:
(A) the failure of Licensor to comply with any applicable FDA or
other governmental laws, regulations or requirements;
(B) Licensor's breach of any covenant or representation contained in
this Agreement; or
(C) the negligence or willful malfeasance of Licensor.
(B) Licensor agrees, to the extent permitted by law, to indemnify, hold
harmless and defend Licensee from all claims, liability, loss, damage and
judgments (collectively, the "Claims") asserted against or incurred by Licensee
(including Litigation and Arbitration Costs), caused by or arising out of (i)
Licensor's use, research, or transfer of the Licensed Technology, (ii)
Licensor's performance of this Agreement, (iii) work product derived from
Licensor's research that infringes any patent, trademark, copyright, or any
other proprietary right of any third party, (iv) any actions of Licensee in
compliance with this Agreement that violate any policy, rule, or regulation of
Licensor, (v) any actions of Licensor that violate any law or regulation of any
governmental authority, or (vi) any actions of Licensor that violate any
restriction or agreement applicable to Licensor; provided, however, that (x)
such indemnity is subordinate to any insurance coverage applicable to the Claims
and applies only to the extent that the Claims exceed the limits of such
insurance coverage, and (y) any Claims resulting from the factors identified in
Subsection (A), (B) or (C) below are excluded from this indemnity:
(A) the failure of Licensee to comply with any applicable FDA or
other governmental laws, regulations or requirements;
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(B) Licensee's breach of any covenant or representation contained in
this Agreement; or
(C) the negligence or willful malfeasance of Licensee.
(C) Both parties agree that upon receipt of a Claim coming within the
scope of this indemnity provision, the recipient will notify the other party
promptly. Each indemnitor agrees, at its own expense, to provide skilled
attorneys to defend against any proceedings filed against the indemnitee with
respect to Claims covered by this indemnity, whether or not such proceedings are
rightfully filed; and each indemnitee agrees to give the indemnitor control of
the defense of such proceedings and to cooperate with the indemnitor in the
defense and settlement of the Claims, provided that the indemnitee may, at its
own expense, also retain separate counsel to cooperate with the indemnitor's
counsel in the defense of the Claims.
(D) Notwithstanding anything to the contrary contained in this Agreement,
Licensor shall not have any responsibility to pay any sum of money pursuant to
any indemnity to Licensee, nor shall Licensee have any right to withhold any sum
of money from Licensor, regarding any claim arising from Licensee's prosecution
or practice of a patent with respect to an invention or discovery that was not
developed by or jointly with Licensor. Further, with respect to any proposed
patent that Licensee may desire to prosecute, and that constitutes a part of
the Licensed Technology, Licensee shall, subject to the confidentiality
provisions of Section 17 hereof, furnish to Licensor a draft of Licensee's
proposed patent claims. Licensor shall then have a period of fifteen (15)
business days (unless extended by mutual written agreement) in which to comment
on specific aspects of the formulation of such claims as set forth in the
proposed patent application, and to specify to Licensee in writing the manner in
which Licensor recommends that the claims be revised. Licensee and Licensor
thereupon shall promptly
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discuss any differences in good faith in a diligent effort to resolve the matter
to the parties' mutual satisfaction. In the event that Licensor and Licensee are
unable to resolve their differences, then Licensor shall give Licensee prompt
written notice (preferably by telefax or facsimile transmission) concerning the
specific nature of Licensor's objections, together with a proposal containing
specific recommended language or action to be taken with respect to the
particular patent claim. Licensee shall then have the right to accept Licensor's
proposal, or to pursue the claims as objected to by Licensor. If Licensor's
proposal is not adopted, and a third party action subsequently results with
respect to that aspect of the patent claim that was objected to by Licensor,
Licensor shall not have any duty to indemnify Licensee with respect to any
settlement payment or damages that may be payable by Licensee to the extent such
payment is attributable to that portion of the patent claim that was objected to
by Licensor.
(E) The terms Licensor and Licensee, as used in this Section 19, shall be
deemed to include the trustees, directors, officers, agents, employees, and
contractors of the respective parties, provided that the duty of indemnity shall
devolve solely upon Licensor and Licensee as entities (and not upon such
individuals).
20. GOVERNMENT REQUIREMENTS AND APPROVALS.
(A) The parties shall cooperate in complying with all domestic and foreign
laws and regulations regarding the development, manufacture, Sale and transport
of the Licensed Technology (including the Derivative Products), and nothing in
this Agreement shall be deemed to require any action in contravention of any
such law or regulation.
36.
<PAGE>
(B) Subject to Sections 25(k) and 17, before this Agreement shall be
effective, this Agreement must be approved by the Director, Department of
Development, State of Ohio. Licensor shall furnish a letter to Licensee
warranting that such approval has been secured, and the Agreement will become
effective upon its execution, and Licensee's receipt of such letter.
21. FORCE MAJEURE.
Performance of this Agreement is subject to unavoidable delays to the
extent caused by force majeure, in the nature of war, civil unrest, labor
dispute, epidemic, natural disaster, or because of any governmental law or order
effectively suspending performance, or any other cause beyond the reasonable
control of the party affected and occurring without its fault; provided that
notice of such force majeure shall be given by the affected party to the other
party with reasonable promptness, specifying the cause of the delay, and the
affected party shall use reasonable efforts to resume performance of its
obligations. The time for performance shall be extended by an amount of time
equal to the period during which the effects of force majeure have prevented
performance.
22. ASSIGNMENTS AND AFFILIATES.
This Agreement shall not be assignable by any party without the prior
written consent of the other, except that Licensee may assign this Agreement, in
whole or in part, to any of its Affiliates, or to its successor in interest by
merger, consolidation or other acquisition (including the assignee of all or
substantially all of its assets), or to its sublicensees. In the event of such
assignment, this Agreement shall, to the extent of the interest transferred,
automatically be binding upon and inure to the benefit of such assignees and
37.
<PAGE>
successors in interest, and they shall be required to undertake in writing to
perform this Agreement in accordance with their applicable responsibilities
hereunder.
23. ARBITRATION.
In the event of a dispute relating to this Agreement, the parties shall
endeavor to settle such dispute amicably. Failing amicable resolution, the
parties shall promptly submit such dispute to arbitration pursuant to the rules
of the American Arbitration Association ("AAA") in Cleveland, Ohio, or in an
available venue closest thereto. The decision rendered by the arbitrators shall
be final and binding, and enforceable by any court of competent jurisdiction.
The prevailing party shall be entitled to recover Arbitration Costs. At their
election the parties may jointly apply to the District Court in Cuyahoga County,
Ohio for the appointment of an arbitrator to hear and resolve the dispute, in
which event such arbitrator shall be guided by the Commercial Arbitration Rules
of the AAA. In such event, the costs associated with the application to such
Court shall be shared equally by the parties, but all other Arbitration Costs
shall be paid by the party against whom the award is rendered. The arbitrators
shall have the power to grant relief in equity as well as at law.
Notwithstanding the foregoing, this provision shall not preclude (a) any party
from seeking temporary injunctive relief from a court pending arbitration, or
(b) the parties from seeking to mediate any dispute hereunder as a more
expeditious and less expensive alternative to arbitration.
24. GOVERNING LAW.
The enforcement and construction of this Agreement shall be governed by
Ohio law.
38.
<PAGE>
25. GENERAL PROVISIONS.
(A) INTEGRATED AGREEMENT. This Agreement, together with the Sponsored
Research Agreement and the Option Agreement (collectively, the "Agreements"),
constitute the complete understanding and agreement of the parties with respect
to the subject matter hereof, and together supersede all prior or
contemporaneous written and oral agreements, representations and understandings
between the parties with respect to the subject matter hereof. The parties
acknowledge that no representations have been made to induce execution of this
Agreement except as set forth in the Agreements. This Agreement can only be
amended or supplemented by a written instrument, duly executed on behalf of the
respective parties.
(B) SEVERABILITY AND REFORMATION. If any provision of this Agreement is
held invalid or unenforceable by a tribunal of competent jurisdiction, such
provision shall be reformed to the minimal extent necessary to render such
provision valid and enforceable. If such reformation cannot be granted, then the
invalid provision shall be deemed severable and all other provisions shall
remain in full force and effect. Notwithstanding the foregoing, if the granting
of reformation or the severance of any provision would materially destroy or
diminish the objectives of the parties or the benefits to be derived by either
party under the Agreement, then the determination that a particular provision is
invalid or unenforceable shall apply to the Agreement in its entirety.
(C) NOTICES. It is contemplated that the parties will frequently conduct
informal communications relating to the subject of this Agreement. However, all
notices and other communications between the parties with respect to specific
rights and obligations of the parties under the provisions of this Agreement
shall be in writing and shall be deemed given if delivered personally, by
courier or by facsimile transmission, telefaxed or mailed by registered or
certified mail
39.
<PAGE>
(return receipt requested), with all facsimile, telex or postage fees paid by
the sender, to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice; provided, however, that
notices of a change of address or telex or facsimile number shall be effective
only upon receipt thereof):
If to Licensor:
Director
Technology Transfer Office
Ohio University Innovation Center
One President Street
Athens, Ohio 45701
Attn: David Allen, Ph.D.
Facsimile: (615) 593-0186
With Copy to:
Vice President, Research and Graduate Studies
University Research Center
Ohio University
Athens, Ohio 45701
Attn: T. Lloyd Chesnut, Ph.D.
Facsimile: (615) 593-0380
If to Licensee:
Drug Development Investment Corp.
570 Penllyn Pike
Blue Bell, Pennsylvania 19422
Attn: John A. Scarlett, M.D.
Facsimile: (215) 643-6616
With Copy to:
Mr. Steven A. Fleckman
Fleckman Johnson & Passman
1800 NationsBank Tower
515 Congress Avenue
Austin, Texas 78701
Facsimile: (512) 476-7644
Notices which are mailed shall be deemed to have been delivered on the third day
after deposit in a postal depository. Records of the sender generated by the
40.
<PAGE>
sender's telecopier and ancillary equipment and/or maintained in the ordinary
course of sender's business showing the recipient's telecopier number and the
date and time of transmission and number of pages transmitted shall constitute
presumptive evidence of the receipt of a telecopy for purposes of this Section.
(D) CONSTRUCTION. References to one gender shall include all other
genders; the use of singular nouns shall imply the plural and vice versa; and
words denoting persons will include corporations and vice versa where
appropriate to the context. References to Licensee shall include its Affiliates
and sublicensees where appropriate to the context.
(E) CAPTIONS. The headings used in this Agreement are solely for
convenience and shall not be considered in interpreting the provisions hereof.
(F) WAIVER. No waiver of any provision of this Agreement shall be deemed
effective unless expressly set forth in a written instrument signed by the party
against whom such waiver is to be enforced, and no failure to insist upon strict
performance of any particular provision shall preclude either party from
thereafter insisting upon strict compliance in the future with such provision or
any other provision in this Agreement.
(G) CUMULATIVE REMEDIES. All rights and remedies contained in this
Agreement are cumulative, and to the extent permitted by law any one or more of
such rights and remedies may be exercised concurrently or successively.
(H) LITIGATION COSTS. The prevailing party in any proceeding involving a
dispute relating to this Agreement shall be entitled to recover its Litigation
Costs and/or Arbitration Costs incurred in connection with the proceeding.
(I) FURTHER ASSURANCES. The parties hereto agree to execute any and all
such further documents and to take any and all such further action as may be
necessary or appropriate to effectuate the purposes of this Agreement.
41.
<PAGE>
(J) NO PARTNERSHIP. In giving effect to this Agreement, Licensor and
Licensee shall not be deemed agents, partners, or joint ventures of each other
for any purpose. Neither party shall have the authority to enter into contract,
or to incur any expense or liability, on behalf of the other.
(K) CONFIDENTIALITY PENDING EFFECTIVENESS OF AGREEMENT. Section 17 of
this Agreement shall be effective upon signing by the parties, even pending the
acquisition of any required formal approval by any party's governing body or any
Regulatory Authority.
(L) INTEREST ON DELINQUENT OBLIGATIONS. Late payments by Licensee will
be subject to interest charges equivalent to [*] and [*] percent above the prime
rate of interest charged from time to time by the Chase Manhattan Bank, N.A. in
New York City, commencing thirty (30) days following the due date.
(M) SIGNATORY AUTHORITY. Each signatory below represents to the other
party that he/she has authority to sign for and bind the principal on whose
behalf he/she has purported to execute this Agreement.
(N) MULTIPLE COUNTERPARTS. This agreement may be executed in multiple
counterparts, all of which collectively, and each of which shall constitute one
and the same instrument.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
42.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby,
have executed and delivered this Agreement as of the Effective Date.
OHIO UNIVERSITY AND ITS EDISON ANIMAL
BIOTECHNOLOGY CENTER
By: /s/ T Lloyd Chesnut, Ph.D.
--------------------------------------
T Lloyd Chesnut, Ph.D., Vice-President
for Research and Graduate Studies
DRUG DEVELOPMENT INVESTMENT CORP.
By: /s/ John A. Scarlett, M.D.
--------------------------------------
John A. Scarlett, M.D., President
43.
<PAGE>
EXHIBIT A
PATENTS
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
44.
<PAGE>
EXHIBIT B
PAYMENT SCHEDULE
The following payments shall be made by Licensee:
a. A [*] licensed to Licensee by Licensor under the terms of this
Agreement [*].
b. A [*] for [*] licensed to Licensee by Licensor under the terms of this
Agreement [*].
c. A [*] in accordance with Section 8 of the Agreement, not including
Sales of Derivative Products as part of a transfer of technology
rights to sublicensees, except as otherwise stated in the Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
45.
<PAGE>
EXHIBIT 10.9
CLARIFICATION TO BIOTECHNOLOGY
LICENSING AND TRANSFER AGREEMENT
This Agreement is entered into as of July 14, 1994 between (a) Ohio
University, a state chartered university and its Edison Biotechnology Institute,
a Department of Ohio University, currently located at 101 University Research
and Technology Center, Athens, Ohio 45701 (hereafter collectively referred to
as "OU/Edison"), and (b) id/2/-I, L.P., a Texas limited partnership having a
principal place of business at 98 San Jacinto Blvd., Suite 430, Austin, Texas
78701, including all of its Affiliates as such term is defined in the Licensing
Agreement described below (collectively referred to as "id/2/").
RECITALS
--------
A. OU/Edison and Drug Development Investment Corp., a Texas corporation
("DDIC") previously entered into that certain Biotechnology Licensing and
Transfer Agreement dated as of January 18, 1993 (the "Licensing Agreement").
B. OU/Edison, DDIC and John J. Kopchick, a scientist on the faculty of
OU/Edison ("Kopchick"), entered into that certain Sponsored Research Agreement
contemporaneously with the Licensing Agreement.
C. DDIC assigned the Licensing Agreement and the Sponsored Research
Agreement to id2 in that certain Amended Assignment and Assumption Agreement
dated effective as of March 26, 1993.
D. id/2/ intends to sublicense a portion of the "Licensed Technology" (as
such term is defined in the Licensing Agreement) to Sensus Drug Development
Corp., a Delaware corporation ("SDDC") pursuant to that certain Sublicense
Agreement dated July 14, 1994 between id/2/-I, L.P. and Sensus Drug Development
Corp. SDDC is an affiliate of id/2/.
E. The parties to this Agreement want to clarify (1) the scope and
definition of "Licensed Technology" as such term is used in the Licensing
Agreement, the Sponsored Research Agreement and any other agreement that refers
to the terms "Licensed Technology", or that uses a definition of technology
similar to the definition set forth in the Licensing Agreement, and (2) the
rights of OU/Edison with regard to such Licensed Technology.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
OU/Edison and id/2/ agree as follows:
1.
<PAGE>
1. OU/Edison acknowledges that (a) id/2/ is conveying to SDDC, by
assignment or sublicense agreement, that portion of the Licensed Technology
described on Exhibit A attached hereto (the "Assigned Technology"), (b) SDDC is
acquiring from Genentech, Inc. ("Genentech") a technology related to growth
hormone antagonists (the "Genentech Technology"), and (c) Kopchick may cooperate
or consult with SDDC in connection with research on growth hormone antagonist
technology, including both the Assigned Technology and the Genentech Technology.
2. OU/Edison acknowledges that Kopchick's cooperation or consultation with
SDDC in connection with the Genentech Technology will not convert the Genentech
Technology into Licensed Technology, except to the extent that the Genentech
Technology is proven to be covered by the Patent Rights of OU/Edison, as defined
in the Licensing Agreement.
3. OU/Edison does not object to the right of SDDC to assist Genentech in
applying for and securing patents on Genentech Technology.
Executed as of the date first written above.
OHIO UNIVERSITY AND ITS EDISON
BIOTECHNOLOGY INSTITUTE
By:_______________________________________
David Allen, Ph.D.
Director Technology Transfer Office
id/2/-I, L.P.
By: DRUG DEVELOPMENT INVESTMENT CORP.,
general partner
By:_______________________________________
John A. Scarlett, M.D., President
2.
<PAGE>
EXHIBIT A
The Assigned Technology is that portion of the Licensed Technology that
consists of any and all growth hormone antagonists covered by the Licensing
Agreement (as defined in the foregoing Agreement), including, but not limited
to, Patent Rights (as such term is defined in the Licensing Agreement) but only
to the extent related to growth hormone antagonists.
3.
<PAGE>
Bracketed information omitted and filed separately with the Securities and
Exchange Commission
Confidential Treatment Requested Under 17 C.F.R. Sections 200.80(b)(4), 200.83
and 240.24b-2
EXHIBIT 10.10
SUBLICENSE AGREEMENT
This Agreement is entered into as of July 14, 1994 between id/2/-I, L.P.. a
Texas limited partnership having a principal place of business at 98 San Jacinto
Blvd., Suite 430, Austin, Texas 78701 ("id/2/" or "Sublicensor," as applicable)
and Sensus Drug Development Corporation, a Delaware corporation having a
principal place of business at 98 San Jacinto Blvd., Suite 430, Austin, Texas
79701 ("Sublicensee").
RECITALS
WHEREAS Ohio University, a state chartered university and its Edison
Biotechnology Institute, a department of Ohio University (hereafter collectively
referred to as "OU/Edison" or Licensor, as applicable) and Drug Development
Investment Corp., a Texas corporation and general partner of id/2/ ("DDIC")
previously entered into that certain Biotechnology Licensing and Transfer
Agreement dated as of January 18, 1993 (the "Licensing Agreement"); and
WHEREAS OU/Edison and DDIC contemporaneously entered into that certain
Sponsored Research Agreement; and
WHEREAS DDIC assigned the Licensing Agreement and the Sponsored Research
Agreement to id/2/ in that certain Amended Assignment and Assumption Agreement
dated effective as of March 26, 1993; and
WHEREAS Section 2(e) of the Licensing Agreement grants the Licensee under
the Licensing Agreement (id/2/) the right to sublicense any rights granted under
the Licensing Agreement; and
WHEREAS id/2/ desires to sublicense certain rights with respect to a
portion of the Licensed Technology (as such term is defined in the Licensing
Agreement) to Sublicensee. Now therefore in consideration of the mutual
covenants herein contained, the parties agree as follows:
1
<PAGE>
1. DEFINITIONS
1.1 "Assigned Technology" means the Licensed Technology to the extent only
that it consists of or relates to growth hormone antagonists that are covered by
the Licensing Agreement, as further described on Exhibit A attached hereto.
1.2 The "Effective Date" of this Agreement shall be July 14, 1994.
1.3 All other capitalized terms used in this Agreement, unless otherwise
defined herein, shall have the meanings ascribed to such terms in the Licensing
Agreement.
2. LICENSE GRANT
Sublicensor hereby grants to Sublicensee (including its Affiliates) and
Sublicensee hereby accepts, upon the terms and conditions herein set forth, an
exclusive worldwide sublicense (the "Sublicense") in and to the Assigned
Technology, including, without limitation, the exclusive right under the
Assigned Technology to make, use, and Sell (directly or through independent
distributors) the Assigned Technology in accordance with this Agreement and the
Licensing Agreement, and also including, without limitation, the right to pursue
further research, discoveries, and inventions, and construct or acquire any
apparatus and facilities useful in the development of the Assigned Technology.
3. RIGHTS, DUTIES AND OBLIGATIONS OF SUBLICENSOR
AND SUBLICENSEE
3.1 Except as expressly modified herein, the provisions of the Licensing
Agreement attached hereto as Exhibit B are incorporated by reference in this
Agreement. Where applicable, all references to "Licensed Technology" in the
Licensing Agreement should, for purposes of this Agreement, be read instead as
stating "Assigned Technology", except as follows: Where the term, "Licensed
2
<PAGE>
Technology,' is used in Section l(g) ("Licensed Technology") and Section l(j)
("Option Agreement"), such term shall be read as it appears in the Licensing
Agreement.
3.2 All rights possessed by Sublicensor under the Licensing Agreement with
respect to that portion of the Licensed Technology that constitutes the Assigned
Technology are hereby conveyed to Sublicensee, subject to the rights herein
reserved by Sublicensor.
3.3 Except as otherwise provided in this Agreement, Sublicensee shall
have, with respect to the Assigned Technology, the same rights, responsibilities
and duties as Sublicensor has in its capacity as Licensee with respect to the
Licensed Technology under the Licensing Agreement. The reference in Section
12(c) of the Licensing Agreement to [*] shall mean such period commencing on
January 18, 1993. The representations applicable to Sublicensor under the
Licensing Agreement are modified in accordance with Section 6 below.
3.4 The provisions of Sections 8, 9 and 17 of the Licensing Agreement, to
the extent applicable to Sublicensee, are hereby made expressly binding on and
are assumed by Sublicensee in accordance with Section 2(e) of the Licensing
Agreement, except that the parties acknowledge that this transfer is not made
under circumstances that would trigger the payment obligations to OU/Edison
provided for under certain circumstances in Sections 8(g).
3.5 Sublicensee shall refrain from disclosing Confidential Information to
the same extent that Sublicensor is prohibited from disclosing same under both
the Licensing Agreement and the Sponsored Research Agreement.
3.6 Sublicensee acknowledges that under certain other circumstances its
rights under this Agreement may be adversely affected by actions taken or not
taken under the Licensing Agreement by OU/Edison or by Sublicensor.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATEMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3
<PAGE>
3.7 In addition, Sublicensee is hereby assigned all rights arising and
benefits accruing under the Sponsored Research Agreement, to the extent only
that such rights and benefits pertain to the Assigned Technology.
4. EXCEPTIONS TO THE RIGHTS, DUTIES AND OBLIGATIONS
OF SUBLICENSEE
4.1 Sublicensee shall have no right to any portion of the Licensed
Technology other than the Assigned Technology, nor shall it have any right or
duty to develop or commercially exploit any portion of the Licensed Technology
other than the Assigned Technology.
4.2 Except to the extent provided herein, Sublicensor's obligations under
the Sponsored Research Agreement shall not be assumed by Sublicensee.
5. PAYMENT
5.1 Sublicensee shall only be required to pay royalties to OU/Edison on
Net Revenues obtained from Derivative Products derived from the commercial
exploitation of the Assigned Technology.
5.2 Sublicensee and Sublicensor agree that Sublicensee has acquired rights
to the Assigned Technology with a bona fide intent to develop and market same,
to the extent economically feasible to do so.
5.3 While the parties do not anticipate that the conditions giving rise to
payment obligations to OU/Edison under Sections 8(h) and 8(i) will apply to this
transfer, to the extent that financial obligations may hereafter arise under
Section 8(i) with respect to the Assigned Technology, Sublicensee agrees to
assume and pay such obligations.
5.4 Sublicensee agrees with Sublicensor that it will financially support
the research performed under the Sponsored Research Agreement with respect to
the Assigned Technology to the extent of at least $[*] annually. However, this
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
4
<PAGE>
provision shall not be enforceable by any person other than Sublicensor, its
successors, and assigns.
6. REPRESENTATIONS AND WARRANTIES
Sublicensee represents and warrants as follows:
(A) Sublicensee has the authority and capability to execute and
perform this Agreement, and such execution and performance will not violate any
restriction contained in any law or regulation applicable to Sublicensee, or any
order or agreement by which it is bound.
(B) Sublicensee has capital of not less than $1,000 and has employed
a Chief Executive Officer with expertise and managerial experience in the
pharmaceutical industry to direct the activities required under this Agreement.
(C) Sublicensee will faithfully keep and perform each of its
obligations imposed or assumed under this Agreement, and it will indemnify and
hold harmless Sublicensor, its principals and agents, from and against any and
all claims, liabilities and expenses (including reasonable attorneys fees,
witness fees, deposition expenses, and other costs of legal proceedings) arising
out of or resulting from any breach of its obligations hereunder, or any
negligent, grossly negligent or otherwise improper action or omission on its
part.
7. TERM AND TERMINATION
7.1 Unless otherwise provided in this Section, this Agreement shall be in
effect as long as the Licensing Agreement is in effect.
5
<PAGE>
7.2 In the event of a Default by OU/Edison, Sublicensee shall have the
same rights with respect to the Assigned Technology as Sublicensor has with
respect to the Licensed Technology under the Licensing Agreement.
7.3 In the event of a Default by Sublicensee, or in the event Sublicensee
terminates this Agreement, unless the Licensing Agreement has also been
terminated, all rights conveyed hereunder shall immediately and automatically
revert to Sublicensor, without the need for any action on its part.
7.4 In the event OU/Edison terminates the Licensing Agreement based on a
Default by Sublicensor, Sublicensor's rights under this Agreement shall
automatically be assigned to OU/Edison in accordance with Section 16(j) of the
Licensing Agreement.
7.5 In the event OU/Edison validly exercises the right to require that all
Licensed Technology be returned to it by Sublicensor under Section 16(1) of the
Licensing Agreement, Sublicensee agrees to return all Assigned Technology to
OU/Edison.
8. GENERAL PROVISIONS.
The notice addresses under this Agreement are as follows:
If to Sublicensor:
id/2/-[, L.P.
98 San Jacinto Blvd., Suite 430
Austin, Texas 78701
Facsimile: (512) 476-3327
With copy to:
Steven A. Fleckman
1800 NationsBank Tower
515 Congress Avenue
Austin, Texas 78701-3503
Facsimile: (512) 476-7644
If to Sublicensee:
Sensus Drug Development Corp.
6
<PAGE>
98 San Jacinto Blvd., Suite 430
Austin, Texas 78701
Facsimile: (512) 476-3327
With copy to:
If to OU/Edison:
Director Technology Transfer Office
Ohio University
Innovation Center
One President Street
Athens, Ohio 45701
Attention: David Allen, Ph.D.
Facsimile: (615) 593-0186
With copy to:
Vice President, Research and Graduate Studies
University Research Center
Ohio University
Athens, Ohio 45701
Attention: T. Lloyd Chestnut, Ph.D.
Facsimile: (615) 593-0380
IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby have
executed and delivered this Agreement as of the Effective Date.
ID/2/-I, L.P.
By: Drug Development Investment Corp., general
partner
By: /s/ John A. Scarlett, M.D.
___________________________________________
John A. Scarlett, M.D., President
SENSUS DRUG DEVELOPMENT CORP.
By: /s/ John A. Scarlett
___________________________________________
John A. Scarlett, Chief Executive Officer
7
<PAGE>
EXHIBIT A
DESCRIPTION OF ASSIGNED TECHNOLOGY
The Assigned Technology is that portion of the Licensed Technology
that consists of any and all growth hormone antagonists covered by the Licensing
Agreement (as defined in the foregoing Agreement), including, but not limited
to, Patent Rights (as such term is defined in the Licensing Agreement) but only
to the extent related to growth hormone antagonists.
8
<PAGE>
Bracketed information omitted and filed separately with the Securities and
Exchange Commission
Confidential Treatment Requested Under 17 C.F.R. Sections 200.80(b)(4), 200.83
and 240.24b-2
EXHIBIT 10.11
FIRST AMENDMENT TO SUBLICENSE AGREEMENT
THIS FIRST AMENDMENT TO SUBLICENSE AGREEMENT (the "Amendment") is made and
entered into effective as of March 18, 1997, by and between id/2/-I, L.P., a
Texas limited partnership having a principal place of business at 98 San Jacinto
Blvd., Suite 430, Austin, Texas 78701 ("id/2/") and Sensus Drug Development
Corporation, a Delaware corporation having a principal place of business at 98
San Jacinto Blvd., Suite 430, Austin, Texas 78701 (Sensus"). id/2/ and Sensus
may be referred to herein individually as a "Party," or collectively, as
"Parties."
RECITALS
A. Ohio University and its Biotechnology Institute entered into a
Biotechnology Licensing and Transfer Agreement (the "Licensing Agreement") with
Drug Development Investment Corporation ("DDIC") on January 18, 1993, which
provides that DDIC may assign the Licensing Agreement in whole or in part to any
of its affiliates.
B. DDIC assigned the Licensing Agreement to id/2/, an affiliate of DDIC,
through that certain "Amended Assignment and Assumption Agreement" dated
effective as of March 26, 1993.
C. id/2/ and Sensus entered into a Sublicense Agreement (the "Agreement")
dated July 14, 1994, whereby id/2/ sublicensed to Sensus its rights under the
License Agreement relating to the growth hormone antagonist portion of the
Licensed Technology (as defined in the Licensing Agreement).
D. The Parties now desire to amend the terms of the Agreement so as to
sublicense to Sensus all id/2/'s rights in the Licensed Technology under the
Licensing Agreement.
NOW, THEREFORE, the Parties agree as follows:
1.0 AMENDMENT OF THE AGREEMENT.
1.1 Section 1.1 of the Agreement is hereby modified to read in its
entirety as follows:
"1.1 'Assigned Technology' means all of the Licensed Technology as
defined in and covered by the Licensing Agreement."
1.2 The following portion of Section 3.1 of the Agreement is deleted:
"Where applicable, all references to "Licensed Technology" in the
Licensing Agreement should, for purposes of this Agreement, be read
instead as stating "Assigned Technology," except as follows: Where the
term, "Licensed Technology," is used in Section 1(g) ("Licensed
Technology") and Section l(j) ("Option Agreement"), such term shall be
read as it appears in the Licensing Agreement."
1.3 Section 4.1 of the Agreement is hereby deleted in its entirety.
1.4 The phrase "to the extent of at least $[*] annually" is hereby deleted
from the first sentence of Section 5.4.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1
<PAGE>
1.5 The following portion of Article is deleted:
"Steven A. Fleckman
1800 NationsBank Tower
515 Congress Avenue
Austin, Texas 78701-3503
Facsimile: (512) 476-7644"
and replaced with the following text:
"Brian C. Cunningham
Cooley Godward, LLP
5 Palo Alto Square
3000 E1 Camino Real
Palo Alto, CA 94306-2155
Facsimile: (415) 857-0663"
1.6 The following portion of Article 8 is deleted:
"Director Technology Transfer Office
Ohio University
Innovation Center
One President Street
Athens, Ohio 45701
Attention: David Allen, Ph.D.
Facsimile: (614) 593-0186"
and replaced with:
"Robert S. Malott
Associate Director
Innovation Center Program and Technology Transfer Office
Technology and Enterprise Building
20 East Circle Drive, Suite 190
Athens, Ohio 45701
Facsimile: (614) 593-0186"
1.7 Exhibit A of the Agreement is hereby deleted in its entirety.
2.0 MISCELLANEOUS
2.1 FULL FORCE AND EFFECT. This Amendment amends the terms of the
Agreement and is deemed incorporated into, and governed by all of other terms
of, the Agreement. The provisions of the Agreement, as amended by this
Amendment, remain in full force and effect.
2.2 COUNTERPARTS. This Amendments may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Amendment in duplicate
originals by their authorized officers as of the date and year first above
written.
2
<PAGE>
ID/2/-I, L.P.
JOHN A. SCARLETT, PRESIDENT
By:___________________________
Title:________________________
SENSUS DRUG DEVELOPMENT CORP.
John A. Scarlett, President / CEO
By:___________________________
Title:________________________
3
<PAGE>
EXHIBIT 10.12
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
1. OHIO UNIVERSITY, a state chartered university and its EDISON ANIMAL
BIOTECHNOLOGY CENTER, a department of Ohio University, located at 101 University
Research and Technology Center, Athens, Ohio 45701 and DRUG DEVELOPMENT
INVESTMENT CORP., a Texas corporation doing business as id/2/, Inc. and having a
principal place of business at 570 Penllyn Pike, Blue Bell, Pennsylvania 19422
("DDIC"), entered into that certain Biotechnology Licensing and Transfer
Agreement relating to growth hormone and gh antagonist technology, dated
effective as of January 18, 1993 (the "Contract").
2. Section 22 of the Contract permits DDIC to assign the Contract, in
whole or in part, to any of its Affiliates, and in such event the Contract shall
become automatically binding upon the assignee. DDIC's Affiliates, as defined
under section 1(a) of the Contract, include id/2/-I, L.P., a Texas limited
partnership maintaining offices in Austin, Texas and at 570 Penllyn Pike, Blue
Bell, Pennsylvania 19422 ("id/2/-I, L.P."). DDIC is the Managing (and sole)
General Partner of id/2/-I, L.P. and directs its management and business
affairs. DDIC and id/2/-I, L.P. are the "parties" herein.
3. DDIC hereby assigns and transfers to id/2/-I, L.P., and in
consideration thereof id/2/-I, L.P. hereby (a) accepts and assumes, all of
DDIC's rights, duties, and obligations hereafter arising under the Contract and
(b) conveys to DDIC a one percent interest as a general partner in the equity
and capital, income and distributions, losses, deductions, and credits of id/2/-
I, L.P. The parties agree that all rights, obligations and protections running
in DDIC's favor under the Contract shall now run in favor of - and be binding
upon - id/2/-I, L.P.
4. The parties agree that DDIC is not hereby released from its duties and
responsibilities under the Contract, and that DDIC shall be indemnified and held
harmless by id/2/-I, L.P. for all of its costs, losses, damages and expenses,
including attorney's fees, hereafter incurred or suffered by DDIC as a result of
any failure of id/2/-I, L.P. to properly perform its duties and pay its
obligations under the Contract.
5. Except as modified herein, the terms and provisions of the Contract are
hereby ratified and reaffirmed by the parties.
1.
<PAGE>
6. Any previous involvement of id/2/-I, L.P. in the performance of DDIC's
duties and responsibilities under the Contract is hereby ratified and approved,
without waiving any substantive rights that the parties may have with respect to
such performance under the Contract.
EXECUTED in multiple original counterparts with an effective date as of
March 26, 1993.
DRUG DEVELOPMENT INVESTMENT CORP.
By: /s/ Richard J. Hawkins
____________________________________________
Richard J. Hawkins, Chairman
id/2/-I, L.P., a Texas Limited Partnership
By: DRUG DEVELOPMENT INVESTMENT CORP.
Its Managing General Partner
By: /s/ Richard J. Hawkins
____________________________________________
Richard J. Hawkins, Chairman
2.
<PAGE>
EXHIBIT 10.13
AMENDED ASSIGNMENT AND ASSUMPTION AGREEMENT
-------------------------------------------
1. OHIO UNIVERSITY, a state chartered university and its EDISON ANIMAL
BIOTECHNOLOGY CENTER, a department of Ohio University, located at 101 University
Research and Technology Center, Athens, Ohio 45701 and DRUG DEVELOPMENT
INVESTMENT CORP., a Texas corporation doing business as id/2/, Inc. and having
a principal place of business at 570 Penllyn Pike, Blue Bell, Pennsylvania 19422
("DDIC"), entered into that (i) certain Biotechnology Licensing and Transfer
Agreement relating to growth hormone and gh antagonist technology (the "License
Agreement) and (ii) that certain Sponsored Research Agreement (the "Research
Agreement"), both dated effective as of January 18, 1993 (collectively, the
"Contracts").
2. Section 22 of the License Agreement and Section 11.1 of the Research
Agreement permit DDIC to assign the respective Contracts, in whole or in part,
to any of its Affiliates, and in such event the Contracts shall become
automatically binding upon the assignee. DDIC's Affiliates, as defined under
section 1(a) of the License Agreement and Section 11.1 of the Research
Agreement, include id/2/-I, L.P., a Texas limited partnership maintaining
offices in Austin, Texas and at 570 Penllyn Pike, Blue Bell, Pennsylvania 19422
("id/2/-I, L.P."). DDIC is the Managing (and sole) General Partner of id/2/-I,
L.P. and directs its management and business affairs. DDIC and id/2/-I, L.P. are
the "parties" herein.
3. DDIC hereby assigns and transfers to id/2/-I, L.P., and in
consideration thereof id/2/-I, L.P. hereby (a) accepts and assumes, all of
DDIC's rights, duties, and obligations hereafter arising under the Contracts and
(b) conveys to DDIC a one percent interest as a general partner in the equity
and capital, income and distributions, losses, deductions, and credits of
id/2/-I, L.P. The parties agree that all rights, obligations and protections
running in DDIC's favor under the Contracts shall now run in favor of - and be
binding upon -id/2/-I, L.P.
4. The parties agree that DDIC is not hereby released from its duties and
responsibilities under the Contracts, and that DDIC shall be indemnified and
held harmless by id/2/-I, L.P. for all of its costs, losses, damages and
expenses, including attorney's fees, hereafter incurred or suffered by DDIC as a
result of any failure of id/2/-I, L.P. to properly perform its duties and pay
its obligations under the Contracts.
1.
<PAGE>
5. Except as modified herein, the terms and provisions of the Contracts
are hereby ratified and reaffirmed by the parties.
6. Any previous involvement of id/2/-I, L.P. in the performance of DDIC's
duties and responsibilities under the Contracts is hereby ratified and approved,
without waiving any substantive rights that the parties may have with respect to
such performance under the Contracts.
EXECUTED in multiple original counterparts with an effective date as of
March 26, 1993.
DRUG DEVELOPMENT INVESTMENT CORP.
By: /s/ Richard J. Hawkins
_______________________________________
Richard J. Hawkins, Chairman
id/2/-I, L.P., a Texas Limited Partnership
By: DRUG DEVELOPMENT INVESTMENT CORP.
Its Managing General Partner
By: /s/ Richard J. Hawkins
_______________________________________
Richard J. Hawkins, Chairman
2.
<PAGE>
Bracketed information omitted and filed separately with the Securities and
Exchange Commission
Confidential TreatmentRequested Under 17 C.F.R. Sections 200.80(b)(4), 200.83
and 240.24b-2
EXHIBIT 10.14
SPONSORED RESEARCH AGREEMENT
BETWEEN OHIO UNIVERSITY
EDISON ANIMAL BIOTECHNOLOGY CENTER
AND
DRUG DEVELOPMENT INVESTMENT CORP.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Effective Date............................................ 1
--------------
2. Research Program.......................................... 1
----------------
3. Compensation.............................................. 2
------------
4. Consultation and Reports.................................. 2
------------------------
5. Publicity, Publications and Confidentiality............... 3
-------------------------------------------
6. Rights in the Licensed Technology......................... 4
---------------------------------
7. Indemnity................................................. 4
---------
8. Independent Contractor.................................... 4
----------------------
9. Term and Termination...................................... 4
--------------------
10. Schedules................................................. 5
---------
11. General Provisions........................................ 5
------------------
</TABLE>
SCHEDULES
Schedule A - Scope of Work.................................... 10
-------------
Schedule B - Compensation and Schedule for Compensation....... 12
------------------------------------------
1.
<PAGE>
SPONSORED RESEARCH AGREEMENT
----------------------------
This Sponsored Research Agreement (the "Agreement") is made by and between
Ohio University, a state chartered university and its Edison Biotechnology
Center, a department of Ohio University, currently located at 101 University
Research and Technology Center, Athens, Ohio 45701 (hereinafter referred to as
'University'), and Drug Development Investment Corp., a corporation organized
and existing under the laws of Texas, having a principal place of business at
570 Penlynn Pike, Bluebell, Pennsylvania (hereinafter referred to as "Sponsor").
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in that certain License Agreement, as hereinafter defined.
RECITALS
--------
WHEREAS, Sponsor and University have contemporaneously entered into that
certain Biotechnology Licensing and Transfer Agreement (the 'License
Agreement'), pursuant to which University has licensed to Sponsor certain patent
and other technology rights collectively referred to therein as Licensed
Technology;
WHEREAS, Sponsor desires that University perform certain research work to
develop the Licensed Technology, and is willing to advance funds to sponsor such
research for the mutual benefit of the parties; and
WHEREAS, University is willing to perform such research;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
University and Sponsor agree as follows:
1. EFFECTIVE DATE
--------------
This Agreement shall be effective commencing as of the Effective Date of
the License Agreement.
2. RESEARCH PROGRAM
----------------
2.1 University will diligently conduct the Research Program (herein so
called) described in Schedule A attached hereto, and will furnish all
facilities, time, and personnel that are necessary to carry out the Research
Program. The Research Program will be under the direction of John J. Kopchick,
or his successor as may be mutually agreed to by the parties hereto (hereinafter
referred to as the "Principal Investigator").
2.2 The Research Program shall be performed beginning on the Effective
Date and shall continue during the period expiring on the eighth anniversary of
the Effective Date (the "Term"), subject to termination in accordance with
Article 11. Sponsor shall have the option to extend the Research Program by
renewing this Agreement for successive periods of one year each following the
expiration of the Term and during the pendency of the License Agreement,
provided that (i) the obligations of Schedule B shall be current at the time of
such renewal, (ii) Sponsor continues to pay the direct costs as provided in
Section 3.1, and (iii) Sponsor shall not then be in Default under the terms of
the
1.
<PAGE>
License Agreement or this Agreement. References to the Term shall hereafter
include a11 applicable extensions thereof. Any such notice of renewal shall be
given no later than ninety (90) days prior to the expiration of the then current
Term.
2.3 The Research Program will be designed to carry out University's
primary mission of education and the advancement of knowledge. The manner of
performance of the Research Program shall be determined by the Principal
Investigator, in consultation with University and Sponsor and in conformity with
Schedule A. University and its Principal Investigator will conduct the Research
Program in a diligent, professional and competent manner designed to maximize
the commercial development and potential of the Licensed Technology.
3. COMPENSATION
------------
3.1 As consideration for the performance by University of its obligations
under this Agreement, Sponsor will pay University [ * ] to maximum expenditure
limitations in the amounts provided in Schedule B. All such costs shall be
accurately and fully accounted for by University to Sponsor in accordance with
generally accepted accounting principles, consistently applied.
3.2 University shall maintain all Research Program funds in a separate
account and shall expend such funds for wages, supplies, equipment, travel, and
other operation expenses solely in connection with the Research Program. It is
understood that funds for the Research Program which are received and not used
in a particular year may be used in a subsequent year during the term (as
extended) of this Agreement.
4. CONSULTATION AND REPORTS
------------------------
4.1 Sponsor's Designated Representative for consultation and
communications with the Principal Investigator shall be John A. Scarlett, M.D.,
or such other person as Sponsor may from time to time designate in writing to
University and the Principal Investigator.
4.2 During the Term, Sponsor's representatives may consult informally with
the Principal Investigator and any other designated representatives of
University regarding the Research Program, in person, in writing, and by
telephone. Sponsor shall have the right to examine the workproduct of the
Research Program, and for such purpose shall have access on a reasonable basis
to University's facilities where such work is performed.
4.3 During the Term the Principal Investigator will make oral reports as
reasonably requested by Sponsor's Designated Representative. The Principal
Investigator shall submit to Sponsor a written report summarizing the work for
each calendar half year of the Term within twenty (20) days after the close of
such half year. In addition, the Principal Investigator shall submit a
comprehensive and informative annual report within forty-five (45) days
following the end of each calendar year during the Term, which report shall
contain, without limitation, the following information:
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
a. A detailed summary of income and direct and indirect costs of the
Research Program for the prior year.
b. A detailed report of the activities undertaken and
accomplishments achieved by the University under the Research Program during the
prior year.
4.4 University will keep accurate and complete financial and scientific
records relating to the Research Program and will make such records available to
Sponsor or its authorized representatives throughout the Term during normal
hours upon reasonable notice. University will not discard any research or
financial data related to the Research Program without first obtaining Sponsor's
express written consent.
4.5 University shall prepare and submit to Sponsor a pro forma budget for
each calendar year during which this Agreement is in effect, commencing with the
year in which this Agreement is signed. The initial pro forma budget shall be
submitted to Sponsor within thirty (30) days of the Effective Date; and
thereafter, the pro forma budget shall be submitted to Sponsor by December 1 of
the year prior to the year to which the pro forma budget applies. The parties
shall discuss in good faith any adjustments to the budget.
5. PUBLICITY, PUBLICATIONS AND CONFIDENTIALITY
-------------------------------------------
5.1 Except as required by law or regulation, no press release or any other
written statements intended for use in the public media that refer to the
Research Program shall be made by University. University shall have the right
to acknowledge Sponsor's support of the investigations under this Agreement in
scientific or academic publications or presentations, with Sponsor's prior
written approval. In any such statements, the parties shall describe the scope
and nature of their participation accurately and appropriately, shall make no
misleading or inflated representations concerning the technology or any
compounds derived therefrom, and shall not compromise any duty of
confidentiality concerning the Research Program or the Licensed Technology.
5.2 The parties agree that it is desirable to avoid loss of commercially
valuable trade secrets, know-how and patent rights arising from performance of
this Agreement but not yet protected by an issued patent (hereinafter,
'Commercial Information') as a result of premature public disclosure of such
information. University and Principal Investigator agree that there will be no
publication nor public disclosure related to research performed in the course of
this Agreement that would cause the loss of Commercial Information. Therefore,
at least sixty (60) days prior to planned submission for publication,
University, through the Principal Investigator, will submit to Sponsor for
review and comment, all manuscripts and other materials that University,
Principal Investigator, and any employees and students of University authorized
to perform research under this Agreement may wish to publish or publicly
disclose, including but not limited to professional articles and papers, theses,
and dissertations. Submissions shall be made in the form proposed for
publication. Sponsor shall notify University within sixty (60) days after
receipt of such materials whether Sponsor in good faith believes that the
proposed publication would disclose Commercial Information, and whether Sponsor
desires to file patent applications on any inventions referred to in such
materials. Where University and Principal
3.
<PAGE>
Investigator, on one hand, and Sponsor, on the other, disagree as to whether
publication would disclose Commercial Information, University, Principal
Investigator, and Sponsor shall discuss the matter in good faith in a diligent
effort to resolve the matter to the parties' mutual satisfaction. No such
publication shall occur without Sponsor's prior written consent. Subject to the
foregoing provisions and Section 5.3 below University and Principal Investigator
shall have the right to publish or otherwise publicly disclose information
derived from research performed in the course of this Agreement.
5.3 In connection with work performed under this Agreement, University and
Principal Investigator, and employees and students authorized to perform
research under this Agreement, will have access to Confidential Information
pertaining to the Licensed Technology and/or the Research Program, including but
not limited to Commercial Information and proprietary information that may be
provided by Sponsor. All Confidential Information shall be protected in
accordance with Section 17 of the License Agreement, the terms of which
provision are incorporated by reference herein.
6. RIGHTS IN THE LICENSED TECHNOLOGY
---------------------------------
As partial consideration for the payments made by Sponsor hereunder, all
Licensed Technology, including without limitation any Patent Rights arising
during the Term of this Agreement and within two years thereafter in accordance
with section 16(c) of the License Agreement, shall be treated in accordance with
the terms of the License Agreement.
7. INDEMNITY
---------
Each party shall have the relative rights and duties of indemnity with
respect to the Research Program that are set forth in Section 19 of the License
Agreement, and the terms Sponsor and University for purposes of this provision
shall be deemed to include the trustees, directors, officers, agents, employees,
and contractors of the respective parties, as well as the Principal
Investigator, provided that the duty of indemnity shall devolve solely upon the
Sponsor and University as entities (and not upon such individuals).
8. INDEPENDENT CONTRACTOR
----------------------
For purposes of this Agreement and all services to be provided hereunder,
each party shall be an independent contractor and not an agent, employee,
partner, or joint venture of the other party. Neither party shall have
authority to make any representation or commitment or take any action on behalf
of or that shall be binding on the other party, except as may be expressly
authorized in writing.
9. TERM AND TERMINATION
--------------------
9.1 This Agreement may be terminated as provided below:
(a) by the agreement of both parties;
4.
<PAGE>
(b) at the election of the non-defaulting party, upon the expiration
of any applicable cure period, in the event that either party shall be in breach
of its material obligations under this Agreement and shall fail to remedy such
breach within ninety (90) days after receipt of written notice specifying such
breach; unless such Default occurs by reason of failure to make any payment
required hereunder, and in that event, where the breach is not remedied within
sixty (60) days after receipt of notice specifying the amount due;
(c) at the option of the Sponsor, in the event the Principal
Investigator should terminate his employment with the University; or
(d) upon the termination of the License Agreement in accordance with
its terms.
9.2 Termination of this Agreement shall not affect the rights and
obligations of the parties that have accrued and vested prior to termination,
all of which shall survive. In addition, the obligations of the parties under
Articles 5 and 11 shall survive termination of this Agreement. Except as
otherwise required pursuant to this Section 9.2, Sponsor's sole liability to
University under this Agreement upon its termination shall be the obligation to
make payments for which Sponsor is liable up to the date of termination; and,
where termination results from University's Default, Sponsor may deduct from
such payment any and all charges required to be expended by Sponsor to correct
or complete the work of the Research Program, including any damages or expenses
attributable to defective work.
9.3 Upon termination of this Agreement, University shall deliver to
Sponsor any materials and documents then required to be delivered pursuant to
the License Agreement, and hereby grants to Sponsor the right of first refusal
to purchase at depreciated cost any machinery or equipment that University has
custom built in performance of the Research Program, unless such equipment was
developed or acquired with funding expressly provided by Sponsor in addition to
the annual budget, in which event Sponsor shall have the option to acquire such
equipment without further charge.
10. SCHEDULES
---------
Schedules A and B are incorporated herein and made a part hereof for all
purposes.
11. GENERAL PROVISIONS
------------------
11.1 Assignment. This Agreement shall not be assignable by any party
----------
without the prior written consent of the other, except that Sponsor may assign
this Agreement, in whole or in part, to any of its Affiliates (as that term is
defined in the License Agreement), or to its successor in interest by merger,
consolidation or other acquisition (including the assignee of all or
substantially all of its assets). In the event of such assignment, this
Agreement shall, to the extent of the interest transferred, automatically be
binding upon and inure to the benefit of such assignees and successors in
interest, and they shall be required to undertake in writing to perform in
accordance with their applicable responsibilities hereunder. In the event of
any assignment by Sponsor
5.
<PAGE>
to one of its Affiliates, Sponsor shall remain jointly and severally liable with
such Affiliate for the full and timely performance by the Affiliate of such
party's assigned obligations.
11.2 Integrated Agreement. This Agreement, together with the License
--------------------
Agreement and the Option Agreement (collectively, the "Agreements"), constitute
the complete understanding and agreement of the parties with respect to the
subject matter hereof, and together supersede all prior or contemporaneous
written and oral agreements, representations and understandings between the
parties with respect to the subject matter hereof. The parties acknowledge that
no representations have been made to induce execution of this Agreement except
as set forth in the Agreements. This Agreement can only be amended or
supplemented by a written instrument, duly executed on behalf of the respective
parties.
11.3 Notices. It is contemplated that the parties will frequently conduct
-------
informal communications relating to the subject of this Agreement. However, all
notices and other communications between the parties with respect to specific
rights and obligations of the parties under the provisions of this Agreement
shall be in writing and shall be deemed given if delivered personally, by
courier or by facsimile transmission, telefaxed or mailed by registered or
certified mail (return receipt requested), with all facsimile, telex or postage
fees paid by the sender, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice; provided,
however, that notices of a change of address or telex or facsimile number shall
be effective only upon receipt thereof):
If to Licensor:
Director
Edison Animal Biotechnology Center
Ohio University Innovation Center
Athens, Ohio 45701
Attn: David Allen, Ph.D.
Facsimile: (614) 593-0186
With Copy to:
Assistant Vice President for Research
Ohio University Research and Technology Center
Athens, Ohio 45701
Attn: Carol J. Blum, Ph.D.
Facsimile: (614) 503-0379
If to Licensee:
Drug Development Investment Corp.
570 Penllyn Pike
Blue Bell, Pennsylvania 19422
Attn: John A. Scarlett, M.D.
Facsimile: (215) 643-6616
6.
<PAGE>
With Copy to:
Mr. Steven A. Fleckman
Fleckman Johnson & Passman
1800 NationsBank Tower
515 Congress Avenue
Austin, Texas 78701
Facsimile: (512) 476-7644
Notices which are mailed shall be deemed to have been delivered on the third day
after deposit in a postal depository. Records of the sender generated by the
sender's telecopier and ancillary equipment and/or maintained in the ordinary
course of sender's business showing the recipient's telecopier number and the
date and time of transmission and number of pages transmitted shall constitute
presumptive evidence of the receipt of a telecopy for purposes of this Section.
11.4 Governing Law. The enforcement and construction of this Agreement
-------------
shall be governed by Ohio law.
11.5 Severability and Reformation. If any provision of this Agreement is
----------------------------
held invalid or unenforceable by a tribunal of competent jurisdiction, such
provision shall be reformed to the minimal extent necessary to render such
provision valid and enforceable. If such reformation cannot be granted, then
the invalid provision shall be deemed severable and all other provisions shall
remain in full force and effect. Notwithstanding the foregoing, if the granting
of reformation or the severance of any provision would materially destroy or
diminish the objectives of the parties or the benefits to be derived by either
party under the Agreement, then the determination that a particular provision is
invalid or unenforceable shall apply to the Agreement in its entirety.
11.6 Waiver. No waiver of any provision of this Agreement shall be deemed
------
effective unless expressly set forth in a written instrument signed by the party
against whom such waiver is to be enforced, and no failure to insist upon strict
performance of any particular provision shall preclude either party from
thereafter insisting upon strict compliance in the future with such provision or
any other provision in this Agreement.
11.7 Attorney's Fees. The prevailing party in any proceeding involving a
---------------
dispute relating to this Agreement shall be entitled to recover its reasonable
attorney's fees and all reasonable costs incurred in connection with the
proceeding.
11.8 Arbitration. In the event of a dispute relating to this Agreement,
-----------
the parties shall endeavor to settle such dispute amicably. Failing amicable
resolution, the parties shall promptly submit such dispute to arbitration
pursuant to the rules of the American Arbitration Association ("AAA") in
Cleveland, Ohio, or in an available venue closest thereto. The decision
rendered by the arbitrators shall be final and binding, and enforceable by any
court of competent jurisdiction. The prevailing party shall be entitled to
recover costs and attorney's fees incurred in connection with the arbitration
proceeding. At their election the parties may jointly apply to the District
Court in Cuyahoga County, Ohio for the appointment of an arbitrator to hear and
resolve the dispute, in which event such arbitrator shall be guided by the
7.
<PAGE>
Commercial Arbitration Rules of the AAA. In such event, the costs associated
with the application to such Court shall be shared equally by the parties, but
the fees of the arbitrator and the arbitration costs shall be paid by the party
against whom the award is rendered. The arbitrators shall have the power to
grant relief in equity as well as at law. Notwithstanding the foregoing, this
provision shall not preclude (a) any party from seeking temporary injunctive
relief from a court pending arbitration, or (b) the parties from seeking to
mediate any dispute hereunder as a more expeditious and less expensive
alternative to arbitration.
11.9 Force Majeure. Performance of this Agreement is subject to
-------------
unavoidable delays to the extent caused by force majeure, in the nature of war,
civil unrest, labor dispute, epidemic, natural disaster, or because of any
governmental law or order effectively suspending performance, or any other cause
beyond the reasonable control of the party affected and occurring without its
fault; provided that notice of such force majeure shall be given by the affected
party to the other party with reasonable promptness, specifying the cause of the
delay, and the affected party shall use reasonable efforts to resume performance
of its obligations. The time for performance shall be extended by an amount of
time equal to the period during which the effects of force majeure have
prevented performance.
11.10 Further Assurances. The parties hereto agree to execute any and all
------------------
such further documents and to take any and all such further action as may be
necessary or appropriate to effectuate the purposes of this Agreement.
11.11 Conflicts in Agreements. In the event of any inconsistency between
-----------------------
this Agreement and the License Agreement, the terms of the License Agreement
shall control.
11.12 Construction. References to one gender shall include all other
------------
genders; the use of singular nouns shall imply the plural and vice versa; and
words denoting persons will include corporations and vice versa where
appropriate to the context.
11.13 Confidentiality Pending Effectiveness of Agreement. Section 5.3 of
--------------------------------------------------
this Agreement shall be effective upon signing by the parties, even pending the
acquisition of any required formal approval of the License Agreement by any
party's governing body or any Regulatory Authority.
11.14 Signatory Authority. Each signatory below represents to the other
-------------------
party that he/she has authority to sign for and bind the principal on whose
behalf he/she has purported to execute this Agreement.
11.15 Multiple Counterparts. This agreement may be executed in multiple
---------------------
counterparts, all of which collectively, and each of which shall constitute one
and the same instrument.
8.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in multiple counterparts by their duly authorized representatives.
DRUG DEVELOPMENT INVESTMENT CORP.
By: /s/ John A. Scarlett, M.D.
__________________________________
John A. Scarlett, M.D., President
OHIO UNIVERSITY
By: /s/ T. Lloyd Chesnut, Ph.D.
________________________________________
T. Lloyd Chesnut, Ph.D., Vice President,
Research and Graduate Studies
Principal Investigator indicates that by his signature he has read, fully
understand, and agrees to the terms of this Agreement.
By: /s/ John Kopchick, Ph.D.
__________________________________
John Kopchick, Ph.D.
Date: 1-15-93
________________________________
9.
<PAGE>
SCHEDULE A - SCOPE OF WORK
-------------
During the term of this Agreement and in performance thereof, the
University will pursue a broad research agenda that consists of five major
programs described as follows:
1. [ * ]
2. [ * ]
3. [ * ]
4. [ * ]
5. [ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
10.
<PAGE>
[ * ]
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
11.
<PAGE>
SCHEDULE B - COMPENSATION AND SCHEDULE FOR COMPENSATION
------------------------------------------
Compensation under this Agreement shall be made by Sponsor in the following
payments:
a. [ * ]
b. [ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
12.
<PAGE>
FIRST AMENDMENT TO SPONSORED RESEARCH AGREEMENT
BETWEEN OHIO UNIVERSITY EDISON BIOTECHNOLOGY INSTITUTE AND
INNOVATIONS IN DRUG DEVELOPMENT, INC.
THIS FIRST AMENDMENT (the "First Amendment") to Sponsored Research
Agreement (the "Agreement") is made and entered into date on the 14th day of
September, 1993 by and between the INNOVATIONS IN DRUG DEVELOPMENT (the
"Sponsor"), and the OHIO UNIVERSITY EDISON BIOTECHNOLOGY INSTITUTE (the
"University") .
WHEREAS, the University and Sponsor entered into a Sponsored Research
Agreement effective January 18, 1993; and the University and Sponsor desire to
modify certain provisions of the Agreement as provided herein.
NOW, THEREFORE, the University and Sponsor agree to the following:
The Sponsor will grant funds to the University in the amount of [*]
dollars($[*]) to conduct work with the intention of producing [ * ]. The
University does not represent and warrant that the University can perform this
work to the quantity and quality specifications needed by Sponsor for Sponsor's
purposes. Work supported by this First Amendment will be conducted in the
College of Engineering, Biomolecular Engineering Group. The budget is attached
as Exhibit 1. Payment will be made upon execution of this Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this First Amendment as
of the date written above.
OHIO UNIVERSITY INNOVATIONS IN DRUG DEVELOPMENT
/S/ DAVID ALLEN, PH.D., /S/ JOHN SCARLETT, M.D.,
By:__________________________________ By:__________________________________
DAVID ALLEN, PH.D., JOHN SCARLETT, M.D.,
DIRECTOR, OUEBI CHIEF EXECUTIVE OFFICER
/S/ CAROL J. BLUM
By:__________________________________
CAROL J. BLUM, PH.D.,
ASSOCIATE VICE PRESIDENT,
RESEARCH AND GRADUATE STUDIES
/S/ JOSEPH E. ESSMAN
By:__________________________________
JOSEPH E. ESSMAN, PH.D.,
ASSOCIATE DEAN, COLLEGE OF
ENGINEERING AND TECHNOLOGY
<PAGE>
EXHIBIT 1
The following budget is for the production of [ * ]. It is based on an
estimated yield of [ * ]. The project is planned for the period September 1,
through November 30, 1993. A total budget cost of $[ * ] is requested and is
itemized below. The project budget does not include costs for a lyophilizer or
evaporator which are being purchased as part of the Ohio Biotech Consortium.
Production will be performed in [ * ]. It is estimated that a total of
[ * ] will be required. This includes a startup period for [ * ].
Purification will be performed in [ * ]. Lots will be analyzed for adequate
concentration before processing.
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
SECOND AMENDMENT TO SPONSORED RESEARCH AGREEMENT
BETWEEN OHIO UNIVERSITY EDISON BIOTECHNOLOGY INSTITUTE AND
INNOVATIONS IN DRUG DEVELOPMENT, INC.
FOR [ * ]
PREPARED BY OHIO UNIVERSITY MAY 11, 1995
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.
<PAGE>
This Second Amendment (the "Second Amendment") to Sponsored Research
Agreement (the "Agreement") is made and entered into date on the 12th day of
May, 1995 by and between Innovations in Drug Development ("the Parent Company")
and its subsidiary, Sensus Corporation (together with the Parent Company
referred to as the "Sponsor"), and the Ohio University Edison Biotechnology
Institute (the "University").
Whereas, the University and Sponsor via the Parent Company entered into a
Sponsored Research Agreement effective January 18, 1993; and the University and
Sponsor desire to modify certain provisions of the Agreement as provided herein.
Now, therefore, the University and Sponsor agree to the following:
The Sponsor will grant funds to the University in the amount of $[ * ]
([ * ]) to conduct fixed fee work with the intention of studying the [ * ] (see
Exhibit 1, Proposal). The University makes no representations and extends no
warranties of any kind, either expressed or implied, concerning this work,
including, but not limited to, warranties of merchantability and fitness for a
particular purpose.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
Work supported by this Second Amendment will be conducted in the laboratories
of the Ohio University Edison Biotechnology Institute. A 1-year fixed fee
budget for the period May 1, 1995 to April 30, 1996 is attached as Exhibit 2.
Payment will be made in three (3) installments: the first for $[ * ] ([ * ]
dollars) upon execution of this Agreement; the second for $[ * ] ([ * ] dollars)
on or before November 1, 1995; and the third for $[ * ] ([ * ] dollars) on or
about April 30, 1996.
In witness whereof, the parties have duly executed this Second Amendment as
of the date written above.
OHIO UNIVERSITY INNOVATIONS IN DRUG DEVELOPMENT
/S/ DAVID ALLEN /S/ JOHN SCARLETT
By: _________________________ By: __________________________
DAVID ALLEN, PH.D., JOHN SCARLETT, M.D.,
DIRECTOR, OUEBI CHIEF EXECUTIVE OFFICER
SENSUS CORPORATION
/S/ LLOYD CHESTNUT /s/ ROBERT F. BUTZ
By: _________________________ By: __________________________
LLOYD CHESTNUT, PH.D., ROBERT F. BUTZ, PH.D.,
VICE PRESIDENT, RESEARCH PRESIDENT/CHIEF OPERATING
AND GRADUATE STUDIES OFFICER, SENSUS CORPORATION
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
EXHIBIT 1
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3.
<PAGE>
PROTOCOLS
PHASE ONE
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
4.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
5.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
6.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
9.
<PAGE>
PHASE TWO
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
10.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
11.
<PAGE>
PHASE THREE
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
8.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
9.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
REFERENCES
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
10.
<PAGE>
[ * ]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
11.
<PAGE>
EXHIBIT 2
[ * ]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
EXHIBIT 10.15
AGREEMENT
This Agreement ("this Agreement") is made and entered into as of July 30,
1996, by and between Sensus Drug Development Corporation, a Delaware corporation
(the "Company"), and Javelin Capital Fund, LP, a Delaware limited partnership
("Javelin"), and is joined in by the undersigned stockholders of the Company
(together, the "Company Stockholders," individually, a "Company Stockholder"),
as set forth in this Agreement, to evidence their agreement as parties hereto to
vote their shares of stock to elect to the board of directors of the Company an
individual designated by Javelin, as provided in Section 2 of this Agreement.
WHEREAS, the Company is offering 685,714 shares (the "Shares") of its
Series A Preferred Stock to Javelin as set forth in certain agreements and
instruments separate from this Agreement; and
WHEREAS, the Company, to induce Javelin to purchase the Shares, has
offered- Javelin the registration rights and the right to representation on the
Company's board of directors as provided in this Agreement, and Javelin desires
to accept such offer.
NOW, THEREFORE, in consideration of the foregoing recitals, Javelin's
purchase of the Shares, and other good and valuable consideration, the receipt
of which is, hereby acknowledged, and in order to induce Javelin to purchase
Shares, the parties hereto agree as follows:
SECTION 1. COVENANT TO REGISTER.
1.1 DEFINITIONS. For the purposes of this Section 1 the following
definitions shall apply:
"Register," "registered," and "registration" refer to a registration under
the Securities Act effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement, document or amendment
thereto.
"Registrable Securities" means (i) the Shares, (ii) common stock of the
Company issued or issuable upon conversion of the Shares, and (iii) any common
stock of the Company or other security issued as (or issued or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, any of the Shares or any common stock of the Company issued or
issuable upon conversion of the Shares. Notwithstanding the foregoing,
Registrable Securities shall not include any securities sold to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which registration rights under this Section 1 are not
transferred or assigned as provided in Section 1.6.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with tiffs Section 1, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and disbursements not to exceed Fifteen Thousand
Dollars ($15,000) of a single special counsel for Javelin in connection with
each registration statement fried by the Company in accordance with
1.
<PAGE>
the registration rights granted in this Section 1, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean the shares of the Company's Series A Preferred Stock
being purchased by Javelin.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to a sale of Registrable Securities pursuant to a
registration statement filed by the Company in accordance with the registration
rights granted in this Section 1.
"SEC" or "Commission" shall mean the Securities and Exchange Commission.
1.2 REQUEST FOR REGISTRATION. Subject to the conditions of this Section
1.2, Javelin may deliver to the Company a written request that the Company
register all or part of the Registrable Securities having an aggregate offering
price in excess of five million dollars. Each such request shall specify the
number of Registrable Securities to be registered and the intended method or
methods of disposition thereof. As soon as practicable, the Company shall file
a registration statement under the Securities Act covering the Registrable
Securities which the Company has been so requested to register in such written
request, and use its best efforts to cause such registration statement to become
effective as soon as possible. If such registration statement is declared
effective with respect to all Registrable Securities, the registration rights
granted pursuant to this Section 1 shall cease. If such registration statement
is not declared effective with respect to all Registrable Securities, the
registration rights granted pursuant to this Section 1 shall remain in effect
until all Registrable Securities have been registered under the Securities Act.
If Javelin so elects in a written request delivered to the Company pursuant to
this Section 1.2, the offering of Registrable Securities registered pursuant to
such written request shall be in the form of an underwritten offering, and in
such underwritten offering the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by
Javelin; provided, that such investment bankers and managers must be reasonably
acceptable to the Company. The Company shall not be required to effect a
registration pursuant to this Section 1.2:
(I) after the Company has effected one (1) registration pursuant to
this Section 1.2,-and such registration has been declared or ordered effective;
or
(II) prior to the Company's first firm commitment underwritten public
offering of its common stock registered under the Securities Act (the "Initial
Offering") or during the period starting with the date of filing of, and ending
on the date one hundred eight (180) days following the effective date of, the
registration statement pertaining to the Initial Offering, provided that the
Company is making reasonable and good faith efforts to cause such registration
statement to become effective; or
(III) if the Company shall furnish to Javelin a certificate signed by
the Chairman of the Board stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its stockholders for such
2.
<PAGE>
registration statement to be effected at such time, in which event the Company
shall have the right to defer such filing for a period of not more than ninety
(90) days after receipt of the request of Javelin to effect a registration
pursuant to this Section 1.2; provided that such right to delay a request shall
be exercised by the Company no more than twice in any one-year period.
1.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration under this Section 1 shall be borne by the
Company. All Selling Expenses incurred in connection with any such registration
shall be borne by Javelin or other holder of the securities so registered pro
rata on the basis of holdings of securities so registered.
1.4 REGISTRATION PROCEDURES. Whenever required to effect the registration
of Registrable Securities pursuant to a written notice delivered pursuant to
Section 1.2, the Company shall:
1.4.1 Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective.
1.4.2 Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
1.4.3 Furnish to Javelin such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as Javelin may reasonably request in
order to facilitate the disposition of Registrable Securities covered by such
registration statement.
1.4.4 Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such states or jurisdictions as shall be reasonably requested
by Javelin, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
1.4.5 In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter or managing underwriters of such
offering. Javelin shall also enter into and perform its obligations under such
an agreement.
1.4.6 Notify Javelin, at any time when a prospectus relating to
securities covered by such registration statement is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and promptly amend
or supplement the registration statement and prospectus, in compliance with the
provisions of the Securities Act, to correct such untrue statement or omission.
3.
<PAGE>
1.4.7 Furnish, at the request of Javelin, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
"registration, in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably satisfactory to Javelin,
addressed to the underwriters, if any, and to Javelin, and (ii) a letter dated
as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to Javelin, addressed to the underwriters, if any, and,
if permitted by applicable accounting standards, to Javelin.
1.5 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under this Section 1:
1.5.1 To the extent permitted by law, the Company will indemnify and
hold harmless Javelin, the partners, officers and directors of Javelin, any
underwriter (as defined in the Securities Act) for Javelin and each person, if
any, who controls Javelin or such underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse Javelin
and each such partner, officer or director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 1.5.1
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by Javelin or any such
partner, officer, director, underwriter or controlling person.
1.5.2 To the extent permitted by law, Javelin will indemnify and hold
harmless the Company, each of its directors, each of its officers, each person,
if any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, any underwriter of securities covered by such registration
statement and each person who controls such underwriter
4.
<PAGE>
within the meaning of the Securities Act or the Exchange Act, and any other
selling securityholder under such registration statement or any of such selling
securityholder's partners, directors or officers or any person who controls such
selling securityholder, against any losses, claims, damages or liabilities
(joint or several) to which the Company or any such director, officer,
controlling person, underwriter, securityholder or securityholder's partners,
directors, officers or other control persons may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by Javelin under an instrument duly executed by
Javelin and stated to be specifically for use in connection with such
registration; and Javelin will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter, securityholder or securityholder's partners, directors, officers or
other control persons in connection with investigating or defending any such
loss, claim, damage, liability or action if it is judicially determined that
there was such a Violation; provided, however, that the indemnity agreement
contained in this Section 1.5.2 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of Javelin, which consent shall not be unreasonably
withheld; provided further, that in no event shall any indemnity under this
Section.1.5.2 exceed the gross proceeds from the offering received by Javelin.
1.5.3 Promptly after receipt by an indemnified party under this
Section 1.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.5, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 1.5.
1.5.4 If the indemnification provided for in this Section 1.5 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation or Violations that resulted
in such loss, claim, damage or liability, as well as any other relevant
5.
<PAGE>
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
1.5.5 The foregoing indemnity agreements of the Company and Javelin
are subject to the condition that, insofar as they relate to any Violation made
in a preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(`0) (the "Final Prospectus"), such indemnity agreements shall not inure to
the benefit of any person if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
1.5.6 The obligations of the Company and Javelin under this Section
1.5 shall survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise. No indemnifying party, in the defense of
any such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
1.6 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned by
Javelin to a transferee or assignee of Registrable Securities; provided,
however, that no such transferee or assignee shall be entitled to registration
under this Section 1 unless it acquires at least 57,143 shares of Registrable
Securities (as adjusted for stock splits and combinations) and the Company
shall, within twenty (20) days of such transfer, be furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned.
Notwithstanding the foregoing, such registration rights may be assigned to any
subsidiary, parent, general partner or limited partner of Javelin without regard
to the number of Registrable Securities so assigned or transferred. Any holder
- -of Registrable Securities to whom registration rights have been assigned
pursuant to this Section 1.6 shall have with respect to such Registrable
Securities the same rights (subject to the same obligations) as Javelin under
this Section 1.
1.7 OTHER REGISTRATION RIGHTS. The registration rights granted to Javelin
in this Section 1 are in addition to the registration rights granted to Javelin
in that certain Investor Rights Agreement, dated as of July 30, 1996 among the
Company and certain purchasers named therein (which purchasers include Javelin).
1.8 AMENDMENT AND WAIVER. Any provision of this Section 1 may be amended
and the observance thereof waived (either generally or in a particular instance)
by an instrument in writing signed by Javelin and the Company.
6.
<PAGE>
1.9 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 1 shall terminate and be of no further force and effect six
(6) years after the closing of the Initial Offering.
SECTION 2. BOARD REPRESENTATION.
2.1 JAVELIN DESIGNEE. So long as Javelin shall hold at least 50 % of the
Shares (including, in calculating such 50%, any common stock or other securities
of the Company into which any of the Shares may be converted), one member of the
board of directors of the Company (the "Board") shall be an individual
designated by Javelin as provided in this Section 2. For the purposes of this
Section 2, "Javelin Designee" shall mean the individual so designated by
Javelin, which designation shall be made by Javelin as follows: (i) Javelin, at
the time of the execution and delivery of this Agreement, has notified the
Company in writing of the name of the Javelin Designee to be elected to the
Board pursuant to Section 2.2, (ii) sixty (60) days prior to each annual meeting
or other meeting of stockholders of the Company at which directors are to be
elected ("Annual Meeting"), Javelin shall notify the Company in writing of the
name of the Javelin Designee to be elected to the Board at such Annual Meeting,
and (iii) if a vacancy on the Board shall occur as a result of the death,
resignation or removal of a director elected to the Board by reason of having
been a Javelin Designee, Javelin shall, within ten (10) days after receiving
written notice from the Company of such vacancy, notify the Company in writing
of the name of the Javelin Designee to be elected to the Board to fill such
vacancy.
2.2 ELECTION OF INITIAL JAVELIN DESIGNEE.
2.2.1 To the extent permitted by the Company's certificate of
incorporation and bylaws and applicable law, upon execution and delivery of this
Agreement the Board shall increase the number of directors constituting the
Board by one (1) and shall elect the Javelin Designee to the Board of Directors
to fill the vacancy created by such increase.
2.2.2 If election of the Javelin Designee to the Board by Board
action without action by the stockholders of the Company, as provided in Section
2.2.1, is not-permitted under the Company's certificate of incorporation and
bylaws and applicable law, then the Company, promptly after the execution and
delivery of this Agreement, shall call a special meeting of the stockholders of
the Company for the purpose of electing the Javelin Designee to the Board.
2.3 FUTURE ELECTIONS OF JAVELIN DESIGNEE. If, in connection with any
Annual Meeting, the Company, its management or the Board nominates, recommends,
or solicits proxies to be voted for, the election to the Board of a particular
group of individuals ("Management Nominees"), the Management Nominees shall
include the Javelin Designee. The Company, its management and the Board shall
each use all reasonable efforts to cause the Javelin Designee to be elected to
the Board at each Annual Meeting, whether or not there are Management Nominees.
2.4 VACANCY. If a vacancy on the Board shall occur as a result of the
death, resignation or removal of a director elected to the Board by reason of
having been a Javelin Designee and such vacancy is to be filled by the vote of
the remaining members of the Board, such remaining members of the Board shall
vote for the election of the Javelin Designee to fill
7.
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such vacancy to the extent permitted under the Company's certificate of
incorporation and bylaws and applicable law.
2.5 VOTING AGREEMENT OF COMPANY STOCKHOLDERS. Each Company Stockholder
agrees that (i) in each election of directors of the Company such Company
Stockholder will vote all shares of common stock of the Company and all other
securities entitled to vote for election of directors held by such Company
Stockholder (either by voting such shares and other securities in person or by
proxy at an Annual Meeting or, if applicable, signing a written consent) to
elect to the Board the Javelin Designee, (ii) such Company Stockholder will not
vote any such shares or other securities for the removal from the Board of a
director elected to the Board by reason of having been a Javelin Designee,
without the prior written consent of Javelin, (iii) if a vacancy on the Board
shall occur as a result of the death, resignation or removal of a director
elected to the Board by reason of having been a Javelin Designee and such
vacancy is to be filled by the stockholders of the Company, each such Company
Stockholder shall vote all such shares and other securities for the election of
the Javelin Designee to fill such vacancy, and (iv) in connection with any
transfer or assignment by such Company Stockholder of shares of common stock of
the Company or any other securities entitled to vote for election of directors,
such Company Stockholder shall obtain an agreement by the transferee or assignee
to assume and be bound by this Agreement with respect to the shares or other
securities so transferred or assigned.
2.6 FUTURE ISSUANCES OF SECURITIES. The Company, in connection with any
future issuance of common stock or any other securities of the Company entitled
to vote for election of directors, will use all reasonable efforts to assure
that the holders of a majority (or such other percentage as shall be required to
elect the Javelin Designee to the Board) of the common stock and other
securities of the Company entitled to vote for election of directors outstanding
after such issuance will continue to be bound to elect the Javelin Designee to
the -Board as provided in this Section 2.
2.7 INSURANCE AND INDEMNIFICATION. The Company represents and warrants
to, and agrees with Javelin, that (i) each Javelin Designee elected to the Board
will have the same indemnification protection (whether such indemnification is
contained in the Company's certificate of incorporation or bylaws, or in a
resolution of the Board or stockholders, or in a contract or otherwise) as other
directors of the Company and the Company will take no action to reduce such
indemnification below that which is provided to other directors of the Company
without the prior written consent of Javelin, and (ii) until the rights of
Javelin under this Section 2 terminate pursuant to Section 2.11, the Company
will keep Javelin advised of any directors' liability insurance coverage the
Company has in effect and will furnish to Javelin, upon Javelin's request, a
true and correct copy of the insurance policy under which any such coverage is
provided, each Javelin Designee elected to the Board will be covered by any such
insurance to the same extent as other directors of the Company, and any such
coverage will not be reduced in amount or scope below that which is provided to
other directors of the Company without the prior written consent of Javelin.
2.8 JAVELIN'S RIGHT NOT TO DESIGNATE A DIRECTOR. Javelin may at its
option elect not to name a Javelin Designee with respect to any election of
directors of the Company, and the exercise of such right shall not constitute a
waiver or termination of Javelin's right to name a Javelin Designee with respect
to any subsequent election of directors of the Company.
8.
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2.9 STOCK OWNERSHIP OF COMPANY STOCKHOLDERS. The Company represents and
warrants to Javelin that to the best of the Company's knowledge each Company
Stockholder owns the number of shares of common stock of the Company
(representing the percentage of such shares outstanding on the date hereof) as
shown on the signature pages of this Agreement.
2.10 AMENDMENT AND WAIVER. Any provision of this Section 2, except
Section 2.5, may be amended and the observance thereof waived (either generally
or in a particular instance) by an instrument in writing signed by Javelin and
the Company. No provision of Section 2.5 may be amended or waived other than by
a written instrument signed by the party against whom enforcement of such any
such amendment or waiver is sought.
2.11 TERMINATION. The rights afforded to Javelin, and the obligations
imposed upon the Company, its directors, officers and stockholders, in this
Section 2 shall immediately terminate: (i) at such time as Javelin owns less
than 50% of the Shares (including, in calculating such 50 %, any common stock or
other securities of the Company into which any of the Shares may be converted);
(ii) upon the Initial Offering; and (iii) upon any consolidation or merger of
the Company with or into (or any other corporate reorganization involving the
Company and) any other corporation or other entity or person (" Purchaser")
which has one or more classes of equity securities (" listed or quoted
securities") - registered on a national securities exchange or designated as
qualified for trading on the National Association of Securities Dealers
Automated Quotations System (or any successor quotation system) ("NASDAQ") and a
market capitalization of at least $40 million and in which the stockholders of
the Company immediately prior to such consolidation, merger or reorganization,
own, immediately after such consolidation, merger or reorganization less than
50% of the voting power of the corporation or other entity or person resulting
from such consolidation, merger or reorganization. For the purpose of clause
(iii) of the preceding sentence, "market capitalization" means the aggregate
market value of all outstanding listed or quoted securities of the Purchaser at
the average daily closing price on the national securities exchange on which
they are listed, or on NASDAQ, as the case may be, during the four calendar
weeks preceding the date of consummation of such consolidation, merger or
reorganization.
SECTION 3. MISCELLANEOUS.
3.1 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without regard
to principles of conflict of laws of such state.
3.2 SURVIVAL. The representations, warranties and agreements of the
parties in this Agreement shall survive the closing of the purchase of the
Shares by Javelin and the delivery of the Shares to Javelin.
3.3 REMEDIES. The parties hereto acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement are
not performed in accordance with their specific terms or are otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this
9.
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being in addition to any other remedy to which any of the parties may be
entitled by law or equity.
3.4 ATTORNEYS FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including, without limitation, reasonable fees and expenses of
attorneys and accountants, and all fees, costs and expenses of appeals.
3.5 SUCCESSORS AND ASSIGNS. Except as expressly otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
3.6 NOTICES. All notices or other communications required or permitted-
hereunder shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified; (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day; (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or (iv)
one (1) day after deposit with a nationally recognized overnight courier
service, specifying `next day delivery, with written verification of receipt.
All such notices or other communications shall be sent to the party to whom
addressed at the address as set forth on the signature pages hereof or at such
other address as such party may designate by ten (10) days advance written
notice to the other parties hereto.
3.7 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, then (i) that provision will be fully
severable and this Agreement will be construed and enforced as if the illegal,
invalid, or unenforceable provision had never been part of this Agreement; (ii)
the remaining provisions of this Agreement will remain in full force and will
not be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement; and (iii) in the place of the illegal, invalid,
or unenforceable provision, there will be added automatically to this Agreement
a legal, valid, and enforceable provision that is as similar to the illegal,
invalid, or unenforceable provision as possible.
3.8 AMENDMENT; WAIVER. Except as expressly otherwise provided in this
Agreement (including without limitation Sections 1.8 and 2.10), no provisions of
this Agreement may be amended or waived other than by a written instrument
signed by the party against whom enforcement of any such amendment or waiver is
sought. No waiver by any party of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to- he a continuing
waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter.
3.9 ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties hereto with respect to the matters covered hereby. The Company and
Javelin acknowledge that they are parties to other agreements relating to the
Shares and agree that in the
10.
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event of any conflict between any provisions of this Agreement and any provision
of any such other agreement, the provisions of this Agreement shall control.
3.10 HEADINGS. The headings in this Agreement are for convenience of
reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
3.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto (including each of the Company
Stockholders) in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which together shall constitute one and the
same instrument. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause an - additional
executed signature page to be physically delivered to the other parties within
five days of the execution and delivery hereof. Proving the execution and
contents of this Agreement against a party may be done by producing any
counterpart of this Agreement signed by that party.
11.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SENSUS DRUG DEVELOPMENT CORPORATION
98 San Jacinto Blvd., Suite 430
Austin, Texas 78701
By:______________________________
JOHN A. SCARLETT, M.D.
Chief Executive Officer
JAVELIN CAPITAL FUND, LP:
1075 13th Street South
Birmingham, Alabama 35205
Attention: Lyle A. Hohnke
By:______________________________
LYLE A. HOHNKE
General Partner
COMPANY STOCKHOLDERS:
Number of Shares of Stock Owned
Signature, Name & Address (& Percentage of Outstanding)
- ------------------------- -----------------------------
______________________________ 2,368,800 shares of Common Stock
Richard J. Hawkins (36.5% of common Stock)
324 Eanes School Road
Austin, TX 78746
12.
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Number of Shares of Stock Owned
Signature, Name & Address (& Percentage of Outstanding)
- ------------------------- -----------------------------
_____________________________ 2,368,800 shares of Common Stock
Nona F. Niland (36.5% of Common Stock)
324 Eanes School Road
Austin, TX 78746
_____________________________ 1,184,400 shares of Common Stock
John A. Scarlett (18.27% of Common Stock)
6801 St. Andrew's Way
Austin, TX 78746
_____________________________ 471,429 shares of Series A Preferred Stock
Richard J. Hawkins and (13.7% of Preferred Stock)
Nona F. Niland, Joint Tenants
324 Eanes School Road
Austin, TX 78746
13.
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AMENDMENT TO AGREEMENT
THIS AMENDMENT (the "Amendment") is made this 19th day of March 1997, to
that certain AGREEMENT dated July 30, 1996 (the "Agreement"), by and between
SENSUS DRUG DEVELOPMENT CORPORATION, a Delaware Corporation (the "Company"), and
JAVELIN CAPITAL FUND, LP, A Delaware limited partnership ("Javelin") that was
joined by certain stockholders of the Company (the "Company Stockholders") as
set forth in the Agreement.
WHEREAS, the Company, Javelin and the Company Stockholders entered into the
Agreement to provide Javelin with certain registration rights and the right to
representation on the Company's Board of Directors in certain circumstances; and
WHEREAS, the Company and Javelin desire to amend and restate Javelin's
registration rights in that certain Amended and Restated Investor Rights
Agreement, of even date herewith, by and among the Company and certain
stockholders of the Company (the "Amended and Restated Investor Rights
Agreement") which will supercede the registration rights provisions set forth in
the Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Agreement.
2. Section 1 of the Agreement is hereby voided and superceded in its
entirety by the Amended and Restated Investor Rights Agreement of even date
herewith. Sections 2 and 3 of the Agreement shall remain in full force and
effect.
3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument. This Amendment shall be governed by and construed and
enforced in accordance with the laws of the State of California without regard
to principles of conflict of laws of such state. This Amendment contains the
entire understanding of the parties hereto with respect to the matters covered
hereby. The Company and Javelin acknowledge that they are parties to other
agreements relating to the Shares and agree that in the event of any conflict
between any provisions of this Amendment and any provision of any such other
agreement, the provisions of this Amendment shall control.
1.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first above written.
SENSUS DRUG DEVELOPMENT CORPORATION JAVELIN CAPITAL FUND, LP
San Jacinto Center 1075 13 Street South
98 San Jacinto Blvd., Suite 430 Birmingham, Alabama 35205
Austin, Texas 78701
By:______________________________ By:__________________________
John A. Scarlett, M.D., Lyle A. Hohnke,
President and Chief General Partner
Executive officer
2.
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EXHIBIT 10.16
BOARD OBSERVER AND VISITATION RIGHTS AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of March 20,
1997 by and between SENSUS DRUG DEVELOPMENT CORPORATION, a Delaware corporation
(the "Company"), and THE GOLDMAN SACHS GROUP, L.P., a Delaware limited
partnership (the "GS Group").
WHEREAS, the Company is offering 625,000 shares of its Series B Preferred
Stock (the "Shares") to the GS Group as set forth in certain agreements and
instruments separate from this Agreement; and
WHEREAS, the Company, to induce the GS Group to purchase the Shares, has
offered the GS Group the right to an observer on the Company's Board of
Directors and certain inspection rights as provided in this Agreement, and the
GS Group desires to accept such offer.
NOW, THEREFORE, in consideration of the foregoing recitals, the GS Group's
purchase of the Shares, and other good and valuable consideration, the receipt
of which is hereby acknowledged, and in order to induce the GS Group to purchase
the Shares, the parties hereto agree as follows:
SECTION 1. INSPECTION RIGHTS. The GS Group or its authorized
representative shall have the right to visit and inspect any of the properties
of the Company or any of its subsidiaries, including its books and records (and
to make copies thereof and to take extracts therefrom), and to discuss the
affairs, finances and accounts of the Company or any of its subsidiaries with
its officers and its independent public accountants, and to review such
information as is reasonably requested all at such reasonable times and as often
as may be reasonably requested; provided, however, that the Company shall not be
obligated under this Section 1 with respect to a competitor of the Company or
with respect to information which the Board of Directors determines in good
faith is confidential and should not, therefore, be disclosed.
SECTION 2. VISITATION RIGHTS. The Company shall allow one representative
designated by the GS Group to attend all meetings of the Company's Board of
Directors in a nonvoting capacity, and in connection therewith, the Company
shall give such representative copies of all notices, minutes, consents and
other materials, financial or otherwise, which the Company provides to its Board
of Directors.
SECTION 3. CONFIDENTIALITY OF RECORDS. The GS Group agrees to use, and to
use all commercially reasonable efforts to insure that its authorized
representatives use, the same degree of care as the GS Group uses to protect its
own confidential information to keep confidential any information furnished to
it which the Company identifies as being confidential or proprietary (so long as
such information is not in the public domain), except that the GS Group may
disclose such proprietary or confidential information (i) to any partner,
employee, subsidiary or parent of the GS Group for the purpose of evaluating its
investment in the Company as long as such
1.
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partner, employee, subsidiary or parent is advised of the confidentiality
provisions of this Section 3, (ii) as is required to be disclosed by order of a
court of competent jurisdiction, administrative agency or governmental body, or
by law, rule or regulation or (iii) with the prior written consent of the
Company, which shall not be unreasonably withheld, to any bona fide prospective
purchaser of its capital stock in the Company.
SECTION 4. DISCLOSURE OF INVESTMENT. The Company shall not (i) use in
advertising or publicity the name of the GS Group or any of its affiliates, or
any stockholder, partner or employee of the GS Group or any of its affiliates,
or any trade name, trademark, trade device, service mark, symbol or any
abbreviation, contraction or simulation thereof owned by the GS Group or any of
its affiliates, in any case without the prior written consent of such party,
which consent shall not be unreasonably withheld or delayed or (ii) represent
that any product or service provided by the Company has been approved or
endorsed by the GS Group or any of its affiliates without the prior written
consent of the GS Group, which consent shall not be unreasonably withheld or
delayed; provided, however, that the Company may disclose: (i) that the GS Group
is a stockholder of the Company, (ii) the aggregate purchase price paid by GS
Group in connection with its investment in the Company and (iii) the percentage
of the outstanding shares of capital stock of the Company held by the GS Group.
SECTION 5. INVESTMENT BANKING SERVICES. So long as the GS Group (together
with its affiliates) shall own 300,000 or more shares of Series B Preferred
Stock (or Common Stock issued upon conversion of such shares), as adjusted for
stock splits, combinations and the like, the Company agrees that it shall not
grant to another investment bank the first right of refusal, the first right of
negotiation or similar right to act as the Company's investment banker or to
otherwise provide investment banking services to the Company with respect to any
matter (including, without limitation, with respect to the sale of the Company
or any of its subsidiaries) or to act as the lead managing underwriter for the
initial public offering of the Company's equity securities (the "IPO"). This
covenant shall terminate on the effective date of the registration statement
pertaining to the Company's IPO.
SECTION 6. GRANT OF REGISTRATION RIGHTS TO HOLDERS OF COMMON STOCK. So
long as the GS Group (together with its affiliates) shall own 300,000 or more
shares of Series B Preferred Stock (or Common Stock issued upon conversion of
such shares), as adjusted for stock splits, combinations and the like, the
Company agrees that it shall not grant any registration rights to the holders of
Company Common Stock unless the Company has first obtained the consent of the
holders of 58% of the outstanding Registrable Securities (as defined in that
certain Amended and Restated Investor Rights Agreement of even date herewith).
SECTION 7. TERMINATION OF COVENANTS. Except for the covenants contained
in Sections 5 and 6 (which shall terminate as set forth therein), all covenants
of the Company contained in this Agreement shall expire and terminate on the
earlier of (i) the effective date of the registration statement pertaining to
the Company's IPO or (ii) the date on which the GS Group no longer holds the
Shares.
2.
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SECTION 8. MISCELLANEOUS.
A. GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
B. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.
C. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein.
D. SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
E. ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
F. TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
G. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of
the date set forth in the first paragraph hereof.
SENSUS DRUG DEVELOPMENT CORPORATION THE GOLDMAN SACHS GROUP,L.P.
By: THE GOLDMAN SACHS CORPORATION
By:__________________________________ _________________________________
J. David Rogers
Name:________________________________ Executive Vice President
3.
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Title:______________________________
4.
<PAGE>
EXHIBIT 10.17
BOARD OBSERVER, RIGHT OF FIRST REFUSAL AND STANDSILL AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of October 10,
1997 by and between SENSUS DRUG DEVELOPMENT CORPORATION, a Delaware corporation
(the "Company"), and ROSS FINANCIAL CORPORATION, a Cayman Islands corporation
("Ross").
WHEREAS, the Company is offering 8,000,000 shares of its Series C Preferred
Stock (the "Shares") to Ross as set forth in certain agreements and instruments
separate from this Agreement; and
WHEREAS, the Company, to induce Ross to purchase the Shares and in
consideration of the standstill provisions contained herein, has offered Ross
the right to an observer on the Company's Board of Directors and certain rights
of first refusal as provided in this Agreement, and Ross desires to accept such
offer.
NOW, THEREFORE, in consideration of the foregoing recitals, Ross' purchase
of the Shares, and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. OBSERVER RIGHTS
1.1 OBSERVER RIGHTS. The Company shall allow one representative
designated by Ross to attend all meetings of the Company's Board of Directors in
a nonvoting capacity, and in connection therewith, the Company shall give such
representative copies of all notices, minutes, consents and other materials,
financial or otherwise, which the Company provides to its Board of Directors;
provided, however, that the Company reserves the right to exclude such
representative from access to any material or meeting or portion thereof if the
Company believes upon advice of counsel that such exclusion is reasonably
necessary to preserve the attorney-client privilege, to protect highly
confidential proprietary information or for other similar reasons.
1.2 CONFIDENTIALITY OF RECORDS. Ross agrees to use, and to use all
commercially reasonable efforts to insure that its authorized representatives
use, the same degree of care as Ross uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that Ross may disclose such
proprietary or confidential information (i) to any partner, employee, subsidiary
or parent of Ross for the purpose of evaluating its investment in the Company as
long as such partner, employee, subsidiary or parent is advised of the
confidentiality provisions of this Section 1.2, (ii) as is required to be
disclosed by order of a court of competent jurisdiction, administrative agency
or governmental body, or by law, rule or regulation or (iii) with the prior
written consent of the Company, which shall not be unreasonably withheld, to any
bona fide prospective purchaser of its capital stock in the Company.
1
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1.3 TERMINATION OF OBSERVER RIGHTS. All covenants of the Company
contained in Section 1 shall expire and terminate on the date on which Ross
holds fewer than fifty percent (50%) of the Shares.
SECTION 2. RIGHTS OF FIRST REFUSAL FOLLOWING INITIAL PUBLIC OFFERING.
2.1 SUBSEQUENT OFFERINGS. Following the effective date of the Company's
first underwritten public offering of its Common Stock, registered under the
Securities Act of 1933, as amended (the "Securities Act"), and so long as Ross
(with its affiliates) shall own not less than fifty percent (50%) of the Shares,
Ross shall have a right of first refusal to purchase its pro rata share of all
Equity Securities, as defined below, that the Company may, from time to time,
propose to sell and issue, other than the Equity Securities excluded by Section
2.6 hereof. Ross' pro rata share is equal to the ratio of (A) the number of
shares of the Company's Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Shares) which Ross is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (B) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon the conversion of shares of
Preferred Stock or upon exercise of any outstanding warrants or options)
immediately prior to the issuance of the Equity Securities. The term "Equity
Securities" shall mean (i) any Common Stock, Preferred Stock or other equity
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other equity security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other equity security or (iv) any such warrant or
right.
2.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give Ross written notice of its intention, describing the
Equity Securities, the price and the terms and conditions upon which the Company
proposes to issue the same. Ross shall have five (5) days from the giving of
such notice to agree to purchase its pro rata share of the Equity Securities for
the price and upon the terms and conditions specified in the notice by giving
written notice to the Company and stating therein the quantity of Equity
Securities to be purchased. Notwithstanding the foregoing, the Company shall
not be required to offer or sell such Equity Securities to Ross if such offer or
sale would cause the Company to be in violation of applicable federal securities
laws.
2.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If Ross fails to
exercise in full the rights of first refusal, the Company shall have one hundred
twenty (120) days thereafter to sell the Equity Securities in respect of which
Ross' rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to Ross pursuant to Section 2.2 hereof. If the Company
has not sold such Equity Securities within such one hundred twenty (120) day
period, the Company shall not thereafter issue or sell any Equity Securities
without first offering such securities to Ross in the manner provided above.
2
<PAGE>
2.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Section 2 shall terminate and be of no further force and
effect three (3) years from the date of the Company's first underwritten public
offering of its Common Stock, registered under the Securities Act.
2.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
Ross under this Section 2 may not be assigned or transferred except that such
rights are assignable by Ross to any wholly owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Securities Act,
controlling, controlled by or under common control with Ross.
2.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 2 shall have no application to any of the following Equity Securities:
A. shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or other arrangements that are approved by a majority of the Board
of Directors;
B. any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination, including without limitation, an acquisition whether pursuant to a
preexisting option or otherwise, of the stock or assets of a special purpose
corporation, research and development partnership or similar entity;
C. any Equity Securities that are issued by the Company as part of
an underwritten public offering;
D. shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
E. shares of Common Stock issued upon conversion of the Shares or
upon conversion or exercise of other convertible securities, options or warrants
of the Company; and
F. any Equity Securities issued pursuant to corporate partnering
transactions, off balance sheet financing transactions (such as "SWORD" or
Research & Development partnership transactions), commercial lending
transactions or lease financings;
provided, however, that if the aggregate number of Equity Securities issued
pursuant to Section 2.6(f) shall exceed, on a cumulative basis, ten percent
(10%) of the fully-diluted outstanding shares of the Company's capital stock
(calculated at the time of issuance), the provisions of Sections 2.1, 2.2 and
2.3 shall apply subject to the following conditions:
(1) if the Company proposes to issue Equity Securities in
conjunction with the equity securities of another entity ("Joint Equity
Securities"), Ross shall have the right to purchase its pro rata share of Joint
Equity Securities as defined in Section 4.1 above only to
3
<PAGE>
the extent that such participation by Ross will not result in a loss of desired
accounting treatment for the Company; and
(2) if the Joint Equity Securities are issued as units, in
exercising its right of first refusal, Ross must purchase the full unit, even if
the component equity securities of such unit may be transferred separately.
SECTION 3. STANDSTILL
3.1 PURCHASE RESTRICTIONS. Ross agrees that from the date of this
Agreement, it will not, nor will it permit any of its affiliates to, acquire or
offer or propose to acquire any shares of Common Stock or any securities
convertible into, exchangeable for or exercisable for Common Stock (all such
securities, collectively referred to hereinafter as "Voting Securities") which,
when taken together with any Voting Securities then owned by Ross and its
affiliates (on an as-if-converted basis), would in the aggregate, exceed an
amount equal to forty-nine percent (49%) of the Company's then outstanding
Voting Securities, unless in any such case specifically approved in writing by
the Board of Directors of the Company.
3.2 EQUITABLE RELIEF. Ross acknowledges that in the event of any breach
by it of this Section 3, the Company would be irreparably and immediately
harmed and could not be made whole by monetary damages and agrees that the
Company, in addition to any other remedy to which it may be entitled, shall be
entitled to an injunction or injunctions to prevent breaches of this Section 3
and to compel specific performance of Section 3. Any requirements for the
securing or posting of any bond with respect to such remedy are hereby waived by
Ross.
SECTION 4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York without regard to the conflict of laws
rules thereof.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
4.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement and supersedes all of the prior agreements and
undertakings, both written and oral, among the parties, or any of them with
respect to the subject matter hereof.
4.4 SEVERABILITY. If any provision of this Agreement or the application
of any such provision or any portion thereof to any person or circumstance,
shall be held invalid, illegal, or unenforceable, to the extent permitted by
law, the remaining portion of such provision and the remaining provisions of
this Agreement shall not in any way be affected or impaired.
4.5 MODIFICATION AND WAIVER. No amendment, modification or alteration of
the terms or provisions of this Agreement shall be binding unless the same shall
be in writing and
4
<PAGE>
duly executed by the parties, except that any of the terms or provisions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits of such waived terms or provisions. No waiver of any of the
provisions of this Agreement shall be deemed to or shall constitute a waiver of
any other provision hereof (whether or not similar).
4.6 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
4.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of
the date set forth in the first paragraph hereof.
SENSUS DRUG DEVELOPMENT CORPORATION ROSS FINANCIAL CORPORATION
_____________________________________ ______________________________
Joan A. Scarlett Kenneth E. Dart
President and Chief Executive Officer President
5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 23, 1998, except for Note 7 as to which
the date is July 20, 1998, in the Registration Statement (Form S-1) and the
related Prospectus of Sensus Drug Development Corporation for the registration
of shares of its common stock.
/s/ Ernst & Young LLP
Austin, Texas
July 23, 1998
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