REDACTED VERSION
EXHIBIT 10.3
TO
ICOS Corporation's
Report on Form 8-K
Dated
August 26, 1997
"[ * ]" = omitted, confidential material, which material has been
separately filed with the Securities and Exchange Commission pursuant to a
request for confidential treatment.
PRODUCT DEVELOPMENT AGREEMENT
dated as of
June 5, 1997
between
ICOS CORPORATION
and
ICOS CLINICAL PARTNERS, L.P.
TABLE OF CONTENTS
ARTICLE I DEFINITIONS...............................................1
SECTION 1.01 Definitions.........................................1
ARTICLE II LICENSES GRANTED.........................................2
SECTION 2.01 Background Technology License.......................2
SECTION 2.02 Transfer of Background Technology License...........2
SECTION 2.03 Program Technology License..........................3
SECTION 2.04 Term of Background and Program Technology Licenses..3
SECTION 2.05 Interim License.....................................3
SECTION 2.06 No Implied License..................................4
SECTION 2.07 License Agreements..................................4
ARTICLE III CONDUCT OF THE RESEARCH PROGRAM.........................5
SECTION 3.01 Research Program....................................5
SECTION 3.02 Annual Review of Research Program...................5
ARTICLE IV PAYMENT FOR THE RESEARCH PROGRAM.........................6
SECTION 4.01 License Fee; Quarterly Payments.....................6
SECTION 4.02 Research Program Accounting.........................7
SECTION 4.03 Default by Limited Partner..........................7
SECTION 4.04 Additional Funds....................................8
ARTICLE V PRODUCT MARKETING.........................................9
SECTION 5.01 Marketing...........................................9
SECTION 5.02 Yearly Review of Marketing Program..................9
SECTION 5.03 Marketing Agreements................................9
ARTICLE VI ROYALTIES...............................................10
SECTION 6.01 Interim License Payments...........................10
SECTION 6.02 Payments on Competitive Products After the
Interim License Termination Date...................10
SECTION 6.03 Manner of Payment..................................10
SECTION 6.04 Accounting Records.................................11
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ARTICLE VII TERMINATION OF RESEARCH PROGRAM OR MARKETING PROGRAM...11
SECTION 7.01 Research Program Infeasible or Uneconomic..........11
SECTION 7.02 Termination for Material Breach....................12
SECTION 7.03 Termination for Bankruptcy of the Company..........13
SECTION 7.04 Termination of Research Program for Bankruptcy
of the Partnership.................................13
SECTION 7.05 Termination by Mutual Consent......................14
SECTION 7.06 Effect of Research Program Termination.............14
SECTION 7.07 Effect of Marketing Program Termination............14
ARTICLE VIII FIELD TECHNOLOGY......................................15
SECTION 8.01 Access and Disclosure..............................15
SECTION 8.02 Library............................................15
SECTION 8.03 Partnership Use of Background Technology...........15
SECTION 8.04 Return of Property Rights..........................15
ARTICLE IX CONFIDENTIALITY.........................................16
SECTION 9.01 Confidentiality....................................16
SECTION 9.02 Exceptions.........................................16
SECTION 9.03 Injunctive Remedy..................................17
ARTICLE X INSURANCE AND LIABILITY..................................17
SECTION 10.01 Insurance.........................................17
SECTION 10.02 Third Party Claims................................17
ARTICLE XI INTELLECTUAL PROPERTY RIGHTS............................18
SECTION 11.01 Applications......................................18
SECTION 11.02 Intellectual Property Right Disclaimers...........19
SECTION 11.03 Intellectual Property Right Protection Outside
the Field of Activity or Outside the Territory....19
SECTION 11.04 Intellectual Property Right Expenses..............19
ARTICLE XII INFRINGEMENT SUITS AND ACTIONS.........................20
SECTION 12.01 Company's Right to Bring Infringement Suits
Against Third Parties.............................20
SECTION 12.02 Standby Right of the Partnership..................21
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SECTION 12.03 Limitations Under License Agreements..............21
ARTICLE XIII REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........22
SECTION 13.01 Representations and Warranties of the Company.....22
ARTICLE XIV MISCELLANEOUS..........................................23
SECTION 14.01 Assignment; Merger Letter.........................23
SECTION 14.02 Entire Agreement..................................23
SECTION 14.03 Severability......................................23
SECTION 14.04 Specific Performance..............................24
SECTION 14.05 Benefits of This Agreement........................24
SECTION 14.06 Choice of Law.....................................24
SECTION 14.07 Amendments and Waivers............................24
SECTION 14.08 Headings..........................................24
SECTION 14.09 Payments, Notices, Reports, Advice and Statements.25
SECTION 14.10 Force Majeure.....................................25
SECTION 14.11 Counterparts......................................25
SECTION 14.12 Decisions by the General Partner..................26
SECTION 14.13 Effective Date....................................26
Schedule I - Glossary
Schedule II - Form of License Agreement Consent
Schedule III - Merger Letter
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PRODUCT DEVELOPMENT AGREEMENT
Agreement dated as of June 5, 1997 between ICOS Corporation, a Delaware
corporation (the "Company"), and ICOS Clinical Partners, L.P., a Delaware
limited partnership (the "Partnership").
WITNESSETH:
WHEREAS, the business of the Partnership is to conduct research and
experimentation in order to develop Products within the Field of Activity in
the Territory; to obtain appropriate regulatory approvals; after receipt of
such approvals to Exploit Products within the Field of Activity in the
Territory; and to engage in activities incidental to the above activities;
and
WHEREAS, the Company owns, on the date hereof, and may develop or
otherwise become the owner of certain technology, and the Partnership
desires to acquire from the Company, and the Company is willing to grant to
the Partnership, a license or sublicense, as the case may be, under such
technology for use within the Field of Activity in the Territory; and
WHEREAS, the Company, directly or through its Affiliates, has, or is
expected to develop, acquire or obtain the use of the facilities, equipment
and employees that would permit it to Exploit Products on behalf of the
Partnership, and the Partnership is willing to grant to the Company a
royalty-bearing license in order that the Company may undertake such
Exploitation;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions
(a) Unless otherwise provided, each capitalized term used herein shall
have the meaning assigned to it in the Glossary attached hereto as Schedule I.
(b) Each of the following terms is defined in the section set forth
opposite such term:
TERM SECTION
Additional Funds 4.04
Background Technology License 2.01
Default Amount 4.03
Default Notice 7.02
Deposit 8.02
Infringement Action 12.01
Interim License 2.05
Invoiced Amount 4.01
Limited Partner Default 4.03
Merger Letter 14.01
Program Review Date 4.04
Quarterly Estimate 4.01
Third Party Claim 10.02
Third Party Sublicensee 2.02
ARTICLE II
LICENSES GRANTED
SECTION 2.01 Background Technology License
The Company hereby irrevocably grants (subject to the terms of any License
Agreement) to the Partnership an exclusive (even as to the Company and its
Affiliates), fully paid-up right and license to make, have made, use, modify
and improve the Background Technology within the Field of Activity in the
Territory (the "Background Technology License").
SECTION 2.02 Transfer of Background Technology License
(a) Subject to the provisions of Section 2.02(b) and subject to the terms
of any License Agreement, the Company also grants to the Partnership after the
Purchase Option Termination Date (i) the right to sell, sublicense, assign,
transfer or otherwise dispose of its rights under the Background Technology
License or any part thereof to any other Person (a "Third Party Sublicensee")
on whatever terms and conditions the Partnership may wish and (ii) the right
to grant any Third Party Sublicensee the right to sell, sublicense, assign,
transfer or otherwise dispose of all or any part of its rights under the
Background Technology License to any other Person (also a "Third Party
Sublicensee").
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(b) No sale, sublicense, assignment, transfer or other disposition of
rights under the Background Technology License under Section 2.02(a) shall be
effective unless (i) it is in writing and (ii) the Third Party Sublicensee
shall have undertaken and agreed in writing with the Partnership or another
Third Party Sublicensee, as applicable, to be bound by the provisions of this
Section 2.02 and Article IX to the same extent as the Partnership or such
Third Party Sublicensee is bound. The Partnership or such Third Party
Sublicensee shall give the Company prompt written notice each time a sale,
sublicense, assignment, transfer or other disposition is granted or made to
a Third Party Sublicensee.
SECTION 2.03 Program Technology License
The Partnership hereby irrevocably grants to the Company a royalty-free,
exclusive (even as to the Partnership and its Affiliates), fully paid-up right
and license to make, have made, use, modify and improve the Program Technology
(a) outside the Field of Activity or (b) outside the Territory for any purpose
whatsoever (the "Program Technology License"). Such right and license shall
be freely assignable or sublicensable to any Person that agrees in writing to
be bound by the provisions of this Section 2.03 and Article IX to the same
extent as the Company is bound. The Company shall give the Partnership
prompt written notice after each assignment or sublicense by the Company of
the Program Technology or any part thereof.
SECTION 2.04 Term of Background and Program Technology Licenses
The licenses and sublicenses granted under Sections 2.01 and 2.03 as part
of the Background Technology License and the Program Technology License,
respectively, with respect to patents shall continue for the life of each
such patent. All other licenses granted under Sections 2.01 and 2.03 as
part of the Background Technology License and the Program Technology
License, respectively, shall not terminate, subject to the provisions of
any License Agreement.
SECTION 2.05 Interim License
The Partnership hereby grants to the Company the royalty-bearing
(pursuant to the terms of this Agreement), exclusive right and license
(with the right to sublicense in accordance with Section 5.03) to make,
have made, use, modify and improve the Technology within the Field of
Activity in the Territory for the purpose of performing its obligations
under this Agreement (the "Interim License"). The foregoing right and
license shall include the right to make, have made, use and sell Products
but not the right to sell or assign the Interim License. The Interim
License will terminate on the Interim License Termination Date.
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SECTION 2.06 No Implied License
No right or license for the Exploitation of any Technology is granted
by this Agreement, except as expressly specified in this Article II.
SECTION 2.07 License Agreements
(a) The Company and the Partnership agree to use all reasonable efforts
with respect to each License Agreement included in the Background Technology
License to obtain (i) a consent in substantially the form attached hereto as
Schedule II with respect to each License Agreement not existing as of the date
hereof or provisions in such License Agreement that (A) the License Agreement
Rights may be sublicensed and (B) any sublicense, upon termination of the
License Agreement for breach by the licensee, shall be converted into a direct
license from the licensor under the terms and conditions of the License
Agreement (as further limited and restricted by the terms of the sublicense)
if the sublicensee is not then in material breach, and (ii) any other consent
required under any such License Agreement not existing as of the date hereof
for the performance of any of the provisions of this Agreement (including the
right to sublicense the Partnership thereunder as provided in this Agreement
and the right to sublicense such License Agreement to any Third Party
Sublicensee as provided in Sections 2.02 and 2.07(c)).
(b) The Company will not, without the majority vote of the board of
directors of the General Partner, and will not permit any of its Affiliates
to (i) enter into any agreement that contains any provision, or terminate or
amend any existing agreement in a manner, that would operate to restrict,
qualify or otherwise limit any right or license granted or to be granted by
the Company to the Partnership pursuant to the terms of this Agreement, or
(ii) take, suffer or permit any action or fail to act, if such action or
failure to act would cause the Partnership to suffer the loss of all or
any part of any License Agreement Right.
(c) The Company will pay or will cause its Affiliates to pay any Earned
Royalty or other fee payable in respect of any License Agreement included in
the Background Technology License. After the Interim License Termination
Date, any Earned Royalty payable pursuant to any License Agreement included
in the Background Technology License in respect of sales of Products within
the Field of Activity in the Territory by the Partnership (or by any Third
Party Sublicensee) after such date shall be promptly paid to the Company by
the Partnership ten days prior to the date the Earned Royalty is due under
the License Agreement; provided, that the Partnership shall be relieved of
its obligations under this Section 2.07(c) if and to the extent such
obligations have been assumed by a Third Party Sublicensee. The obligations
of the Company pursuant to this Section 2.07 shall terminate with respect
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to any License Agreement included in the Background Technology License to
the extent the Partnership has not sublicensed or assigned its rights
therein, as permitted by this Agreement, within 18 months after the Purchase
Option Termination Date.
ARTICLE III
CONDUCT OF THE RESEARCH PROGRAM
SECTION 3.01 Research Program
(a) The Company shall, subject to the provisions of Article VII, use its
best efforts to carry out the Research Program to the extent of the Available
Funds. The Partnership shall own all right, title and interest in all
Program Technology.
(b) The Company does not guarantee that the Research Program will be
successful in whole or in part or that any Products will actually be developed
or suitable for sale within the Field of Activity in the Territory as a result
thereof or that appropriate regulatory approvals can be obtained. To the
extent that the Company has used its best efforts to carry out the Research
Program to the extent of the Available Funds, the failure of the Company to
develop successfully any Product within the Field of Activity in the
Territory will not be a breach by the Company in the performance of its
obligations under this Agreement. Except as provided in Section 4.04, the
Company shall not be required to pay any of its own funds to conduct the
Research Program.
(c) In carrying out the Research Program, the Company may contract or
otherwise deal with its Affiliates and with subcontractors and other third
parties. Any fees to be paid to such third parties by the Company shall be
reimbursed by the Partnership as part of its payments pursuant to
Section 4.02.
SECTION 3.02 Annual Review of Research Program
Prior to April 30 of each year, beginning in 1998, the management of the
Company shall give a report to the General Partner with respect to the
progress of the Research Program in the 12-month period ending on the
preceding December 31 and the status of the development of the Technology with
respect to each Product being developed or expected to be developed by or on
behalf of the Partnership within the Field of Activity in the Territory. At
least annually prior to an installment being due under the Investor Notes, the
board of directors of the General Partner shall meet to review such report,
the progress of the Research Program and the status of the development of the
Technology.
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ARTICLE IV
PAYMENT FOR THE RESEARCH PROGRAM
SECTION 4.01 License Fee; Quarterly Payments
(a) On the first Closing Date at which at least 500 Units in the
aggregate have been purchased by Investors (not including Units purchased by
officers or directors of the Company), the Partnership shall pay to the
Company a one-time, nonrefundable license fee of $3,333,333.33 for each of
the three Products to be pursued in the Research Program in consideration for
the Company's willingness to enter into this Agreement.
(b) The Partnership shall be obligated to pay to the Company, as
provided in Section 4.01(c), the amount of the Company's expenditures after
May 1, 1997 for conducting the Research Program and a management fee equal to
ten percent (10%) of the total amount of such expenditures, but not exceeding
in the aggregate an amount equal to the Available Funds.
(c) At or prior to the first Closing Date, the Company shall provide the
Partnership with a written statement of its estimate of expenditures for
conducting the Research Program from May 1, 1997 through the end of the
Quarter, which the Partnership shall pay, together with the management fee
referred to in Section 4.01(b) on such estimated expenditures, on the first
Closing Date. At least ten days prior to the end of each Quarter during the
Research Program, the Company shall provide the Partnership with a written
statement of its estimate of expenditures for conducting the Research Program
during the next Quarter (the "Quarterly Estimate"). Within 15 days after the
end of each Quarter, the Company shall provide to the Partnership (i) a report
summarizing the work performed in connection with the Research Program in the
Quarter just ended and (ii) an invoice for an amount (the "Invoiced Amount")
equal to (A) the amount shown in the Quarterly Estimate for the next
succeeding Quarter and the management fee referred to in Section 4.01(b) on
such amount plus (B) the amount of the Company's expenditures with respect
to the Research Program during the Quarter just ended and the management
fee referred to in Section4.01(b), reduced by the Quarterly Estimate and
management fee for the Quarter just ended that were included in the
previously invoice and paid. Such report and invoice shall include any
developments material to the Partnership in the Technology during such
Quarter, shall be in such detail as the Partnership may reasonably
request and shall be signed by an officer of the Company.
(d) Upon receipt of each such invoice, the Partnership shall promptly
pay to the Company the Invoiced Amount no later than the last day of the
month in which the invoice was received (i.e., by April 30, July 31,
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October 31 or January 31, as the case may be); provided, that, to the
extent that the Invoiced Amount exceeds the Outstanding Available Funds,
the Partnership shall be obligated to pay such excess only upon receipt
of additional Available Funds.
SECTION 4.02 Research Program Accounting
(a) The Company's expenditures of conducting the Research Program shall
be determined using the Company's internal financial and accounting systems.
Allocation of all indirect costs, including general and administrative costs,
will be made by the Company on a reasonable basis consistent with generally
accepted accounting principles and with the Company's regular internal cost
accounting system.
(b) The Company shall keep and maintain, in accordance with generally
accepted accounting principles, books of account and other records with
respect to its expenditures, payments and allocations hereunder and shall
permit such books and records to be examined annually by an independent
certified public accountant retained by the Partnership and acceptable
to the Company (which shall be the independent certified public accountant
for the Company, unless the board of directors of the General Partner
determines otherwise) to the extent deemed necessary by the Partnership
to verify such expenditures and payments.
SECTION 4.03 Default by Limited Partner
(a) The failure by any Defaulting Limited Partner to make a payment on
such Limited Partner's Investor Note (as defined in the Partnership Agreement)
when such payment shall be due shall be referred to as a "Limited Partner
Default," and the amount not paid as the result of a Limited Partner Default
shall be referred to as the "Default Amount."
(b) In the event that payment of any Invoiced Amount has been reduced
as a result of a Limited Partner Default, the Partnership shall begin efforts
promptly to collect any Default Amount from such Defaulting Limited Partner
and, if unsuccessful in collecting such Default Amount, shall use its best
efforts to resell the Interest of such Defaulting Limited Partner pursuant
to the Partnership Agreement.
(c) Upon receipt of all or any portion of a Defaulting Limited
Partner's Default Amount after a Quarter for which the Company has not
been paid the full Invoiced Amount, the Partnership shall pay all or such
portion of the amount received as is necessary to make up the portion of
the deficiency caused by such Limited Partner Default.
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SECTION 4.04 Additional Funds
(a) If at any time the Available Funds shall have been expended
(including any Royalty Amounts paid to the Partnership), the General Partner
shall promptly review the progress of the Research Program and the status of
the development of the Technology with respect to each Product being developed
or expected to be developed by or on behalf of the Partnership within the
Field of Activity in the Territory (the date on which such review is commenced
being referred to as the "Program Review Date").
(b) Based on such review, a majority of the board of directors of the
General Partner shall determine in its reasonable business judgment the amount
of funds (the "Additional Funds") reasonably required to allow the Partnership
to pursue its goals under the Research Program for the 12 months immediately
succeeding such Program Review Date in the manner and according to the
schedules contemplated thereby, and shall notify the Company of the amount of
such Additional Funds not later than 20 days after such Program Review Date.
If the Company in its sole discretion agrees to pay such Additional Funds, the
Company shall, not later than 15 days after it shall have received the notice
described in the immediately preceding sentence, so notify the General Partner
and cause the General Partner to provide such Additional Funds as a
contribution to the capital of the Partnership or otherwise cause such
Additional Funds to be paid to the Partnership in such manner as the Company
and the board of directors of the General Partner shall agree. To the extent
that any amount the Company has agreed to pay under this Section 4.04 remains
unpaid, the Company shall deliver to the General Partner a promissory note of
the Company for such unpaid amount and the General Partner shall deliver to
the Partnership a promissory note of the General Partner for such unpaid
amount, such notes to be in a form reasonably satisfactory to the Partnership.
(c) If the Company shall have failed so to notify the General Partner as
required in Section 4.01(b) or shall fail at any time to pay any Additional
Funds it has agreed to pay, then (i) the General Partner shall give notice to
the Company and to each Limited Partner of such failure; and (ii) if the
Company has not paid such Additional Funds within ten business days after
receipt by the Company of such notice, (x) the obligation of the Company
to continue to carry out the Research Program pursuant to Section 3.01 shall
cease, and (y) the Research Program shall terminate with the effect set forth
in Section 7.06.
(d) If any Available Funds (and any Additional Funds theretofore
provided pursuant to this Section 4.04) shall have been expended, the Company
shall have the right to continue to fund the Research Program in any manner
determined by it; provided, that the failure of the Company to fund any
amounts under this Section 4.04(d) shall not result in a breach of this
Agreement.
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ARTICLE V
PRODUCT MARKETING
SECTION 5.01 Marketing
(a) The Company shall, subject to the provisions of Section 7.07, use
its commercially reasonable best efforts, directly or through third parties,
to carry out the Marketing Program and to sell Products within the Field of
Activity in the Territory.
(b) The Company does not guarantee that the Marketing Program will be
successful in whole or in part. To the extent that the Company has used its
commercially reasonable best efforts to carry out the Marketing Program and to
sell Products within the Field of Activity in the Territory, the failure of
the Company to market or sell any Product or Products successfully will not
be a breach by the Company in the performance of its obligations under this
Agreement.
(c) The Company's obligations under this Section 5.01 shall terminate on
the Purchase Option Termination Date.
SECTION 5.02 Yearly Review of Marketing Program
After receipt of regulatory approval in the Territory for the sale of any
Product within the Field of Activity, within 60 days after the end of each
calendar year, and at such additional times as the Partnership shall
reasonably request, the Company shall provide to the Partnership in writing
a report on the Marketing Program for such year. Such report shall be in
such reasonable detail as the Partnership shall request.
SECTION 5.03 Marketing Agreements
In performing the Marketing Program and Exploiting Products, the Company
may enter into co-promotion, co-detailing, marketing or similar agreements or
sublicenses with third parties with respect to Products within the Field of
Activity in the Territory. After entering into any such agreements or
sublicenses, the Company shall provide the Partnership with copies of such
agreements or sublicenses.
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ARTICLE VI
ROYALTIES
SECTION 6.01 Interim License Payments
(a) The Company shall pay to the Partnership within 60 days after the
end of each Quarter the Royalty Amount for such Quarter. Each such payment
shall be accompanied by a summary of the operations that resulted in such
payment, such summary report to be signed by an authorized officer of the
Company.
(b) In the Quarter in which the Interim License Termination Date occurs,
there shall be excluded from the calculations pursuant to this Section 6.01
any Net Revenues attributable to the period subsequent to such date.
SECTION 6.02 Payments on Competitive Products After the Interim License
Termination Date
(a) After the Interim License Termination Date and until the fifth
anniversary of the Purchase Option Termination Date, the Company shall pay to
the Partnership, within 60 days after the end of each Quarter, an amount equal
to the Royalty Amount for such Quarter calculated solely based upon
Competitive Product Revenues.
(b) In the Quarter in which the fifth anniversary of the Purchase Option
Termination Date occurs, there shall be excluded from the calculations
pursuant to this Section 6.02 any Competitive Product Revenues attributable
to the period subsequent to the date of such fifth anniversary.
SECTION 6.03 Manner of Payment
(a) Any payment due pursuant to this Article VI shall be payable in
Dollars without deduction for or on account of any present or future taxes,
duties or other charges levied or imposed by any governmental or political
authority through withholding or deduction with respect to any such payments
to the extent permitted by law (except to the extent any such withholding or
deduction provides a credit or other benefit to the Limited Partners or is a
withholding of tax on or measured by the net income of the Limited Partners).
If any such taxes, duties or other charges are so levied or imposed, or any
such withholding or deduction is required by law (subject to the exception
referred to in the preceding sentence), the Company will make additional
payments in such amounts so that every net payment under this Agreement,
after any required withholding, deduction or payment for or on account of
any such present or future taxes, duties or other charges, will not be less
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than the amount provided for herein. The Company shall furnish promptly to
the Partnership official receipts evidencing such withholding or deduction.
Any Net Revenues in a currency other than Dollars shall be deemed to be equal
to the amount of Dollars obtained converting the outstanding amount of
currency of such Net Revenues into Dollars at the average spot rate for the
purchase of Dollars with such currency as published by Bloomberg on the last
ten business days of the Quarter with respect to which such revenues were
accrued.
(b) Each payment pursuant to this Article VI shall be accompanied by a
summary of the calculations that resulted in such payment. Such report shall
be in such detail as the Partnership reasonably requests and shall be signed
by an officer of the Company.
(c) Any payment that is not made on or before the date when due shall
accrue interest thereon from and including such date and until but excluding
the date of payment at the rate of one percent (1%) plus the "prime rate" of
interest as published by THE WALL STREET JOURNAL (WESTERN EDITION) (or if not
published, another appropriate publication) for the first business day of each
month (based on a 365-day year) or, if such rate is in excess of the rate then
permitted by applicable law, at the highest rate then so permitted.
SECTION 6.04 Accounting Records
The Company shall keep and maintain, in accordance with generally
accepted accounting principles, books of account and other records with
respect to Net Revenues and the payments due under this Article VI and shall
permit such books and records to be examined annually by an independent
certified public accountant retained by the Partnership (which may be the
independent certified public accountant for the Company) to the extent deemed
necessary by the Partnership to verify such payments.
ARTICLE VII
TERMINATION OF RESEARCH PROGRAM OR MARKETING PROGRAM
SECTION 7.01 Research Program Infeasible or Uneconomic
(a) If at any time the board of directors of the General Partner in its
good faith business judgment shall determine (whether or not such
determination is based on a report prepared in accordance with Section 3.02)
that the Research Program is infeasible or uneconomic and should be
discontinued with respect to any Product or Products, then (i) such Product
or Products shall be deemed abandoned and the Research Program with respect
to such Product or Products shall be discontinued, (ii) any funds that the
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General Partner and the Company had determined were to be expended on such
Product or Products, but at the time such Product or Products were deemed
abandoned had not been actually expended or irrevocably committed by the
Company in connection with the research, experimentation and development
of such Product or Products, net of termination costs, shall be
distributed or applied as determined by the board of directors
of the General Partner, (iii) the Company's obligation to perform further
research, experimentation and development with respect to such Product or
Products pursuant to Section 3.01 shall cease, and (iv) the Partnership shall
reimburse the Company for any costs reimbursable to it under this Agreement
with respect to such Product or Products through such reasonable period after
the date of such notice as shall be necessary to effectuate such
discontinuation.
(b) If at any time the board of directors of the General Partner in its
good faith business judgment shall determine that the Research Program is
infeasible or uneconomic, and should be discontinued, with respect to all
Products (whether or not such determination is based on a report prepared in
accordance with Section 3.02), the General Partner shall give notice to the
Company terminating the Research Program with respect to all Products in
accordance with Section 7.06.
SECTION 7.02 Termination for Material Breach
If the Company has materially breached this Agreement, then for so long
as such breach continues unremedied, the Partnership shall have the right to
give written notice to the Company terminating this Agreement if all the
following shall have occurred:
(a) the Partnership shall have sent a written default notice (the
"Default Notice") to the Company that (i) states that a material breach has
occurred, (ii) identifies the section of this Agreement that has been
breached, and (iii) describes in reasonable detail the basis for such Default
Notice; and
(b) (i) the Company shall have failed to cure the breach within 30 days
of receipt of the Default Notice and (ii) the Company has failed to submit in
writing to the Partnership within 30 days of receipt of the Default Notice a
reasonable plan to cure such breach, which plan is accepted by the board of
directors of the General Partner within 30 days of receipt of the Company's
written plan of cure (such acceptance not to be unreasonably withheld). The
board of directors of the General Partner shall review such written plan of
cure promptly upon receipt thereof. As long as the Company is carrying out
the terms of the plan of cure in good faith and in a timely manner, the
breach set forth in the Default Notice will be deemed to be remedied.
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SECTION 7.03 Termination for Bankruptcy of the Company
Notwithstanding Section 7.02, the Partnership shall have the right to
give notice to the Company terminating the Research Program and/or the
Marketing Program after the occurrence, and during the continuation, of
any of the following events:
(a) (i) a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect shall be instituted by the
Company, or the Company shall consent to the entry of an order for relief
in an involuntary case under any such law; (ii) a general assignment for
the benefit of creditors shall be made by the Company; (iii) the Company
shall consent to the appointment of or possession by a receiver, liquidator,
trustee, custodian, sequestrator or similar official of the Company or of
any substantial part of its property; or (iv) the Company shall adopt a
board resolution in furtherance of any of the foregoing actions specified
in this Section 7.03(a); or
(b) a decree or order for relief by a court of competent jurisdiction
shall be entered in respect of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall remain unstayed or undischarged and in effect for a period of
60days.
SECTION 7.04 Termination of Research Program for Bankruptcy of the
Partnership
The Company shall have the right to give notice to the Partnership
terminating the Research Program at any time after the occurrence, and during
the continuation, of any of the following events:
(a) (i) a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect shall be instituted by the
Partnership, or the Partnership shall consent to the entry of an order for
relief in an involuntary case under any such law; (ii) a general assignment
for the benefit of creditors shall be made by the Partnership; (iii) the
Partnership shall consent to the appointment of or possession by a receiver,
liquidator, trustee, custodian, sequestrator or similar official of the
Partnership or of any substantial part of its property; or (iv) the
Partnership shall adopt a board resolution or Partnership resolution, as the
case may be, in furtherance of any of the foregoing actions specified in this
Section 7.04(a); or
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(b) a decree or order for relief by a court of competent jurisdiction
shall be entered in respect of the Partnership in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, trustee, sequestrator or
other similar official of the Partnership or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and any
such decree or order shall remain unstayed or undischarged and in effect for
a period of 60 days.
SECTION 7.05 Termination by Mutual Consent
The Research Program and/or the Marketing Program shall terminate upon
the mutual agreement of the parties; provided, that such agreement on behalf
of the Partnership shall be evidenced by a resolution of the board of
directors of the General Partner and by a resolution of the board of
directors of the Company.
SECTION 7.06 Effect of Research Program Termination
If notice shall be given pursuant to this Article VII (other than
pursuant to Section 7.01(a)) terminating the Research Program with respect
to all Products or if the Research Program is terminated by mutual agreement
pursuant to Section 7.05 (a) the obligation of the Company to perform further
research and development pursuant to Section 3.01 shall cease; (b) the
Partnership shall reimburse the Company for any reimbursable costs under this
Agreement through such reasonable period after the date of such notice as
shall be necessary to effectuate such discontinuation, to the extent of
Available Funds; (c) the obligation of the Partnership to make any further
payments to the Company pursuant to Section 4.01 shall cease; and (d) the
obligation, if any, of the Company to provide any Additional Funds shall
cease and any promissory notes evidencing Additional Funds shall be cancelled.
SECTION 7.07 Effect of Marketing Program Termination
If notice shall be given pursuant to this Article VII terminating the
Marketing Program, (a) the obligation of the Company to market Products
pursuant to Section 5.01 shall cease and (b) not later than 60 days after
the date of such notice, the Company shall pay to the Partnership the
Royalty Amount for the Quarter in which such termination occurs.
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ARTICLE VIII
FIELD TECHNOLOGY
SECTION 8.01 Access and Disclosure
The Company, at its expense, shall on reasonable notice and at all
reasonable times during normal business hours permit the Partnership to have
access to the Field Technology and, upon request, shall disclose in reasonable
detail the Field Technology (including providing copies of all documentation
embodying the Field Technology) to the Partnership or any Third Party
Sublicensee.
SECTION 8.02 Library
The Company shall make and maintain an identified and clearly
identifiable library consisting of any bacterial strain, cell line,
recombinant DNA molecule, cloning vector or other material (each a
"Deposit") forming part of the Field Technology. The Company shall
maintain such library at its address set forth in Section 14.09 or at such
other place as the Company shall have notified the board of directors of
the General Partner by not less than 30 days' advance notice. The Company
will assure the viability and integrity of each Deposit in the library by
monitoring and replacing each Deposit at such times after the
formation of the library as the board of directors of the General Partner
believes to be reasonably necessary to assure the viability and integrity of
such Deposits.
SECTION 8.03 Partnership Use of Background Technology
Except as expressly authorized by this Agreement or by other prior
written consent of the Company, prior to the Purchase Option Termination Date,
the Partnership shall not deliver, transmit or provide to any Person, and
shall not use, any of the Background Technology within the Field of Activity
in the Territory or authorize or cause or aid anyone else to do so.
SECTION 8.04 Return of Property Rights
The Company shall, not later than 60 days after the receipt of a written
request from the Partnership given at any time after the Interim License
Termination Date, deliver to the Partnership all Field Technology in the
Territory and all documentation and other tangible manifestations relating
thereto.
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ARTICLE IX
CONFIDENTIALITY
SECTION 9.01 Confidentiality
The Partnership and the Company, using the same degree of care
customarily used by companies engaged in the development of pharmaceutical
products to protect confidential information of like character, shall keep
confidential all the Technology and all other trade secrets and proprietary
or confidential information furnished by the other party or its agents or
representatives, shall not disclose or deliver any of such Technology, trade
secrets or proprietary or confidential information to third parties (except
as permitted by the Operative Agreements) and shall Exploit the Technology
only as permitted by the Operative Agreements. For such purposes, it shall
be sufficient if the Company or the Partnership, as the case may be, uses the
same degree of care as the Company uses to protect its own confidential
information of like character. The provisions of this Section 9.01 shall
continue in force notwithstanding the termination of the Research Program or
the Marketing Program, or the passing of the Interim License Termination Date.
SECTION 9.02 Exceptions
(a) The obligation of confidentiality and restriction on use imposed by
Section 9.01 shall not apply to any of the Technology that was
(i) in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such party or its
Affiliates;
(ii) disclosed without restriction by, or with the prior written
approval of, the other party; or
(iii) in the case of the Partnership, lawfully obtained by the
Partnership without a binder of confidentiality from a source other than the
Company.
(b) Notwithstanding anything to the contrary contained in Section 9.01,
the Partnership or the Company may disclose or deliver any of the Technology
(i) to the extent such party has been advised by counsel that such disclosure
or delivery is necessary for such party to comply with applicable laws or
regulations, (ii) to the extent that such disclosure or delivery is required
by regulatory authorities in order to obtain marketing approvals of any
Product, (iii) in any customary scientific publication (following the
preparation and filing of appropriate patent applications), and (iv) to the
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extent that such disclosure or delivery is necessary to engage in the Field
of Activity in the Territory or to sublicense others to do so if any third
parties to whom any such disclosure or delivery is to be made shall have
agreed to keep the Technology confidential pursuant to a confidentiality
agreement substantially to the effect of this Article IX. Each party shall
give the other party reasonable advance notice of any such proposed disclosure
or delivery by it, shall use its best efforts to secure confidential treatment
of such Technology and shall advise the other party of the manner of such
disclosure or delivery.
SECTION 9.03 Injunctive Remedy
The parties agree that remedies at law may be inadequate to protect
against breach of this Article IX, and hereby agree to the granting of
injunctive relief in favor of the other party without proof of actual damages.
ARTICLE X
INSURANCE AND LIABILITY
SECTION 10.01 Insurance
Until the Interim License Termination Date, the Company shall use its
best efforts to maintain such insurance relating to the Research Program and
the Marketing Program as is customary to maintain for research or marketing
programs of a similar nature against such risks (including to the extent
available on commercially reasonable terms, against product liability) and
pursuant to such terms (including coverages, deductible limits and self-
insured retentions) as are customary for such businesses. Such insurance
shall be obtained from insurers of good repute and shall be issued in the
names of the Company and the Partnership. The premiums for such insurance
shall be included in the costs referred to in Section 4.01 to the extent
provided therein.
SECTION 10.02 Third Party Claims
(a) The Company will defend any claim, suit, action or proceeding (a
"Third Party Claim") brought or threatened against itself or the Partnership
(i) at any time prior to the Interim License Termination Date or (ii) arising
from the Research Program or the Marketing Program (irrespective of when such
claim, suit, action or proceeding is brought).
(b) Each party will give to the other prompt written notice of any such
actual or threatened Third Party Claim of which it is aware. The Company
shall have the right to exclusive control of the defense of any such Third
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Party Claim, except that any settlement shall require the consent of the
Partnership, which consent shall not be unreasonably withheld. The Company
will pay all expenses (including attorneys' fees) incurred in connection with
defending any such Third Party Claim. Any damages and costs finally settled
or awarded in connection with such Third Party Claim shall be paid by the
Company.
(c) The provisions of this Section 10.02 shall continue in force
notwithstanding the termination of the Research Program or the Marketing
Program, or the passage of the Interim License Termination Date.
ARTICLE XI
INTELLECTUAL PROPERTY RIGHTS
SECTION 11.01 Applications
(a) The Company shall file and pursue all Intellectual Property Right
applications and amendments and continuations thereof that the Company, in its
reasonable business judgment, believes are useful to protect the Partnership's
interest in any Technology and shall use reasonable diligence to maintain in
force any and all resultant Intellectual Property Rights. The Company shall
promptly inform the Partnership of the making of any such filings or the
taking of any such action and shall provide the Partnership with copies
thereof and keep the Partnership informed as to the status thereof.
(b) The Partnership shall have the right, but not the obligation, to
direct that the Company, on the Partnership's behalf, file and pursue such
Intellectual Property Right applications within the Field of Activity in the
Territory and amendments and continuations thereof as the General Partner
believes in its reasonable business judgment are useful to protect the
Partnership's interest in any Technology, and the Company shall use reasonable
diligence to maintain in force any and all resultant Intellectual Property
Rights.
(c) All such Intellectual Property Right applications that claim any
Program Technology within the Field of Activity in the Territory shall be
filed and pursued by the Company in the name of the Partnership. All such
applications that claim any Background Technology (but do not claim any
Program Technology) may be filed and pursued by the Company in its name
(d) The Company's obligations under this Section 11.01 shall terminate
on the Interim License Termination Date and shall be subject to applicable
License Agreements with respect to License Agreement Rights.
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SECTION 11.02 Intellectual Property Right Disclaimers
The Company shall not disclaim any Intellectual Property Right or abandon
any application for any Intellectual Property Right relating to the Technology
within the Field of Activity in the Territory without the prior written
consent of the Partnership. The Company shall, subject to the terms of any
applicable License Agreement, use its best efforts to prevent any licensor
under any such License Agreement included in the Background Technology License
from disclaiming any Intellectual Property Right or abandoning any application
for any Intellectual Property Right relating to the Technology within the
Field of Activity in the Territory without the prior written consent of the
Partnership.
SECTION 11.03 Intellectual Property Right Protection Outside the Field of
Activity or Outside the Territory
The Company, at its own expense and in its name, may file such
Intellectual Property Right applications as the Company believes are necessary
to protect the Company's interests outside the Field of Activity or outside
the Territory in any Technology and may thereafter pursue and maintain in
force the resultant Intellectual Property Rights.
SECTION 11.04 Intellectual Property Right Expenses
To the extent that they are not otherwise reimbursed under any License
Agreement included in the Background Technology License, all the Company's
costs and expenses (including attorneys' fees) incurred in filing, pursuing
and maintaining Intellectual Property Rights pursuant to Section 11.01 shall
be included in the costs referred to in Section 4.01; provided, that such
costs and expenses in connection with filing, pursuing and maintaining
Intellectual Property Rights that are or are reasonably likely to be useful
for products manufactured or expected to be manufactured by or on behalf of
the Company or any Affiliate, in addition to the Products within the Field of
Activity in the Territory, shall be allocated between the Partnership and the
Company in an equitable manner, taking into account the relative benefit of
such Technology to the Company and its Affiliates and to the Partnership.
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ARTICLE XII
INFRINGEMENT SUITS AND ACTIONS
SECTION 12.01 Company's Right to Bring Infringement Suits Against Third
Parties
(a) Each party to this Agreement shall promptly notify the other of any
material infringement in the Territory of which it becomes aware within the
Field of Activity of any Intellectual Property Right included in the
Technology and shall provide the other with any available evidence thereof.
Prior to the Interim License Termination Date, the Company shall have the
right, but not the obligation, to bring, defend and maintain any appropriate
suit, action or proceeding involving any infringement within the Field of
Activity in the Territory (an "Infringement Action"). The Company shall give
the Partnership notice of its intention to commence any such Infringement
Action and the Partnership may at any time elect to participate in such
Infringement Action at its own cost and expense.
(b) If the Company finds it necessary or advisable to join the
Partnership in an Infringement Action, the Partnership shall execute all
papers and perform such other acts as reasonably may be required and, at its
option, may be represented by counsel of its choice. Should the Company lack
standing to bring any Infringement Action, the Partnership shall do so at the
request of the Company upon an undertaking by the Company to indemnify and
hold the Partnership harmless (to the extent permitted by law) from all
related costs and expenses, including attorneys' fees and consequent
liability.
(c) Subject to the right of the Partnership to be represented by counsel
of its choice, the Company shall have the exclusive right to control any
Infringement Action brought, defended or maintained by the Company pursuant to
this Section 12.01; provided, that the Company may not, without the prior
written consent of the Partnership (which consent may not be unreasonably
withheld), enter into any agreement or other arrangement effecting a
settlement of such Infringement Action. The Company shall pay all expenses
(including attorneys' fees) incurred in connection with such Infringement
Action as and when such expenses are incurred subject to reimbursement to the
extent described below.
(d) If, as a result of any such Infringement Action, a judgment is
executed in favor of the Company or settlement is reached with the infringing
party, and such judgment or settlement specifies the amount of damages
attributable to the infringer's past or prospective sales, for purposes of the
definition of Net Revenues, such award will be treated in the same manner as a
sublicense granted by the Company for the respective periods covered by the
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award. In the event that such judgment or settlement does not specify the
amount of damages attributable to the infringing party's past or prospective
sales, the Company shall be entitled to seventy-five percent (75%) of such
settlement or judgment and the Partnership shall be entitled to the remaining
twenty-five percent (25%). Expenses incurred by the Company in bringing such
action shall be reimbursed by the Partnership to the Company, out of the
proceeds received by the Partnership, pro rata based on the relative economic
benefit of any proceeds to the Company as compared to such benefit to the
Partnership.
SECTION 12.02 Standby Right of the Partnership
(a) If the Partnership shall have given the Company not less than 30
days' notice of its intention to bring an Infringement Action and the Company
shall have failed to bring such an Infringement Action, the Partnership, at it
own expense, shall have the right to bring and maintain an Infringement
Action.
(b) If the Partnership finds it necessary or advisable to join the
Company in such Infringement Action, the Company shall execute all papers
and perform such other acts as reasonably may be required and, at its option,
may be represented by counsel of its choice. Should the Partnership lack
standing to bring such Infringement Action, the Company shall do so at the
request of the Partnership upon an undertaking by the Partnership to indemnify
and hold the Company harmless (to the extent permitted by law) from all
related costs and expenses (including attorneys' fees) and consequent
liability.
(c) Subject to the right of the Company, at its expense, to be
represented by counsel of its choice, the Partnership shall have the exclusive
right to control any Infringement Action brought, defended or maintained by
the Partnership pursuant to this Section 12.02. The Partnership shall pay all
expenses (including attorneys' fees) incurred in connection with such
Infringement Action as and when such expenses are incurred.
(d) If, as a result of any such Infringement Action, a judgment is
executed in favor of the Partnership or a settlement is reached with the
infringing party, the Partnership shall be entitled to receive the full
benefit of any such judgment or settlement.
SECTION 12.03 Limitations Under License Agreements
Notwithstanding the provisions of this Article XII, all matters related
to an Infringement Action involving a License Agreement Right shall be
governed by, and subject to, the terms and conditions of any applicable
License Agreements.
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ARTICLE XIII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 13.01 Representations and Warranties of the Company
The Company represents and warrants to the Partnership as of each Closing
Date that:
(a) The execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all requisite action and will not contravene any law or
regulation, any order, award, judgment or decree of any court or governmental
instrumentality, and will not violate, conflict with or constitute a default
under the Company's Certificate of Incorporation or Bylaws, or any material
indenture, mortgage, deed of trust, agreement, license or other instrument or
restriction applicable to the Company or any of its Affiliates, or by which
the Company or any of its Affiliates is bound.
(b) As of the date thereof and as of each Closing Date, the Memorandum
will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
(c) Except as provided in the License Agreements, neither the Background
Technology within the Field of Activity in the Territory nor the Background
Technology License is subject to any mortgage, pledge, lien, security interest,
encumbrance, restriction, royalty, payment or charge of any kind that would
materially adversely affect any use thereof within the Field of Activity in
the Territory.
(d) To the best of its knowledge, no exclusive marketing rights pursuant
to the Orphan Drug Act of 1985, 21 U.S.C. subsection 360aa, are in existence
that are or would be infringed by the activities of the Company or the
Partnership contemplated by this Agreement or the Purchase Agreement.
(e) All royalties or other payments due and payable by the Company or
any Affiliate pursuant to any License Agreement contained in the Background
Technology within the Field of Activity in the Territory have been paid, and
the Company is not in default under any such License Agreement.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 Assignment; Merger Letter
Except as provided in Section 5.07 of the Purchase Agreement and in
Article II of this Agreement, neither this Agreement nor any right or
obligation arising hereunder may be assigned or delegated, in whole or in
part, by either party without the prior written consent of the other, which
consent shall not be unreasonably withheld, except that the Company may,
without the prior written consent of the Partnership, assign its rights and
delegate its obligations hereunder (a) to any Person to which the Company has
assigned, sold, leased, transferred or otherwise disposed of all or
substantially all of its assets or the business related to the Products,
(b) to any successor corporation resulting from any merger or consolidation
of the Company with or into another corporation, or (c) to any wholly owned
subsidiary of the Company; provided, however, that the Company will not merge
or consolidate with any Person or sell, lease, transfer or otherwise dispose
of substantially all of its assets to any Person, unless (i) the Person formed
by or surviving such consolidation or merger or to which the Company effects
such sale, lease, transfer or other disposition shall be a solvent corporation
organized and existing under the laws of the United States of America or a
state thereof and (ii) such successor or transferee corporation shall have
executed and delivered to the Partnership before such event a letter agreement
in substantially the form attached hereto as Schedule III (a "Merger Letter");
and provided, further, that, in the event of any assignment or delegation
under this Section 14.01, this Agreement shall remain binding on the assignor.
Subject to the restrictions on assignment herein set forth, this Agreement
shall inure to the benefit of the successors and assigns of each of the
parties.
SECTION 14.02 Entire Agreement
This Agreement and the other Operative Agreements set forth and
constitute the entire agreement between the parties with respect to the
subject matter hereof, and supersede any and all prior agreements,
understandings, promises and representations made by either party to the
other concerning the subject matter hereof and the terms applicable hereto.
SECTION 14.03 Severability
If any provision of this Agreement is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction, such provision shall be
construed or deemed to be amended to conform to applicable laws so as to be
valid and enforceable, or, if it cannot be so construed or deemed amended
-23-
without materially altering the intention of the parties, it shall be stricken
and the remainder of this Agreement shall remain in full force and effect.
SECTION 14.04 Specific Performance
The parties agree that remedies at law may be inadequate to protect
against breach of Article IX, and the parties hereby agree to the granting of
specific performance in favor of the other party without proof that the
payment of damages would be inadequate compensation.
SECTION 14.05 Benefits of This Agreement
Nothing in this Agreement shall be construed to give to any Person other
than the Company and the Partnership any legal or equitable right, remedy or
claim under this Agreement. This Agreement shall be for the sole and
exclusive benefit of the Company and the Partnership.
SECTION 14.06 Choice of Law
This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of New York as applied to
contracts made and to be performed entirely within New York.
SECTION 14.07 Amendments and Waivers
This Agreement may not be released, discharged, amended or modified in
any manner except by an instrument in writing signed by duly authorized
officers of both parties and, in the case of the Partnership, with the
approval of the board of directors of the General Partner. No waiver of any
right under this Agreement shall be deemed effective unless contained in a
writing signed by the party charged with such waiver and, in the case of a
waiver by the Partnership, only if made with the prior approval of the board
of directors of the General Partner. No waiver of any right arising from any
breach or failure to perform shall be deemed to be a waiver of any future such
right or of any other right arising under this Agreement.
SECTION 14.08 Headings
Section headings contained in this Agreement are included for convenience
only and form no part of the agreement between the parties.
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SECTION 14.09 Payments, Notices, Reports, Advice and Statements
Payments hereunder shall be sent, and notices, reports, advice and
statements required or permitted hereunder shall be in writing and shall be
sentto each party, as follows:
If to the Company, to:
ICOS Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
Bothell, Washington 98021
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Secretary
If to the Partnership, to:
ICOS Clinical Partners, L.P.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
Bothell, Washington 98021
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Partner
with a copy to each member of the board of directors of the General Partner or
to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earliest of (a) physical delivery, (b) if given
by facsimile transmission, when such facsimile is transmitted to the
facsimile number specified in this Agreement and facsimile confirmation of
receipt thereof is received, (c) three days after mailing by prepaid first-
class mail, and (d) two days after mailing by prepaid overnight or express
mail.
SECTION 14.10 Force Majeure
Each of the parties shall be excused from performing such acts required
hereunder that are prevented by, or whose purpose is frustrated by, Force
Majeure.
SECTION 14.11 Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be an original and all of which shall constitute together but one
and the same document.
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SECTION 14.12 Decisions by the General Partner
For purposes of this Agreement, a decision by the board of directors of
the General Partner (including, without limitation, any decision to be made
by a majority of the board of directors) shall be made as prescribed in the
Certificate of Incorporation and Bylaws of the General Partner.
SECTION 14.13 Effective Date
This Agreement shall become effective concurrently with the first Closing
Date under the Sales Agency Agreement dated the date hereof between the
parties hereto and the Sales Agent.
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IN WITNESS WHEREOF, the Company and the Partnership have executed this
Agreement as of the date first above mentioned.
ICOS CORPORATION
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President & Secretary
ICOS CLINICAL PARTNERS, L.P.
By ICOS DEVELOPMENT CORPORATION,
as General Partner
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Secretary/Treasurer
-27-
Schedule I to the
Product Development
Agreement
GLOSSARY
Each of the following terms shall have the meaning assigned to it in this
Glossary, except as otherwise expressly provided in each agreement, as amended
from time to time, to which this Glossary is attached.
"Additional Funds" shall have the meaning set forth in Section 4.04
of the Product Development Agreement.
"Advance Payment" shall mean the Cash Advance Payment, the Stock
Advance Payment or the Combination Advance Payment, as applicable.
"Affiliate" shall mean, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls, or
is controlled by or is under common control with, such Person; provided, that
the Company's ownership interest in Suncos and its contractual arrangements
with Suncos, as such ownership interest or contractual arrangements may be
amended from time to time, do not constitute control of Suncos by the Company;
provided, further, that the Partnership, General Partner and Company shall not
be deemed to be Affiliates of each other; provided, further, that, with
respect to Background Technology and License Agreements, any Person that
controls or is under common control with any other Person shall only be
considered to be an "Affiliate" of the other Person with respect to its
Elements of Technology that are used in, or are conceived, developed or
acquired in the course of assisting or participating in, the Research Program.
"Annual Minimum Amount" shall mean sixteen percent (16%) of the
aggregate Capital Contributions to the Partnership of all Limited Partners
with respect to the first four Fiscal Years after the Purchase Date and
twenty percent (20%) of the aggregate Capital Contributions to the Partnership
of all Limited Partners with respect to the fifth Fiscal Year after the
Purchase Date; provided, that the Annual Minimum Amount for any Fiscal Year
shall not exceed the amount by which the sum of all distributions paid or
payable to Limited Partners pursuant to the Partnership Agreement and Purchase
Agreement through such Fiscal Year is less than the aggregate Capital
Contributions to the Partnership of all Limited Partners.
"Available Funds" shall mean at any time an amount equal to (a) the
sum of the aggregate amount of capital contributions made or agreed to be made
to the Partnership by the General Partner and the Limited Partners (including
the amount of any Additional Funds that the Company has agreed to pay or to
cause to be paid), the aggregate Royalty Amounts paid to the Partnership and
any interest earned on such contributions, Additional Funds and Royalty
Amounts by the Partnership, less (i) the aggregate Royalty Amounts paid to the
Partnership that were not needed to fund the Research Program in accordance
with the Product Development Agreement and that have been distributed to the
Limited Partners, (ii) the aggregate amount expended by the Partnership for
selling commissions, financial advisory fees, investment banking and marketing
fees, warrant valuation fees, and offering and organizational costs, (iii) all
interest payable on amounts borrowed by the Partnership, (iv) reasonable
expenses (other than amounts expended pursuant to the Product Development
Agreement) of operating the Partnership, including administrative and interest
expenses and operating reserves, and (v) the aggregate of all Default Amounts
outstanding as of such time, or (b) such other amount as the Company and the
Partnership shall agree to in writing.
"Background Technology" shall mean all Elements of Technology that
(a) the Company or any Affiliate of the Company Controls, has an ownership
interest in or has the right to acquire an ownership interest in or may
conceive, develop or acquire an ownership interest in (under licenses from
others or otherwise) at any time prior to the Interim License Termination Date
and (b) are necessary or materially useful to Exploit Products.
"Background Technology License" shall have the meaning set forth in
Section 2.01 of the Product Development Agreement.
"Business Commencement Date" shall mean the first date on which the
Company or any Affiliate, licensee or sublicensee of the Company makes a
commercial sale of any Product within the Field of Activity in the Territory
that would generate a payment to the Partnership or the Class A Limited
Partners.
"Capital Contribution" shall mean (a) in respect of each Class A
Limited Partner (whether such Limited Partner's Interest was acquired directly
from the Partnership, by sale or assignment from a predecessor Limited
Partner, or otherwise), $100,000 for each Unit (or $25,000 for each Quarter
Unit) owned by such Class A Limited Partner, less any Default Amount in
respect of such Unit or Quarter Unit; and (b) in respect of the Class B
Limited Partner, $250,000; provided, that, in the event the Company exercises
the Purchase Option prior to the due date for the payment of any installments
under the Class A Limited Partner's Investor Notes or in the event the General
Partner relieves Class A Limited Partners of their obligation to pay any
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installments under the Class A Limited Partner's Investor Notes in accordance
with paragraph 7.10 of the Partnership Agreement, the "Capital Contribution"
of each such Class A Limited Partner shall mean (for all purposes other than
clause (a) of the definitions of Class A Percentage and Class B Percentage)
$100,000 for each Unit (or $25,000 for each Quarter Unit), less any Default
Amount in respect of such Unit or Quarter Unit and less the aggregate amount
of the installments that would otherwise be due and payable under such Class A
Limited Partner's Investor Note after the Purchase Option Exercise Date or the
Installment Termination Date (as defined in paragraph 7.10 of the Partnership
Agreement), as the case may be.
"Cash Advance Payment" shall mean the consideration payable in cash
by the Company to Payment Recipients pursuant to Sections 3.02(b) and 3.03
(b) of the Purchase Agreement in connection with the purchase by the Company
of their Interests.
"Class A Combination Advance Payment" shall mean (a) a cash payment
equal to the product of (i) the difference between one hundred percent (100%)
and the Stock Percentage and (ii) the Class A Down Payment, plus (b) issuance
of the number of shares of Common Stock (and any securities deliverable
pursuant to Section 3.09 of the Purchase Agreement) that is equal to the
quotient of (i) the product of (A) the Stock Percentage and (B) the Class A
Down Payment divided by (ii) the average Closing Price on the 30 trading days
immediately preceding the Stock Pricing Date for each Full Class A Interest of
such Class A Payment Recipient. In the case of any Quarter Class A Interest
held by a Class A Payment Recipient, the number of shares to be delivered to
such Class A Payment Recipient in respect of such Quarter Class A Interest
shall be equal to one-quarter the number of shares of Common Stock (and any
securities deliverable pursuant to Section 3.09 of the Purchase Agreement) to
be delivered in respect of a Full Class A Interest.
"Class A Down Payment" shall mean an amount equal to sixteen percent
(16%) of the Capital Contribution to the Partnership by a Class A Limited
Partner.
"Class A Interest" shall mean any limited partnership interest in
the Partnership (other than the Class B Interest) owned by any Class A Limited
Partner.
"Class A Limited Partner" shall have the meaning assigned to such
term in Article I of the Partnership Agreement.
"Class A Payment" shall mean (a) the Last Interim License Payment
payable to a Class A Limited Partner, (b) until the Cut-Off Date, for each
Class A Payment Recipient, (i) prior to the calendar quarter following the
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calendar quarter in which the Class B Threshold with respect to Class A
Payment Recipients occurs, its Class A Percentage of the Quarterly Payment and
Minimum Royalty Payment and (ii) beginning with the calendar quarter following
the calendar quarter in which the Class B Threshold with respect to Class A
Payment Recipients occurs and ending with the Cut-Off Date, for each calendar
quarter an amount equal to ninety-five percent (95%) of its Class A Percentage
of the Quarterly Payment and Minimum Royalty Payment and (c) either (i) the
Class A Down Payment, if the Company elects to make the Cash Advance Payment
or if the Company is required to make the Cash Advance Payment pursuant to
Section 2.02 of the Purchase Agreement, (ii) the Class A Stock Advance Payment
if the Company elects to make the Stock Advance Payment or (iii) the Class A
Combination
Advance Payment if the Company elects to make the Combination Advance Payment
"Class A Payment Recipient" shall mean each Class A Limited Partner
on or after the Purchase Date on which the Company has purchased the Class A
Interest of such Class A Limited Partner pursuant to the Purchase Agreement,
or any other Person entitled to receive payments in respect of Class A
Interests in accordance with Section 8.01 of the Purchase Agreement.
"Class A Percentage" shall mean, in the case of each Class A Limited
Partner or Class A Payment Recipient, as the case may be, (a) prior to the
first day of the calendar quarter following the calendar quarter in which the
Class B Threshold with respect to such Class A Limited Partner or Class A
Payment Recipient, as the case may be, occurs, the ratio that the amount of
such Class A Limited Partner's or Class A Payment Recipient's Capital
Contribution to the Partnership bears to the aggregate Capital Contributions
to the Partnership of all Limited Partners and (b) thereafter, the ratio that
the amount of such Class A Limited Partner's or Class A Payment Recipient's
Capital Contribution to the Partnership bears to the aggregate Capital
Contributions to the Partnership of all Class A Limited Partners.
"Class A Stock Advance Payment" shall mean issuance of the number of
shares of Common Stock (and any securities deliverable pursuant to Section
3.09 of the Purchase Agreement) that is equal to the quotient of (a) the Class
A Down Payment divided by (b) the average Closing Price on the 30 trading days
immediately preceding the Stock Pricing Date for each Full Class A Interest of
such Class A Payment Recipient. In the case of any Quarter Class A Interest
held by a Class A Payment Recipient, the number of shares to be delivered to
such Class A Payment Recipient in respect of such Quarter Class A Interest
shall be equal to one-quarter the number of shares of Common Stock (and any
securities deliverable pursuant to Section 3.09 of the Purchase Agreement) to
be delivered in respect of a Full Class A Interest.
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"Class B Combination Advance Payment" shall mean (a) a cash payment
equal to the product of (i) the difference between one hundred percent (100%)
and the Stock Percentage and (ii) the Class B Down Payment, plus (b) issuance
of the number of shares of Common Stock (and any securities deliverable
pursuant to Section 3.09 of the Purchase Agreement) that is equal to the
quotient of (i) the product of (A) the Stock Percentage and (B) the Class B
Down Payment divided by (ii) the average Closing Price on the 30 trading days
immediately preceding the Stock Pricing Date.
"Class B Down Payment" shall mean an amount equal to sixteen percent
(16%) of the Capital Contribution of the Class B Limited Partner.
"Class B Interest" shall mean the limited partnership interest in
the Partnership owned by the Class B Limited Partner.
"Class B Limited Partner" shall have the meaning assigned to such
term in Article I of the Partnership Agreement.
"Class B Payment" shall mean (a) the Last Interim License Payment
payable to a Class B Limited Partner; (b) until the Cut-Off Date, the Class B
Percentage of the Quarterly Payment and Minimum Royalty Payment; and
(c) either (i) the Class B Down Payment, if the Company elects to make the
Cash Advance Payment or if the Company is required to make the Cash Advance
Payment pursuant to Section 2.02 of the Purchase Agreement, (ii) the Class B
Stock Advance Payment if the Company elects to make the Stock Advance Payment
or (iii) the Class B Combination Advance Payment if the Company elects to make
the Combination Advance Payment.
"Class B Payment Recipient" shall mean the Class B Limited Partner
on or after the Purchase Date on which the Company has purchased the Class B
Interest of such Class B Limited Partner pursuant to the Purchase Agreement,
or any other Person entitled to receive payments in respect of the Class B
Interest in accordance with Section 8.01 of the Purchase Agreement.
"Class B Percentage" shall mean for all amounts paid (a) prior to
the first day of the calendar quarter following the calendar quarter in which
the Class B Threshold occurs with respect to Class A Limited Partners or
Class A Payment Recipients, as the case may be, the ratio that the amount of
the Class B Limited Partner's Capital Contribution to the Partnership bears to
the aggregate Capital Contributions to the Partnership of all Limited Partners
and (b) on and after the time on which such Class B Threshold occurs, five
percent (5%).
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"Class B Stock Advance Payment" shall mean issuance of the number
of shares of Common Stock (and other securities deliverable pursuant to
Section 3.09 of the Purchase Agreement) that is equal to the quotient of
(a) the Class B Down Payment divided by (b) the average Closing Price on
the 30 trading days immediately preceding the Stock Pricing Date.
"Class B Threshold" shall mean (a) with respect to Class A Limited
Partners prior to the Interim License Termination Date, the receipt by each
Class A Limited Partner of distributions pursuant to the Partnership Agreement
in an aggregate amount equal to each such Class A Limited Partner's Capital
Contribution and (b) with respect to Class A Payment Recipients after the
Purchase Date, the receipt by each Class A Payment Recipient of
(i) distributions pursuant to the Partnership Agreement and Quarterly Payments
(increased by any Credits) pursuant to the Purchase Agreement in an aggregate
amount equal to each seventy-five percent (75%) of such Class A Payment
Recipient's Capital Contribution and (ii) distributions pursuant to the
Partnership Agreement and Purchase Agreement (i.e., Class A Down Payment,
Quarterly Payments and Minimum Royalty Payments) in an aggregate amount equal
to each such Class A Payment Recipient's Capital Contribution.
"Closing Date" shall mean each date on which subscriptions to
purchase Units are accepted by the General Partner.
"Closing Price" at any time shall mean the closing price per share
of the Common Stock (or other securities deliverable pursuant to Section 3.09
of the Purchase Agreement) on the principal national securities exchange on
which the Common Stock (or such other securities) is then listed or admitted
to trading or, if not then listed or traded on any such exchange, on the
Nasdaq National Market or, if not listed or traded on any such exchange or
system, the average of the bid and asked price per share on the Nasdaq
National Market or, if such quotations are not available, the fair market
value as reasonably determined by the board of directors of the Company or
any committee of such board.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor statute or subsequent codification or recodification of
the federal income tax laws of the United States.
"Combination Advance Payment" shall mean the consideration payable
in cash and Common Stock by the Company to Payment Recipients pursuant to
Sections 3.02(d) and 3.03(d) of the Purchase Agreement in connection with the
purchase by the Company of their Interests.
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"Combination Product" shall mean any product that is formulated in
part with any Product (or any part thereof) and in part with any Combination
Substance.
"Combination Substance" shall mean an active ingredient (other than
a Product) or device used in a Combination Product.
"Common Stock" shall mean fully paid and nonassessable shares of
common stock, par value $.01 per share, of the Company, together with any
other equity securities that may be issued by the Company in addition thereto
or in substitution therefor as provided in Section 10 of the Warrant.
"Company" shall mean ICOS Corporation, a corporation organized and
existing under the laws of the State of Delaware, and its successors.
"Competitive Product" shall mean [ * ].
"Competitive Product Revenues" shall mean, [ * ], the
aggregate of all Net Revenues of the Company and its Affiliates (but not
licensees or ublicensees) in respect of all Competitive Products for such
period within the Field of Activity in the Territory. In the event a
product ("Combination Competitive Product") is formulated in part with any
Competitive Product (or any part thereof) and in part with any active
ingredient (other than a Competitive Product) or device ("Combination
Competitive Substance"), "Competitive Product
"Revenues" shall mean an amount equal to (a) the aggregate amount
of all Net Revenues of the Company and its Affiliates in such period in the
Territory in respect of any Combination Competitive Product multiplied by
(b) a fraction the numerator of which equals the fair market value of the
Competitive Product (or any part thereof) included in such Combination
Competitive Product and the denominator of which equals the sum of (i) the
fair market value of such Competitive Product (or part thereof) and (ii) the
fair market value of each Combination Competitive Substance included in such
Combination Competitive Product, such "fair market value" being determined
in the same manner that it is determined for Products and Combination
Substances in the definition of Product Revenues.
"Controls" or "Controlled" shall mean at any time, with respect to
any right, title or license, the possession of such right, title or license
with the right to assign or grant licenses or sublicenses without obtaining
the consent of any other Person (other than any consent that has been
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[ * ] Confidential Treatment Requested
-7-
obtained) and without violating or causing a default under the terms of any
agreement or other arrangement with or the rights of any other Person.
"Credit" shall mean, with respect to each calendar quarter ending in
the Fiscal Year, [ * ] in the Territory that are in excess of the
Product Revenues that cause the sum of the Royalty Amounts paid or payable
for the calendar quarters ending in the Fiscal Year to equal the Annual
Minimum Amount, if any, for the Fiscal Year; provided, that the Credit
shall not exceed the balance in the Credit Account. In the event the
Credit Account is zero, the Credit shall be zero.
"Credit Account" shall mean the sum of the Class A Down Payments,
Class B Down Payment and each Minimum Royalty Payment made by the Company,
less the aggregate Credits.
"Cut-Off Date" shall mean the later of (a) the last day of the month
in which the thirteenth anniversary of the Business Commencement Date occurs
and (b) the last day of the month in which the eleventh anniversary of the
Purchase Date occurs.
"Default Amount" shall have the meaning assigned to such term in
Section 4.03(a) of the Product Development Agreement.
"Defaulting Limited Partner" shall have the meaning assigned to such
term in Section 3.3.5 of the Partnership Agreement.
"Dollars" and the sign "$" shall mean lawful money of the United
States of America.
"Earned Royalty" shall mean any royalty due under any License
Agreement.
"Elements of Technology" shall mean all technical information,
whether tangible or intangible, including, without limitation, any and all
data, preclinical and clinical results, techniques, discoveries, inventions,
ideas, processes, know-how, patents (including any extension, reissue or
renewal patents), patent applications, inventor's certificates, trade secrets
and other proprietary information, licenses and sublicenses, and samples of
any physical, biological or chemical material.
_______________________________
[ * ] Confidential Treatment Requested
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"Exploitation" shall mean research, experimentation, development,
manufacturing, production, marketing, use, lease, sale, assignment, transfer,
license, sublicense and other disposition, and "Exploit" shall have a
correlative meaning.
"FDA" shall mean the United States Food and Drug Administration or
any successor agency.
"Field of Activity" shall mean collectively (a) the Hu23F2G Field of
Activity, (b) the ICM3 Field of Activity and (c) the PAF-AH Field of Activity
"Field Technology" shall mean the Technology within the Field of
Activity.
"Fiscal Year" shall mean the series of 12 full calendar months
following the month in which the Purchase Date occurs and each series of 12
successive calendar months thereafter.
"Force Majeure" shall mean any occurrence that prevents or
substantially interferes with the performance by a party of any of its
obligations hereunder, if such occurs by reason of any act of God, flood,
fire, explosion, breakdown of plant, strike, lockout, labor dispute, casualty,
accident, war, revolution, civil commotion, acts of public enemies, blockage,
embargo, injunction, law, order, proclamation, regulation, ordinance, demand
or requirement of any government or of any subdivision, authority or
representative of any such government, inability to procure or use materials,
labor, equipment, transportation or energy sufficient to meet manufacturing
needs without the necessity of allocation, or any other cause whatsoever,
whether similar or dissimilar to those above enumerated, beyond the reasonable
control of such party, if and only if the party affected shall have used
reasonable efforts to avoid such occurrence and to remedy it promptly if it
shall have occurred.
"Full Class A Interest" shall mean each Class A Interest that
represents a $100,000 Capital Contribution.
"General Partner" shall mean ICOS Development Corporation, a
corporation organized and existing under the laws of the State of Delaware, as
general partner of the Partnership, and its successors in such capacity.
"Hu23F2G" shall mean the recombinant humanized monoclonal antibody
developed by the Company to block CD11/CD18-mediated cell adhesions in humans.
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"Hu23F2G Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of Hu23F2G Products
for human therapeutic purposes.
"Hu23F2G Product" shall mean Hu23F2G, any fragment or component
thereof or any substance derived from Hu23F2G (or any fragment or component
thereof).
"ICM3 Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of ICM3 Products for
human therapeutic purposes.
"ICM3 Product" shall mean a recombinant humanized monoclonal
antibody developed by the Company to block the function of human intercellular
adhesion molecule-3, any fragment or component thereof or any substance
derived from such monoclonal antibody (or any fragment or component thereof).
"Initial Calendar Quarter" shall mean the calendar quarter in which
the Purchase Date falls.
"Intellectual Property Right" shall mean rights under patents
(including any extension, reissue or renewal patents) and other similar
rights.
"Interest" shall mean any Class A Interest or the Class B Interest;
and "Interests" shall mean all Class A Interests and the Class B Interest.
"Interim License" shall have the meaning assigned to such term in
Section 2.05 of the Product Development Agreement.
"Interim License Termination Date" shall mean the earlier of (a) the
Purchase Date and (b) if the Purchase Option terminates for any reason other
than the purchase by the Company of all the Interests on the Purchase Date,
the earlier of (i) the date on which the Partnership sells, licenses,
sublicenses, assigns or otherwise transfers or disposes of all or a
substantial part of the Technology and (ii) the date that is 18 months after
the Purchase Option Termination Date.
"Investor" shall mean a purchaser of any multiple of one-quarter of
a Unit who meets the suitability standards set forth in the Memorandum under
the caption "Investor Suitability."
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"Investor Note" shall have the meaning assigned to such term in
Section 3.3.1 of the Partnership Agreement.
"Invoiced Amount" shall have the meaning assigned to such term in
Section 4.01(c) of the Product Development Agreement.
"Last Interim License Payment" shall mean (a) with respect to a
Class A Payment Recipient, such Class A Payment Recipient's Class A Percentage
of ninety-nine percent (99%) (until the Class B Threshold occurs, and
thereafter, 95% of 99%) of the Royalty Amount that would otherwise have been
payable to the Partnership (the "Interim License Amount") determined pursuant
to Section 6.01 of the Product Development Agreement for the period commencing
on the first day of the calendar quarter following the last calendar quarter
in respect of which payments have been made under such Section 6.01 and
distributed to the partners of the Partnership and ending on the Purchase Date
and (b) with respect to a Class B Payment Recipient, the Class B Percentage of
ninety-nine percent (99%) of the Interim License Amount.
"License Agreement" shall mean any license or sublicense or portion
thereof (other than the Background Technology License, the Program Technology
License or the Interim License) by any Person granting to the Company or any
Affiliate of the Company on the date hereof, or at any time hereafter, rights
that are necessary or materially useful in the Exploitation of Products, and
any amendments thereto, including, without limitation, any consent from the
licensor or sublicensor obtained by the Company pursuant to the Product
Development Agreement.
"License Agreement Right" shall mean any right held by the
Partnership, directly or indirectly (including, without limitation, under the
Background Technology License), in any Technology licensed under any License
Agreement.
"Limited Partners" shall mean the Class A Limited Partners and the
Class B Limited Partner.
"Marketing Program" shall mean the Company's implementation of the
Marketing Strategy pursuant to Article V of the Product Development Agreement,
including the execution of marketing agreements with third parties.
"Marketing Strategy" shall mean the strategy to provide for the
distribution, marketing and sale of the Products within the Field of Activity
in the Territory, all as determined by the Company.
"Memorandum" shall mean the Confidential Private Placement
Memorandum dated April 11, 1997 used in connection with the placement of
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Units, including the exhibits thereto, in each case together with any
amendments thereof or written supplements thereto prepared by the Company.
"Merger Letter" shall have the meaning assigned to such term in
Section 14.01 of the Product Development Agreement.
"Minimum Royalty Payment" shall mean the amount by which the Annual
Minimum Amount for the Fiscal Year exceeds, if at all, the sum of the Quarterly
Payments paid or payable for the four quarters ending in the Fiscal Year. The
Minimum Royalty Payment may be paid in cash or as a Minimum Royalty Stock
Payment or as a combination of cash and a Minimum Royalty Stock Payment in
accordance with Section 3.05 of the Purchase Agreement.
"Minimum Royalty Stock Payment" shall mean the issuance of the
number of shares of Common Stock (or other securities deliverable pursuant to
Section 3.09 of the Purchase Agreement) that is equal to the quotient of
(a) the portion of the Minimum Royalty Payment for a Fiscal Year that will be
paid in Common Stock divided by (b) the average Closing Price on the 30
trading days immediately preceding the Minimum Royalty Stock Pricing Date.
The number of such shares issued to each Class A Payment Recipient and the
Class B Payment Recipient is determined in accordance with the Class A Payment
and the Class B Payment, respectively.
"Minimum Royalty Stock Pricing Date" shall mean the last day of the
Fiscal Year to which the Minimum Royalty Stock Payment pertains.
"Nasdaq" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Nasdaq National Market" shall mean the Nasdaq National Market of
the Nasdaq Stock Market.
"Net Revenues," with respect to sales for any period and with
respect to any item, shall mean the proceeds received or to be received, under
generally accepted accounting principles, from sales of Products or
Competitive Products (as applicable) by the Company, any Affiliate of the
Company or any licensee or sublicensee of the Company, but excluding sales to
any Affiliate, licensee or sublicensee of the Company. In determining such
net proceeds, the amounts received from such sales shall be reduced by related
prompt payment and other trade discounts, transportation and related insurance
charges, returns, bad debt and other allowances, taxes (except income and
franchise taxes) and distributors', consignees' and wholesalers' fees and
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commissions. The terms "licensee" and "sublicensee" shall mean any Person
licensed or sublicensed by the Company or any Affiliate of the Company,
including pursuant to any marketing, co-marketing or co-detailing agreement
(or similar arrangement that is the functional equivalent of a license), but
excluding customary distribution, wholesaling and consignment arrangements.
For the purposes of this definition, distribution, wholesaling or consignment
arrangements shall be limited to arrangements where the distributor,
wholesaler or consignee is not obligated, in addition to selling a Product
or Competitive Product, to undertake any significant promotional or similar
marketing efforts directed at the Product or Competitive Product. In
calculating Net Revenues, any given unit of a Product or Competitive Product
shall be taken into account only once.
"Notice of Exercise" shall mean the written notice that the Company
shall send to each Limited Partner pursuant to Section 2.03 of the Purchase
Agreement in order to inform such Limited Partners that the Company has
elected to exercise its purchase option with respect to the Interests and to
designate the Purchase Date.
"Operative Agreements" shall mean each of the Product Development
Agreement, the Partnership Agreement, the Purchase Agreement, the Sales Agency
Agreement and the Warrants.
"Outstanding Available Funds" shall mean, at any time, the Available
Funds actually received through such time by the Partnership less all amounts
theretofore disbursed to the Company by the Partnership pursuant to Section
4.01 of the Product Development Agreement.
"PAF-AH Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of PAF-AH Products
for human therapeutic purposes.
"PAF-AH Product" shall mean platelet-activating factor
acetylhydrolase and any fragment, component or derivative thereof.
"Partnership" shall mean ICOS Clinical Partners, L.P., a limited
partnership organized under the laws of the State of Delaware.
"Partnership Agreement" shall mean the Agreement of Limited
Partnership dated as of April 11, 1997 among the General Partner and the
limited partners of the Partnership, as amended, modified or restated from
time to time.
"Payment Recipient" shall mean each Class A Payment Recipient and
the Class B Payment Recipient.
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"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an estate, an unincorporated organization, a government
or any department or agency thereof, or other entity.
"Product Development Agreement" shall mean the Product Development
Agreement dated as of June 5, 1997, between the Partnership and the Company,
as amended, modified or restated from time to time.
"Product Revenues" for any period shall mean the sum of (a) the
aggregate amount of Net Revenues in such period within the Field of Activity
in the Territory in respect of any Product and (b) an amount equal to (i) the
aggregate amount of Net Revenues in such period within the Field of Activity
in the Territory in respect of any Combination Product multiplied by (ii) a
fraction the numerator of which equals the fair market value of the Product
(or any part thereof) included in such Combination Product and the denominator
of which equals the sum of (A) the fair market value of such Product (or part
thereof) and (B) the fair market value of each Combination Substance included
in such Combination Product. For purposes of this definition, "fair market
value" of any Product (or part thereof) and Combination Substance shall be the
list retail price of such Product (or part thereof) and Combination Substance
sold separately or, if such Product (or part thereof) or Combination Substance
is not ordinarily sold separately, a value for both the Product (or part
thereof) and Combination Substance determined in the good-faith business
judgment of (x) if the Purchase Date has not occurred, the General Partner or
any successor to the General Partner as the general partner of the Partnership
or (y) if the Purchase Date (if any) has occurred, the Company.
"Products" shall mean collectively (a) Hu23F2G Products, (b) ICM3
Products and (c) PAF-AH Products.
"Program Technology" shall mean all Elements of Technology that are
developed, acquired or conceived by or on behalf of the Partnership during the
Research Program, but in all cases excluding Background Technology.
"Program Technology License" shall have the meaning set forth in
Section 2.03 of the Product Development Agreement.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
June 3, 1997 between the Company and the Limited Partners, as amended,
modified or restated from time to time.
"Purchase Date" shall mean the date, designated by the Company
pursuant to Section 2.01(a) of the Purchase Agreement in the Notice of
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Exercise, on which the Company purchases the Interests pursuant to the
Purchase Agreement, which shall be a date not more than 60 days after the
date of the Notice of Exercise.
"Purchase Option" shall mean any of the options granted by the
Limited Partners pursuant to Section 2.01 of the Purchase Agreement.
"Purchase Option Commencement Date" shall mean the first day after
the final Closing Date.
"Purchase Option Exercise Date" shall mean the date, if any, on
which the Notice of Exercise is given.
"Purchase Option Shares" shall have the meaning assigned to such
term in Section 4.01(c) of the Purchase Agreement.
"Purchase Option Termination Date" shall have the meaning set forth
in Section 7.02(a) of the Purchase Agreement.
"Purchase Option Termination Event" shall mean any of the events set
forth in Section 7.01 of the Purchase Agreement.
"Quarter" shall mean any calendar quarter beginning or ending during
the term of the Product Development Agreement; provided, that the first
Quarter shall be the period beginning on May 1, 1997 and ending on the last
day of the calendar quarter in which the first Closing Date occurs, and the
last Quarter shall be the period beginning on the first day of the last
calendar quarter before the Interim License Termination Date and ending on the
Interim License Termination Date.
"Quarter Class A Interest" shall mean each Class A Interest, other
than a Full Class A Interest, that represents a $25,000 Capital Contribution.
"Quarterly Payment" shall mean, for the period beginning with the
Initial Calendar Quarter and for each calendar quarter thereafter, the sum of
seven percent (7%) of Product Revenues in the United States, five percent (5%)
of Product Revenues in the Territory outside the United States and [ * ]
in the Territory for such calendar quarter; provided, that, in the event that
less than 700 Units are issued, such seven percent (7%) and five percent (5%)
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[ * ] Confidential Treatment Requested
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shall be adjusted by multiplying each by a fraction, the numerator of which is
the number of Units issued and the denominator of which is 700; provided,
further, that any such sum shall be reduced, if and as appropriate, to exclude
in the Initial Calendar Quarter any Net Revenues applicable to any period in
the Initial Calendar Quarter before the Purchase Date; provided, further,
that, in the event the Credit Account is positive at the beginning of the
calendar quarter, any such sum shall be reduced by the Credit for the calendar
quarter.
"Quarter Unit" shall mean an interest comprising a Quarter Class A
Interest and Series A Warrants to purchase an aggregate of 2,000 shares of
Common Stock and Series B Warrants to purchase an aggregate of 2,000 shares of
Common Stock.
"Research Program" shall mean any research, experimentation or
development relating to the Products within the Field of Activity in the
Territory proposed to be conducted or conducted, directly or indirectly, by
the Company pursuant to the terms of the Product Development Agreement,
including, without limitation, the research, experimentation and development
necessary or useful to receive FDA and such other regulatory approvals to
Exploit Products and otherwise engage within the Field of Activity in the
Territory as the Partnership, in consultation with the Company, directs.
"Research Program Termination Date" shall mean the date on which the
board of directors of the General Partner terminates the Research Program with
respect to all Products pursuant to Section 7.01(b) of the Product Development
Agreement.
"Royalty Amount" shall mean for each calendar quarter the sum of
seven percent (7%) of Product Revenues in the United States, five percent (5%)
of Product Revenues in the Territory outside the United States and [ * ]
in the Territory for such calendar quarter; provided, that, in the event that
less than 700 Units are issued, such seven percent (7%) and five percent (5%)
shall be adjusted by multiplying each by a fraction, the numerator of which is
the number of Units issued and the denominator of which is 700.
"Sales Agency Agreement" shall mean the Sales Agency Agreement dated
as of June 3, 1997 among the Sales Agent, the Partnership, the General Partner
and the Company relating to the placement of Units, as amended, modified or
restated from time to time.
_______________________________
[ * ] Confidential Treatment Requested
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"Sales Agent" shall mean PaineWebber Incorporated, as sales agent
"Stock Advance Payment" shall mean the consideration payable by the
Company to Payment Recipients in Common Stock or other securities, assets or
evidence of indebtedness pursuant to Article III of the Purchase Agreement in
connection with the purchase by the Company of their Interests.
"Stock Percentage" shall mean, if the Company shall have elected to
make the Combination Advance Payment, the percentage of the purchase price of
the applicable Partnership Interest that the Company elects to pay in Common
Stock.
"Stock Pricing Date" shall mean the fifth trading day before the
Purchase Option Exercise Date.
"Suncos" shall mean Suncos Corporation, a corporation organized and
existing under the laws of Delaware, the stockholders of which are Suntory and
the Company.
"Suntory" shall mean Suntory Limited, a corporation organized and
existing under the laws of Japan.
"Technology" shall mean the Background Technology and the Program
Technology.
"Territory" shall mean (a) the United States with respect to PAF-AH
Products and (b) the entire world, except Japan, with respect to ICM3 Products
and Hu23F2G Products.
"Third Party Sublicensee" shall have the meaning assigned to such
term in Section 2.02(a) of the Product Development Agreement.
"Unit" shall mean a "Unit" as contemplated by the Sales Agency
Agreement consisting of one Class A Interest, Series A Warrants to purchase an
aggregate of 8,000 shares of Common Stock and the right to receive Series B
Warrants to purchase an aggregate of 8,000 shares of Common Stock.
"United States" shall mean the United States of America, including
its territories and possessions.
"Warrant" shall mean any of the warrants to purchase Common Stock
issued to each Limited Partner by the Company in exchange for the Purchase
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Options.
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Schedule II to
Product Development
Agreement
[Date]
ICOS Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
Bothell, Washington 98021
Re: License Agreement dated as of __________
Gentlemen:
[Licensor] (the "Licensor") has been informed that, for the purposes of
developing and testing [product] for human pharmaceutical use, ICOS
Corporation (the "Company") has caused to be formed ICOS Clinical Partners,
L.P., a Delaware limited partnership (the "Partnership"). The Licensor and
the Company desire to amend the License Agreement dated as of ___________,
19__ between the Licensor and the Company (the "License Agreement") to induce
the Partnership to raise the requisite funds for the development of the
technology licensed under the License Agreement.
Sublicense to the Partnership
The Licensor hereby consents to any sublicense to the Partnership of any
of the rights and licenses granted to the Company under the License Agreement.
Unless otherwise agreed to by the Licensor in writing, no such sublicense shall
relieve the Company from primary liability thereunder.
Transfers to Third Parties
The Partnership, or any other third party to which the Partnership has
assigned or further sublicensed its sublicense rights (a "Third Party"), may
assign or further sublicense any of its sublicense rights, provided, that the
Licensor is promptly notified in writing of such assignment or further
sublicense.
Curing of Defaults
The Licensor agrees that the Partnership and any Third Party shall have
the right to cure any default by the Company under the License Agreement at
any time during the ___-day period specified in Section ___ of the License
Agreement.
Partnership Option at Termination
The Licensor hereby grants the Partnership an option to acquire all the
license and other rights granted to the Company under the License Agreement
(the "Company License Rights"), which option shall be exercisable at any time
within 60 days after receipt by the Partnership of a copy of any notice of
termination given to the Company terminating the License Agreement for any
reason. The Licensor hereby grants the Partnership a license to use the
Company License Rights in accordance with the provisions of the License
Agreement during the period from such termination of the License Agreement
until such option lapses unexercised.
Notice
The Licensor hereby agrees that any notice give under the License
Agreement by the Licensor to the Company shall also be given to the
Partnership (and, if applicable, to any Third Party) and shall be sent
to the last address designated by written notice to the Licensor pursuant
to the License Agreement. For such purpose, the initial address for
notices to the Partnership shall be:
ICOS Clinical Partners, L.P.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
Bothell, Washington 98021
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Partner
Sincerely,
[LICENSOR]
By _________________________________
Title:
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Accepted and approved as of
the date stated above:
ICOS CORPORATION
By _______________________________
Title:
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Schedule III to
Product Development
Agreement
[Dated pursuant to the
Product Development Agreement]
ICOS Clinical Partners, L.P.
c/o ICOS Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
Bothell, Washington 98021
Dear Sirs:
Upon consummation of the proposed [acquisition/merger/consolidation] of
ICOS Corporation, a Delaware corporation (the "Company"), [by/with] ________
[insert name of Company involved in the acquisition of, or merger or
consolidation with, the Company], a wholly owned subsidiary of [insert name of
ultimate parent Company] (the "Parent"), [insert name of surviving company]
(the "Surviving Company") will be the surviving company. The Company is a
party to the Product Development Agreement, the Purchase Agreement, the Sales
Agency Agreement and the Warrants (each as defined in Schedule I to the
Product Development Agreement dated as of _____________, 1997 between the
Company and ICOS Clinical Partners, L.P. (the "Partnership") and,
collectively, the "Agreements").
Each of the undersigned is familiar with the content of the Agreements
and acknowledges and agrees that the Surviving Company will be bound by all
the terms of the Agreements as though it were the Company and an initial
signatory thereto. The Surviving Company agrees that, upon the consummation
of the [acquisition/merger/consolidation], it will fully perform all the
Company's obligations under the Agreements, including, but not limited to, the
obligation of the Company to carry out the Research Program and the Marketing
Program in the manner described in the Product Development Agreement. The
Surviving Company agrees to respect the fiduciary duty of ICOS Development
Corporation, the general partner of the Partnership (the "General Partner"),
to the limited partners of the Partnership. The Parent agrees not to impede
the Surviving Company's performance of its obligations under the Agreements or
the General Partner's fulfilling such fiduciary duty.
Each of the undersigned understands that your remedies at law may be
inadequate to compensate you for any injury that may result from the Surviving
Company's failure or threatened failure to honor the Company's obligations
under the Agreements, and agrees that, in addition to such remedies at law,
you shall be entitled, without proof of actual injury, to obtain equitable
relief in the form of specific performance, a temporary restraining order, a
temporary or permanent injunction or any other equitable remedy that you may,
in your sole discretion, deem necessary or appropriate to carry out the
purposes, or ensure the benefits to the beneficiaries of, the Agreements.
Each of the undersigned has caused this letter to be executed as of the date
first written above as its duly authorized, valid and binding agreement. This
letter shall be effective as of the date of the consummation of the proposed
[acquisition/merger/consolidation].
Very truly yours,
[SURVIVING COMPANY]
By ________________________________
[Name]
Chief Executive Officer
[PARENT]
By ________________________________
[Name]
Chief Executive Officer
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