REDACTED VERSION
EXHIBIT 10.2
TO
ICOS Corporation's
Report on Form 8-K
Dated
August 26, 1997
"[ * ]" = omitted, confidential material, which material
has been separately filed with the Securities and Exchange Commission
pursuant to a request for confidential treatment.
PURCHASE AGREEMENT
dated as of
June 5, 1997
between
ICOS CORPORATION
and
each of the Limited Partners from time to time
of
ICOS CLINICAL PARTNERS, L.P.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS2
SECTION 1.01 Definitions........................................2
ARTICLE II PURCHASE OPTIONS............................................2
SECTION 2.01 Purchase Options...................................2
SECTION 2.02 Advance Payment Election...........................3
SECTION 2.03 Notice of Exercise.................................4
ARTICLE III PURCHASE AND SALE OF LIMITED PARTNERSHIP INTERESTS.........5
SECTION 3.01 Purchase of Interests..............................5
SECTION 3.02 Purchase Price of Class A Interests................5
SECTION 3.03 Purchase Price of the Class B Interest.............6
SECTION 3.04 Delivery of Common Stock...........................7
SECTION 3.05 Payments...........................................7
SECTION 3.06 Interest...........................................9
SECTION 3.07 Statements.........................................9
SECTION 3.08 Records............................................9
SECTION 3.09 Anti-Dilution......................................9
SECTION 3.10 Purchase of Royalty Payment Obligations...........10
ARTICLE IV REPRESENTATIONS AND WARRANTIES ............................10
SECTION 4.01 Representations and Warranties of the Company.....10
ARTICLE V COVENANTS OF THE COMPANY....................................12
SECTION 5.01 Reservation of Stock..............................12
SECTION 5.02 Registration and Listing of Stock.................13
SECTION 5.03 Delivery of Prospectus............................13
SECTION 5.04 Existence of Partnership..........................14
SECTION 5.05 Payment Recipient Register........................14
SECTION 5.06 Manufacture and Sale of Products..................14
SECTION 5.07 Sale or Disposition of Technology.................15
ARTICLE VI DISCLAIMERS................................................15
SECTION 6.01 No Warranty on Products...........................15
SECTION 6.02 No Warranty on Technology.........................15
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ARTICLE VII TERM AND TERMINATION......................................16
SECTION 7.01 Purchase Option Termination Events................16
SECTION 7.02 Purchase Option Termination Date..................17
SECTION 7.03 Events of Default.................................17
SECTION 7.04 Term and Termination..............................18
ARTICLE VIII SALE OR ASSIGNMENT.......................................18
SECTION 8.01 Sale or Assignment................................18
ARTICLE IX MISCELLANEOUS PROVISIONS...................................19
SECTION 9.01 Parties Independent...............................19
SECTION 9.02 Entire Agreement; Amendment.......................19
SECTION 9.03 Choice of Law.....................................20
SECTION 9.04 Severability......................................20
SECTION 9.05 No Waiver.........................................20
SECTION 9.06 Payments and Notices..............................20
SECTION 9.07 Headings..........................................21
SECTION 9.08 Counterparts......................................21
Schedule I - Glossary
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PURCHASE AGREEMENT
Agreement dated as of June 5, 1997 between ICOS Corporation, a
Delaware corporation (the "Company"), and each of the limited partners
(individually, a "Limited Partner" and, collectively, the "Limited
Partners") from time to time of ICOS Clinical Partners, L.P., a Delaware
limited partnership (the "Partnership").
WITNESSETH
WHEREAS, the business of the Partnership is to conduct research
and experimentation in order to develop Products within the Field of
Activity in the Territory; to obtain appropriate regulatory approvals;
after receipt of such approvals, to obtain revenues from the
Exploitation of the Products within the Field of Activity in the
Territory; and to engage in activities incidental to the above activities;
WHEREAS, the Company and the Partnership have entered into the
Product Development Agreement pursuant to which the Company has granted
the Partnership the exclusive right to use certain technology owned or
controlled by the Company, and the Company has agreed to perform, on
behalf of the Partnership, research and experimentation in order to
develop the Products and thereafter to market the Products within the
Field of Activity in the Territory;
WHEREAS, in order to fund such research and experimentation, the
Partnership intends to raise up to $100,000,000 through a private
placement of limited partnership interests in the Partnership as more
fully described in the Memorandum; and
WHEREAS, each Limited Partner wishes to grant the Company an
option to purchase such Limited Partner's Interest exercisable at the
time and in the manner and on the terms described in this Agreement,
and, in consideration for such options, the Company has issued to the
Limited Partners Warrants to purchase shares of its Common Stock;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions
(a) Unless otherwise provided, each capitalized term used herein
shall have the meaning assigned to it in the Glossary attached hereto
as Schedule I.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
Events of Default.................................7.03
Notice of Exercise................................2.01(b)
Prospectus........................................4.01(d)
Purchase Date.....................................2.01(a)
Purchase Option Exercise Date.....................2.03(a)
Purchase Option Shares............................4.01(c)
Purchase Option Termination Date..................7.02(a)
Purchase Option Termination Event.................7.01
Registration Statement............................4.01(d)
SEC...............................................4.01(d)
Securities Act....................................4.01(d)
ARTICLE II
PURCHASE OPTIONS
SECTION 2.01 Purchase Options
(a) Each Limited Partner hereby grants the Company an
irrevocable option to purchase, on a date (the "Purchase Date") designated
by the Company pursuant to Section 2.03(a), all the Interests of such
Limited Partner in accordance with the terms of this Agreement. Such
options to purchase the Interests may only be exercised in the manner set
forth in this Article II.
(b) The Company's right to exercise the options granted hereby
is subject to the following conditions:
(i) Such options may only be exercised if all the options
to purchase the Interests are to be exercised simultaneously;
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(ii) Such options may be exercised only during the period
commencing on the Purchase Option Commencement Date and ending on the
Purchase Option Termination Date by sending a written notice to such
effect containing the information required by Section 2.03 to the
Partnership, the General Partner and all Limited Partners (the "Notice
of Exercise");
(iii) The representations and warranties set forth in
Article IV shall be true and correct in all material respects on the
Purchase Option Exercise Date as if made on such date;
(iv) The Company shall have complied with the
covenants set forth in Sections 5.01 and 5.02(a), (b) and (c) if the Company
elects to make the Stock Advance Payment or the Combination Advance Payment;
and
(v) The Purchase Option Termination Date shall not have
occurred prior to the Purchase Option Exercise Date.
SECTION 2.02 Advance Payment Election
Prior to the Purchase Option Exercise Date, the Company shall determine
whether it will make the Cash Advance Payment, the Stock Advance Payment or
the Combination Advance Payment to the Payment Recipients; provided, that the
Company may make the Stock Advance Payment or the Combination Advance Payment
only if the representations set forth in Section 4.01(d) are true and correct
as of the Purchase Date and the Common Stock (or any other securities included
in the Stock Advance Payment or the Combination Advance Payment pursuant to
Section 3.09) is listed on a national securities exchange or quoted on the
Nasdaq National Market; provided, further, that the Company may not make the
Stock Advance Payment without the prior consent of the General Partner (which
consent shall not be unreasonably withheld) if, prior to the Purchase Date,
the Partnership has not expended an amount equal to or greater than the
aggregate Capital Contributions of all Limited Partners (reduced by $5,000
for each Unit sold without a selling commission under the Sales Agency
Agreement); provided, further, that, in the event that the Partnership has
not expended, prior to the Purchase Date, an amount equal to such Capital
Contributions, the Company may not, without the prior consent of the General
Partner (which consent shall not be unreasonably withheld), make the Common
Stock portion of the Combination Advance Payment larger than an amount that
would cause the cash portion of the Combination Advance Payment to be less
than the cash in the Partnership (less payables) on the Purchase Date. In
the event the Company has not specified in the Notice of Exercise whether it
will make the Cash Advance Payment, the Stock Advance Payment or the
Combination Advance Payment, the Company will be required to make the Cash
Advance Payment.
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SECTION 2.03 Notice of Exercise
(a) The Notice of Exercise shall (A) be dated the date that it is sent
(the "Purchase Option Exercise Date"), (B) be irrevocable, (C) designate the
Purchase Date, which shall be a date not more than 60 days after the Purchase
Option Exercise Date, and (D) contain or be accompanied by:
(i) a description in reasonable detail of each Limited Partner's
right to receive the Class A Payment or the Class B Payment, as the case may
be, for its Interest;
(ii) notification of whether the Company will, pursuant to
Section 2.02, make the Cash Advance Payment, the Stock Advance Payment or the
Combination Advance Payment to the Payment Recipients and (A) if the Company
will make the Stock Advance Payment, (1) the number of shares of Common Stock
that will be delivered on the Purchase Date for each Class A Interest or
Class B Interest, as the case may be, and (2) the computations relating thereto
in reasonable detail and (B) if the Company will make the Combination Advance
Payment, (1) the number of shares of Common Stock and the amount of cash that
will be delivered on the Purchase Date for each Class A Interest or Class B
Interest, as the case may be, and (2) the computations relating thereto in
reasonable detail;
(iii) the information required by Section 2.03(b), if applicable;
and
(iv) a conformed copy of this Agreement.
(b) If, at any time before the Purchase Date, the number of shares of
Common Stock or other securities that would or may be deliverable to any
Limited Partner pursuant to Article III in respect of its Interest shall be
adjusted or any other consideration would be deliverable to any Limited Partner
pursuant to Section 3.09, the Company shall give notice thereof to the
Partnership and, upon request, to any Limited Partner, and shall include in the
Notice of Exercise (or, if such adjustment occurs after the date of such notice,
shall promptly send to each Limited Partner) a statement of the facts requiring
such adjustment or the delivery of such other consideration, the computations
relating thereto in reasonable detail and the number of shares of Common Stock
or other consideration that would or may be deliverable to Limited Partners in
respect of each such Interest pursuant to the Stock Advance Payment or the
Combination Advance Payment. Such statement shall be signed by the Chief
Executive Officer or Chief Financial Officer of the Company.
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ARTICLE III
PURCHASE AND SALE OF LIMITED PARTNERSHIP INTERESTS
SECTION 3.01 Purchase of Interests
(a) On the Purchase Date, each Limited Partner shall sell to the Company,
and the Company shall purchase from such Limited Partner, the Interest of such
Limited Partner at the price and on the terms specified in this Agreement.
(b) At the request and expense of the Company, each Limited Partner shall
execute such further proper assignments and instruments as the Company shall
reasonably request to accomplish and record such purchase and sale and establish
the sole ownership of the Company in and to the Interest of such Limited
Partner.
SECTION 3.02 Purchase Price of Class A Interests
(a) As complete and full consideration for the sale to the Company by
each Class A Limited Partner of its Class A Interest, the Company shall pay
the Class A Payment to each Class A Payment Recipient.
(b) If the Company shall have elected pursuant to Section 2.02 to make the
Cash Advance Payment, or if the Company is not permitted under Section 2.02 to
make the Stock Advance Payment or the Combination Advance Payment, the Company
shall pay to each Class A Payment Recipient the amount of the Class A Down
Payment, in cash, on the Purchase Date in respect of such Class A Payment
Recipient's Class A Interest.
(c) If the Company shall have elected pursuant to Section 2.02 to make the
Stock Advance Payment, the Company shall deliver to each Class A Payment
Recipient the Class A Stock Advance Payment in the manner and at the time
specified in Section 3.04.
(d) If the Company shall have elected pursuant to Section 2.02 to make the
Combination Advance Payment, the Company shall deliver to each Class A Payment
Recipient the Class A Combination Advance Payment in the manner and at the time
specified in Section 3.04.
(e) The Company shall pay in cash to each Class A Payment Recipient that
portion of its Class A Payment constituting the Last Interim License Payment
within 60 days after the Purchase Date.
(f) No fractional shares of Common Stock (or other securities to be
delivered pursuant to Section 3.09) shall be issued to any Class A Payment
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Recipient as part of the Stock Advance Payment, Combination Advance Payment or
Minimum Royalty Stock Payment. Instead of any fractional shares of Common Stock
(or other securities) that would otherwise be issuable to a Class A Payment
Recipient, the Company shall pay to the Class A Payment Recipient a cash
adjustment in respect of such fractional interest in an amount equal to that
fractional interest of the average Closing Price of the Common Stock used to
determine the number of shares of Common Stock comprising the Stock Advance
Payment, Combination Advance Payment or Minimum Royalty Stock Payment.
SECTION 3.03 Purchase Price of the Class B Interest
(a) As complete and full consideration for the sale to the Company by the
Class B Limited Partner of its Class B Interest, the Company shall pay the
Class B Payment to the Class B Payment Recipient.
(b) If the Company shall have elected pursuant to Section 2.02 to make the
Cash Advance Payment, or if the Company is not permitted under Section 2.02 to
make the Stock Advance Payment or the Combination Advance Payment, the Company
shall pay to the Class B Payment Recipient the Class B Down Payment, in cash,
on the Purchase Date.
(c) If the Company shall have elected pursuant to Section 2.02 to make
the Stock Advance Payment, the Company shall deliver to the Class B Payment
Recipientthe Class B Stock Advance Payment in the manner and at the time
specified inSection 3.04.
(d) If the Company shall have elected pursuant to Section 2.02 to make
the Combination Advance Payment, the Company shall deliver to the Class B
Payment Recipient the Class B Combination Advance Payment in the manner
and at the time specified in Section 3.04.
(e) The Company shall pay in cash to the Class B Payment Recipient that
portion of the Class B Payment constituting the Last Interim License Payment
within 60 days of the Purchase Date.
(f) No fractional shares of Common Stock (or other securities to be
delivered pursuant to Section 3.09) shall be issued to the Class B Payment
Recipient as part of the Stock Advance Payment, Combination Advance Payment
or Minimum Royalty Stock Payment. Instead of any fractional shares of Common
Stock (or other securities) that would otherwise be issuable to the Class B
Payment Recipient, the Company shall pay to the Class B Payment Recipient a
cash adjustment in respect of such fractional interest in an amount equal to
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that fractional interest of the average Closing Price of the Common Stock used
to determine the number of shares of Common Stock comprising the Stock Advance
Payment, Combination Advance Payment or Minimum Royalty Stock Payment.
SECTION 3.04 Delivery of Common Stock
The shares of Common Stock (or such other securities as are to be delivered
pursuant to Section 3.09) to be delivered to the Payment Recipient pursuant to
the Stock Advance Payment or the Combination Advance Payment shall be mailed
on the Purchase Date to such Payment Recipient by certified mail, return receipt
requested, at the address of such Payment Recipient set forth in the Limited
Partner register maintained by the Partnership in accordance with Article 13 of
the Partnership Agreement. The Company shall pay all documentary, stamp,
transfer or other transaction taxes attributable to the issuance or delivery of
such shares.
SECTION 3.05 Payments
(a) Each cash payment to a Payment Recipient pursuant to Section 3.02 or
3.03 (other than (i) the Cash Advance Payment or the Combination Advance
Payment, as the case may be, which shall be paid on the Purchase Date,
(ii) the Last Interim License Payment, which shall be paid in accordance with
Sections 3.02(e) and 3.03(e) and (iii) the Minimum Royalty Payment, which shall
be paid in accordance with Section 3.05(b)) shall be made by the Company within
45 days of the last day of each calendar quarter in respect of which the Company
shall be required to make any such payment, at which time there shall also be
delivered to each Payment Recipient a statement setting forth the basis upon
which such payment was calculated for such calendar quarter, signed by the Chief
Executive Officer, Chief Financial Officer or Chief Accounting Officer of the
Company.
(b) The Minimum Royalty Payment to a Payment Recipient shall be made by
the Company within 60 days of the last day of the last calendar quarter of the
Fiscal Year in respect of which the Company shall be required to make any such
payment, at which time there shall be delivered to each Payment Recipient a
statement setting forth the basis upon which such payment was calculated for
such Fiscal Year, signed by the Chief Executive Officer, Chief Financial
Officer or Chief Accounting Officer of the Company. For each Fiscal Year, the
Company may elect whether to make the Minimum Royalty Payment in cash, as a
Minimum Royalty Stock Payment or as a combination of cash and a Minimum Royalty
Stock Payment; provided, that (i) the Company may make the Minimum Royalty
Stock Payment only if the representations set forth in Section 4.01(d) are
true and correct as of the date payment is made and the Common Stock (or any
other securities deliverable pursuant to Section 3.09) is listed on a national
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securities exchange or quoted on the Nasdaq National Market and (ii) the Company
may not make a Minimum Royalty Stock Payment without the prior consent of the
General Partner (which consent shall not be unreasonably withheld) if, prior
to the Purchase Date, the Partnership has not expended an amount equal to or
greater than the aggregate Capital Contributions of all Limited Partners
(reduced by $5,000 for each Unit sold without a selling commission under the
Sales Agency Agreement) until the Company has made payments in cash to Payment
Recipients under this Agreement in an aggregate amount equal to at least the
cash in the Partnership (less payables) on the Purchase Date.
(c) Any cash payment to any Payment Recipient shall be made by mailing to
such Payment Recipient, in accordance with Section 9.06, a check of the Company
in the amount of such payment payable to such Payment Recipient. Any Minimum
Royalty Stock Payment shall be mailed to each Payment Recipient by certified
mail, return receipt requested, to the address of such Payment Recipient set
forth in the Payment Recipient register maintained by the Company pursuant to
Section 5.05. The Company shall pay all documentary, stamp, transfer or other
transaction taxes attributable to the issuance or delivery of the Minimum
Royalty Stock Payment.
(d) A portion of each payment payable pursuant to this Article III
(other than pursuant to Section 3.06) to a Payment Recipient that is made more
than six months after the Purchase Date shall constitute interest on the
remaining portion of the payment. Such interest shall be the minimum rate in
effect on the Purchase Date at which interest must be stated to avoid the
imputation of interest under Section 483 or 1274 of the Code, or any
applicable successor provisions.
(e) Any Net Revenues in a currency other than Dollars shall be deemed
to be equal to the amount of Dollars obtained by converting the outstanding
amount of currency of such Net Revenues into Dollars at the average spot rate
for the purchase of Dollars with such currency as published by Bloomberg on
the last ten business days of the calendar quarter with respect to which such
revenues were accrued.
(f) Any cash payment due pursuant to this Article III shall be payable
in Dollars without deduction for or on account of any present or future taxes,
duties or other charges levied or imposed by any governmental or political
authority (other than any federal, state or local authority in the United
States) through withholding or deduction with respect to any such payments
to the extent permitted by law (except to the extent any such withholding
or deduction provides a credit or other benefit to the Payment Recipients
or is a withholding of tax on or measured by the net income of the Payment
Recipients). If any such taxes, duties or other charges are so levied or
imposed, or any such withholding or deduction (subject to the exception
referred to in the preceding sentence) is required by law, the Company
will make additional payments in such amounts so that every net payment
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under this Agreement, after any required withholding, deduction or payment
for or on account of any such present or future taxes, duties or other
charges, will not be less than the amount provided for herein. The Company
shall furnish promptly to the Payment Recipients official receipts
evidencing such withholding or deduction.
SECTION 3.06 Interest
Any payment pursuant to Section 3.02 or 3.03 that is not made on or before
the date when due shall accrue interest thereon from and after such date and
until the date of payment at the "prime rate" of interest as published by
The Wall Street Journal (Western Edition) (or if not published, another
appropriate publication) for the first business day of each month plus one
percent (1%) (based on a 365-day year) or, if such rate is in excess of the
rate then permitted under applicable law, at the highest rate then permitted
under applicable law.
SECTION 3.07 Statements
After the Purchase Date, the Company shall cause to be delivered to each
Payment Recipient, within 90 days of the end of each fiscal year of the
Company, a statement setting forth the basis upon which payments were
calculated during the preceding fiscal year and the amount of payments payable
during and with respect to such fiscal year.
SECTION 3.08 Records
After the Purchase Date, the Company shall keep accurate records that are
sufficient for the computation of the payments to be made hereunder and shall
make such records available, upon reasonable advance notice, to the Payment
Recipients at the place or places where such records are customarily kept,
for inspection during normal business hours.
SECTION 3.09 Anti-Dilution
(a) If any of the events set forth in paragraph 10(a)(i), 10(a)(ii),
10(a)(iii) or 10(b)(i) of the Warrant shall occur between the Stock Pricing
Date and the Purchase Date, the number of shares of Common Stock or any other
securities to be delivered to each Payment Recipient pursuant to this
Article III shall be adjusted as set forth in paragraphs 10(a)(i), 10(a)(ii),
10(a)(iii), 10(b)(i) and 10(c) of the Warrant, as applicable; provided, that,
for purposes of this Section 3.09, all references in the Warrant to "Holder"
shall be read as "Payment Recipient," all references to "Warrant" shall be
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read as "Purchase Option," all references to "Warrant Shares" shall be read
as "shares of Common Stock (or other securities deliverable hereunder)" and
all provisions adjusting the "Exercise Price" therein shall be disregarded.
(b) If any event shall occur during the period of 30 trading days
immediately preceding the Stock Pricing Date that, had such event occurred
immediately after the Stock Pricing Date, would have required an adjustment
pursuant to Section 3.09(a), an appropriate adjustment shall be made in the
number of shares of Common Stock (or any other securities deliverable hereunder)
to be delivered to each Payment Recipient pursuant to this Section 3.09.
(c) Notwithstanding any other provision of this Section 3.09, no
adjustment shall be made to the number of shares of Common Stock (or other
securities deliverable hereunder) to be delivered to a Payment Recipient if such
adjustment would represent less than one percent (1%) of the number of shares
to be so delivered, but instead, any such Payment Recipient shall receive in
cash the market value of the securities that would otherwise have constituted
such adjustment.
SECTION 3.10 Purchase of Royalty Payment Obligations
The Company shall have the right, at any time after the Purchase Date,
to make an offer to all Class A Payment Recipients and the Class B Payment
Recipient to purchase the Company's payment obligations under this Article III,
as applicable. Any such offer to the Class B Payment Recipient shall be in an
aggregate amount equal to at least five percent (5%) of the aggregate amount
offered to all Class A Payment Recipients and the Class B Payment Recipient
and otherwise on terms no less favorable than the offer to the Class A Payment
Recipients. The Company shall notify each Payment Recipient in accordance
with Section 9.06 of the proposed terms of such offer. If, at any time, at
least sixty-six and two-thirds percent (66-2/3%) in value of all Class A
Payment Recipients shall have accepted the terms of any such offer, the
Company shall have the right, for a period of 60 days after the date on which
such Class A Payment Recipients shall have indicated such acceptance, to
purchase pursuant to the terms of such offer the Company's payment
obligations under this Article III in respect of each Class A Payment
Recipient who has not accepted the terms of such offer and of the Class B
Payment Recipient.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Company
The Company represents and warrants on and as of the Purchase Option
Exercise Date (except for Section 4.01(d)) and the Purchase Date, as if made
on such dates, that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation; this
Agreement constitutes a valid and binding obligation of the Company;
(b) The performance by the Company of its obligations under this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all requisite action, require no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency (except such as has been obtained pursuant to Section 4.01(d)) and
will not contravene the Company's Certificate of Incorporation or Bylaws or
any material agreement or other instrument to which the Company is a party
or by which it is bound or any law, order, judgment or decree to which the
Company is a party or by which it is bound;
(c) If the Company elects to make the Stock Advance Payment or the
Combination Advance Payment, a number of shares of Common Stock (or other
securities deliverable pursuant to Section 3.09, to the extent applicable)
equal to the greater number of such securities (the "Purchase Option Shares")
that would be deliverable to all Payment Recipients pursuant to Article III
if the Company has elected to make the Stock Advance Payment or the
Combination Advance Payment has been duly authorized and reserved solely for
issuance and delivery for such purposes, and, when such shares have been
issued and delivered to the Payment Recipients entitled thereto in
accordance with the terms and conditions of this Agreement, such shares will
have been validly issued and will be fully paid, nonassessable and free of
preemptive or similar rights; and
(d) If the Company elects to make the Stock Advance Payment or the
Combination Advance Payment, as of the Purchase Date:
(i) a registration statement covering the Purchase Option Shares
that would be deliverable to all Payment Recipients pursuant to Article III
under the circumstance set forth under Section 4.01(c) has been declared
effective by the Securities and Exchange Commission (the "SEC") pursuant
to Section 8(a) of the Securities Act of 1933, as amended (the "Securities
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Act"); such registration statement, including all exhibits thereto and
documents incorporated by reference therein, as amended at the time such
registration statement became effective and as amended by any posteffective
amendment thereto, is hereinafter referred to as the "Registration Statement"
and the prospectus included therein, in the form in which such prospectus
was first filed with the SEC pursuant to Rule 424(b) under the Securities
Act, including the documents, if any, incorporated by reference therein,
is hereinafter referred to as the "Prospectus";
(ii) no stop order suspending the use of the Registration
Statement is in effect, and no proceedings for such purpose are pending
before or threatened by the SEC;
(iii) the Purchase Option Shares have been registered or
qualified for sale under the securities or Blue Sky laws of each
jurisdiction in which such registration or qualification is necessary in
connection with the issuance, delivery and resale by the Payment Recipients
of the Purchase Option Shares;
(iv) any document incorporated by reference in the Registration
Statement or the Prospectus, when such document was or will be filed with
the SEC, conformed or will conform in all material respects to the
requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC thereunder;
(v) the Registration Statement and the Prospectus included
therein (including the documents incorporated by reference therein), at
the time that the Registration Statement became effective and on the
Purchase Date, conformed in all material respects to the requirements of
the Securities Act, and the rules and regulations of the SEC thereunder, and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and
(vi) the Prospectus does not contain, and as amended or
supplemented, if applicable, will not contain, any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
ARTICLE V
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees:
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SECTION 5.01 Reservation of Stock
In the event the Company were to elect to make the Stock Advance Payment
or the Combination Advance Payment, prior to giving the Notice of Exercise,
to reserve out of its duly authorized Common Stock (or other securities
deliverable pursuant to Section 3.09), solely for the purpose of issuance and
delivery upon the exercise by the Company of its option to purchase the
Interests, the number of shares of Common Stock (or such other securities)
that would be deliverable to all Payment Recipients pursuant to Section 3.04.
SECTION 5.02 Registration and Listing of Stock
In the event the Company were to elect to make the Stock Advance Payment,
the Combination Advance Payment or the Minimum Royalty Stock Payment:
(a) Prior to the Purchase Date, to prepare and file with the SEC a
Registration Statement under the Securities Act, with respect to not less
than the aggregate number of shares of Common Stock (or other securities
deliverable pursuant to Section 3.09) that would be deliverable to all Payment
Recipients pursuant to Section 3.04, and to cause such Registration Statement
to be declared effective under the Securities Act;
(b) Prior to the Purchase Date, to register or qualify the shares of
Common Stock (or other securities deliverable pursuant to Section 3.09)
that would be deliverable to each Payment Recipient pursuant to Section 3.04
under the securities or Blue Sky laws of each jurisdiction within the United
States in which such registration or qualification is necessary;
(c) Prior to the Purchase Date, to list on each national securities
exchange on which Common Stock (or other securities deliverable pursuant to
Section 3.09) is then listed, or to keep authorized for quotation on the
Nasdaq National Market, all shares of Common Stock (or such other securities)
to be delivered to each Payment Recipient on the Purchase Date;
(d) To perform the same obligations of registration and listing with
respect to any Minimum Royalty Stock Payment prior to the delivery date of
the Common Stock (or other securities deliverable pursuant to Section 3.09);
and
(e) To pay all expenses it incurs in complying with the provisions
of this Section 5.02, including (i) all registration and filing fees,
(ii) all printing expenses, (iii) all fees and disbursements of its counsel
and independent public accountants, and (iv) all Blue Sky fees and expenses
(including fees and disbursements of counsel).
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SECTION 5.03 Delivery of Prospectus
In the event the Company were to elect to make the Stock Advance Payment,
the Combination Advance Payment or the Minimum Royalty Stock Payment:
(a) As expeditiously as possible (i) after the Company delivers the
Notice of Exercise and on or before the Purchase Date and (ii) on or before
the delivery of any Minimum Royalty Stock Payment, to furnish to each
Limited Partner such number of copies of the Prospectus as such Limited
Partner shall reasonably request, or as shall be necessary in order to
conform with the requirements of the Securities Act, or the applicable
rules and regulations of the SEC thereunder, in order to facilitate the sale
or other disposition by such Limited Partner of the shares delivered to it
pursuant to Section 3.02(c) or (d), 3.03(c) or (d) or 3.05(b).
(b) If, during such period after the delivery of any Prospectus
pursuant to Section 5.03(a), as in the opinion of outside counsel to the
Company, the Prospectus is required by law to be delivered in connection
with sales by any Limited Partner, any event shall occur as a result of
which it is necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances when the Prospectus
is delivered to a purchaser, not misleading, or if it is necessary to amend
or supplement the Prospectus to comply with law, forthwith to prepare and
furnish, at its own expense, to any Limited Partner to which any Prospectus
or Prospectuses may have been delivered pursuant to Section 5.03(a), either
amendments or supplements to the Prospectus, in such numbers as such
Limited Partner shall reasonably request, or as shall be necessary in order
to comply with any law, so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law.
SECTION 5.04 Existence of Partnership
Beginning on the Purchase Date and until the later of (a) one year
following the occurrence of any of the events referred to in
Section 7.01(a), (b) or (c) and (b) 90 days after the Purchase Date, to take
all action necessary to maintain the existence of the Partnership and to
prevent the termination or dissolution thereof, or the winding up of
its affairs.
SECTION 5.05 Payment Recipient Register
Beginning on the Purchase Date and until the termination of this
Agreement, to keep a register that, subject to such reasonable regulations
as it may prescribe, shall contain the names and addresses of each Payment
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Recipient. Until the Company shall have received notice of a sale or an
assignment made in accordance with Article VIII, the Company shall be
entitled to deem and treat each Payment Recipient contained in such
register as the Payment Recipient for the purpose of making payments or
giving notices hereunder and for all other purposes.
SECTION 5.06 Manufacture and Sale of Products
Beginning on the Purchase Date and until the termination of this
Agreement, to use its commercially reasonable best efforts (a) to manufacture
the Products and (b) to sell the Products within the Field of Activity in
the Territory; provided, that if the Company shall determine that such
manufacture or sale of such Products within the Field of Activity in the
Territory is not commercially practicable, it shall use its commercially
reasonable best efforts to license or sell the Technology for use within
the Field of Activity in the Territory to one or more third parties for the
highest consideration that, in the Company's reasonable business judgment,
is obtainable.
SECTION 5.07 Sale or Disposition of Technology
Notwithstanding any other provision of this Agreement, beginning on
the Purchase Date and until the termination of this Agreement, the Company
shall not sell any of the Technology within the Field of Activity in the
Territory to any Person, unless such Person agrees in writing to be bound,
for the benefit of each Payment Recipient, by provisions substantially
similar to the provisions of Article III (excluding any provisions relating
solely to the Cash Advance Payment, the Stock Advance Payment or the
Combination Advance Payment, which shall be payable by the Company).
ARTICLE VI
DISCLAIMERS
SECTION 6.01 No Warranty on Products
Neither the General Partner nor any Limited Partner makes any warranty,
express or implied, and it is expressly agreed that neither the General
Partner nor any Limited Partner shall be liable, or in any way responsible,
for the operation, performance, serviceability, quality of performance, or
material or commercial success of any Product within the Field of Activity
in the Territory or any process related to the Technology, or for the use,
sale, lease, license, assignment, transfer or other disposition of any such
Product within the Field of Activity in the Territory or any process related
to the Technology, in whole or in part.
-15-
SECTION 6.02 No Warranty on Technology
Neither the General Partner nor any Limited Partner makes any
representation, or extends any warranty of any kind, either express or
implied, or assumes any responsibility whatever with respect to the use,
sale, assignment, transfer or other disposition by the Company or its
vendees or transferees of products incorporating or made by use of the
Technology.
ARTICLE VII
TERM AND TERMINATION
This Agreement shall continue in effect until terminated, in whole or
in part, in accordance with the following provisions. Payments accrued as
of the date of termination of this Agreement shall remain due and payable
notwithstanding such termination.
SECTION 7.01 Purchase Option Termination Events
The events set forth below shall constitute "Purchase Option
Termination Events":
(a) the institution of a voluntary case by the Company under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by the Company to the entry of an order for relief
in any involuntary case under any such law, the consent by the Company to
the appointment of or possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official of the Company or of
any substantial part of its property, the general assignment by the
Company for the benefit of creditors or the taking of any corporate action
by the Company in furtherance of any of the foregoing;
(b) the entry of a decree or an order for relief by a court of
competent jurisdiction in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official of the Company or
of any substantial part of its property or ordering the winding up or
liquidation of its affairs, and any such decree or order shall remain
unstayed or undischarged and in effect for a period of 60 days;
(c) the cessation of operations by the Company;
(d) the seizure or attachment of all or a substantial part of the
assets of the Company, which seizure or attachment shall not be terminated,
vacated, set aside or stayed within 60 days; provided, that such seizure or
-16-
attachment shall not constitute a Purchase Option Termination Event if, in
the opinion of the General Partner (as evidenced by a majority vote of its
board of directors), the Company's ability to perform the Research Program
or the Marketing Program is not materially impaired; or
(e) 45 days have elapsed after the termination of the Research Program
with respect to all Products pursuant to Section 7.01(b) of the Product
Development Agreement or any termination of the Product Development Agreement
pursuant to Section 7.02, 7.03 or 7.05 of the Product Development Agreement.
SECTION 7.02 Purchase Option Termination Date
(a) The Purchase Options granted in Section 2.01 shall terminate upon
the earliest date (the "Purchase Option Termination Date") on which any of
the following events shall occur:
(i) the date on which the Company shall give notice to the General
Partner and the Limited Partners to the effect that the Company has
determined not to purchase the Interests pursuant to this Agreement;
(ii) the earlier of (A) 45 days after the last day of the first
month in which the aggregate cumulative amount of payments received by the
Partnership under Section 6.01 of the Product Development Agreement shall equal
or exceed fifteen percent (15%) of the aggregate Capital Contributions of the
Limited Partners (but not earlier than 24 months after the Business Commencement
Date) and (B) 48 months after the Business Commencement Date, prior to which the
Company shall not have exercised its option to purchase the Interests pursuant
to this Agreement by sending a Notice of Exercise; and
(iii) the date on which a Purchase Option Termination Event shall
have occurred.
(b) The Company shall promptly notify the Partnership, the General Partner
and each Limited Partner of the occurrence of (i) a Purchase Option Termination
Event or (ii) the expiration of its option to purchase the Interests.
SECTION 7.03 Events of Default
The events set forth below shall constitute "Events of Default":
(a) any of the events set forth in Section 7.01(a), (b), (c) or (d);
(b) a failure by the Company to make any Advance Payment;
-17-
(c) a failure by the Company to make any payment (other than an Advance
Payment) within five business days of the date when due or any other payment
required by this Agreement when due; or
(d) a default in the performance, or breach, of any covenant or warranty
of the Company contained in this Agreement and continuance of such default or
breach for a period of 90 days after notice of such default or breach has been
given to the Company by a Payment Recipient, the Partnership or the General
Partner, as the case may be, in accordance with Section 9.06.
SECTION 7.04 Term and Termination
(a) The Company shall promptly notify each Payment Recipient in writing
upon the occurrence of any Event of Default of which the Company has knowledge.
If an Event of Default specified in Section 7.03(c) has not been cured within
ten business days after the date of such notice, each Payment Recipient shall
have the right to terminate this Agreement as it applies to such Payment
Recipient upon giving notice to such effect to the Company and shall be free
to pursue against the Company any remedy available at law, in equity or by
statute or otherwise.
(b) If not terminated earlier pursuant to Section 7.04(a), this Agreement
(except for Articles IV and VI) shall terminate when the shares of Common Stock
or capital stock of the Company or other securities, assets or evidences of
indebtedness to be delivered to the Payment Recipients in accordance with
Article III, if any, shall have been delivered and all payments required to be
made by the Company under this Agreement shall have been made to the Payment
Recipients; and the parties hereto shall thereafter have no further rights or
obligations hereunder. The provisions of Articles IV and VI shall survive the
termination of this Agreement.
ARTICLE VIII
SALE OR ASSIGNMENT
SECTION 8.01 Sale or Assignment
(a) The Company shall not assign, delegate or transfer this Agreement or
sell any or all of its rights hereunder without the prior written consent of
(i) the Class A Payment Recipients entitled to receive payments with respect
to two-thirds of the Class A Interests for which the Company shall not have
made all payments required to be made by the Company under this Agreement and
(ii) the Class B Payment Recipient, which consent of the Class B Payment
Recipient shall not be unreasonably withheld, except that the Company may
make such assignment, delegation, transfer or sale without the prior written
-18-
consent of any Payment Recipient (A) to any Person to whom the Company has
assigned, sold, leased, transferred or otherwise disposed of all or
substantially all of the Company's assets, (B) to any successor corporation
resulting from any merger or consolidation of the Company with or into another
corporation, or (C) to any wholly owned subsidiary of the Company; provided,
that the Company will not merge or consolidate with any Person or sell,
lease, transfer or otherwise dispose of substantially all of its assets to
any Person, unless (1) the Person formed by or surviving such merger or
consolidation or to which the Company effects such sale, lease, transfer or
other disposition shall be a solvent corporation organized and existing under
the laws of the United States or a state thereof and (2) such successor
transferee corporation shall expressly assume in writing, by an instrument
or instruments satisfactory in scope, substance, form and legal effect to
the Partnership, the due and punctual payment, performance and observance
of all obligations of the Company under this Agreement, with the same effect
as if such corporation had originally been the Company hereunder (except
that this clause (2) shall not apply to any merger in which the Company is
the surviving corporation); and provided, further, that, in the event of
any assignment under this Section 8.01, this Agreement shall remain binding
upon the assignor.
(b) No Payment Recipient shall assign or transfer this Agreement or
sell any or all of its rights hereunder except the Common Stock or other
securities delivered to it pursuant to this Agreement after such delivery,
if any, without the prior written consent of the Company, which consent
may be withheld in its absolute discretion; provided, that the Class B
Payment Recipient may make any such assignment, transfer or sale to any
present or former officer or officers or director or directors of PaineWebber
Incorporated without the consent of the Company.
(c) The Company and each Payment Recipient shall provide notice to each
other of any such assignment or sale made in accordance with this Section 8.01
no later than ten days prior to such assignment or sale setting forth the
identity and address of the assignee or purchaser and summarizing the terms of
the assignment or sale. Subject to the restrictions on assignment herein set
forth, this Agreement shall inure to the benefit of the successors and assigns
of each of the parties.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.01 Parties Independent
In making and performing this Agreement, the parties act and shall act at
all times as independent contractors, and nothing contained in this Agreement
shall be construed or implied to create an agency, partnership or employer and
-19-
employee relationship among any of the parties hereto. At no time shall any
party make commitments or incur any charges or expenses for or in the name of
any other party.
SECTION 9.02 Entire Agreement; Amendment
This Agreement sets forth and constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof, and shall supersede
any and all prior agreements, understandings, promises and representations made
by any party to any other party concerning the subject matter hereof and the
terms hereto. This Agreement may not be released, discharged, amended or
modified in any manner, except by an instrument in writing signed by each party
hereto.
SECTION 9.03 Choice of Law
This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of New York as applied to
contracts made and to be performed entirely within New York.
SECTION 9.04 Severability
If any provision of this Agreement is or becomes or is deemed invalid,
illegal or unenforceable in any jurisdiction, such provision shall be construed
or deemed amended to conform to applicable laws so as to be valid and
enforceable, or, if it cannot be so construed or deemed amended without
materially altering the intention of the parties, it shall be stricken and the
remainder of this Agreement shall remain in full force and effect.
SECTION 9.05 No Waiver
No waiver of any right under this Agreement shall be deemed effective
unless contained in a writing signed by the party charged with such waiver,
and no waiver of any right arising from any breach or failure to perform shall
be deemed to be a waiver of any future such right or of any other right arising
under this Agreement.
SECTION 9.06 Payments and Notices
Payments hereunder shall be sent, and notices required or permitted
hereunder shall be in writing and shall be sent, if to any Payment Recipient,
to the address given for such Payment Recipient in the Payment Recipient
register maintained by the Company pursuant to Section 5.05 and if to the
Company, the Partnership or the General Partner, as follows:
If to the Company, to:
ICOS Corporation
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00000 00xx Xxxxxx X.X.
Bothell, Washington 98021
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Attention: Corporate Secretary
If to the Partnership, to:
ICOS Clinical Partners, L.P.
00000 00xx Xxxxxx X.X.
Bothell, Washington 98021
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Attention: General Partner
With a copy to each of the directors of
the General Partner
If to the General Partner, to:
ICOS Development Corporation
00000 00xx Xxxxxx X.X.
Bothell, Washington 98021
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Attention: Corporate Secretary
With a copy to each of the directors of
the General Partner
or to such other address as such other party may hereafter specify in writing,
and shall be deemed given on the earliest of (a) physical delivery, (b) if given
by facsimile transmission, when such facsimile is transmitted to the facsimile
number specified in this Agreement and facsimile confirmation of receipt thereof
is received, (c) three days after mailing by prepaid first-class mail, and
(d) two days after mailing by prepaid overnight or express mail.
SECTION 9.07 Headings
Article and section headings contained in this Agreement are included for
convenience only and are not to be used in construing or interpreting this
Agreement.
-21-
SECTION 9.08 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which shall constitute together but one and the
same instrument.
-22-
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their authorized officers as of the day and year first above
written.
ICOS CORPORATION
By: /s/ Xxxx Xxxxxx
Title: Executive Vice
President & Secretary
THE CLASS A LIMITED PARTNERS
By: ICOS DEVELOPMENT
CORPORATION, as Attorney-in-
Fact for each of the Class A
Limited Partners
By: /s/ Xxxxxx X. Xxxxxxxxxx
Title: Secretary/Treasurer
PAINEWEBBER INCORPORATED, as
the Class B Limited Partner
By: /s/ Xxxxxxx X. Xxxxxxx
Title: First Vice President
-23-
Schedule I to the
Purchase Agreement
GLOSSARY
Each of the following terms shall have the meaning assigned to it in this
Glossary, except as otherwise expressly provided in each agreement, as amended
from time to time, to which this Glossary is attached.
"Additional Funds" shall have the meaning set forth in Section 4.04 of the
Product Development Agreement.
"Advance Payment" shall mean the Cash Advance Payment, the Stock
Advance Payment or the Combination Advance Payment, as applicable.
"Affiliate" shall mean, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, such Person; provided, that the
Company's ownership interest in Suncos and its contractual arrangements with
Suncos, as such ownership interest or contractual arrangements may be amended
from time to time, do not constitute control of Suncos by the Company; provided,
further, that the Partnership, General Partner and Company shall not be deemed
to be Affiliates of each other; provided, further, that, with respect to
Background Technology and License Agreements, any Person that controls or is
under common control with any other Person shall only be considered to be an
"Affiliate" of the other Person with respect to its Elements of Technology that
are used in, or are conceived, developed or acquired in the course of
assisting or participating in, the Research Program.
"Annual Minimum Amount" shall mean sixteen percent (16%) of the aggregate
Capital Contributions to the Partnership of all Limited Partners with respect
to the first four Fiscal Years after the Purchase Date and twenty percent (20%)
of the aggregate Capital Contributions to the Partnership of all Limited
Partners with respect to the fifth Fiscal Year after the Purchase Date;
provided, that the Annual Minimum Amount for any Fiscal Year shall not
exceed the amount by which the sum of all distributions paid or payable
to Limited Partners pursuant to the Partnership Agreement and Purchase
Agreement through such Fiscal Year is less than the aggregate Capital
Contributions to the Partnership of all Limited Partners.
"Available Funds" shall mean at any time an amount equal to (a) the sum
of the aggregate amount of capital contributions made or agreed to be made to
the Partnership by the General Partner and the Limited Partners (including the
amount of any Additional Funds that the Company has agreed to pay or to
cause to be paid), the aggregate Royalty Amounts paid to the Partnership
and any interest earned on such contributions, Additional Funds and Royalty
Amounts by the Partnership, less (i) the aggregate Royalty Amounts paid to
the Partnership that were not needed to fund the Research Program in
accordance with the Product Development Agreement and that have been
distributed to the Limited Partners, (ii) the aggregate amount expended
by the Partnership for selling commissions, financial advisory fees,
investment banking and marketing fees, warrant valuation fees, and
offering and organizational costs,(iii) all interest payable on amounts
borrowed by the Partnership, (iv) reasonable expenses (other than amounts
expended pursuant to the Product Development Agreement) of operating the
Partnership, including administrative and interest expenses and operating
reserves, and (v) the aggregate of all Default Amounts outstanding as of such
time, or (b) such other amount as the Company and the Partnership shall agree
to in writing.
"Background Technology" shall mean all Elements of Technology that (a) the
Company or any Affiliate of the Company Controls, has an ownership interest in
or has the right to acquire an ownership interest in or may conceive, develop or
acquire an ownership interest in (under licenses from others or otherwise) at
any time prior to the Interim License Termination Date and (b) are necessary or
materially useful to Exploit Products.
"Background Technology License" shall have the meaning set forth in
Section 2.01 of the Product Development Agreement.
"Business Commencement Date" shall mean the first date on which the
Company or any Affiliate, licensee or sublicensee of the Company makes a
commercial sale of any Product within the Field of Activity in the Territory
that would generate a payment to the Partnership or the Class A Limited
Partners.
"Capital Contribution" shall mean (a) in respect of each Class A Limited
Partner (whether such Limited Partner's Interest was acquired directly from
the Partnership, by sale or assignment from a predecessor Limited Partner, or
otherwise), $100,000 for each Unit (or $25,000 for each Quarter Unit) owned
by such Class A Limited Partner, less any Default Amount in respect of such
Unit or Quarter Unit; and (b) in respect of the Class B Limited Partner,
$250,000; provided, that, in the event the Company exercises the Purchase
Option prior to the due date for the payment of any installments under the
Class A Limited Partner's Investor Notes or in the event the General Partner
relieves Class A Limited Partners of their obligation to pay any installments
under the Class A Limited Partner's Investor Notes in accordance with
paragraph 7.10 of the Partnership Agreement, the "Capital Contribution"
-2-
of each such Class A Limited Partner shall mean (for all purposes other than
clause (a) of the definitions of Class A Percentage and Class B Percentage)
$100,000 for each Unit (or $25,000 for each Quarter Unit), less any Default
Amount in respect of such Unit or Quarter Unit and less the aggregate amount
of the installments that would otherwise be due and payable under such
Class A Limited Partner's Investor Note after the Purchase Option Exercise
Date or the Installment Termination Date (as defined in paragraph 7.10 of
the Partnership Agreement), as the case may be.
"Cash Advance Payment" shall mean the consideration payable in cash by the
Company to Payment Recipients pursuant to Sections 3.02(b) and 3.03(b) of the
Purchase Agreement in connection with the purchase by the Company of their
Interests.
"Class A Combination Advance Payment" shall mean (a) a cash payment equal
to the product of (i) the difference between one hundred percent (100%) and
the Stock Percentage and (ii) the Class A Down Payment, plus (b) issuance of
the number of shares of Common Stock (and any securities deliverable pursuant
to Section 3.09 of the Purchase Agreement) that is equal to the quotient of
(i) the product of (A) the Stock Percentage and (B) the Class A Down Payment
divided by (ii) the average Closing Price on the 30 trading days immediately
preceding the Stock Pricing Date for each Full Class A Interest of such
Class A Payment Recipient. In the case of any Quarter Class A Interest held
by a Class A Payment Recipient, the number of shares to be delivered to such
Class A Payment Recipient in respect of such Quarter Class A Interest shall be
equal to one-quarter the number of shares of Common Stock (and any securities
deliverable pursuant to Section 3.09 of the Purchase Agreement) to be delivered
in respect of a Full Class A Interest.
"Class A Down Payment" shall mean an amount equal to sixteen percent (16%)
of the Capital Contribution to the Partnership by a Class A Limited Partner.
"Class A Interest" shall mean any limited partnership interest in the
Partnership (other than the Class B Interest) owned by any Class A Limited
Partner.
"Class A Limited Partner" shall have the meaning assigned to such term
in Article I of the Partnership Agreement.
"Class A Payment" shall mean (a) the Last Interim License Payment
payable to a Class A Limited Partner, (b) until the Cut-Off Date, for each
Class A Payment Recipient, (i) prior to the calendar quarter following the
calendar quarter in which the Class B Threshold with respect to Class A
Payment Recipients occurs, its Class A Percentage of the Quarterly Payment
-3-
and Minimum Royalty Payment and (ii) beginning with the calendar quarter
following the calendar quarter in which the Class B Threshold with respect
to Class A Payment Recipients occurs and ending with the Cut-Off Date, for
each calendar quarter an amount equal to ninety-five percent (95%) of its
Class A Percentage of the Quarterly Payment and Minimum Royalty Payment
and (c) either (i) the Class A Down Payment, if the Company elects to make
the Cash Advance Payment or if the Company is required to make the Cash
Advance Payment pursuant to Section 2.02 of the Purchase Agreement,
(ii) the Class A Stock Advance Payment if the Company elects to make the
Stock Advance Payment or (iii) the Class A Combination Advance Payment if
the Company elects to make the Combination Advance Payment.
"Class A Payment Recipient" shall mean each Class A Limited Partner
on or after the Purchase Date on which the Company has purchased the
Class A Interest of such Class A Limited Partner pursuant to the Purchase
Agreement, or any other Person entitled to receive payments in respect of
Class A Interests in accordance with Section 8.01 of the Purchase
Agreement.
"Class A Percentage" shall mean, in the case of each Class A Limited
Partner or Class A Payment Recipient, as the case may be, (a) prior to
the first day of the calendar quarter following the calendar quarter in
which the Class B Threshold with respect to such Class A Limited Partner
or Class A Payment Recipient, as the case may be, occurs, the ratio that
the amount of such Class A Limited Partner's or Class A Payment
Recipient's Capital Contribution to the Partnership bears to the aggregate
Capital Contributions to the Partnership of all Limited Partners and
(b) thereafter, the ratio that the amount of such Class A Limited Partner's
or Class A Payment Recipient's Capital Contribution to the Partnership bears
to the aggregate Capital Contributions to the Partnership of all Class A
Limited Partners.
"Class A Stock Advance Payment" shall mean issuance of the number of shares
of Common Stock (and any securities deliverable pursuant to Section 3.09 of
the Purchase Agreement) that is equal to the quotient of (a) the Class A Down
Payment divided by (b) the average Closing Price on the 30 trading days
immediately preceding the Stock Pricing Date for each Full Class A Interest
of such Class A Payment Recipient. In the case of any Quarter Class A
Interest held by a Class A Payment Recipient, the number of shares to be
delivered to such Class A Payment Recipient in respect of such Quarter Class A
Interest shall be equal to one-quarter the number of shares of Common Stock
(and any securities deliverable pursuant to Section 3.09 of the Purchase
Agreement) to be delivered in respect of a Full Class A Interest.
"Class B Combination Advance Payment" shall mean (a) a cash payment
equal to the product of (i) the difference between one hundred percent (100%)
-4-
and the Stock Percentage and (ii) the Class B Down Payment, plus (b) issuance
of the number of shares of Common Stock (and any securities deliverable
pursuant to Section 3.09 of the Purchase Agreement) that is equal to the
quotient of (i) the product of (A) the Stock Percentage and (B) the Class B
Down Payment divided by (ii) the average Closing Price on the 30 trading
days immediately preceding the Stock Pricing Date.
"Class B Down Payment" shall mean an amount equal to sixteen percent (16%)
of the Capital Contribution of the Class B Limited Partner.
"Class B Interest" shall mean the limited partnership interest in the
Partnership owned by the Class B Limited Partner.
"Class B Limited Partner" shall have the meaning assigned to such term
in Article I of the Partnership Agreement.
"Class B Payment" shall mean (a) the Last Interim License Payment payable
to a Class B Limited Partner; (b) until the Cut-Off Date, the Class B Percentage
of the Quarterly Payment and Minimum Royalty Payment; and (c) either (i) the
Class B Down Payment, if the Company elects to make the Cash Advance Payment or
if the Company is required to make the Cash Advance Payment pursuant to
Section 2.02 of the Purchase Agreement, (ii) the Class B Stock Advance
Payment if the Company elects to make the Stock Advance Payment or (iii) the
Class B Combination Advance Payment if the Company elects to make the
Combination Advance Payment.
"Class B Payment Recipient" shall mean the Class B Limited Partner on or
after the Purchase Date on which the Company has purchased the Class B Interest
of such Class B Limited Partner pursuant to the Purchase Agreement, or any
other Person entitled to receive payments in respect of the Class B Interest
in accordance with Section 8.01 of the Purchase Agreement.
"Class B Percentage" shall mean for all amounts paid (a) prior to the
first day of the calendar quarter following the calendar quarter in which
the Class B Threshold occurs with respect to Class A Limited Partners or
Class A Payment Recipients, as the case may be, the ratio that the amount of
the Class B Limited Partner's Capital Contribution to the Partnership bears to
the aggregate Capital Contributions to the Partnership of all Limited Partners
and (b) on and after the time on which such Class B Threshold occurs,
five percent (5%).
"Class B Stock Advance Payment" shall mean issuance of the number of
shares of Common Stock (and other securities deliverable pursuant to
-5-
Section 3.09 of the Purchase Agreement) that is equal to the quotient of
(a) the Class B Down Payment divided by (b) the average Closing Price on the
30 trading days immediately preceding the Stock Pricing Date.
"Class B Threshold" shall mean (a) with respect to Class A Limited
Partners prior to the Interim License Termination Date, the receipt by each
Class A Limited Partner of distributions pursuant to the Partnership Agreement
in an aggregate amount equal to each such Class A Limited Partner's Capital
Contribution and (b) with respect to Class A Payment Recipients after the
Purchase Date, the receipt by each Class A Payment Recipient of
(i) distributions pursuant to the Partnership Agreement and Quarterly
Payments (increased by any Credits) pursuant to the Purchase Agreement
in an aggregate amount equal to each seventy-five percent (75%) of such
Class A Payment Recipient's Capital Contribution and (ii) distributions
pursuant to the Partnership Agreement and Purchase Agreement (i.e., Class
A Down Payment, Quarterly Payments and Minimum Royalty Payments) in an
aggregate amount equal to each such Class A Payment Recipient's Capital
Contribution.
"Closing Date" shall mean each date on which subscriptions to purchase
Units are accepted by the General Partner.
"Closing Price" at any time shall mean the closing price per share of
the Common Stock (or other securities deliverable pursuant to Section 3.09
of the Purchase Agreement) on the principal national securities exchange on
which the Common Stock (or such other securities) is then listed or admitted
to trading or, if not then listed or traded on any such exchange, on the
Nasdaq National Market or, if not listed or traded on any such exchange or
system, the average of the bid and asked price per share on the Nasdaq
National Market or, if such quotations are not available, the fair market
value as reasonably determined by the board of directors of the Company or
any committee of such board.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute or subsequent codification or recodification of the
federal income tax laws of the United States.
"Combination Advance Payment" shall mean the consideration payable
in cash and Common Stock by the Company to Payment Recipients pursuant to
Sections 3.02(d) and 3.03(d) of the Purchase Agreement in connection with
the purchase by the Company of their Interests.
"Combination Product" shall mean any product that is formulated in part
with any Product (or any part thereof) and in part with any Combination
Substance.
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"Combination Substance" shall mean an active ingredient (other than a
Product) or device used in a Combination Product.
"Common Stock" shall mean fully paid and nonassessable shares of
common stock, par value $.01 per share, of the Company, together with any
other equity securities that may be issued by the Company in addition thereto
or in substitution therefor as provided in Section 10 of the Warrant.
"Company" shall mean ICOS Corporation, a corporation organized and
existing under the laws of the State of Delaware, and its successors.
"Competitive Product" shall mean [ * ].
"Competitive Product Revenues" shall mean, [ * ], the aggregate of
all Net Revenues of the Company and its Affiliates (but not licensees or
sublicensees) in respect of all Competitive Products for such period within
the Field of Activity in the Territory. In the event a product ("Combination
Competitive Product") is formulated in part with any Competitive Product (or
any part thereof) and in part with any active ingredient (other than a
Competitive Product) or device ("Combination Competitive Substance"),
"Competitive Product Revenues" shall mean an amount equal to (a) the aggregate
amount of all Net Revenues of the Company and its Affiliates in such period in
the Territory in respect of any Combination Competitive Product multiplied
by (b) a fraction the numerator of which equals the fair market value of the
Competitive Product (or any part thereof) included in such Combination
Competitive Product and the denominator of which equals the sum of (i) the
fair market value of such Competitive Product (or part thereof) and (ii) the
fair market value of each Combination Competitive Substance included in such
Combination Competitive Product, such "fair market value" being determined
in the same manner that it is determined for Products and Combination
Substances in the definition of Product Revenues.
"Controls" or "Controlled" shall mean at any time, with respect to any
right, title or license, the possession of such right, title or license with
the right to assign or grant licenses or sublicenses without obtaining the
consent of any other Person (other than any consent that has been obtained)
and without violating or causing a default under the terms of any agreement
or other arrangement with or the rights of any other Person.
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[ * ] Confidential Treatment Requested
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"Credit" shall mean, with respect to each calendar quarter ending in
the Fiscal Year, [ * ] in the Territory that are in excess of the
Product Revenues that cause the sum of the Royalty Amounts paid or payable
for the calendar quarters ending in the Fiscal Year to equal the Annual
Minimum Amount, if any, for the Fiscal Year; provided, that the Credit
shall not exceed the balance in the Credit Account. In the event the
Credit Account is zero, the Credit shall be zero.
"Credit Account" shall mean the sum of the Class A Down Payments,
Class B Down Payment and each Minimum Royalty Payment made by the Company,
less the aggregate Credits.
"Cut-Off Date" shall mean the later of (a) the last day of the month
in which the thirteenth anniversary of the Business Commencement Date occurs
and (b) the last day of the month in which the eleventh anniversary of the
Purchase Date occurs.
"Default Amount" shall have the meaning assigned to such term in
Section 4.03(a) of the Product Development Agreement.
"Defaulting Limited Partner" shall have the meaning assigned to such
term in Section 3.3.5 of the Partnership Agreement.
"Dollars" and the sign "$" shall mean lawful money of the United States
of America.
"Earned Royalty" shall mean any royalty due under any License
Agreement.
"Elements of Technology" shall mean all technical information, whether
tangible or intangible, including, without limitation, any and all data,
preclinical and clinical results, techniques, discoveries, inventions, ideas,
processes, know-how, patents (including any extension, reissue or renewal
patents), patent applications, inventor's certificates, trade secrets and
other proprietary information, licenses and sublicenses, and samples of any
physical, biological or chemical material.
"Exploitation" shall mean research, experimentation, development,
manufacturing, production, marketing, use, lease, sale, assignment, transfer,
license, sublicense and other disposition, and "Exploit" shall have a
correlative meaning.
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[ * ] Confidential Treatment Requested
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"FDA" shall mean the United States Food and Drug Administration or
any successor agency.
"Field of Activity" shall mean collectively (a) the Hu23F2G Field of
Activity, (b) the ICM3 Field of Activity and (c) the PAF-AH Field of Activity.
"Field Technology" shall mean the Technology within the Field of
Activity.
"Fiscal Year" shall mean the series of 12 full calendar months
following the month in which the Purchase Date occurs and each series
of 12 successive calendar months thereafter.
"Force Majeure" shall mean any occurrence that prevents or
substantially interferes with the performance by a party of any of its
obligations hereunder, if such occurs by reason of any act of God, flood,
fire, explosion, breakdown of plant, strike, lockout, labor dispute, casualty,
accident, war, revolution, civil commotion, acts of public enemies, blockage,
embargo, injunction, law, order, proclamation, regulation, ordinance, demand
or requirement of any government or of any subdivision, authority or
representative of any such government, inability to procure or use materials,
labor, equipment, transportation or energy sufficient to meet manufacturing
needs without the necessity of allocation, or any other cause whatsoever,
whether similar or dissimilar to those above enumerated, beyond the reasonable
control of such party, if and only if the party affected shall have used
reasonable efforts to avoid such occurrence and to remedy it promptly if
it shall have occurred.
"Full Class A Interest" shall mean each Class A Interest that represents
a $100,000 Capital Contribution.
"General Partner" shall mean ICOS Development Corporation, a corporation
organized and existing under the laws of the State of Delaware, as general
partner of the Partnership, and its successors in such capacity.
"Hu23F2G" shall mean the recombinant humanized monoclonal antibody
developed by the Company to block CD11/CD18-mediated cell adhesions in humans.
"Hu23F2G Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of Hu23F2G Products
for human therapeutic purposes.
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"Hu23F2G Product" shall mean Hu23F2G, any fragment or component
thereof or any substance derived from Hu23F2G (or any fragment or
component thereof).
"ICM3 Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of ICM3 Products
for human therapeutic purposes.
"ICM3 Product" shall mean a recombinant humanized monoclonal antibody
developed by the Company to block the function of human intercellular adhesion
molecule-3, any fragment or component thereof or any substance derived from
such monoclonal antibody (or any fragment or component thereof).
"Initial Calendar Quarter" shall mean the calendar quarter in which the
Purchase Date falls.
"Intellectual Property Right" shall mean rights under patents (including
any extension, reissue or renewal patents) and other similar rights.
"Interest" shall mean any Class A Interest or the Class B Interest; and
"Interests" shall mean all Class A Interests and the Class B Interest.
"Interim License" shall have the meaning assigned to such term in
Section 2.05 of the Product Development Agreement.
"Interim License Termination Date" shall mean the earlier of (a) the
Purchase Date and (b) if the Purchase Option terminates for any reason other
than the purchase by the Company of all the Interests on the Purchase Date,
the earlier of (i) the date on which the Partnership sells, licenses,
sublicenses, assigns or otherwise transfers or disposes of all or a
substantial part of the Technology and (ii) the date that is 18 months after
the Purchase Option Termination Date.
"Investor" shall mean a purchaser of any multiple of one-quarter of
a Unit who meets the suitability standards set forth in the Memorandum
under the caption "Investor Suitability."
"Investor Note" shall have the meaning assigned to such term in
Section 3.3.1 of the Partnership Agreement.
"Invoiced Amount" shall have the meaning assigned to such term in
Section 4.01(c) of the Product Development Agreement.
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"Last Interim License Payment" shall mean (a) with respect to a Class A
Payment Recipient, such Class A Payment Recipient's Class A Percentage of
ninety-nine percent (99%) (until the Class B Threshold occurs, and thereafter,
95% of 99%) of the Royalty Amount that would otherwise have been payable to
the Partnership (the "Interim License Amount") determined pursuant to Section
6.01 of the Product Development Agreement for the period commencing on the
first day of the calendar quarter following the last calendar quarter in
respect of which payments have been made under such Section 6.01 and
distributed to the partners of the Partnership and ending on the Purchase
Date and (b) with respect to a Class B Payment Recipient, the Class B
Percentage of ninety-nine percent (99%) of the Interim License Amount.
"License Agreement" shall mean any license or sublicense or portion
thereof (other than the Background Technology License, the Program
Technology License or the Interim License) by any Person granting to the
Company or any Affiliate of the Company on the date hereof, or at any time
hereafter, rights that are necessary or materially useful in the
Exploitation of Products, and any amendments thereto, including, without
limitation, any consent from the licensor or sublicensor obtained by the
Company pursuant to the Product Development Agreement.
"License Agreement Right" shall mean any right held by the Partnership,
directly or indirectly (including, without limitation, under the Background
Technology License), in any Technology licensed under any License Agreement.
"Limited Partners" shall mean the Class A Limited Partners and the
Class B Limited Partner.
"Marketing Program" shall mean the Company's implementation of the
Marketing Strategy pursuant to Article V of the Product Development Agreement,
including the execution of marketing agreements with third parties.
"Marketing Strategy" shall mean the strategy to provide for the
distribution, marketing and sale of the Products within the Field of
Activity in the Territory, all as determined by the Company.
"Memorandum" shall mean the Confidential Private Placement
Memorandum dated April 11, 1997 used in connection with the placement of
Units, including the exhibits thereto, in each case together with any
amendments thereof or written supplements thereto prepared by the Company.
"Merger Letter" shall have the meaning assigned to such term in
Section 14.01 of the Product Development Agreement.
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"Minimum Royalty Payment" shall mean the amount by which the
Annual Minimum Amount for the Fiscal Year exceeds, if at all, the sum of
the Quarterly Payments paid or payable for the four quarters ending in
the Fiscal Year. The Minimum Royalty Payment may be paid in cash or as
a Minimum Royalty Stock Payment or as a combination of cash and a Minimum
Royalty Stock Payment in accordance with Section 3.05 of the Purchase
Agreement.
"Minimum Royalty Stock Payment" shall mean the issuance of the
number of shares of Common Stock (or other securities deliverable
pursuant to Section 3.09 of the Purchase Agreement) that is equal to the
quotient of (a) the portion of the Minimum Royalty Payment for a Fiscal
Year that will be paid in Common Stock divided by (b) the average Closing
Price on the 30 trading days immediately preceding the Minimum Royalty
Stock Pricing Date. The number of such shares issued to each Class A
Payment Recipient and the Class B Payment Recipient is determined in
accordance with the Class A Payment and the Class B Payment, respectively.
"Minimum Royalty Stock Pricing Date" shall mean the last day of the
Fiscal Year to which the Minimum Royalty Stock Payment pertains.
"Nasdaq" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Nasdaq National Market" shall mean the Nasdaq National Market of
the Nasdaq Stock Market.
"Net Revenues," with respect to sales for any period and with respect
to any item, shall mean the proceeds received or to be received, under
generally accepted accounting principles, from sales of Products or Competitive
Products (as applicable) by the Company, any Affiliate of the Company or any
licensee or sublicensee of the Company, but excluding sales to any Affiliate,
licensee or sublicensee of the Company. In determining such net proceeds,
the amounts received from such sales shall be reduced by related prompt
payment and other trade discounts, transportation and related insurance
charges, returns, bad debt and other allowances, taxes (except income and
franchise taxes) and distributors', consignees' and wholesalers' fees and
commissions. The terms "licensee" and "sublicensee" shall mean any Person
licensed or sublicensed by the Company or any Affiliate of the Company,
including pursuant to any marketing, co-marketing or co-detailing agreement (or
similar arrangement that is the functional equivalent of a license), but
excluding customary distribution, wholesaling and consignment arrangements.
For the purposes of this definition, distribution, wholesaling or consignment
-12-
arrangements shall be limited to arrangements where the distributor,
wholesaler or consignee is not obligated, in addition to selling a Product or
Competitive Product, to undertake any significant promotional or similar
marketing efforts directed at the Product or Competitive Product. In
calculating Net Revenues, any given unit of a Product or Competitive Product
shall be taken into account only once.
"Notice of Exercise" shall mean the written notice that the Company
shall send to each Limited Partner pursuant to Section 2.03 of the Purchase
Agreement in order to inform such Limited Partners that the Company has
elected to exercise its purchase option with respect to the Interests and to
designate the Purchase Date.
"Operative Agreements" shall mean each of the Product Development
Agreement, the Partnership Agreement, the Purchase Agreement, the Sales
Agency Agreement and the Warrants.
"Outstanding Available Funds" shall mean, at any time, the Available
Funds actually received through such time by the Partnership less all amounts
theretofore disbursed to the Company by the Partnership pursuant to Section
4.01 of the Product Development Agreement.
"PAF-AH Field of Activity" shall mean the use (including any use in
connection with research, development, demonstration, testing or
experimentation), manufacture, sale or other disposition of PAF-AH Products
for human therapeutic purposes.
"PAF-AH Product" shall mean platelet-activating factor acetylhydrolase
and any fragment, component or derivative thereof.
"Partnership" shall mean ICOS Clinical Partners, L.P., a limited
partnership organized under the laws of the State of Delaware.
"Partnership Agreement" shall mean the Agreement of Limited
Partnership dated as of April 11, 1997 among the General Partner and the
limited partners of the Partnership, as amended, modified or restated from
time to time.
"Payment Recipient" shall mean each Class A Payment Recipient and
the Class B Payment Recipient.
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an estate, an unincorporated organization, a government
or any department or agency thereof, or other entity.
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"Product Development Agreement" shall mean the Product
Development Agreement dated as of June 5, 1997, between the Partnership and
the Company, as amended, modified or restated from time to time.
"Product Revenues" for any period shall mean the sum of (a) the
aggregate amount of Net Revenues in such period within the Field of Activity
in the Territory in respect of any Product and (b) an amount equal to (i) the
aggregate amount of Net Revenues in such period within the Field of Activity
in the Territory in respect of any Combination Product multiplied by (ii) a
fraction the numerator of which equals the fair market value of the Product
(or any part thereof) included in such Combination Product and the
denominator of which equals the sum of (A) the fair market value of such
Product (or part thereof) and (B) the fair market value of each Combination
Substance included in such Combination Product. For purposes of this
definition, "fair market value" of any Product (or part thereof) and
Combination Substance shall be the list retail price of such Product (or part
thereof) and Combination Substance sold separately or, if such Product (or
part thereof) or Combination Substance is not ordinarily sold separately, a
value for both the Product (or part thereof) and Combination Substance
determined in the good-faith business judgment of (x) if the Purchase Date
has not occurred, the General Partner or any successor to the General Partner
as the general partner of the Partnership or (y) if the Purchase Date (if any)
has occurred, the Company.
"Products" shall mean collectively (a) Hu23F2G Products, (b) ICM3
Products and (c) PAF-AH Products.
"Program Technology" shall mean all Elements of Technology that are
developed, acquired or conceived by or on behalf of the Partnership during
the Research Program, but in all cases excluding Background Technology.
"Program Technology License" shall have the meaning set forth in
Section 2.03 of the Product Development Agreement.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
June 3, 1997 between the Company and the Limited Partners, as amended,
modified or restated from time to time.
"Purchase Date" shall mean the date, designated by the Company
pursuant to Section 2.01(a) of the Purchase Agreement in the Notice of
Exercise, on which the Company purchases the Interests pursuant to the
Purchase Agreement, which shall be a date not more than 60 days after the
date of the Notice of Exercise.
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"Purchase Option" shall mean any of the options granted by the Limited
Partners pursuant to Section 2.01 of the Purchase Agreement.
"Purchase Option Commencement Date" shall mean the first day after
the final Closing Date.
"Purchase Option Exercise Date" shall mean the date, if any, on which
the Notice of Exercise is given.
"Purchase Option Shares" shall have the meaning assigned to such term
in Section 4.01(c) of the Purchase Agreement.
"Purchase Option Termination Date" shall have the meaning set forth in
Section 7.02(a) of the Purchase Agreement.
"Purchase Option Termination Event" shall mean any of the events set forth
in Section 7.01 of the Purchase Agreement.
"Quarter" shall mean any calendar quarter beginning or ending during the
term of the Product Development Agreement; provided, that the first Quarter
shall be the period beginning on May 1, 1997 and ending on the last day of
the calendar quarter in which the first Closing Date occurs, and the last
Quarter shall be the period beginning on the first day of the last calendar
quarter before the Interim License Termination Date and ending on the Interim
License Termination Date.
"Quarter Class A Interest" shall mean each Class A Interest, other than
a Full Class A Interest, that represents a $25,000 Capital Contribution.
"Quarterly Payment" shall mean, for the period beginning with the
Initial Calendar Quarter and for each calendar quarter thereafter, the
sum of seven percent (7%) of Product Revenues in the United States, five
percent (5%) of Product Revenues in the Territory outside the United States
and [ * ] in the Territory for such calendar quarter; provided, that,
in the event that less than 700 Units are issued, such seven percent (7%)
and five percent (5%) shall be adjusted by multiplying each by a fraction,
the numerator of which is the number of Units issued and the denominator
of which is 700; provided, further, that any such sum shall be reduced, if
and as appropriate, to exclude in the Initial Calendar Quarter any Net
Revenues applicable to any period in the Initial Calendar Quarter before
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[ * ] Confidential Treatment Requested
-15
the Purchase Date; provided, further, that, in the event the Credit Account
is positive at the beginning of the calendar quarter, any such sum shall
be reduced by the Credit for the calendar quarter.
"Quarter Unit" shall mean an interest comprising a Quarter Class A
Interest and Series A Warrants to purchase an aggregate of 2,000 shares
of Common Stock and Series B Warrants to purchase an aggregate of 2,000
shares of Common Stock.
"Research Program" shall mean any research, experimentation or
development relating to the Products within the Field of Activity in the
Territory proposed to be conducted or conducted, directly or indirectly,
by the Company pursuant to the terms of the Product Development Agreement,
including, without limitation, the research, experimentation and development
necessary or useful to receive FDA and such other regulatory approvals to
Exploit Products and otherwise engage within the Field of Activity in the
Territory as the Partnership, in consultation with the Company, directs.
"Research Program Termination Date" shall mean the date on which the
board of directors of the General Partner terminates the Research Program
with respect to all Products pursuant to Section 7.01(b) of the Product
Development Agreement.
"Royalty Amount" shall mean for each calendar quarter the sum of
seven percent (7%) of Product Revenues in the United States, five
percent (5%) of Product Revenues in the Territory outside the United
States and [ * ] in the Territory for such calendar quarter; provided,
that, in the event that less than 700 Units are issued, such seven
percent (7%) and five percent (5%) shall be adjusted by multiplying each by
a fraction, the numerator of which is the number of Units issued and the
denominator of which is 700.
"Sales Agency Agreement" shall mean the Sales Agency Agreement
dated as of June 3, 1997 among the Sales Agent, the Partnership, the General
Partner and the Company relating to the placement of Units, as amended,
modified or restated from time to time.
"Sales Agent" shall mean PaineWebber Incorporated, as sales agent
under the Sales Agency Agreement.
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[ * ] Confidential Treatment Requested
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"Stock Advance Payment" shall mean the consideration payable by the
Company to Payment Recipients in Common Stock or other securities, assets
or evidence of indebtedness pursuant to Article III of the Purchase Agreement
in connection with the purchase by the Company of their Interests.
"Stock Percentage" shall mean, if the Company shall have elected to
make the Combination Advance Payment, the percentage of the purchase price
of the applicable Partnership Interest that the Company elects to pay in
Common Stock.
"Stock Pricing Date" shall mean the fifth trading day before the
Purchase Option Exercise Date.
"Suncos" shall mean Suncos Corporation, a corporation organized and
existing under the laws of Delaware, the stockholders of which are Suntory
and the Company.
"Suntory" shall mean Suntory Limited, a corporation organized and
existing under the laws of Japan.
"Technology" shall mean the Background Technology and the Program
Technology.
"Territory" shall mean (a) the United States with respect to PAF-AH
Products and (b) the entire world, except Japan, with respect to ICM3
Products and Hu23F2G Products.
"Third Party Sublicensee" shall have the meaning assigned to such term
in Section 2.02(a) of the Product Development Agreement.
"Unit" shall mean a "Unit" as contemplated by the Sales Agency
Agreement consisting of one Class A Interest, Series A Warrants to
purchase an aggregate of 8,000 shares of Common Stock and the right to
receive Series B Warrants to purchase an aggregate of 8,000 shares of
Common Stock.
"United States" shall mean the United States of America, including
its territories and possessions.
"Warrant" shall mean any of the warrants to purchase Common Stock
issued to each Limited Partner by the Company in exchange for the Purchase
Options.
_______________________________
[ * ] Confidential Treatment Requested
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